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2016 (11) TMI 31 - SUPREME COURT

2016 (11) TMI 31 - SUPREME COURT - TMI - Quantum of surcharge - payment of Entry Tax u/s 3(3) of the Orissa Entry Tax Act, 1999 - surcharge calculated on the balance amount after deduction of the entry tax paid on the motor vehicles - whether the ‘Surcharge’ under Section 5A of the OST Act is to be computed on the gross amount of sales tax or on the net amount of sales tax after setting of or deducting the amount of entry tax? - Section 5A of the OST Act - Rule 18 of the Odisha Entry Tax Rule, 1 .....

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the levy of surcharge under Section 5A of the OST Act - on a conjoint reading of Section 5 of the OST Act, Section 4 of the OET Act and Rule 18 of the Rules, we are of the considered opinion that the amount of surcharge under Section 5A of the OST Act is to be levied before deducting the amount of entry tax paid by a dealer. - Surchargr to be calculated on gross amount - appeal allowed - decided in favor of appellant revenue. - Civil Appeal Nos. 5913-5920, 5921 of 2008 - Dated:- 28-10-2016 .....

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given below:- a) The respondents are engaged in the sale and purchase of Motor Vehicles and are registered dealers under the Orissa Sales Tax Act, 1947 (in short the OST Act ) as well as under the Central Sales Tax Act. The respondents had been paying entry tax on the goods when they were bought into the State of Orissa under Section 3(3) of the Orissa Entry Tax Act, 1999 (in short the OET Act ). However, they were paying surcharge on the balance amount after deduction of the entry tax paid on t .....

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ales tax payable by the respondent-Company. d) Being aggrieved by the demand notice dated 30.03.2002 as well as the letter dated 20.11.2001 issued by the Finance Department of the Government of Orissa, the respondent-Company filed a writ petition being No. 233 of 2002 along with a set of other writ petitions filed by the respondents herein before the High Court of Orissa at Cuttack. e) The Division Bench of the High Court, vide common judgment and order dated 05.01.2007, allowed the appeals file .....

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Sales Tax Act to the extent of entry tax paid under the OET Act. This provision only appertains to reduction of entry tax. It has nothing to do with the computation of the surcharge under the OST Act. In any event, in terms of Section 4 of the OET Act, reduction of entry tax paid by the dealers is from the liability under the Sales Tax Act. In substance, it means that the total liability under the Sales Tax Act having been determined would then be reduced by the extent of entry tax paid. 4) Lear .....

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its ambit;…. 5) Learned senior counsel further relied upon Lalit Mohan Pandey vs. Pooran Singh and Others (2004) 6 SCC 626, wherein this Court has held as under:- 75. The illustration appended to the Rules does not envisage such a situation. Illustrations although are of relevance and have some value in the construction of the text of the sections but they cannot have the effect of modifying the language of the statute and they cannot either curtail or expand the ambit of the statute. 6) .....

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ank Ltd. vs. The Third Income Tax Officer, Madurai (1975) 2 SCC 454, it was held as under:- 18. In CIT Kerala v. K. Srinivasan on which the appellant relies, this Court has traced the history of the concept of surcharge in the tax laws of our country. After considering the report of the Committee on Indian Constitutional Reforms, the provisions of the Government of India Act, 1935, the provisions of Articles 269, 270 and 271 of the Constitution and the various Finance Acts, this Court held, diff .....

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certain class of dealers in addition to the tax payable by them….. 79. ….A surcharge in its true nature and character is nothing but a higher rate of tax to raise revenue for general purposes…. (iv) In M/s Ashok Service Centre and Others vs. State of Orissa (1983) 2 SCC 82, this Court has held as under:- 17….The Act only levied some extra sales tax in addition to what had been levied by the principal Act. The nature of the taxes levied under the Act and under the pri .....

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on is the same as the tax on which it is imposed as surcharge. A surcharge on land revenue is an enhancement of the land revenue to the extent of the imposition of surcharge. The nature of such imposition is the same viz., land revenue on which it is a surcharge. 7) On the other hand, learned senior counsel for the respondents submitted that in view of the clarification issued by the office of Commercial Tax through e-mail to one of the dealers in motor vehicles, viz., TELCO, Bhubaneswar, the ap .....

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ed that the amount of surcharge is to be levied only on the balance amount of sales tax payable on the sale price of the motor vehicle after deducting the entry tax paid. According to him, if two constructions are possible then the one which preserves the workability and efficacy has to be preferred for which he relied upon a decision of this Court in State of Tamil Nadu vs. M.K. Kandaswami and Others (1975) 4 SCC 745, wherein it has been held as under:- 26. It may be remembered that Section 7-A .....

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canon of interpretation. 8) Learned senior counsel also relied upon a decision of this Court in Associated Cement Companies Ltd. vs. State of Bihar and Others (2004) 7 SCC 642, wherein this Court has held that a dealer is entitled to reduction in tax to the extent of tax paid under the Bihar Entry Tax Act while working out the tax payable by it under the Bihar Sales Tax Act. 9) Heard learned counsel for the parties and perused the records. 10) The sole question for consideration is whether the S .....

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g any year exceeds rupees ten lakhs shall, in addition to the tax payable by him under this Act, also pay a surcharge at the rate of ten per centum of the total amount of tax payable by him:….. 12) It would also be relevant to reproduce Section 4 of the OET Act (as it stood at the relevant time) which reads as under:- (4) Reduction in Tax Liability: (1) where an importer of motor vehicle liable to pay tax under sub-section (3) of Section 3 being a Dealer in motor vehicles becomes liable t .....

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Act, being a Dealer under the Sales Tax Act becomes liable to pay tax under the said Act by virtue of Sale of such goods, then his liability under the Sales Tax Act shall be reduced to the extent of tax paid under this Act. (3) The reduction in tax liability of an importer as provided in sub-section (1) or of an importer or manufacturer as provided in sub-section (2) shall not be allowed, unless the entry tax paid and tax payable under the Sales Tax Act are shown separately in the cash memo or .....

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e extent of the tax paid under these rules. Illustration: Assuming Entry Tax Rate and Sales Tax Rate to be 10% 1) Purchase Value of Motor Vehicle ₹ 2,00,000/- 2) Entry Tax Payable @ 10% ₹ 20,000/- Total:- ₹ 2,20,000/- 3) Sale Price of the Motor Vehicle ₹ 2,20,000/- 4) (a) Sales Tax due @ 10% ₹ 22,000/- Deduct Entry Tax paid ₹ 20,000/- Sales Tax payable ₹ 2,000/- Total:- ₹ 2,22,000/- Note: If the sales tax payable on such motor vehicle is less than .....

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der the said Act was to be determined after deduction therefrom the entry tax paid by a dealer importing vehicle into the State of Orissa. 14) Since the determination of surcharge payable under the OET Act was relatable and/or linked to the tax payable under the OST Act, a clarification was sought for by one of the dealers in motor vehicles, namely, TELCO which is similarly situated as the Respondent No.1-company from the office of Commercial Tax, in view of the provision contained in Rule 18 of .....

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pany while importing a motor vehicle into the State of Orissa. 16) On 20.11.2001, the Government of Orissa, in the Finance Department, wrote a letter to the Commissioner of Commercial Taxes, Orissa relating to the computation of tax payable on the motor vehicle for the purpose of levy of surcharge on an interpretation of the provisions of the OET Act, the OST Act and the Rules which is as under:- GOVERNMENT OF ORISSA FINANCE DEPARTMENT No. CTB-23/2001. 55863/F From: Shri K.C. Parija, Deputy Secr .....

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ales Tax amount after setting off of entry tax. The position may kindly be clarified to the Field Officers and if such faulty procedure of charging surcharge is adopted by any of the Circle Officers, same should be discontinued forthwith and corrective measure as per the provisions of the statue may be taken up to make good the loss. 2. It may further be noted that the illustration in rule -18 of Orissa Entry Tax Rule, 1999 or provision of any other Finance Department notification have limited i .....

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Os of their respective circles. Dd/- Addl. Commissioner of Commercial Taxes (Gen) Orissa, Cuttack In the said letter, it was inter alia intimated that surcharge shall be calculated on the payable amount of tax due on the taxable turnover (section 5 and 5A) instead of on the reduced sales tax amount after setting off of Entry Tax. 17) On 30.03.2002, the Sales Tax Officer, Sambalpur-I Circle, Sambalpur passed an order under section 12(4) of the OST Act wherein surcharge has been levied under Secti .....

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s payable on the sale of goods in the manner laid down for levy of surcharge. In view of the provisions contained in the OET Act, a dealer is not entitled for reduction of the amount of entry tax from the amount of tax payable before the levy of surcharge under Section 5A of the OST Act. 19) On a plain reading of the provisions of the OST Act as well as the OET Act and the Rules, it can be seen that Section 5A of the OST Act creates a charge and imposes liability on every dealer under the OST Ac .....

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, the provisions made in the Rules lay down the modality of set off . It is important to mention here that OST Act was enacted in the year 1947 whereas OET Act was enacted in 1999. The provision of set off has been made in the OET Act and the Rules framed thereunder and not in the OST Act. The heading of Section 4 of the OET Act gives a broad idea regarding the provision of set off by way of reduction in tax liability . Sub-Sections 1 and 2 of Section 4 of the OET Act provide for reduction of li .....

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