Swarna Mahal Vs. Commissioner of Commercial Taxes in Karnataka - Court Judgment

Excerpt:
- section 13(4) & security interest (enforcement) rules, 2002, rules 6 & 8 & contract act (9 of 1872), section 73: [p.d. dinakaran, c.j & v.g. sabhahit, j] sale of secured assets -tenders invited from general public for auction of movable and immovable properties on as is where is condition-petitioner highest bidder having knowledge of said facts has submitted his bid - however, failed to deposit 75% of bid amount within extended time for making deposit - non-compliance with terms of contract by petitioner property notified by secured creditor for re auction held, secured creditor not guilty of breach of contract. mere fact that section 13(4) of sarfaesi act enables the secured creditor to take possession of property would not necessarily mean that secured creditor would have taken vacant possession of property before 75% of bid amount is deposited.section 13(4) & security interest (enforcement) rules, 2002, rules 6 & 8 & contract act (9 of 1872), section 73: [p.d. dinakaran, c.j & v.g. sabhahit, j] sale of secured assets -tenders invited from general public for auction of movable and immovable properties on as is where is condition-petitioner highest bidder having knowledge of said facts has submitted his bid - however, failed to deposit 75% of bid amount within extended time for making deposit - non-compliance with terms of contract by petitioner property notified by secured creditor for re auction held, secured creditor not guilty of breach of contract. mere fact that section 13(4) of sarfaesi act enables the secured creditor to take possession of property would not necessarily mean that secured creditor would have taken vacant possession of property before 75% of bid amount is deposited. - therefore, if these two conditions are satisfied, i. 10 lakhs, only because of the inclusion of the inter-state transaction, still such dealer would be liable to pay tax under section 6-b and it was held that the legislature was perfectly competent to enact such a provision.k. shivashankar bhat, j. 1. for the assessment year 1976-77 the appellant was assessed to tax under the provisions of the karnataka sales tax act, 1957 ('the act' for short). 2. the appellant is a dealer dealing in gold and silver articles and generally purchases gold ornaments which thereafter are sold after conversion. the appellant had filed a return declaring the total turnover of rs. 9,84,340.44. the appellant had claimed exemption in respect of the turnover pertaining to purchase of gold ornaments relying upon the notification issued by the government in that regard. that tax on purchase is levied under section 6 of the act but by virtue of the notification issued by the government, regarding which there was no dispute, the said turnover was excluded. the assessing authority by its order dated october 27, 1977, assessed the appellant to a total tax of rs. 37,810.61 after holding that the total turnover of the appellant as rs. 9,46,073. subsequently, the assessing authority initiated proceedings under section 12-a of the act proposing to levy tax under section 6-b of the act on the ground that the total turnover of the appellant exceeded rs. 10 lakhs and for the purpose of the said provision the turnover which was exempted under section 6 also will have to be included. consequently, at the rate of 10 per cent on the tax assessed earlier on rs. 37,810.61 the additional tax of rs. 3,781 was assessed. this was on april 5, 1979. the total turnover was held to be rs. 10,71,439 for the purposes of section 6-b. the appellant filed an appeal before the deputy commissioner, who allowed the appeal. the appellate authority held that it was not a case for initiating proceedings under section 12-a of the act because there was escapement of turnover, since the assessee had disclosed the turnover but excluded the same for the purpose of taxation. secondly, he held that the purchase turnover of old articles of silver and gold while computing the total turnover should be excluded in view of the exemption notification. according to the first appellate authority, since the purchase tax is not leviable on the purchase of old articles of silver and gold those purchases cannot be included for the purpose of section 6-b also. the commissioner of commercial taxes revised this order in the exercise of his power under section 22-a. the commissioner referred to rule 6 of the karnataka sales tax rules, 1957. according to the commissioner, as per this rule the entire turnover will have to be grossed up, whether particular turnover is exempted from levy of tax or not. hence this appeal. 3. mr. b. v. katageri, learned counsel for the appellant, contended that under section 6-b of the act, as was in force during the relevant period, the liability to pay the additional tax arises only if the dealer is liable to pay the tax either under section 5 or section 6 of the act and if a dealer is not liable to pay tax under section 6 then the said turnover under section 6 will have to be excluded. the learned counsel pointed out that under section 6-b, what is levied is an additional tax which itself indicates that it is a tax in addition to normal tax payable by the dealer under section 5 or section 6 of the act. 4. the relevant part of section 6-b(1) reads thus : 'section 6-b. levy of additional tax. - (1) there shall be levied and collected from every dealer liable to pay tax under section 5 or under section 6 and whose total turnover is ten lakh rupees or more in a year, an additional tax at the rate of ten paise in the rupee on the sales tax or purchase tax or both payable by such dealer.' the first part of this provision purports to identify the dealer who is liable to pay the additional tax. the tax under section 6-b is to be levied and collected from a dealer who is liable to pay the tax under section 5 or under section 6. further, the condition is to be that the total turnover of the said dealer should be rs. 10 lakhs or more in an year. therefore, if these two conditions are satisfied, i.e., if the dealer is liable to pay tax either under section 5 or under section 6 and his total turnover exceeds rs. 10 lakhs, section 6-b stands attracted and such a dealer is liable to pay the additional tax at the rate of ten paise in the rupee on the sales tax or purchase tax or both payable by such dealer. the latter half of this provision levies and computes the tax. the computation is at the rate of 10 per cent on the sales tax or purchase tax or both. this provision does not say that the additional tax shall be levied on the sales tax or purchase tax as the case may be. the levy under section 6-b essentially depends upon the total turnover of the dealer. the legislature has thought it fit to levy these taxes depending upon the volume of dealings of the particular dealer. the subject of levy under section 6-b is not a particular transaction as such. it is the totality of the dealing by the dealer that attracts levy. the contention of mr. katageri is that, only the turnover which is taxed under section 5 or under section 6 that should be considered for the purpose of levy under section 6-b, which will be restricting the language of section 6-b. a reading of section 6-b as it then stood in no way conveys the idea sought to be conveyed by mr. katageri. the contention of mr. katageri, if it has to be accepted, we will have to read the phrase 'turnover' under section 6-b as taxable turnover. if the intention of the legislature was to consider only the taxable turnover either under section 5 or under section 6 as the basis for levy under section 6-b the legislature would have stated so in clear terms. two decisions of this court were cited by the learned government pleader in support of his contention that there is a distinction between the concept of 'turnover' and 'taxable turnover'. one of the decisions of this court is b. p. automobiles v. state of karnataka [1984] 55 stc 93. the main question involved in the decision pertained to the validity of section 6-b as it stood substituted in the year 1981. the turnover pertaining to inter-state sales was also sought to be included while computing the total turnover for the purpose of the levy. this court pointed out that these transactions were referred to identify the dealer and upheld the provision. in other words, even if the dealer's total turnover exceeded rs. 10 lakhs, only because of the inclusion of the inter-state transaction, still such dealer would be liable to pay tax under section 6-b and it was held that the legislature was perfectly competent to enact such a provision. another citation is shantilal & brothers v. state of karnataka [1985] 59 stc 178. the attack against section 6-b by invoking articles 14 and 19(1)(g) of the constitution was repelled and the provision was once again upheld in this decision. the earlier decision in b. p. automobiles' case : 1983(2)karlj105 was followed. 5. mr. katageri, learned counsel for the appellant, cited a decision of the supreme court reported in commissioner of income-tax, bombay city-i v. jalgaon electric supply co. ltd., bombay : [1960]40itr184(sc) to contend that if the main tax itself is not payable then question of levying additional tax does not arise. this decision depended upon the language of the finance act, 1949 and to establish the principle urged, this decision cannot be of any help to mr. katageri. 6. the words 'total turnover' and 'taxable turnover' are defined as per section 2(u-2) and 2(u-1) respectively. while total turnover means the aggregate turnover in all goods of a dealer, etc., the taxable turnover means the turnover on which a dealer shall be liable to pay tax as determined after making certain deductions from his total turnover. these ideas are sought to be enumerated by rule 6 of the karnataka sales tax rules which has been referred to and relied on by the commissioner in the instant case. the order of the commissioner cannot be held to be erroneous having regard to the principles stated by us on an interpretation of section 6-b. certainly there is a distinction between these two phrases and the phrase 'taxable turnover' cannot be substituted in place of 'total turnover' in the process of interpreting section 6-b, as is sought out by the learned counsel for the appellant. 7. in these circumstances, we are not able to agree with the contention advanced on behalf of the appellant. hence the appeal is dismissed.