TMI Blog1982 (2) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... the Karnataka Act 7 of 1981. Section 6B of the "Act" as it earlier stood envisaged and provided for an additional tax levied on and collected from every dealer liable to pay tax under section 5 or under section 6 at the rate of 10 paise in the rupee on the sales tax or purchase tax or both payable, as the case may be, by such dealer. Sub-section (2) of section 6B provided that the provisions of the Act and Rules made thereunder including those relating to refund or exemption from tax shall, in so far as may be, apply in relation to the levy, assessment and collection of such additional tax as they apply in relation to the levy, assessment and collection of sales tax or purchase tax under the "Act". This provision was substituted by section 3 of the Karnataka Act 7 of 1981. There is material difference between the provisions of the earlier sub-section (1) and the substituted sub-section. While the earlier provisions envisaged an additional levy on a dealer calculated at 10 paise in the rupee on the amount of sales tax or purchase tax or both payable by him, the present sub-section (1) envisages a levy at per cent on the "total turnover" of a dealer whose "total turnover" in a yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er in favour of the petitioners. As the "motor vehicles" constituting the subject-matter of the hire-purchase agreement suffer tax at the point of first sale by the automobile dealers in favour of the petitioner, the sales that the hire purchase agreements might eventually culminate in as between the petitioner and the hirers in terms of the agreements became second sales and exempt from levy of tax under section 5(1) by virtue of section 5(3)(a), of the "Act". However, the assessing authority, upon a construction of the provisions of section 6B, has held that notwithstanding the circumstance that the turnover of the second sales by the petitioner is not exigible to tax under section 5(1) of the "Act", the turnover of such second sales, nevertheless, attracts the levy under section 6B. The petitioner's turnover for the two working days that fell between 29th March, 1981, and 31st March, 1981, was Rs. 2,37,000 and turnover tax at per cent under section 6B amounting to Rs. 1,185 is demanded from the petitioner under the demand notice dated 17th September, 1981 (annexure C). The legality of this demand is challenged by the petitioner. In W.P. Nos. 11889 of 1981 and 11890 of 1981, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vanathan, the learned counsel who addressed arguments for the petitioners, and the learned Advocate-General and Sri M.R. Achar, the learned High Court Government Advocate, for the respondents. 6.. A number of contentions are taken in the memorandum of writ petitions. Initially, the submission of the counsel for the petitioners was that in view of section 6B(1) including inter-State and export turnover within the concept of "total turnover", as defined in section 2(u-2) of the "Act", was unconstitutional as offending article 286 of the Constitution. But this line of argument was not pursued and Sri K. Srinivasan stated-and this submission was adopted by all other learned counsel-that he would not urge the question of constitutionality, but would rest his case on a point of construction, and would urge that the expression "total turnover" occurring in section 6B(1) should be understood to mean a turnover excluding the inter-State and import and export turnover. It may be pointed out here that section 2(u-2) of the "Act" defines "total turnover" to mean the aggregate turnover in all goods of a dealer whether or not the whole or any part of it is liable to tax including the turnove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpetence to levy tax and so understood the line of demarcation of dealers in whose cases the levy under section 6B(1) is attracted would depend upon the quantum of total turnover excluding the transactions of inter-State sales and purchases and sales and purchases in the course of export and import. The argument for the revenue is that the first part of section 6B(1) is not a provision for levy or imposition of the tax; that it merely specifies the class of dealers whose turnover in intrastate transactions is liable to turnover tax under section 6B(1) and that it was only for that limited purpose the total turnover, including inter-State and import and export turnover, is taken into account. But the levy of turnover tax, under section 6B(1) was, so proceeds the argument, only on such turnover respecting which the State Legislature had competence to levy tax, as is evident from the proviso to section 6B(1), and therefore, it is not impermissible to give to the expression "total turnover" in the first part of section 6B(1) the same meaning as in section 2(u-2) of the "Act". 8.. In support of their interpretation, the learned counsel for the petitioners placed reliance on the pron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded the inter-State sales turnover of coconut oil to the extent of Rs. 3,67,816-10-1, both from the gross turnover and taxable turnover. Consequently only that part of the purchase turnover of copra corresponding to the intrastate sales turnover of oil was permitted to be excluded from the gross turnover so arrived at, for purposes of rule 7(1)(k). Consequently deduction, only to the extent of the purchase turnover of copra, as was attributable to the oil manufactured and sold within the State out of the gross turnover, was given. Both the High Court and the Supreme Court upheld the stand of the revenue. The Supreme Court held that the effect of section 26, introduced into the Travancore-Cochin General Sales Tax Act, 1125, a pre-Constitution law so as to bring that law in conformity with the requirements of article 286 of the Constitution, was, in so far as categories of sales falling within article 286 of the Constitution were concerned, the "setting at nought and of obliterating in regard thereto the provisions contained in the Act relating to the imposition of tax on the sale or purchase of such goods ". Section 26 was in terms similar to article 286. It was, therefore, held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or export transactions could be included in the expression "total turnover " occurring in the first part of section 6B(1). *Here italicised. 9.. The learned counsel for the petitioners stated that the principle of the above pronouncement of the Supreme Court could well be illustrated by the way it was understood and applied in two cases, one of the Madras High Court in T.A. Kumarasamy Pathar v. State of Madras [1969] 23 STC 447 and the other a Full Bench decision of the Allahabad High Court in Commissioner, Sales Tax, U.P. v. Allied Chemicals, Kanpur [1969] 23 STC 165 (FB). 10.. In T.A. Kumarasamy Pathar's case [1969] 23 STC 447 the facts were these: Section 3 of the Madras General Sales Tax Act, 1959, imposed a tax on every dealer "whose total turnover for a year was not less than Rs. 10,000". The turnover respecting intrastate sales of the assessee in that case was estimated by the authorities at Rs. 8,935.40. The turnover of inter-State sales of the assessee was Rs. 12,421.12. The two together amounted to Rs. 21,356.52. The question was whether for purposes of ascertainment of the cut-off line of Rs. 10,000 the inter-State sales turnover could, as the authorities did, be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales cannot be taken into consideration when applying the first proviso to section 3(1) and that is so whether what is contemplated by that proviso is the gross turnover or net turnover." Gulati, J., in his concurring opinion referred to a contention similar to the one urged by the State in this case that as long as inter-State sales and export sales were not ultimately subjected to tax, there was indeed no exceeding of the constitutional limitation in article 286, observed: "...........The argument proceeded that so long as such sales were not subjected to tax, the mandate contained in article 286 could not be said to have been violated merely because such sales were included in the gross turnover of a dealer in order to determine as to whether or not he was liable to pay tax in respect of his other sales. The State was not bound to provide that a dealer shall not be liable to tax if his turnover did not exceed a particular limit, but if it did provide a minimum limit, it was open to the legislature to further provide that the minimum turnover so provided would include such sales as were not liable to tax. The argument is attractive indeed, but cannot be accepted in view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at all places of business in the State, whether or not the whole or any portion of such turnover is liable to tax, including the turnover of purchase or sale in the course of inter-State trade or commerce or in the course of export of the goods out of the territory of India or in the course of import of the goods into the territory of India." The learned Advocate-General says it is a sound rule of construction to give the same meaning to the same words occurring in different parts of the same section unless sufficient reasons can be assigned. But a word in one part of a section may have to be understood in a different sense from that which it bears in another part or to give a meaning different from the one given in the definition section if the context so requires. Here the expression "total turnover" in the two places in section 6B(1) of the "Act", says the learned Advocate-General, are used in different contexts and that the expression in the clause "every dealer whose total turnover in a year exceeds rupees one lakh" cannot be qualified and controlled by the proviso to sub-section (1) of section 6B(1) as suggested by the learned counsel for the petitioners. It is further urge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in spite of its disability in the matter of the imposition of sales tax by virtue of the provisions of article 286 of the Constitution, may for the purposes of the registration of a dealer and submission of the returns of sales tax include these transactions in the dealer's turnover. Such inclusion, however, for the purposes aforesaid would not affect the non-liability of these transactions to levy or imposition of sales tax by virtue of the provisions of articles 286 of the Constitution and the corresponding provision enacted in the Act, as above." (Underlining supplied*). Indeed, says the learned Advocate-General the very passage relied upon by the petitioners in Fernandez's case [1957] 8 STC 561 (SC) furnishes the answer. The Supreme Court said: "........The very fact of their non-liability to tax is sufficient to exclude them from the calculation of the gross turnover as well as the net turnover on which sales tax can be levied or imposed." (Underlining supplied*). In a taxing law the question as to which part of it is a provision which imposes a tax must needs depend on the context in which and the purposes for which the provision occurs. It is no doubt true, as observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impact of the burden of a tax-law on different persons or interests, but can only strike down, if the court is satisfied that the method adopted is arbitrary, capricious, fanciful or clearly unjust. If the legislature has adopted one method for imposition of tax burden, the court cannot strike down the law on the ground that the legislature should have adopted another method which, in the opinion of the court, is more reasonable: see Khandige Sham Bhat v. Agricultural Income-tax Officer, Kasaragod [1963] 48 ITR 21 (SC). In view of the intrinsic complexity of fiscal adjustments of diverse elements, there is considerably wide discretion in the matter of classification for taxation purposes. If the classification by a taxing statute is a reasonable one, it is not vulnerable on the ground of discrimination merely because it taxes, or exempts from tax, some income or objects and not others. 17.. In Twyford Tea Co. Ltd. v. Kerala State AIR 1970 SC 1133 the Supreme Court said: "There is a wide range of selection and freedom in appraisal not only in the objects of taxation and the manner of taxation but also in the determination of the rate or rates applicable. The burden of proving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al tax. That capacity is being judged by a common yardstick. The emphasis of the argument of the learned counsel for the petitioners is somewhat on the lines that there is no rational nexus between the classification and objects of the legislation. The distinction between intrastate sales and inter-State sales will undoubtedly assume materiality in regard to the power of the State to impose tax on such sales. Indeed a close parallel and close analogy is furnished by section 5(5) of the "Act" which is in the "Act " over the years unchallenged. It reads: "A dealer whose total turnover in any year is less than twenty-five thousand rupees shall not be liable to pay tax for that year." The meaning of the expression "total turnover" in that provision also cannot be different either and must draw the implications from section 2(u-2). Of course, the counsel now say that if section 6B(1) is constitutionally bad, section 5(5) could be no better. But what is of importance is both under section 5(5) and section 6B(1) the total turnover, including inter-State and import and export turnover on which it is not competent for the State Legislature to levy tax, has been taken only for the purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the additional tax is really a tax on the sale of goods.......................................It is in reality a tax on the aggregate of sales effected by a dealer during a year................................................So, the contention of the appellants that the additional sales tax is not a tax on sales but on the income of the dealer is without any basis." We, accordingly, hold and answer Point (C) against the petitioners. 21.. Point (D): The argument on this point was advanced by Sri Kashinath Rao Patil, the learned counsel for some of the petitioners. Apart from raising the contention, he did not make any submission in substantiation of it. We may however examine the merits of the contention. The contention is that section 6B of the "Act", as substituted by Karnataka Act 7 of 1981, imposes unreasonable restrictions on the freedom of trade, commerce and intercourse, and therefore violative of article 301 of the Constitution. Even if the restrictions can be said to be reasonable, the argument proceeds, the legislative measure, not having been introduced with the previous sanction of the President, is unconstitutional. It is no doubt true that taxation laws a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in computing the turnover for purposes of the levy of turnover tax under section 6B(1). 23.. It is useful to recapitulate the scheme in regard to the exemptions under the "Act". Section 5(1) of the "Act" is the charging section so far as the main impost under the "Act" is concerned. It provides that every dealer shall pay, for each year, tax on his taxable turnover at the rate of 4 per cent of such turnover. Sub-section (3) of section 5 says that notwithstanding anything contained in sub-section (1) of section 5, no tax under the "Act " shall be levied: (a) In the case of sale of goods mentioned in column (2) of the Second Schedule at the rate specified in the corresponding entry in column (3) of that Schedule payable by the first or the earliest of successive dealers in the State who is liable to tax on the taxable turnover of sales. (b) Similarly, in the case of purchase of any goods mentioned in column (2) of the Third Schedule at the rate and only at the point specified in the corresponding entries in columns (4) and (3) of that schedule, payable by the dealer liable to pay tax under this Act on the taxable turnover of purchases. Section 5(4) provides that the tax u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and collection of sales tax or purchase tax under this Act." (Underlining supplied*) 25.. Reliance was placed by the petitioners on the pronouncement of the Supreme Court in the case of State of Mysore v. Yaddalam Lakshminarasimhiah Setty [1965] 16 STC 231 (SC); AIR 1965 SC 1510 in which provisions of section 9(1) and (2) of the Central Sales Tax Act came in for interpretation. The relevant facts of that case and the precise question which arose for consideration in that case are: (i) Section 6 of the Central Sales Tax Act was the charging section. It provided for the levy of Central sales tax by any dealer in any State on all sales effected by him in the course of inter-State transactions. Sub-section (2) of section 8 provided that the rate of tax payable on such inter-State sales shall be the same as fixed under the sales tax law of the appropriate State. Section 9(1) of the Central Sales Tax Act provided that the tax payable under that Act shall be levied and collected in the appropriate State by the Government of India in the manner provided in sub-section (2) of section 9. Sub-section (2), inter alia, provided that the authorities empowered to assess, collect and enforce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 5(3)(a) of the Mysore Sales Tax Act, 1957, hereinafter called the State Act, tax shall be levied in the case of the sale of any of the goods mentioned in column (2) of the Second Schedule by the first or the earliest of successive dealers in the State, who is liable to tax under that section, a tax at the rate specified in the corresponding entry of column (3) of the said schedule on the turnover of sales of such dealer in each year relating to such goods. When section 9(1) says that under the Central Act tax shall be levied in the same manner as the tax on the sale or purchase of goods under the general sales tax law of the State is assessed, paid and collected, it is reasonable to hold that the expression 'levied' in section 9(1) of the Central Act refers to the expression 'levied' in section 5(3)(a) of the State Act......................." Relying on the aforesaid view, the petitioners contend that the wording of section 6B(2) being similar to section 9(1) and (2) of the Central Sales Tax Act, it must receive the same construction and have the same significance, in the matter of assessment on turnover tax under section 6B(1) of the "Act" and therefore, it should be held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 6B(1) and in such an event the expression "if any" in section 6B(1) -which was intended to emphasise that there is a "turnover" taxable under section 6(B)(1) which may not be taxable under section 5(1)-would be rendered nugatory; (b) That the proviso to section 6B(1) exhaustively enumerates-and was intended to exhaust all-the exemptions in relation to the levy under section 6B and the scheme of and the need for the enumeration would be rendered nugatory if section 6B(2) is given the meaning which the petitioners impute to it and would detract from the exhaustiveness, legislatively intended, for, the construction suggested by the petitioners would have the effect of rewriting the proviso by adding to it what was, as a legislative policy, omitted from it; (c) That no construction of section 6B(2) which would militate against the scheme and clear intent of section 6B(1) should be permitted; and (d) That the expression "so far as may be" in section 6B(2) was intended to avoid such a construction of that sub-section and the construction suggested by the petitioners would ignore this expression. 27.. After a careful consideration of the matter, it appears to us that even if wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1978] 41 STC 409 (SC) the Supreme Court said: "...........It is a well-settled rule of interpretation that where there are two expressions which might have been used to convey a certain intention, but one of those expressions will convey that intention more clearly than the other, it is proper to conclude that, if the legislature used that one of the two expressions which would convey the intention less clearly, it does not intend to convey that intention at all.......................................................................the legislature would have expressed itself clearly and not left its intention to be gathered by doubtful implication from other provisions of the Act." The implication of the words "in addition to the tax payable, if any" in section 6B(1) of the "Act" may very well be that the legislature conceived the possibility of a transaction respecting which the dealer may not be liable under section 5(1), but yet may be liable under section 6B. But it is an altogether different thing to say that what is exempt under section 5(1) must necessarily be subject to tax under section 6B(1) or that the court of construction ought to find out some residual positions w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cope of section 5(1). An exemption can arise only when there is a levy otherwise attracted to the case covered by the exemption. That apart, the Rules to which section 6B expressly alludes, provide in rule 6(4) and 6(4)(i) thus: "Rule 6. (4) In determining the taxable turnover, the amount specified in clauses (a) to (k) shall, subject to the conditions specified therein, be deducted from the total turnover as determined under clauses (a) and (b) of sub-rule (1)." "Rule 6. (4)(i) All amounts for which the goods specified in the Second, Third and Fourth Schedules are sold or purchased by a dealer when such sales or purchases are exempt from the tax leviable under any of the provisions of the Act." This would make it clear that section 5(3)(a) and 5(3)(b) refer to and provide for exemptions. 30.. It was next urged by the learned Advocate-General that if we give the meaning that the petitioners want to give to section 6B(2), the expression "total turnover" in the second part of section 6B(1) would really be read as "taxable turnover". This consequence appears to us not to have been altogether unintended by the amendment having regard to the speech of the Honourable Finance Mini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Parliament were drafted with divine prescience and perfect clarity. In the absence of it, when a defect appears a Judge cannot simply fold his hands and blame the draftsman. He must set to work on the constructive task of finding the intention of Parliament...............A Judge should ask himself the question how, if the makers of the Act had themselves come across this ruck in the texture of it, they would have straightened it out? He must then do as they would have done. A Judge must not alter the material of which the Act is woven, but he can and should iron out the creases." But we are dealing with a taxation measure and permissible limits of interpretation cannot allow the view urged for the revenue to prevail. 32.. In view of the foregoing discussion, we hold and answer point (E) in favour of the petitioners and against the revenue. We hold that the exemptions provided under sections 5(3)(a) and 5(3)(b), to the levy under sections 5(1) and 6 of the "Act", are, by virtue of section 6B(2) of the "Act", also attracted to the levy under section 6B(1). 33.. Before we dispose of these petitions by appropriate directions, our attention was invited to a batch of cases inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21074 of 1981, 22357 of 1981 and 14892 of 1981, referred to in para 33, the petitioners are directed to make good the deficit court-fee within six weeks from today, failing which the same shall be recovered from them in accordance with law. (5) In all the writ petitions disposed of by the main and subsequent orders relating to the challenge to section 6B of the Karnataka Sales Tax Act, 1957, we direct the office, in relaxation of the rules regarding issue of writs, that a common writ with short cause title of the first case in the batch, shall be issued to the State and the Commissioner of Commercial Taxes. It shall not be necessary to issue individual writs. A copy of the writ shall also be furnished to Sri M.R. Achar, the learned Government Advocate. (6) In the circumstances of the case, the parties are left to bear and pay their own costs in all these petitions. At the conclusion of the above order, the learned counsel for the petitioners made oral applications under article 134-A of the Constitution for certificates of fitness under article 133 to appeal to the Supreme Court from this order. The case, in our opinion, does involve substantial questions of law of general ..... 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