TMI Blog1995 (1) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, in contradistinction to other commodities, has been made multi-point as provided under sub-section (1-A) of section 5 of the Act, inserted by the Karnataka Sales Tax (Amendment) Act, 1988, with effect from April 1, 1988. The said provision reads as under: "Notwithstanding anything contained in sub-section (1), every dealer shall pay for each year tax on his taxable turnover of sales (other than the last sale in the State) relating to all kinds of alcoholic liquors for human consumption (other than toddy, arrack, fenny, wine and beer) at the rate of thirty-five per cent of such turnover: Provided that at any point of sale other than first point of sale and the last point of sale, the taxable turnover shall be arrived at by deducting the turnover of such goods on which tax has been levied under this sub-section at the immediately preceding point of sale: Provided further that no tax under this sub-section shall be levied and collected up to the 31st day of May, 1988 on subsequent sales excepting the last sale of alcoholic liquors for human consumption (other than toddy, arrack, fenny, wine and beer) which have already been subjected to tax at the rate of fortyfive per cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst sale is much less than the sale price at subsequent sales which are presently exempt from tax (except the last sale). In order to plug this loophole, it is proposed to levy tax at every sale at the rate of 35 per cent except the last sale and to give a set-off of the tax paid on the previous sale. Levy of last sale point tax at the rate of 5 per cent will continue." 9.. Therefore, the scheme envisaged under the impugned provisions of section 5(1-A) is that of value added taxation whereunder the value added to a commodity which has not suffered tax is only subjected to tax so that no part of the turnover from first point to last point remains uncovered by levy of tax. For the present purposes, the definitions of "taxable turnover", "total turnover" and "turnover" as defined under the Act are material, and, accordingly those are being extracted hereunder: "2(u-1). 'Taxable turnover' means the turnover on which a dealer shall be liable to pay tax as determined after making such deductions from his total turnover and in such manner as may be prescribed, but shall not include the turnover of purchase or sale in the course of inter-State trade or commerce or in the course of ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of Goddard, L.J., in Love v. Norman Wright (Builders) Ltd. [1944] 1 All ER 618: " 'Where an article is taxed, whether by purchase tax, customs duty, or excise duty, the tax becomes part of the price which ordinarily the buyer will have to pay. The price of an ounce of tobacco is what it is because of the rate of tax, but on a sale there is only one consideration though made up of cost plus profit plus tax. So, if a seller offers goods for sale, it is for him to quote a price which includes the tax if he desires to pass it on to the buyer. If the buyer agrees to the price, it is not for him to consider how it is made up or whether the seller has included tax or not'.... So far as the purchaser is concerned, he pays for the goods what the seller demands, viz., price even though it may include tax. That is the whole consideration for the sale and there is no reason why the whole amount paid to the seller by the purchaser should not be treated as the consideration for the sale and included in the turnover." 11.. In the case of Delhi Cloth and General Mills Co. Ltd. v. Commissioner of Sales Tax [1971] 28 STC 331, it has been held by the Supreme Court that: "..........Unle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the turnover. Under the scheme of the Act, for the purpose of computing the tax liability of the dealer, the tax component is allowed as a deduction under rule 6(4)(h) of the Karnataka Sales Tax Rules, 1957. But can for this reason, it can be said that the entire turnover including the tax components has not suffered tax under the Act. In my opinion, the answer has to be in negative. Because, Rs. 35 which has been levied as tax is relatable to the entire turnover of Rs. 135. For the said reason, in my opinion, the Commissioner has erred in taking a view that the tax component forming a part of the turnover will not qualify for deduction under the first proviso to section 5(1-A) of the Act. 14.. The next contention raised is regarding the validity of the Notification No. FD 271 CSI 89, dated 17th November, 1989 (annexure B), which reads as under: "In exercise of the powers conferred by clause (b) of sub-section (1) of section 8-A of the Karnataka Sales Tax Act, 1957 (Karnataka Act 25 of 1957), the Government of Karnataka hereby exempts with immediate effect the tax payable under the Act by a dealer holding a distributor licence under the Karnataka Excise (Sale of Indian and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by them. Issuance of the impugned notification has not in any way affected their ultimate liability. The submission that because of the notification the petitioners have to shoulder the tax liability of MSIL is obviously based on a wrong arithmetics. 16.. In the view of the matter, latter part of the notification namely "subject to the condition that the said turnover of sales shall not be deemed to be the turnover on which tax has been levied for the purpose of the proviso to subsection (1-A) of section 5 of the said Act", is inconsequential. It is so because that part of the turnover of the MSIL which has not borne the incidence of tax could not have been, even otherwise deducted from the turnover of the petitioners, under the first proviso to section 5(1-A) of the Act. 17.. As such I do not find any infirmity in the notification at annexure B. 18. Before concluding, I find it necessary to notice one important aspect touching upon the practice which is being followed in the office of the Commissioner of Commercial Taxes. As noticed above, the present controversy has arisen because of some alleged statutory clarification issued on behalf of the Commissioner purporting to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stand as to under what statutory authority such clarifications are issued by the Commissioner or some one acting on his behalf; or how these can acquire statutory colour so as to bind the assessing authorities. Dealing with somewhat similar situation, a Bench of this Court in the case of Lipton India Limited v. State of Karnataka [1994] 95 STC 225; ILR 1994 Kar 1848 at paragraph 53 (at pages 267 and 268 of STC; 1903 and 1904 of ILR), had to observe thus: "It is difficult to appreciate how the reply of the Commissioner dated April 2, 1992 to the appellant can ever be construed as suo motu clarification by the Commissioner about the rate of tax payable and that the said clarification can be said to have been made to officers and persons employed in the execution of the Act, who have to follow such clarification. The said reply given by the Commissioner was not in exercise of any suo motu power. Secondly, it was not a clarification issued in connection with any rate of tax. Thirdly, it was not addressed to any of the subordinate officers. Mr. Chidambaram, in this connection submitted that it can be said to be a clarification saying that it will not be a nil rate of tax but would be ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
