The liability to pay tax under the Central Sales Tax Act, 1956 (74 of 1956) is subject to the other provisions of the Act, and if the effect of another provision is to take away the liability, effect will have to be given to it.

Headnote:
CENTRAL SALES TAX ACT - Levy and collection of tax - Inter-State sales - Calculation of tax - Exemption from tax under State law - Applicability - Mysore Sales Tax Act, 1957 (Mysore Act 25 of 1957), S. 5(3)(a) - Central Sales Tax Act, 1956 (74 of 1956), Ss. 6, 8(2), 9.
Fact of the Case:

The assessee, a dealer in powerloom and handloom textiles, was assessed and taxed under the Central Sales Tax Act, 1956 (74 of 1956) (Central Act) on his turnover relating to powerloom textiles sold in the course of inter-State trade. The assessee contended that he was not liable to pay tax as he was not the first or earliest of the successive dealers of the disputed turnover and, therefore, if he had sold the goods intra-State, no tax would have been levied on him.
Finding of the Court:

The Court held that the assessee was liable to pay tax under the Central Act as the liability to pay tax under the Central Act was subject to the other provisions of the Act, and if the effect of another provision was to take away the liability, effect would have to be given to it. The Court further held that Section 8(2) of the Central Act, which provided for the method of calculating the tax, did not deal with the manner of levy of the tax, and that Section 9(1) of the Central Act, which provided for the levy and collection of tax, referred to the manner of levy of tax under the State Act. Therefore, the Court held that the assessee was liable to pay tax under the Central Act in the same manner as he would have been liable to pay tax under the State Act.
Issues: Whether the assessee was liable to pay tax under the Central Sales Tax Act, 1956 (74 of 1956) on his turnover relating to powerloom textiles sold in the course of inter-State trade, even though he was not the first or earliest of the successive dealers of the disputed turnover.
Ratio Decidendi: The Court held that the assessee was liable to pay tax under the Central Act as the liability to pay tax under the Central Act was subject to the other provisions of the Act, and if the effect of another provision was to take away the liability, effect would have to be given to it. The Court further held that Section 8(2) of the Central Act, which provided for the method of calculating the tax, did not deal with the manner of levy of the tax, and that Section 9(1) of the Central Act, which provided for the levy and collection of tax, referred to the manner of levy of tax under the State Act. Therefore, the Court held that the assessee was liable to pay tax under the Central Act in the same manner as he would have been liable to pay tax under the State Act.
Final Decision: The Court dismissed the appeal and upheld the order of the High Court, which had held that the assessee was liable to pay tax under the Central Act.

Judgment

SHAH, J. : The High Court of Mysore has held that sales which were not "first sales" within the Mysore State being not exigible to tax under the Mysore Sales Tax Act, no tax was payable thereon under the Central Sales Tax Act, 1956.

2. The provisions of the Central Sales Tax Act in force at the relevant time may be briefly referred to Section 6 imposes upon every dealer, subject to the other provisions contained in the Act, liability to pay tax under the Act on all sales effected by him in the course of interState trade or commerce during any year. Section 7 provides for registration of dealers. Section 8 deals with the rates of tax on sales in the course of inter-State trade or commerce. By sub-s. (2), as it stood at the relevant time, it was provided :

"The tax payable by any dealer in any case not falling within sub-s. (1) in respect of the sale, by him of any goods in the course of inter-State trade or commerce 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 and for the purpose of making any such calculation any such dealer shall be deemed to be a dealer liable to pay tax under the sales tax law of the appropriate State, notwithstanding that he, in fact, may not be so liable under that law."

Section 9 provided for levy and collection of tax.

It provided :

"1 The tax payable by any dealer under this Act shall be levied and collected in the appropriate State by the Government of India in the manner provided in sub-s. (2).

2. The authorities for the time being empowered to assess, collect and enforce payment of any tax under the general sales tax law of the appropriate State shall, on behalf of the Government of India and subject to any rules made under this Act, assess, collect and enforce payment of any tax payable by a dealer under this 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; and for the purpose they may exercise all or any of the powers they have under the general sales tax law of the State; and the provisions of such law, including provisions relating to returns, appeals, reviews, revisions, references, penalties and compounding of offence, shall apply accordingly.

(3) * * * * "

3. The turnover of the respondents sought to be taxed arises out of transactions of sale of handloom and powerloom cloth effected by them in the "course of inter-State trade or commerce. Under the Mysore Sales Tax Act, 1957, sale of these goods was liable to tax under S. 5 (3) (a) read with Entry 7 in Sch. II of the Act, at a single point on sale by the first or the earliest of successive dealers in in the State. It is common ground that the respondents are not the first or the earliest of successive dealers in the State in respect of the transaction sought to be taxed. Section 6 charges to tax sales in the course of inter-State trade or commerce of every dealer, but the Act does not prescribe the rates at which tax is to be levied, nor does it set up machinery for assessment, collection : enforcement of liability to pay tax, charged upon inter-State sales of dealers. By S. 8 (2) tax payable by the dealer in respect of his sales not falling within sub-s. (1)-and the turnover in the present case is not in respect of sale falling within sub-s. (1) has to be calculated at the same rates and in the same manner as would have boon calculated, if the sale had taken place inside the appropriate State. The clause in terms only deals with calculation of the tax-the rate at which and the manner in which the tax has to be calculatedunder the State law : it does not attract any exemptions from tax prescribed by the State law.

4. Use of the expression "in the same manner" in S. 8 (2) has not the effect of assimilating the procedural and the substantive provisions relating to the imposition, levy and collection of tax as are provided by the State law in the

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1964 Supreme(SC) 305

The liability to pay tax under the Central Sales Tax Act, 1956 (74 of 1956) is subject to the other provisions of the Act, and if the effect of another provision is to take away the liability, effect will have to be given to it.

Cases Referred (4)