Case: Deputy Commissioner of Sales Tax Etc Vs. Aysha Hosiery Factory Private Limited Etc

In this batch of appeals the appellants are the State of Kerala. The respondents are registered dealers under the Kerala General Sales Tax Act, 1963, hereinafter called the State A ct as well as under the Central Sales Tax Act, 1956 hereinafter called the Central Act. Some of the assesses carry on the business of sales and purchase of Coir products which is taxable under the State Act at 2%, some of the dealers carry on business of Hosiery which is taxable at 3%. The respondents-assessee in Civil Appeal Nos. 1426-27 of 1988 deal in automobile spares which is taxable at 15% and the assessee in Civil Appeal No. 1015 of 1988 deals in transformer which is taxable a t 10%. The respondent in Civil Appeal No. 4386 of 1988 is a dealer in titanium dioxide, Cement, and Paints products which are taxable at 10% and the respondent in Civil Appeal No. 18 9 of 1990 is a dealer of Sewing Thread which is taxable at 3%. The assessee in Civil Appeal No. 5557 of 1990 is a dealer in rice taxable at 2%. Under the Kerala Additional Sales Tax Act (20 of 1978) all taxable sales and purchases in the State including the local sales of Coir, Hosiery, Rice, Automobile parts, titanium dioxide, Cement, Paints and transformers etc. With which we are concerned, were subjected to an additional sales tax calculated at 10% of the rate of tax already imposed under the Kerala General Sales Tax Act, 1963. The result of it was where the rate of tax was 2% the tax payable became 2.2% where it was 3% it was 3.3%, 10% became 11%, 15%. In all these cases the assessments in question were under the Central S ales Tax Act. The Kerala Additional Sales Tax Act came into force with effect from 1st April, 1978. In the present appeals the assessment year in question were either 1978-79 or subsequent thereto. The assessing officers sought to levy tax in respect of the inter-state sales of the assesses by including the additional sales tax. The assesses questioned the inclusion of the additional sales tax levy in respect of their inter-state sale on ground that the levy under the Kerala Additional Sales Tax Act is not and could not be considered as a levy "under the sales tax law of the appropriate State" within the meaning of section 8(2-A) of the Central Act and for the purpose of levying Central Sales Tax in view of the provision of section 8(2-A) of the CST Act only the rate of tax as per the original Kerala General Sales Tax Act, 1963 shall be taken into account. They also contended that the rate of tax on inter- state sales payable under section 8 of the Central Act cannot be increased by an amendment of the State Act or any legislation by the State. All the revision petitions filed by the assesses were allowed by the High Court of Kerala accepting their contention following the judgment of the Division Bench of the same Court reported in Assistant Commissioner (Assessment) Sales Tax v. Janata Expeller Company and Ors., 1987 (64) STC 435  which confirmed a Single Judge judgment in Janata Expeller Company &Ors. v. Assistant Commissioner (Assessment) Sales Tax, Special Circle, Trichur, 1982 (49) STC 216.

Court's reasoning:
Any other construction would restrict the applicability of section 8 ( 2-A) of the CST Act to the sales tax law was in force in 1956 when the Central Sales Tax Act came into force and any amendment to the local law would not have any affect on the applicability of that provisions. We do not see any logic or reason for such a construction. What is relevant is if a particular intra-state sale transaction in a particular assessment year is subjected to a particular rate of tax that automatically gets reflected in and had to be taken into consideration for finding the rate and the applicability of section 8 (2-A) or Section 8(2)(b) of Central Sales Tax Act. As already stated if instead of an additional sales tax Act the legislature has simply amended the Kerala General Sales Tax Act by varying the rate automatically that will come in for consideration and application of the provisions of Section 8(2)(b) and 8(2-A) of the CST Act. For this purpose amendment of the State Act is not considered as an amendment of the Central Sales Tax Act. But since the rate applicable to the intra-state sales at a particular point of time is a relevant consideration for finding out the rate of tax on inter-State sale the amendment of the State Act automatically has the effect of changing the rate provided under Section 8 of the Central Sales Tax Act. That is not to say that the Central Act is amended by the State Legislature. The rates of tax in certain cases under the Central Act are linked to the rates fixed under the local Act and that is how the amendment of the local acts affects the rates under the Central Act. It is still the Central Act that is applied but only for purposes of fixing the rate of tax leviable under the Central Sales Tax Act the provisions of the Local Act are looked into. So construed we have no doubt that in all cases where the rate of tax under the local law is less than four per cent that will be the rate applicable to the inter-state sale of the same commodity if the provisions of Section 8(2-A) of the CST Act are applicable. The dealer undoubtedly would be paying at the rate as enhanced by the Additional Sales Tax Act and therefore that will be the rate that is including the additional tax, that is to be taken into consideration for finding out the applicability of section 8(2-A) of the CST Act and the rate of tax in respect of his inter-State sales turnover. There could be therefore no doubt that the assessees-respondents in all these cases are liable to pay sales tax at the rate including the additional sales tax in respect of their inter-State sales under the Central Sales Tax assessmentare unable to see anything in this judgment to support the contention of the respondents-assessees that even in a case which is not covered by any notification under section 8(5) of the CST Act increase in the rate of tax under the local act will not have any effect on the applicability of Section 8(2)(b) an d 8(2-A) of the CST Act. Further, for enhancing the rate notified under section 8(5) of the Central Sales Tax Act no reliance can be placed on section 8(2-A) of the CST Act. However, while agreeing with the view of the learned single Judge the Division Bench on appeal in the case of Assistant Commissioner (Assessment) Sales Tax (supra) made certain further observation which in a way supported the contention of the assessees. That passage reads asare also of the view, that even in cases where tax is exigible under section 8(2A) of the Central Sales Tax for the inter-State sales, the Kerala Additional Sales Tax Act, 1978 (Act 20 of 1978), has no application.As stated already, in cases where the tax is payable under section 8(2A) of the Central Sales Tax Act, what is crucial or relevant is to ascertain, the appropriate sales tax law of the State, under which the tax is levied for the sale or purchase of the goods or the commodity, in question. Looked at from the angle, we have no doubt, that the appropriate sales tax law of the State, of which tax is levied, is the Kerala General Sales Tax Act, 1963. The Kerala Additional Sales Tax Act, 1978(Act 20 of 1978), does not levy sales tax on the sale or purchase of the goods or commodity, in question. We hold that the provisions of Act 20 of 1978 are inapplicable to a situation, where inter-State sales are to be taxed under section 8 or section 8(2A) or section 8(5) of the Central Sales Taxthe first place these observations are in the nature of obiter in view of the fact that the learned Judges have accepted the interpretation placed by the learned single Judge that in respect of a case where a notification has been issued under Section 8(5) of the CST Act the amendment to the State Act will not have any effect on the notification. That should have been enough to dispose of the case but they have given an alternative reasoning which in our view is not correct and is against the provisions of Section 8(2-A) of the CST Act itself. For the purpose of applicability of Section 8(2-A) of the CST Act we have to look to the rate of tax applicable for the time being under the local Act at the time when the CST Act was enacted. Any amendment in the local Act ultimately will have a reflection in the assessment of the inter-state sales. We have already discussed the scope of Section 8 (2-A) of the CST Act and in the light of those reasonings the passage extracted above in the judgment of the Division Bench is contrary to law and could not bequestion could not have arisen but for the fact that this additional levy came to be imposed under a separate Act. Had the additional Sales Tax been imposed by simply amending the rates in the original Act the question would not have arisen. But we are of the view that this makes no difference and it is merely a matter of style of legislation. The additional sales tax levied under the Sales Tax Act is al so a sales tax of the same category as in the originaldefinition does not say that the sale tax law or the general sales tax law which levies taxes on sale or purchase of goods shall be under a single