Confiscatory tax challenge rejected; first seller liability and exhaustion of statutory appeal remedy upheld under the Karnataka sales tax scheme.

Additional tax under section 6-B of the Karnataka Sales Tax Act was not shown to be confiscatory merely because it reduced or eliminated the petitioner's business profit; the levy was upheld because a loss of margin, without more, does not invalidate a tax. The petitioner was also held liable for sales tax, surcharge and additional tax as the first seller of cement in the State, since title passed on the high seas and the transaction attracted section 5(3); the writ challenge also failed because the statutory appeal remedy under section 20 had not been exhausted.

---

---

Issues: (i) Whether the additional tax under section 6-B of the Karnataka Sales Tax Act was demonstrably confiscatory and liable to be struck down. (ii) Whether the petitioner, despite being the first seller of the cement in the State, was not liable to pay sales tax, surcharge, and additional tax, and could invoke writ jurisdiction without exhausting the statutory appeal remedy.

Issue (i): Whether the additional tax under section 6-B of the Karnataka Sales Tax Act was demonstrably confiscatory and liable to be struck down.

Analysis: The levy was challenged on the footing that the petitioner's handling and clearing margin was lower than the additional tax burden. The Court held that the petitioner entered the contractual arrangement with knowledge of the statutory scheme and could have negotiated adequate charges. Mere reduction of business profit, without more, does not establish that a tax is confiscatory. The challenge to the levy therefore lacked substance.

Conclusion: The additional tax was not shown to be confiscatory and the challenge failed, against the petitioner.

Issue (ii): Whether the petitioner, despite being the first seller of the cement in the State, was not liable to pay sales tax, surcharge, and additional tax, and could invoke writ jurisdiction without exhausting the statutory appeal remedy.

Analysis: On the agreement and the surrounding transaction, the Court found that title in the imported cement passed to the petitioner on the high seas and that the petitioner was the first seller in the State. In that position, the petitioner fell within the statutory liability to sales tax under section 5(3), and the additional tax under section 6-B followed as a charging levy. The Court also noted that the assessment orders were appealable under section 20, and the petitioner had not exhausted the statutory remedy before approaching writ jurisdiction.

Conclusion: The petitioner was liable to the tax levies and could not succeed in writ jurisdiction, against the petitioner.

Final Conclusion: The writ petition was rejected and the demand for additional tax was allowed to be enforced in accordance with the security already furnished.

Ratio Decidendi: A tax levy is not confiscatory merely because it reduces or eliminates business profit, and a first seller who acquires title on the high seas is liable for the statutory sales tax and consequential additional tax under the taxing scheme.

---