2010 (12) TMI 1105 - HC - VAT and Sales Tax

Court Upholds Sales Tax on Old Newspapers Sold as Waste Paper, Denies Exemption

United Agencies Versus Assistant Commissioner of Commercial Taxes, II Circle, Bangalore and Others

In STA No. 3 of 2009, the court upheld the decision to impose sales tax on old newspapers sold as waste paper, ruling that they lose their character as ... Whether old newspaper when sold as such, would be covered by the exemption provided in the Constitution under entry 92A of List I read with entry 54 of List II of the Seventh Schedule to the Constitution and sale thereof would not be liable to tax under the Karnataka Sales Tax Act? In case of a conflict arising from decision of the co-equal Benches of the Supreme Court, whether the High Court can follow the earlier decision which has taken a particular view as opposed to a later decision on the same point which has taken a contrary view? Held that:- The object and purpose of the said Act is totally different from the object and purpose of levying sales tax on old newspaper. In fact, it is a settled principle of taxation law that while interpreting the provision of a taxation statute in the context of the tax being leviable on a particular transaction and interpretation thereof, reliance cannot be placed on the meaning given to certain words or phrases in other enactments. Under the circumstances, I am constrained not to follow the later decision of the Supreme Court in Sait Rikhaji's case [1990 (8) TMI 344 - SUPREME COURT OF INDIA] and are inclined to follow the earlier decisions in The Indian Express (P.) Ltd. case [1986 (4) TMI 321 - SUPREME COURT OF INDIA], and in the case of The Hindu [1987 (11) TMI 334 - SUPREME COURT OF INDIA]. Hence, the questions raised in these cases are answered against the assessee and in favour of the Revenue. Issues Involved:1. Opportunity to the appellant before passing the impugned order.2. Interpretation of Entry 54 of List II of the Seventh Schedule to the Constitution of India regarding the exemption of sales tax on old newspapers.3. Applicability of Article 141 of the Constitution of India and the Supreme Court's ruling in Sait Rikhaji Furtarnal v. State of Andhra Pradesh.4. Classification of old newspapers as waste paper for tax purposes.Detailed Analysis:STA No. 3 of 2009:1. Opportunity to the Appellant:- The appellant contended that the third respondent (revisional authority) passed the impugned order without affording an opportunity to the appellant. The court found this action unjustified and emphasized the importance of procedural fairness in tax assessments.2. Interpretation of Entry 54 of List II:- The appellant argued that the sale of old newspapers should be exempt from tax under Entry 54 of List II of the Seventh Schedule to the Constitution, which exempts newspapers from sales tax. The court examined whether old newspapers lose their character as newspapers when sold as waste paper.3. Applicability of Article 141 and Supreme Court Rulings:- The appellant cited the Supreme Court's ruling in Sait Rikhaji Furtarnal v. State of Andhra Pradesh, which held that old newspapers retain their character and are exempt from sales tax. The court had to determine whether this ruling should be followed or if it was per incuriam due to not considering earlier conflicting judgments.4. Classification of Old Newspapers:- The court deliberated whether old newspapers should be classified as waste paper for tax purposes. The State argued that old newspapers sold by weight lose their news value and should be taxed as waste paper.STRP Nos. 36 of 2007 and 39 of 2008:1. Interpretation of Full Bench Decision:- The Tribunal's interpretation of the Full Bench decision of the Andhra Pradesh High Court was questioned. The Full Bench had distinguished the point involved from two Division Bench judgments of the Supreme Court, impacting the applicability of sales tax on old newspapers.2. Application of Later Judgment:- The Tribunal's reliance on the later judgment of the Supreme Court, even if distinguished by the Full Bench of the Andhra Pradesh High Court, was scrutinized. The court had to decide if old newspapers sold by weight should be treated differently for tax purposes.3. Reading of Entry 54:- The court examined whether Entry 54 of List II should include old newspapers/raddi paper, which have scrap value and no news value.Judgment Summary:- STA No. 3 of 2009:- The court dismissed the appeal, upholding the revisional authority's decision to impose sales tax on old newspapers sold as waste paper. The court found that the appellant was not denied procedural fairness and that old newspapers sold as waste paper lose their character as newspapers.- STRP Nos. 36 of 2007 and 39 of 2008:- The court allowed the revision petitions, siding with the Revenue. It held that old newspapers sold by weight for purposes other than reading do not qualify for the tax exemption under Entry 54 of List II. The court preferred the earlier Supreme Court decisions in The Indian Express (P.) Ltd. and The Hindu, which held that old newspapers sold as waste paper are taxable.Additional Remarks by Mrs. B.V. Nagarathna, J.:- Mrs. B.V. Nagarathna, J., concurred with the judgment and added that the later decision in Sait Rikhaji Furtarnal's case should not automatically be followed if it was based on an erroneous impression or did not consider earlier binding precedents. She emphasized that the earlier decisions in The Indian Express (P.) Ltd. and The Hindu should prevail, as they directly addressed the issue of taxability of old newspapers sold as waste paper.Conclusion:- The court concluded that old newspapers sold as waste paper are subject to sales tax, affirming the earlier judgments that distinguish between newspapers sold for reading and those sold as waste. The appeal in STA No. 3 of 2009 was dismissed, and the revision petitions in STRP Nos. 36 of 2007 and 39 of 2008 were allowed in favor of the Revenue.