1987 (9) TMI 394 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of sub-section (2-A) of section 8 of the Central Sales Tax Act.

Analysis:
The judgment of the High Court of Andhra Pradesh dealt with the interpretation of sub-section (2-A) of section 8 of the Central Sales Tax Act in the context of two writ petitions. The petitions raised a question regarding the tax liability on the turnover of goods sold in inter-State trade or commerce, specifically focusing on the applicability of surcharge under the State Act. The petitioners, a public limited company engaged in the sale of declared goods like cotton yarn, de-oiled cake, and vegetable oils, challenged a notice demanding payment of surcharge on the tax already paid. The key issue revolved around whether the surcharge imposed under the State Act should be included in the calculation of Central sales tax payable on inter-State transactions.

The court examined the relevant provisions of the Central Sales Tax Act, particularly section 8 which outlines the rates of tax on inter-State sales. Sub-section (2-A) of section 8, introduced in 1958 and amended in 1972, restricts the tax payable on goods exempt from State tax or taxed at a lower rate to nil or the lower rate. The court analyzed the language of the sub-section, emphasizing that the term "tax" encompasses not only the basic sales tax but also any additional charges, fees, or surcharges imposed by the State Act. The objective of sub-section (2-A) is to ensure uniformity in tax rates between intra-State and inter-State sales of goods.

The court rejected the petitioner's argument that sub-section (2-A) only pertains to the basic tax rate and does not include surcharge. It highlighted that surcharge, though labeled differently, functions as an additional sales tax under the State Act. Referring to a previous decision by the Sales Tax Appellate Tribunal, the court emphasized the need for consistency in tax treatment across intra-State and inter-State sales. The court also distinguished and disagreed with decisions from the Kerala and Karnataka High Courts, which held that additional sales tax or surcharge should not be considered in the calculation of Central sales tax.

Ultimately, the High Court concluded that surcharge must be factored into the determination of the Central sales tax rate under sub-section (2-A) of section 8. The judgment dismissed the writ petitions, upholding the inclusion of surcharge in the tax liability for inter-State sales to maintain parity with intra-State sales. No costs were awarded in the case.

In summary, the judgment clarified the scope of sub-section (2-A) of section 8 of the Central Sales Tax Act, affirming that surcharge levied under the State Act should be included in the calculation of Central sales tax on inter-State transactions. The decision aimed to prevent discrepancies in tax treatment between intra-State and inter-State sales and ensure consistency in tax rates across different types of transactions.