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Commissioner of Commercial Taxes and Ors. v. Bajaj Auto Ltd. and Ors. - (Supreme Court) (28 Oct 2016)

Amount of surcharge under Section 5A of OST Act to be levied before deducting amount of entry tax paid by a dealer

MANU/SC/1365/2016

Sales Tax/VAT

Respondents are engaged in sale and purchase of Motor Vehicles and are registered dealers under Orissa Sales Tax Act, 1947 ('OST Act') as well as under Central Sales Tax Act. Respondents had been paying entry tax on goods, when they were bought into State of Orissa under Section 3(3) of Orissa Entry Tax Act, 1999 ('the OET Act'). However, they were paying surcharge on balance amount after deduction of entry tax paid on motor vehicles. Finance Department, by letter dated 20th November, 2001, stated that surcharge under OST Act shall be calculated on payable amount of tax due on taxable turnover (Section 5 & 5A) instead of on the reduced Sales Tax amount after setting off of entry tax. Sales Tax Officer, passed an order under Section 12(4) of OST Act wherein surcharge was levied under Section 5A of the OST Act on gross sales tax payable by Respondent-Company. Being aggrieved by demand notice as well as the letter issued by Finance Department, Respondent-Company filed a writ petition before High Court. Division Bench of High Court, vide common judgment allowed appeals filed by Respondents.

It is well settled that an illustration given under Rules does not exhaust full content of Section which it illustrates but equally it can neither curtails nor expands its ambit. Further, surcharge is nothing but an additional tax and is payable on the sale of goods in the manner laid down for levy of surcharge. In view of the provisions contained in OET Act, a dealer is not entitled for reduction of the amount of entry tax from the amount of tax payable before the levy of surcharge Under Section 5A of the OST Act.

Section 5A of the OST Act creates a charge and imposes liability on every dealer under OST Act to pay surcharge @ 10% on amount of tax payable by him under OST Act. Section 4(1) of OET Act, in same way, prescribes for reduction of tax amount payable by dealer to extent of entry tax already paid for the same Article for which sales tax is payable. The Section, does not specifically contemplate anything, which would indicate that provisions of OET Act or Rules have to be taken into consideration while assessing sales tax or surcharge. In essence, provisions made in Rules lay down the modality of 'set off'. OST Act was enacted in the year 1947 whereas OET Act was enacted in 1999. The provision of set off has been made in the OET Act and the Rules framed thereunder and not in the OST Act. The heading of Section 4 of the OET Act gives a broad idea regarding the provision of set off by way of "reduction in tax liability". Sub-Sections 1 and 2 of Section 4 of the OET Act provide for reduction of liability under the OST Act.

It is well settled that the objective of framing Rules is to fill up the gaps in a statutory enactment so as to make the statutory provisions operative. Rules also clarify the provisions of an Act under which the same are framed. Section 4 of the OST Act is a charging Section attracting liability to pay Sales Tax "on sales and purchases effected". Section 5 of the OST Act provides for rate of Sales Tax. Section 5A of the OST Act levies surcharge on the dealer which is nothing but an additional tax. Therefore, on a plain reading of the provisions under the OST Act as well as under the OET Act, a dealer is not entitled for reduction of the amount of entry tax from the amount of tax payable before the levy of surcharge Under Section 5A of the OST Act. A harmonious reading of Rule 18 of the Rules as well as Sections 4, 5, 5-A of the OST Act reveals no conflict or inconsistency. The Rules are to be construed to have been made for furtherance of the cause for which the Statute is enacted and not for the purpose of bringing inconsistencies.

Section 5A of the OST Act is a self-contained provision and surcharge, is leviable at specified per centum of tax payable under OST Act. Tax payable under OST Act is independent of provisions of OET Act. Assessment or quantification or computation of surcharge shall have to be made in accordance with provisions of OST Act. Thus, on a conjoint reading of Section 5 of OST Act, Section 4 of OET Act and Rule 18 of Rules, Supreme Court opined that, amount of surcharge under Section 5A of the OST Act is to be levied before deducting amount of entry tax paid by a dealer. Supreme Court quashed order passed by High Court allowed appeals.

Relevant : Sections 4, 5, 5a, Orissa Sales Tax Act, 1947, Section 4 of Orissa Entry Tax Act, 1999

Tags : SURCHARGE   ENTRY TAX   LEVY  

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