2003 (3) TMI 696 - HC - VAT and Sales Tax

Manufacturing tire flaps triggers tax liability under Karnataka Sales Tax Act despite low turnover

Vima Rubbers Pvt. Ltd. Versus Commercial Tax Officer (Intl.), Mysore and another

Vima Rubbers Pvt. Ltd. Versus Commercial Tax Officer (Intl.), Mysore and another - [2006] 143 STC 486 (Kar) Issues:Challenge to Tribunal's order under Karnataka Sales Tax Act, 1957 regarding liability to pay tax for purchase of firewood by a petitioner engaged in manufacturing of tyre flaps.Analysis:The petitions were filed challenging the Tribunal's order confirming the assessing authority's decision that the petitioner is liable to pay tax as a 'manufacturer' under section 5(5)(b)(ii) of the Act, despite the turnover being less than Rs. 2 lakhs. The petitioner argued that it is a dealer, not a manufacturer, as it manufactures tyre flaps on behalf of another company. However, the authorities held that the petitioner falls under the category of a manufacturer, distinct from other dealers, based on the terms of the agreement with the company it manufactures for.The petitioner contended that the purchase of firewood locally from unregistered dealers for manufacturing tyre flaps should not attract tax liability as it was not supplied by the company it works for. The authorities found that the petitioner, being a manufacturer of tyre flaps, falls under the provision of law regarding turnover exceeding Rs. 1 lakh within the State of Karnataka, even though it was less than Rs. 2 lakhs. The provision specifically refers to dealers, not manufacturers, for purchases made outside the State.The Court concluded that the impugned orders correctly interpreted the law in relation to the facts of the case. It was determined that no substantial question of law arose, and the view taken by the authorities and the Tribunal was not perverse or contrary to any legal provision. Consequently, the petitions were rejected, and the petitioner's challenge was dismissed.