Sales tax exemption can also defeat additional tax where the additional levy depends on the same taxable turnover.

Exemption from basic sales tax on raw bathi under a notification issued for the relevant taxable turnover removed the statutory base for imposing additional tax on the same turnover. Because additional tax under section 6C is computed with reference to turnover otherwise liable to tax under section 6, 5B, 5C or 6, the Karnataka High Court held that once the principal levy under section 6 was exempted, the ancillary additional levy could not survive on that turnover. In the absence of any separate notification preserving the additional tax, the demand was not sustainable.

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Issues: Whether additional tax under section 6C of the Karnataka Sales Tax Act, 1957 could be levied when the dealer was exempted from the basic tax payable under section 6 by a notification issued under section 8A of the Act.

Analysis: The notification issued under section 8A exempted the tax payable under section 6 together with turnover tax under section 6B on raw bathi used for manufacture of agarbathi. Section 6C levies additional tax at one per cent of the portion of total turnover liable to tax under sections 5, 5B, 5C or 6. Since the additional levy is computed with reference to turnover otherwise liable to tax under section 6, exemption from the principal tax meant that the foundation for charging additional tax on the same turnover was absent. In the absence of any separate notification preserving the additional levy, the demand could not be sustained.

Conclusion: The levy of additional tax under section 6C was not sustainable where the basic tax under section 6 stood exempted.

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