Karnataka High Court
Vasudeva Pai And Sons vs State Of Karnataka on 22 December, 1993
Equivalent citations: ILR1994KAR726
Bench: S.B. Majmudar, R.V. Raveendran
JUDGMENT M. Ramakrishna, J.
1. A Division Bench of this Court by an order made on 12.11.1992 referred the following Question for the Opinion of the Full Bench:-
"Whether Section 8A of the Karnataka Sales Tax Act, 1957 is applicable to turnover tax after the amendment of Section 6B of the Act by Karnataka Act No. 13/82, and whether a notification exempting turnover tax is traceable to Section 8A of the Act?"
Thus, the above Question has come up for Consideration before this Full Bench.
2. It appears, according to the view taken by the Division Bench, there has been a conflict between the two Decisions rendered by this Court, reported in (1) 55 STC 93 B.P. Automobiles v. State and (2) 58 STC 178 Shantilal v. State.
3. We have heard the learned Counsel on both the sides.
4. In order to appreciate the legal contentions raised before us, it is better to extract Section 6B of the Karnataka Sales Tax Act 1957 (hereinafter referred to as 'the Act') as amended by Karnataka Act No. 13 of 1982. The relevant portion of which reads:-
"6-B. Levy of Turnover Tax -
(1) Every dealer other than the Government of Karnataka, the Central Government or the State Government or any other State whose total turnover in a year is not less than ten lakh rupees whether or not the whole or any portion of such turnover is liable to tax under any other provisions of this Act, shall be liable to pay tax, -
(i) at the rate of x x x (ii) at the rate of x x x
Provided that no tax under this sub-section shall be payable on that part of such turnover which relates to, -
i) sale or purchase of goods in the Fifth Schedule;
ii) sale or purchase of goods specified in the Fourth Schedule;
iii) sale or purchase of goods in the course of inter-State trade or commerce;
iv) sale or purchase of goods in the course of export out of the territory of India or sale or purchase in the course of import into the territory of India;
v) all amounts collected by way of tax under the provisions of this Act or the Central Sales Tax Act 1956 (Central Act 74 of 1956)".
5. The State of Karnataka issued a Notification under Section 8A of the Act on 1.9.1982, the scope of which came up for consideration before a Division Bench of this Court in W.A.Nos. 1377 to 1380/89 and connected Writ Appeals, disposed of on 21.3.1991. While considering the scope of the Notification, the Division Bench raised a question as to whether the benefit of that Notification would be available to turnover tax leviable under Section 6B of the Act. In order to appreciate the same, it is better to extract the relevant portion of the notification and it reads:-
"In exercise of the powers conferred by Section 8A of the Karnataka Sales Tax Act, 1957 (Karnataka Act 25 of 1957) the Government of Karnataka hereby exempts with effect from 1st September 1982 the rate of tax payable under the said Act on the sale of goods specified in the schedule below:-
2. Student Note Books, Exercise Books, Copy Books, Outline Maps, Pencils, Erasers, Instrument Boxes, Dissection Boxes, T-Square and Drawing Boards provided that the price of each such goods does not exceed fifty rupees."
In answering the question raised by the Division Bench, it considered not only the said Notification but also the power of the State of Karnataka under Section 8A of the Act. Section 8A of the Act reads:-
"8-A. Power of State Government to notify exemptions and reductions of tax -
1) The State Government may, by notification, make an exemption, or reduction in rate, in respect of any tax payable under this Act -
a) on the sale or purchase of any specified goods or class of goods at all points in the series of sales by successive dealers; or
b) by any specified class of persons, in regard to the whole or any part of their turnover; or
c) on the sale or purchase of any specified class of goods by any specified class of dealers in regard to the whole or part of their turnover".
The Division Bench ultimately held as follows:-
"A logical extension of this reasoning would mean that the turnover tax was intended to be included under Section 8A as well. Where therefore an exemption notification is issued Under Section 8-A(1)(a), it would, as we pointed-out above, envelope all' the three taxes mentioned above. That was the intention of the legislature in carving out this Explanation, making it clear that Section 8-A(1)(a) exemption would include turn-over tax as well. So looked up, we are in entire agreement with the learned single Judge".
The above conclusion was arrived at by the Division Bench appreciating the view taken by the learned single Judge in the course of his order.
6. The legal contention urged before the learned Single Judge in the Writ Petition was that having regard to the scope of the Notification and the power conferred upon the State under Section 8A of the Act, the State could not have exercised the power under Section 8A of the Act as the expression "tax" does not include the tax payable under Section 6B of the Act. That contention was negatived by the learned Single Judge observing that the exemption would be available to turnover tax under Section 6B of the Act. As against that view of the learned Single Judge the Revenue appealed in the aforesaid Writ Appeals. The Appeals were dismissed by the Division Bench.
7. Thus, agreeing with the view of the learned Single Judge, the Division Bench ruled that in view of the Explanation found under Section 8A of the Act the view taken by the learned Single Judge in favour of the assessee was justified. The Explanation to Section 8A of the Act reads:-
"Explanations For the purpose of Sub-section (3A), the expression "tax" does not include the tax payable under Section 6B and Section 6C".
We may point-out here that Sub-section (3-A) of Section 8A of the Act came to be omitted by Karnataka Act 8 of 1984. Consequently, the Explanation also came to be omitted with effect from 1.4.1984.
8. In B.P. AUTOMOBILES AND OTHERS v. STATE OF KARNATAKA AND ANR., , the question posed before the Division Bench was as to whether the Writ Petitioners, being dealers in second sales, whether Section 6B of the Act authorised levy of tax on such second sales and any construction placed upon the provision as supporting the levy would render the provisions itself unconstitutional. Therefore, the Division Bench in that case was not called upon to consider the question which is now posed before us. In that view of the matter, the Ruling in that Decision in B.P. Automobile's case is of no assistance to answer the question now posed before us.
9. In SHANTILAL AND BROTHERS v. STATE OF KARNATAKA AND ANR., the Constitutional validity of Section 6-B(1) of the Act, as amended by Karnataka Act 13 of 1982 which provides for the levy of one-half per cent of turnover tax on every dealer whose total turnover in a year exceeds Rs. 1,00,000, came up for consideration. In that Decision the scope of Section 6B of the Act and the competency of the State Legislature to levy the tax came up for consideration. The Division Bench in that case held that the State Legislature was competent to levy tax under Section 6B of the Act and therefore it did not violate the rights guaranteed under Articles 14 and 19(1)(g) of the Constitution,
10. The argument now advanced by the learned Counsel for the appellants is that having regard to the power under Section 8A of the Act, in view of the exemption Notification dated 29.6.1981 exempting levy of tax under Section 6B of the Act for insecticides under the Insecticides Act, the State has no power to issue notification in exercise of the power under Section 8A of the Act, On the other , hand, the contention of Mr. H.L. Dattu, learned Government Advocate, is that the State has got enough power to do so and that the Notification is competent. We will now examine the contentions.
11. As we already noticed, the very question came up for consideration before the Division Bench in W.A.Nos. 1377 to 1380/80 and connected Writ Appeals. We have also extracted in the above paragraphs the view taken by the Division Bench affirming the Ruling of the learned Single Judge with reference to the power of the State to issue Notification in exercise of the power under Section 8A of the Act and that the Division Bench, referring to the similar contention in the Writ Appeals, held that the Notification in question is issued only under Section 8-A(1) of the Act and therefore the Explanation, though had no effect upon the Notification issued, it had a bearing on the interpretation of the Section. Thus, the Division Bench of this Court considering the very question held in favour of the State holding that the Notification could be traceable to the power of the State under Section 8A of the Act. In that view of the matter, we do not see any conflict between the two Decisions referred to above.
12. Learned Counsel for the appellant also has not brought to our notice that the power of the State could toe traceable for issuance of the Notification granting exemption to any other provision than the provision under Section 8A of the Act. Therefore, we have to hold that the Notification granting exemption is traceable only to the provision of Section 8A of the Act which confers necessary power on the State of Karnataka.
13. We will now deal with the exemption granted in respect of Copper Sulphate. It is not in dispute that under the Schedule to the Pesticides Act 1968 (Central Act 46/68) Copper Sulphate finds a place in the Schedule to Section 3(e) of the said Act. Indeed, it is also found in Schedule II to the Karnataka Sales Tax Act 1957 at Entry 24. Copper Sulphate is also included in the exemption granted in the Notification referred to above. The said entry in respect of Copper Sulphate as found in II Schedule of the K.S.T.Act is by virtue of the provision under Section 5(3)(a) of the Act.
14. Indeed, by an order made on 1.4.1988 a new Entry is also made under Section 79-A in the old Schedule to the K.S.T. Act whereas Entry 24 found in the II Schedule is in respect of the inclusion underlying in Section 5(3)(a) of the K.S.T.Act with effect from 1.4.1988.
15. Therefore, in view of the foregoing, it is abundantly clear that the State of Karnataka by virtue of the power conferred on them under Section 8A of the Act has issued the Notification granting exemption in respect of Copper Sulphate under Section 5(3)(a) read with new Entry 24 in the II Schedule, which has been in effect from 1.4.1988. There is no doubt about that and that exemption is on the turnover of the dealer dealing in Copper Sulphate which is taxable.
16. Thus, viewed from these circumstances, there cannot be any dispute that the Notification referred to above granting exemption is traceable to the power under Section 8A of the Act. In that view of the matter, it cannot be said that the Notification is invalid notwithstanding the introduction of Section 79-A in the old Schedule. Accordingly, we answer the Question as follows:-
Section 8A of the Karnataka Sales Tax Act 1957 is applicable to turnover tax after the amendment of Section 6B of the Act by Karnataka Act 13 of 1982 and that the Notification exempting turnover tax is traceable to Section 8A of the Act.
The opinion of the Full Bench is accordingly rendered. The same may be sent to the Division Bench to hear and dispose of the above Appeals accordingly.