Karnataka Sales Tax Rules, 1957:
r. 6(4)(m)(i) r/w. Explanation to r. 6(4) – Constitutional validity of – Whether the rule ovesteps the substantive/charging provision i.e. s.5B of the Sales Tax Act – Held: Rule 6(4)(m)(i) and s.5B of the Act operate in different fields – Section 5B is charging provision while r. 6(4)(m)(i) is a provision for deduction from tax – Rule 6(4)(m)(i) r/w. Explanation III is in clear consonance with the charging provision i.e. s. 5B – In the present case eligibility of the assessee u/r. 6(4) is a clear question of fact which has to be determined in the assessment proceedings – Karnataka Sales Tax Act, 1957 – s. 5B.
Dismissing the appeal, the Court
HELD : 1.1 Section 5B of Karnataka Sales Tax Act, 1957 and Rule 6(4)(m)(i) of the Karnataka Sales Tax Rules, 1957 operate in different spheres. Section 5B is a charging provision for levy of sales tax whereas Rule 6(4)(m)(i) is a provision for deduction from tax. Under Section 5B, tax can be levied on transfer of property in the goods whether as goods or in some other form whereas Rule 6(4)(m)(i) provides for a deduction in respect of the goods which have already suffered tax and which are used in the same form. Thus, it appears to be in clear consonance with the charging provision and does not militate against Section 5B of the Act, 1957. [Para 19] [907-C-D]
1.2 What emerges from the scheme of the Act and Rules framed thereunder is that Rule 6(4)(m)(i) purports to grant benefit to the assessee by allowing deductions for the value of goods which have already suffered taxation and which goods substantially retain their original identity while being used in the execution of a works contract. Explanation III to Rule 6(4) clarifies it further by categorically providing that in case the goods are transformed into a different commodity which then is used in the execution of works contract, then the benefit of deduction cannot be availed. It is trite law that tax provisions granting exemptions/concessions are required to be strictly construed. There is no variance between Rules 6(4)(m)(i) read with Explanation III and Section 5B of the Act. [Paras 24, 25 and 26] [909-C-F] State of Tamil Nadu v. Pyare Lal Malhotra and Others (1976) 1 SCC 834 : [1976] 2 SCR 168 ; Vasantham Foundry v. Union of India and Others (1995) 5 SCC
289 : [1995] 2 Suppl. SCR 575 ; B. Narasamma v. Deputy Commissioner of Commercial Taxes, Karnataka and Another (2016) 15 SCC 167 : [2016] 7 SCR 760 ; Telangana Steel Industries and Others v. State of A.P. and Others (1994) Supp. 2 SCC 259 : [1994] 2 SCR
324 – relied on.
Media Communications v. Government of Andhra Pradesh 1997 (105) STC 227 (AP) – held inapplicable.
E.C.I.E. Pvt. Ltd. v. Additional Deputy Commissioner, Commercial Taxes (Kar.)and Another 1999 (114) STC
309 – referred to.
2. So far as the five impugned notices of provisional assessment served under Section 28(6) of the Act is concerned, whether the assessee was eligible under Rule 6(4)(m)(i) is a question of fact which has to be determined in the assessment proceedings and since the provisional assessment has not been finalised due to pendency of the instant proceedings, it may not be advisable for this Court to dilate on the subject issue of the notices served upon the appellant at this stage and leave it open to the appellant to address before the assessing authority in the pending appropriate assessment proceedings, if so advised. [Para 29] [910-F-G]
M/s. Achal Industries v. State of Karnataka AIR 2019 SC 1653 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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