Full Judgment Text
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PETITIONER:
DEPUTY COMMISSIONER OF SALES TAX ETC. ETC.
Vs.
RESPONDENT:
AYSHA HOSIERY FACTORY (P) LTD. ETC. ETC.
DATE OF JUDGMENT16/01/1992
BENCH:
RAMASWAMI, V. (J) II
BENCH:
RAMASWAMI, V. (J) II
RANGNATHAN, S.
OJHA, N.D. (J)
CITATION:
1992 AIR 874 1992 SCR (1) 140
1992 SCC Supl. (2) 178 JT 1992 (1) 379
1992 SCALE (1)207
ACT:
: Central Sales Tax Act, 1956.
: Sections 6(1-A), 8,9: Tax on sale of goods in
inter-state trade-Liability of dealer-Rate of tax-Whether
applicable under the local Act at the particular point of
time.
Kerala General Sales Tax Act, 1963 [1] Kerala
Additional Sales Tax Act, 1978 :
Additional levy imposed under the 1978 Act-Whether
amounts to amending the Sales tax Act-Such levy-Whether
could be applied to interstate sales.
HEADNOTE:
The Kerala Additional Sales Tax Act, 1978 sought to
impose an additional sales tax at 10% of the rate of tax
already imposed under the Kerala General Sales Tax Act,
1963, on all taxable sales and purchases in the State.
The assesses challenged before the High Court, the levy
of additional sales tax in respect of their inter-state
sales on the ground that the said levy could not be
considered as a levy under the sales tax law of the
appropriate State within the meaning of Section 8(2-A) of
the Central Sales Tax Act, and for the purpose of levying
Central Sales Tax only the rate of tax as per the original
Kerala General Sales Tax Act, 1963 shall be taken into
account. It was also contended that the rate of tax on
interstate sales payable under Section 8 of the Central
Sales Tax Act cannot be increased by any amendment or
legislation by the State.
The High Court having upheld the challenge, the State
has preferred the present appeals by special leave.
On the question whether the additional tax levied could
also be considered as sales tax under the Sale tax law of
the State, for the purpose of Central Sales Tax levy.
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Allowing the appeals, this Court,
HELD :1.1 The definition provided by Section 2(i) of the
Central sales Tax Act does not say that the sales tax law or
the general sales tax law which levies taxes on sale or
purchase of goods shall be under a single enactment. What
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is relevant is whether the tax partakes the character of
sales tax or purchase tax. Any other construction would
restrict the applicability of Section 8(2-A) of the Central
Sales Tax Act to the sales tax law that was in force in 1956
when the Central Sales Tax Act came into force and any
amendment to the local law would not have any effect on the
applicability of that provision. If a particular intra-state
sale transaction in a particular assessment year is
subjected to a particular rate of tax that automatically
gets reflected in and had to be taken into consideration for
finding the rate and the applicability of Section 8(2-A) or
section 8(2) (b) of Central Sales Tax Act. [146F-G; 147-A]
1.2 Instead of an additional Sales Tax Act, if the
legislature has simply amended the Kerala General sales tax
Act by varying the rate, automatically that will come in for
consideration and application of the provision of Section
8(2) (b) and 8 (2-A) of the Central Sales Tax Act. For this
purpose amendment of the State Act is not considered as an
amendment of the Central Sales Tax Act. But since the rate
applicable to the intra-state sales at a particular point of
time is a relevant consideration for finding out the rate of
tax on inter-state sale the amendment of the State Act
automatically has the effect of changing the rate provided
under Section 8 of the Central Sales Tax Act. That is not to
say that the Central Act is amended by the State
Legislature. The rates of tax in certain cases under the
Central Act are linked to the rates fixed under the local
Acts and that is how the amendment of the local Act affects
the rates under the Central Act. It is still the Central Act
that is applied but only for purposes of fixing the rate of
tax leviable under the Central Sales Tax Act, the provisions
of the local Act are looked into. So construed there is not
doubt that in all cases where the rate of tax under the
local law is less than four per cent that will be the rate
applicable to the inter-state sales of the same commodity if
the provisions of Section 8(2-A) of the Central Sales Tax
Act are applicable. The dealer undoubtedly would be paying
at the rate as enhanced by the Additional Sales Tax Act and
therefore that will be the rate that is including the
additional tax, that is to be taken into consideration for
finding out the applicability of Section 8(2-A) of the
Central Sales Tax Act and the rate of tax in respect of his
inter-state sales turnover. Therefore the respondents are
liable to pay sales tax at the rate including the additional
sales tax in respect of their inter-state sale under the
Central Sales Tax assessment orders.
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1.3 For the purpose of applicability of Section 8(2-A)
of the CST Act one has to look to the rate of tax applicable
for the time being under the local Act and not a rate of
tax which was applicable under the local Act at the time
when the CST Act was enacted. Any amendment in the local
Act ultimately will have a reflection in the assessment of
the inter-state sales. [147A-F]
1.4 However, where a notification has been issued under
Section 8(5) of the Central Sales Tax Act, the amendment to
the State Act will not have any affect on the notification.
Janta Expeller Company & Ors. v. Assistant Commissioner
(Assessment) Sales Tax, Special Circle, Trichur, 49 STC 216,
referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4042 of
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1987 etc. etc.
From the Judgment and Order dated 11.7.1986 of the
Kerala High Court in T.R.C. No. 9 of 1985.
P.S. Poti and K.R. Nambiar for the Appellants.
A.S. Nambiar, G. Vishwanatha Iyer, G.B. Pai, P.H.
Parekh, P.K. Manohar, Smt. Shanta Vasudevan, Ms. Malini
Poduval, S. Sukumaran and N. Sudhakaran for the Respondents.
The Judgment of the Court was delivered by
V. RAMASWAMI, J. Leave granted in Special Leave
Petition Nos. 8417 and 8492-93 of 1987.
In this batch of appeals the appellants are the State
of Kerala. The respondents are registered dealers under the
Kerala General Sales Tax Act, 1963, hereinafter called the
State Act as well as under the Central Sales Tax Act, 1956
hereinafter called the Central Act. Some of the assesses
carry on the business of sales and purchase of Coir products
which is taxable under the State Act at 2%, some of the
dealers carry on business of Hosiery which is taxable at 3%.
The respondents-assessee in Civil Appeal Nos. 1426-27 of
1988 deal in automobile spares which is taxable at 15% and
the assessee in Civil Appeal No. 1015 of 1988 deals in
transformer which is taxable at 10%. The respondent in
Civil Appeal No. 4386 of 1988 is a dealer in titanium
dioxide, Cement, and Paints products which are taxable at
10% and the
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respondent in Civil Appeal No. 189 of 1990 is a dealer of
Sewing Thread which is taxable at 3%. The assessee in Civil
Appeal No. 5557 of 1990 is a dealer in rice taxable at 2%.
Under the Kerala Additional Sales Tax Act (20 of 1978) all
taxable sales and purchases in the State including the local
sales of Coir, Hosiery, Rice, Automobile parts, titanium
dioxide, Cement, Paints and transformers etc. With which we
are concerned, were subjected to an additional sales tax
calculated at 10% of the rate of tax already imposed under
the Kerala General Sales Tax Act, 1963. The result of it
was where the rate of tax was 2% the tax payable became 2.2%
where it was 3% it was 3.3%, 10% became 11%, 15%. In all
these cases the assessments in question were under the
Central Sales Tax Act. The Kerala Additional Sales Tax Act
came into force with effect from 1st April, 1978. In the
present appeals the assessment year in question were either
1978-79 or subsequent thereto. The assessing officers
sought to levy tax in respect of the inter-state sales of
the assesses by including the additional sales tax. The
assesses questioned the inclusion of the additional sales
tax levy in respect of their inter-state sale on ground that
the levy under the Kerala Additional Sales Tax Act is not
and could not be considered as a levy "under the sales tax
law of the appropriate State" within the meaning of section
8(2-A) of the Central Act and for the purpose of levying
Central Sales Tax in view of the provision of section 8(2-A)
of the CST Act only the rate of tax as per the original
Kerala General Sales Tax Act, 1963 shall be taken into
account. They also contended that the rate of tax on inter-
state sales payable under section 8 of the Central Act
cannot be increased by an amendment of the State Act or any
legislation by the State. All the revision petitions filed
by the assesses were allowed by the High Court of Kerala
accepting their contention following the judgment of the
Division Bench of the same Court reported in Assistant
Commissioner (Assessment) Sales Tax v. Janata Expeller
Company and Ors., 64 STC 435 which confirmed a Single Judge
judgment in Janata Expeller Company & Ors. v. Assistant
Commissioner (Assessment) Sales Tax, Special Circle,
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Trichur, 49 STC 216.
Before we deal with the decision relied on by them it
is better we set out the relevant provisions and understand
the scope and implications of the same.
"8. Rates of tax on sales in the course of inter-
state trade or commerce-(1) Every dealer, who in
the course of inter-State trade or commerce-
(a) sells on the Government any goods; or
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(b) sells to a registered dealer other than the
Government goods of the description referred
to in sub-section (3); shall be liable to pay
tax under this Act, which shall be four
percent of the turnover.
(2) The tax payable by any dealer on his turnover
in so far as the turnover or any part thereof
relates to the sale of goods in the course of
inter-State trade or commerce not falling within
sub-section (1)-
(a) in the case of declared goods shall be
calculated at twice the rate applicable to the
sale or purchase of such goods inside the
appropriate State; and
(b) in the case of goods other than declared
goods, shall be calculated at the rate of ten
per cent or at the rate applicable to the sale
or purchase of such goods inside the
appropriate State whichever is higher;
and for the purpose of making any such calculation
any such dealer shall be deemed to be a dealer
liable to pay tax under the sales tax law of the
appropriate State, notwithstanding that he, in
fact, may not be so liable under that law.
(2A) Notwithstanding anything contained in sub-
section (1A) of section 6 or sub-section (1) or
clause (b) of sub-section (2) of this section, the
tax payable under this Act by a dealer on his
turnover in so far as the turnover or any part
thereof relates to the sale of any goods, the sale
or, as the case may be, the purchase of which is,
under the sales tax law of the appropriate State,
exempt from tax four percent (whether called a tax
or fee or by any other name), shall be nil or, as
the case may be, shall be calculated at the lower
rate.
Explanation- For the purposes of this sub-section a
sale or purchase of any goods shall not be deemed
to be exempt from tax generally under the sales tax
law of the appropriate State if under that law the
sale or purchase of such goods is exempt only in
specified circumstances or under specified
conditions or the tax is levied on the sale or
purchase of such goods at specified stages or
otherwise than with reference to the turnover of
the goods.
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(3)....................
(4)....................
(5) Notwithstanding anything contained in this
section, the State Government may, if it is
satisfied that it is necessary so to do in the
public interest, by notification in the official
Gazette, and subject to such conditions as may be
specified therein, direct-
(a) that no tax under this Act shall be payable by
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any dealer having his place of business in the
State in respect of the sales by him, in the
course of inter-state trade or commerce, from
any such place of business of any such goods
or classes of goods as may be specified in the
notification, or that the tax on such sale
shall be calculated at such lower rates than
those specified in sub-section (1) or sub-
section (2) as may be mentioned in the
notification ;
that in respect of all sales of goods or sales
of such classes of goods as may be specified
in the notification, which are made in the
course of inter-State trade or commerce, by
any class of such dealers as may be specified
in the notification, to any person or to such
class of persons as may be specified in the
notification, no tax under this Act shall be
payable or the tax on such sales shall be
calculated at such lower rates than those
specified in sub-section (1) or sub-section
(2) as may be mentioned in the notification."
In all these appeals the inter-State sales in question
which are sought to be taxed admittedly do not fall under
sub-section (1) or clause (a) of sub-section (2) of section
8 of the CST Act. The sales were of goods other than the
declared goods, therefore, under clause (b) of sub-section
(2) of section 8 the tax payable by the dealer on his
turnover shall be calculated at the rate of 10% or at the
rate applicable to the sale or purchase of such goods inside
the State whichever is higher. However, sub-section (2-A)
of this section states that notwithstanding anything
contained in clause (b) of sub-section (2) the tax payable
under the Central Sales Tax Act by the dealer where the
intra-state sale of the same under the ‘sale tax law’ of the
State is "exempt from tax generally or subject to tax
generally at a rate which is lower than four per cent shall
be nil or as the case may be shall be calculated at the
lower rate." Thus if an intra-state sale by the dealer is
exempt then his inter-State
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sale also will be exempt. If the intra-State sale is taxed
at a rate which is lower than four percent, then his inter-
State sale of the same commodity shall also have to be taxed
at the lower rate applicable in the State. But where the
rate of tax applicable to intra-State sale was more than
four percent then the rate applicable for inter-State sale
will be nil or the rate applicable for the local sale
whichever is higher. The question for consideration is as
to whether the additional tax levied under Kerala Additional
Sales Tax Act is also to be considered as sales tax under
the ‘sales tax law’ of the State. The question could not
have arisen but for the fact that this additional levy came
to be imposed under a separate Act. Had the additional Sales
Tax been imposed by simply amending the rates in the
original Act the question would not have arisen. But we are
of the view that this makes no difference and it is merely a
matter of style of legislation. The additional sales tax
levied under the Sales Tax Act is also a sales tax of the
same category as in the original Act. The Kerala Additional
Sales Tax Act provides that "The tax payable under Kerala
General Sales Tax Act, 1963 (15 of 1963) (hereinafter
referred to as the State Act) for every financial year
commencing from the financial year 1978-79 shall be
increased by 10 per cent of such tax" instead of increasing
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the rate of tax for each of the commodities which are
covered by the Kerala General Sales Tax Act by one
comprehensive provision the tax is increased by 10% over the
rate provided under the original Act in respect of all the
commodities the sale or purchase of which are taxable. Both
take the form of sales tax and in the case of assessment of
local sales it makes no difference whether it is called tax
and additional tax or one higher percentage of tax. In
truth and effect it is a levy of tax on the sales or
purchase of the dealers. However, it was contended on
behalf of the assesses that the words "under the sale tax
law of the appropriate State" in Section 8 (2-A) of the CST
refers to only the General Sales Tax Act provisions and not
the additional Sales Tax Act provisions. Section 2(i) of
the Central sales Tax Act defines ‘sale tax law’ as meaning
"any law for the time being in force in any State or part
thereof which provides for the levy of taxes on the sale or
purchase of goods generally or on any specified goods
expressly mentioned in that behalf and ‘general sales tax
law’ means the law for the time being in force in any State
or part thereof which provides for the levy of tax on the
sale or purchase of goods generally." The definition does
not say that the sale tax law or the general sales tax law
which levies taxes on sale or purchase of goods shall be
under a single enactment. What is relevant is whether the
tax partakes the character of sales tax or purchase tax.
Any other construction would restrict the applicability of
section 8 (2-A) of the CST Act to the sales tax law was in
force in 1956 when the Central Sales Tax Act came into force
and any amendment to the local law would not have any affect
on the applicability of that provisions. We do not see any
logic or reason for such a
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construction. What is relevant is if a particular intra-
state sale transaction in a particular assessment year is
subjected to a particular rate of tax that automatically
gets reflected in and had to be taken into consideration for
finding the rate and the applicability of section 8 (2-A) or
Section 8(2)(b) of Central Sales Tax Act. As already stated
if instead of an additional sales tax Act the legislature
has simply amended the Kerala General Sales Tax Act by
varying the rate automatically that will come in for
consideration and application of the provisions of Section
8(2)(b) and 8(2-A) of the CST Act. For this purpose
amendment of the State Act is not considered as an amendment
of the Central Sales Tax Act. But since the rate applicable
to the intra-state sales at a particular point of time is a
relevant consideration for finding out the rate of tax on
inter-State sale the amendment of the State Act
automatically has the effect of changing the rate provided
under Section 8 of the Central Sales Tax Act. That is not
to say that the Central Act is amended by the State
Legislature. The rates of tax in certain cases under the
Central Act are linked to the rates fixed under the local
Act and that is how the amendment of the local acts affects
the rates under the Central Act. It is still the Central
Act that is applied but only for purposes of fixing the rate
of tax leviable under the Central Sales Tax Act the
provisions of the Local Act are looked into. So construed
we have no doubt that in all cases where the rate of tax
under the local law is less than four per cent that will be
the rate applicable to the inter-state sale of the same
commodity if the provisions of Section 8(2-A) of the CST Act
are applicable. The dealer undoubtedly would be paying at
the rate as enhanced by the Additional Sales Tax Act and
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therefore that will be the rate that is including the
additional tax, that is to be taken into consideration for
finding out the applicability of section 8(2-A) of the CST
Act and the rate of tax in respect of his inter-State sales
turnover. There could be therefore no doubt that the
assessees-respondents in all these cases are liable to pay
sales tax at the rate including the additional sales tax in
respect of their inter-State sales under the Central Sales
Tax assessment orders.
The High Court has reversed the order of the assessment
in all these cases relying on the decision of a learned
Single Judge in Janata Expeller Co. case 49 STC 216 which
was affirmed on appeal by the Division Bench of the same
High Court in 64 STC 435. That case related to the
assessment of a dealer in relation to his inter-State sales
turnover of coconut oil and cake. Under the Kerala General
Sales Tax Act, 1963 the local sales of coconut oil and cake
were taxable at 2%. By reason of the Kerala Additional
Sales Tax Act, 1978 the rate of tax had increased to 2.2%.
In exercise of the power under section 8(5) of the Central
Sales Tax Act the State Government on 1.4.1966 notified that
the Government "being satisfied that it is necessary so
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to do in the public interest, hereby direct that in respect
of coconut oil and its cake the tax payable under the said
Act by an oil miller having his place of business in the
State of Kerala in respect of the sale by him from such
place of business of the said goods in the course of inter-
State trade or commerce shall be calculated at 1 percent on
the sale price of the goods so sold subject to the condition
that the turnover of coconut or copra, from which the said
goods were produced by him in his mill within the State, is
assessed to tax or is liable to tax at his hands under the
Kerala General Sales Tax Act. This notification came into
force with effect from 1.4.1966. When the assessing
authorities sought to levy the additional tax imposed under
the additional Sales Tax Act, 1978 in respect of the inter-
state sale and called upon the assessees to pay at 1.1%, the
dealers questioned the assessment orders on the ground that
when once a notification has been made under Section 8(5) of
the Central Sales Tax Act fixing the rate for purposes of
C.S.T. any change in the rate of tax under the local act
will have no impact on the notification itself unless the
notification also is modified or amended giving effect to
the amendment. This contention was accepted by Kochu
Thommen. as he then was, in the judgment in the Janatha
Expeller Co. & Ors. case (supra). No exception could be
taken to this view of the learned Judge. Because section
8(5) of the Central Sales Tax Act is a provision which
enable the State Government if it was of the view that it
was necessary to do so in the public interest to completely
exempt the inter-state sales from payment of tax or reduce
the tax payable under the Central Act in respect of inter-
state sales. The section itself states the notification
will have effect "Notwithstanding anything contained in
section 8". Therefore when once a notification is made it
will have effect propio vigor and even any amendment of the
rate applicable to inter-state sale will not affect the
notification under section 8(5) of the Central Sales Tax Act
as such unless the notification also is amended along with
the amendment of the other provisions in the Section or the
amended statute in law the effect of superseding the
notification itself. In the case dealt with in Janatha
Expeller Co. & Ors. (supra) the levy of additional sales tax
could not affect the notification because the notification,
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though issued by the State Government, was made in exercise
of the powers under section 8(5) of the Central Act enacted
by the Parliament, and the Kerala Additional Sales Tax Act
was made by the State Legislature and that could have the
effect of superseding the notification. We may also point
out that the learned Judge also had confined his decision
to the notification and its effect though he had dealt with
the scope of section 8(2-A) of the Central Sales Tax Act
also in order to give better understanding of the provisions
of section 8(5) of the Central Sales Tax Act. We are unable
to see anything in this judgment to support the contention
of the respondents-assessees that even in a case which is
not covered by any notification under section 8(5) of
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the CST Act increase in the rate of tax under the local act
will not have any effect on the applicability of Section
8(2)(b) and 8(2-A) of the CST Act. Further, for enhancing
the rate notified under section 8(5) of the Central Sales
Tax Act no reliance can be placed on section 8(2-A) of the
CST Act. However, while agreeing with the view of the
learned single Judge the Division Bench on appeal in the
case of Assistant Commissioner (Assessment) Sales Tax
(supra) made certain further observation which in a way
supported the contention of the assessees. That passage
reads as follows:
"We are also of the view, that even in cases where
tax is exigible under section 8(2A) of the Central
Sales Tax for the inter-State sales, the Kerala
Additional Sales Tax Act, 1978 (Act 20 of 1978),
has no application.
As stated already, in cases where the tax is
payable under section 8(2A) of the Central Sales
Tax Act, what is crucial or relevant is to
ascertain, the appropriate sales tax law of the
State, under which the tax is levied for the sale
or purchase of the goods or the commodity, in
question. Looked at from the angle, we have no
doubt, that the appropriate sales tax law of the
State, of which tax is levied, is the Kerala
General Sales Tax Act, 1963. The Kerala Additional
Sales Tax Act, 1978(Act 20 of 1978), does not levy
sales tax on the sale or purchase of the goods or
commodity, in question. We hold that the
provisions of Act 20 of 1978 are inapplicable to a
situation, where inter-State sales are to be taxed
under section 8 or section 8(2A) or section 8(5) of
the Central Sales Tax Act.
In the first place these observations are in the nature
of obiter in view of the fact that the learned Judges have
accepted the interpretation placed by the learned single
Judge that in respect of a case where a notification has
been issued under Section 8(5) of the CST Act the amendment
to the State Act will not have any effect on the
notification. That should have been enough to dispose of
the case but they have given an alternative reasoning which
in our view is not correct and is against the provisions of
Section 8(2-A) of the CST Act itself. For the purpose of
applicability of Section 8(2-A) of the CST Act we have to
look to the rate of tax applicable for the time being under
the local Act at the time when the CST Act was enacted. Any
amendment in the local Act ultimately will have a reflection
in the assessment of the inter-state sales. We have already
discussed the scope of Section 8 (2-A) of the CST Act and in
the light of those reasonings the passage extracted above in
the judgment of the Division Bench is contrary to law and
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could not be accepted.
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As we have stated already in all the appeals under
consideration there were no notifications under section 8(5)
of the CST Act and simply the applicability of section 8(2-
A) of the CST Act alone is involved. The appeals are
accordingly allowed. The orders of the High Court are set
aside and the respective assessment orders are restored.
However, there will be no order as to costs.
G.N. Appeals allowed.
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