1. Dispute regarding whether sales tax exemptions under an industrial policy extend to purchase tax under the Karnataka Sales Tax Act. (Para 3 , 4 )
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2020 Supreme(SC) 868
SUPREME COURT OF INDIA
A.M. Khanwilkar, Dinesh Maheshwari, JJ.
High Range Coffee Curing Pvt. Ltd. - Appellant
Versus
State Of Karnataka & Ors. - Respondents
Civil Appeal Nos. 10680-10683 of 2011 with Civil Appeal No.10684 of 2011
Decided On : 05-02-2020
Important Points
Point of Law: Levy of tax - Industrial Policy - Concession and incentives - State can levy tax both at sale point and/or at purchase point. That distinction being clear, question of assuming that purchase tax was also part of the industrial policy under consideration cannot be countenanced.
Subject
Taxation Law - Sales Tax
Act Referred
Headnote
Karnataka Sales Tax Act, 1957 - Sections 5 and 6 - Industrial Policy, 1996 - Notification - Sales tax - Res integra - Incidence and levy of tax - Levy of tax on sale or purchase of goods - Appellant/assessees industry has been included or added in Appendix- IV does not mean that substance of policy has undergone any change - Purport of amendment is only to include more industries which were left out in first notification.
Finding of the court:
Court opinion as recorded in the aforesaid decision, that the Government Order, the Industrial Policy merely provides for sales tax concession and incentives and nothing more - Sale and purchase as different aspects of same transaction - Fact remains that appellant, after recall of entire decision, participated in appeal proceedings before the Division Bench and argued matter on merits. As a result, this technical plea cannot be the basis to undo the entire judgment which otherwise is in conformity with legal principle stated in the case of Malnad (supra).
Result: Appeals dismissed
Legal Category Hierarchy
Advocates appeared:
Mr. Yashraj Singh Deora, Advocate, Ms. Shivangi Sud, Advocate, Ms. Sonal Mashankar, Advocate, for M/s. Mitter & Mitter Co., Advocate, for the Appellant; Mr. Basava prabhu S. Patil, Sr. Advocate, Mr. V. N. Raghupathy, Advocate, Mr. Manendra Pal Gupta, Advocate, Ms. Rachitha Hirenath, Advocate, Ms. Rudrali Patil, Advocate, Mr. Joseph Aristotle S., Advocate, and Ms. Radha Rangaswamy, Advocate, for the Respondent.
Mr. Yashraj Singh Deora, Advocate, Ms. Shivangi Sud, Advocate, Ms. Sonal Mashankar, Advocate, for M/s. Mitter & Mitter Co., Advocate, for the Appellant; Mr. Basava prabhu S. Patil, Sr. Advocate, Mr. V. N. Raghupathy, Advocate, Mr. Manendra Pal Gupta, Advocate, Ms. Rachitha Hirenath, Advocate, Ms. Rudrali Patil, Advocate, Mr. Joseph Aristotle S., Advocate, and Ms. Radha Rangaswamy, Advocate, for the Respondent.
Table of Contents
2. Whether purchase tax is covered by sales tax exemptions since sale and purchase are different aspects of the same transaction. (Para 6 , 8 )
3. The state can levy tax at both sale and purchase points; industrial policy exemptions for sales tax do not automatically cover purchase tax. (Para 4 , 5 , 7 , 9 )
4. Sales tax exemptions under an industrial policy do not encompass purchase tax, as the state may legally tax both points of transaction separately. (Para 4 , 9 )
5. Appeals dismissed. (Para 11 )
6. Does a sales tax exemption under an industrial policy automatically extend to purchase tax?
No. The court held that industrial policies providing sales tax concessions or exemptions apply only to sales tax and do not extend to purchase tax, as the state can levy taxes at both the sale and purchase points. (Para 4 , 5 , 9 )
7. Are sale and purchase considered the same for the purpose of tax exemptions?
While sale and purchase are different aspects of the same transaction, they are distinct for taxation purposes. The legislature has the power to classify and levy taxes at either the sale point or the purchase point. (Para 4 , 8 , 9 )
8. Does the inclusion of an industry in a policy appendix change the substantive nature of the tax exemptions provided?
No. The inclusion of additional industries in a policy appendix serves only to expand the scope of eligible industries and does not alter the substantive nature or terms of the existing policy. (Para 7 )
9. Can a technical plea regarding the recall of a judgment override a decision made on merits?
No. If a party participates in the proceedings and argues the matter on merits after a decision is recalled, a technical plea regarding the recall process cannot be used to undo the final judgment. (Para 10 )
JUDGMENT
1. Heard counsel for the parties.
2. The opening ground urged by the appellant is that the High Court ought not to have entertained the appeals on merits without condoning the delay in filing of appeals. This argument though attractive at the first blush, does not take the matter any further as we find the delay was only of 71 and 283 days respectively and sufficient explanation has been offered by the respondent(s) which could be condoned in the interest of justice and we order accordingly.
3. The core issue raised in these appeals, in our opinion, is no more res integra. It has been answered in the decision of this Court in "Malnad Areca Processing and Marketing Limited vs. Deputy Commissioner of Commercial Taxes (Assessment) and Others", reported in (2008) 11 SCC 536 .
4. This very Industrial Policy, 1996 was considered by the Court. The Court opined that the same provides for exemption only in respect of sales tax and not for purchase tax as such. The relevant discussion in this behalf can be discerned from paragraph Nos.15 to 19 of the said decision, which read thus:
"15. In the government order what is provided to new industrial units is the sales tax exemption or deferral of sales tax under the Act and the Central Sales Tax Act, 1956 (in short "the CST Act").
16. Clause 5 of the Government Order dated 15-3-1996 of the Industrial Policy, 1996-2001 provides for sales tax concession and incentives. The said clause provides for an option to industrial investments in the tiny/SSI/medium and large-scale sectors to claim either sales tax exemption or sales tax deferral.
17. A sale and a purchase are two different aspects of the same transaction. Whether sale or purchase, it will have same ingredients, both in common law and also under the Sale of Goods Act. As stated by this Curt in Devi Das Gopal Krishnan vs. State of Punjab, AIR 1967 SC 1895 = (1967) 3 SCR 557 the transaction, which the sales tax laws are concerned with, is a transfer of property in goods for price, inter vivos, both in the case of sale as well as purchase.
18. In the government order, what is provided to the new industrial units, is an option to claim sales tax exemption or deferment of sales tax both under the Act and the CST Act. In the field of taxation, it is recognized that the power to classify the objects or persons to be taxed or exempted from levy is with the legislature. It also enjoys the power to select persons or transactions. A law of the State, could therefore, levy tax both at the sale point and at the purchase point.
19. Under the government order, the policy of the Government as spelt out is, that tiny and small-scale industries and medium-and large-scale industries may exercise their option either for sales tax exemption or sales tax deferment for number of years prescribed in the government order itself. In the context in which these expressions are used, they only mean "sales tax holiday" or exemption from payment of sales tax for number of years specified, depending on where the tiny or small-scale industry is located. "Sales tax" refers to any tax which includes within its scope all "business of sale of goods" specified in the Schedule. Similarly, "sales tax deferral" only means the aforesaid industries are entitled to collect tax but they need not pay sales tax collected immediately to the State. If understood in this manner and thereafter the New Industrial Policy of the State Government for the years 1993-1998 and the exemption notification is looked into, the only conclusion that can be drawn is, what is exempted under the notification issued by the State Government is tax leviable under Section 5 of the Act on the goods manufactured and sold by an industrial unit. Therefore, the notification is in no way in variance or contrary to the industrial policy for the years 1993-1998 the above position has been rightly highlighted by the High Court."
5. We are in agreement with the opinion as recorded in the aforesaid decision, t
