Case: State Of Mysore Vs. Yaddalam Lakshminarasimhaiah Setty And Sons

13. The relevant facts are these. The assessee is a dealer in powerloom and handloom textiles, both within the Mysore State and in the course of inter-State trade. For the year 195758, the Commercial Tax Officer, Bangalore, assessed and taxed the turnover relating to powerloom textiles under S.9 of the Central Sales Tax Act (LXXIV of 1956), hereinafter referred to as the Central Act, as it stood before its amendment by the Central Sales Tax (Second Amendment) Act, 1958 (XXX of 1958). This was upheld by the Deputy Commissioner of Commercial Taxes. The Mysore Sales Tax Appellate Tribunal also affirmed the order. The High Court, in revision accepted the plea of the assessee that its turnover consisting of sales of textiles manufactured by means of powerlooms in the course of inter-State trade is liable to be taxed at the same rate and exactly in the same manner as they would have been taxed if they had been intra-State transactions. The High Court arrived at this conclusion because, according to it, the true construction of S. 8(2) of the Central Act is that any exemption given by a State Sales Tax Act or the point determined by it at which a sale is to be taxed applies to assessments under the Central Act.

Court's reasoning:
16. Section 6 of the Central Act is the charging section. Subject to the other provisions contained in the Act, every dealer is liable to pay tax under the Act on all sales effected by him. It will be noticed that the liability is not absolute but subject to the other provisions of the Act. If the effect of another provision is to take away the liability, effect will have to be given to it. Section 8 prescribes the rates of tax to be levied. It is common ground that S. 8(1) does not apply to the facts of the case, but the proviso is important as it indicates that in some cases falling within the proviso the rate may be nil. In other words, notwithstanding S. 6, the dealer may not be liable to pay any tax if he comes within the proviso to S. 8(1). It follows that the scheme of the Act is not that every transaction in inter-State trade must bear some tax.17. Section 8(2) provides for the method of calculating the tax; under that sub-section, the tax shall be calculated at the same rates and in the same manner as would have been done if the sale had, in fact, taken place inside the appropriate State. The expression in the manner" may give rise to two conflicting views, namely, (i) it is concerned only with the calculation of the tax, and (ii) it deals not only with the calculation of the rates but also the manner of levy of the tax. But S. 9 (1) dispels the ambiguity for it says that the tax payable by any dealer under the Central Act shall be levied and collected in the appropriate State by the Government of India in the manner provided in sub- s. (2); and sub-s. (2) of S. 9 empowers the appropriate State authorities to assess, collect and enforce payment of any tax payable by any dealer under the Central Act 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. The expression "levy" means "impose". Under S. 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 col. (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 col. (3) of the said Schedule on the turnover of sales of such dealer in each year relating to such goods. When S. 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 S. 9(1) of the Central Act refers to the expression "levied" in Section 5 (3) (a) of the State Act. There is no reason why the Central Act made a departure in the manner of levy of tax on the specified goods which are taxed only at a single point under the State Act; if any such radical departure was intended, the Central Act would have expressly stated so. The Central Act was passed to levy and collect sales-tax on interState sales to avoid confusion and conflict of jurisdictions; the tax is also collected only for the benefit of the State. Therefore, the construction we accept avoids the anomaly of the State collecting tax on powerloom textiles only at a single point and the Centre, through the agency of the State authorities, collecting the said tax for and on behalf of the State almulti-points.18. There has been considerable difference of opinion among the High Courts about the true construction of S. 8 (2), but none of them have relied on S.9 of the Central Act. Therefore, it is not necessary to refer to cases cited before us.