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2010 DIGILAW 851 (KAR)

MAHENDRA PERFUMERY WORKS v. STATE OF KARNATAKA.

2010-07-30

B.V.NAGARATHNA, N.KUMAR

body2010
ORDER N. Kumar :- The petition is by the assessee, challenging the order passed by the authorities upholding the claim for additional tax under section 6C of the Karnataka Sales Tax Act (for short, "the KST Act"). The facts of the case leading to the filing of this petition are that the petitioner - assessee who is a dealer registered under the KST Act, is engaged in the activity of manufacture and sales of agarbathies. The assessing authority had passed an order of assessment under section 12(3) of the Act subjecting to additional tax on turnover, when the tax on turnover was exempted from tax under a notification dated March 31, 2000 as per annexure F. Aggrieved by the said order, the petitioner preferred an appeal before the Joint Commissioner of Commercial Taxes (Appeals). The appellate authority upheld the demand and dismissed the appeal. Aggrieved by the same, the petitioner preferred a second appeal before the Karnataka Appellate Tribunal, which also dismissed the appeal upholding the demand. Aggrieved by these orders, the petitioner is before this court. The learned counsel for the petitioner submits that, by a notification dated March 31, 2000, the Government of Karnataka has exempted with effect from April 1, 2000, the tax payable under section 6 of the Act together with turnover tax payable under section 6B of the said Act on certain items which includes raw bathi for manufacture of agarbathi for sale in the State or in the course of inter-State trade. Section 6C of the Act deals with the levy of additional tax. The additional tax is payable in addition to the tax payable under section 6 of the Act. When there is exemption from the payment of the principal tax under section 6, the levy of additional tax is not warranted. The authorities have committed a serious error in ignoring this fundamental principle and in charging additional tax though they have not charged the principal tax under section 6 of the Act. Per contra, the learned counsel appearing for the learned Government Advocate supported the impugned orders. Section 8A of the Karnataka Sales Tax Act confers powers to Government to issue notifications granting exemptions or reduction in rate in respect of any tax under the Act. Per contra, the learned counsel appearing for the learned Government Advocate supported the impugned orders. Section 8A of the Karnataka Sales Tax Act confers powers to Government to issue notifications granting exemptions or reduction in rate in respect of any tax under the Act. By virtue of such powers conferred, the Government of Karnataka has issued notification on March 31, 2000, which reads as under : "In exercise of the powers conferred by section 8A of the Karnataka Sales Tax Act, 1957 (Karnataka Act 25 of 1957), the Government of Karnataka hereby exempts with effect from the first day of April, 2000 the tax payable under section 6 together with turnover tax payable under section 6B of the said Act on the following : 1. Butter for manufacture of ghee; 2. Old jewellery when used in the manufacture of new jewellery and tax under Karnataka Sales Tax Act, 1957 or Central Sales Tax Act, 1956 is paid on such new jewellery; 3. Raw bathi for manufacture of agarbathi for sale in the State or in the course of inter-State trade." Section 6 of the Act provides for levy of purchase tax under certain circumstances. Similarly, section 6B provides for levy of resale tax on the same goods, which has suffered tax under sections 6 and 6B of the Act. Section 6C provides for levy of additional tax. Section 6C reads as under : "6C. Levy of additional tax. - (1) Every registered dealer and every dealer who is liable to get himself registered under sub-sections (1) and (2) of section 10 whose total turnover in a year is not less than the turnovers specified in the said sub-sections, shall be liable to pay tax at the rate of one per cent of such portion of the total turnover which is liable to tax under sections 5, 5B, 5C, or 6." A perusal of the aforesaid provision makes it clear that every registered dealer shall be liable to pay tax at the rate of one per cent of such portion of the total turnover, which is liable to tax under sections, 5B, 5C, or 6. So, the liability to pay tax under section 6C is in addition to tax liable to pay under section 6 on the total turnover. So, the liability to pay tax under section 6C is in addition to tax liable to pay under section 6 on the total turnover. When once an exemption is granted exempting the dealer from the payment of tax under section 6, the question of levying additional tax on such basic tax does not arise. The learned counsel for the appellant submits that the tax payable under section 6C is an additional tax to the tax payable under section 6 of the Act. In that view of the matter, when the basic tax is exempted automatically, the additional tax and the basic tax is also exempted. There is no necessity to issue any separate notification specifically prescribing exemption for payment of tax. In that view of the matter, the authorities are not justified in levying tax under section 6C on the petitioner - assessee, when the exemption is granted from payment of basic tax under section 6 of the Act. Hence, the appeal is allowed. The impugned orders are hereby set aside. Parties to bear their own costs.