1992 (3) TMI 336 - HC - VAT and Sales Tax

Interpretation of Karnataka Sales Tax Act: Registration under Central Sales Tax Act at time of sale determines liability.

KM Kamath Versus Commissioner of Commercial Taxes in Karnataka

The Karnataka High Court interpreted section 5(2) of the Karnataka Sales Tax Act, 1957, ruling that a dealer must be registered under the Central Sales ... - Issues: Interpretation of section 5(2) of the Karnataka Sales Tax Act, 1957 regarding liability to pay tax on goods purchased in the course of inter-State trade under the Central Sales Tax Act, 1956.The judgment of the Karnataka High Court involved the interpretation of section 5(2) of the Karnataka Sales Tax Act, 1957, concerning the liability to pay tax on goods purchased in the course of inter-State trade under the Central Sales Tax Act, 1956. The petitioner had purchased goods under concessional rates during the assessment year 1980-81 while registered under the Central Act, and sold them in the subsequent assessment year 1981-82 after his registration under the Central Act was canceled. The petitioner argued that he was not liable to pay tax under the Karnataka Act during the sale of these goods in 1981-82 due to not being registered under the Central Act at that time and his turnover being below the Karnataka Act's minimum threshold.The Karnataka Appellate Tribunal had previously ruled against the petitioner, stating that section 5(2) did not explicitly require the dealer to be registered under the Central Act during the assessment period. However, the High Court analyzed section 5(2) and concluded that the dealer must be registered under the Central Act at the time of sale, not necessarily at the time of purchase, to be liable to pay tax under the Karnataka Act. The Court emphasized that the provision mandates tax payment on goods purchased in inter-State trade under concessional rates of the Central Act, implying registration under the Central Act at the time of purchase. Therefore, the words 'a dealer registered under the Central Sales Tax Act, 1956' in section 5(2) refer to the time of sale, not purchase.The High Court rejected the petitioner's argument that his liability to pay tax should be based on his turnover falling below the Karnataka Act's minimum threshold, as section 5(2) imposes tax irrespective of turnover. Consequently, the Court allowed the petition, setting aside the Tribunal's order, and held that the petitioner was not liable to pay tax under section 5(2) of the Karnataka Act for the assessment year 1981-82 concerning goods purchased at concessional rates under the Central Act in the previous assessment year. The judgment was delivered by the Chief Justice and Justice Shivashankar Bhat K., ordering no costs to be paid.