COMMR.OF COMMERCIAL TAX vs. M/S BAJAJ AUTO LTD

C.A. No.-005913-005920 - 2008Supreme Court28 October 2016Bench: SHIVA KIRTI SINGH R.K. AGRAWAL36 pages
For Petitioner: KIRTI RENU MISHRAFor Respondent: K J JOHN AND CO
AI SummaryAllowed

What were the facts?

The respondents, M/s Bajaj Auto Ltd. and another, are dealers registered under the Orissa Sales Tax Act, 1947 (OST Act) and the Central Sales Tax Act. They paid entry tax on motor vehicles entering Orissa under the Orissa Entry Tax Act, 1999 (OET Act) and then paid surcharge on the balance sales tax amount after deducting the entry tax. The Finance Department, Government of Orissa, vide a letter dated 20.11.2001, clarified that surcharge under the OST Act should be calculated on the gross taxable turnover (Section 5 & 5A) instead of the reduced sales tax amount after setting off entry tax. Subsequently, the Sales Tax Officer, Sambalpur, passed an order on 30.03.2002, levying surcharge under Section 5A of the OST Act on the gross sales tax payable. The respondents filed writ petitions before the High Court of Orissa challenging the demand notice and the Finance Department's letter. The High Court allowed the petitions, leading to the present appeals by the appellants (Commissioner of Commercial Taxes & Ors.).

What did the Supreme Court hold?

The Supreme Court held that the surcharge under Section 5A of the OST Act is to be levied on the gross sales tax payable before deducting the amount of entry tax paid by a dealer. The Court reasoned that Section 5A of the OST Act is a self-contained provision for levying surcharge at a specified percentage of the tax payable under the OST Act. The tax payable under the OST Act is independent of the provisions of the OET Act. The assessment and computation of surcharge must be made in accordance with the OST Act. While Section 4 of the OET Act provides for a reduction in tax liability to the extent of entry tax paid, it does not contemplate that these provisions should be considered while assessing sales tax or surcharge. The Court noted that the OET Act was enacted in 1999, while the OST Act was enacted in 1947, and the provision for set-off was made in the OET Act and its Rules, not the OST Act. The Court also reiterated that illustrations in rules do not expand or curtail the ambit of the parent Act. Therefore, the High Court's judgment was set aside. The appeals were allowed, with parties bearing their own costs.

What were the issues?

1. Whether the surcharge under Section 5A of the Orissa Sales Tax Act, 1947 (OST Act) is to be calculated on the gross sales tax amount before deducting the entry tax paid under Section 4 of the Orissa Entry Tax Act, 1999 (OET Act)? Assessee's Contention: The respondents argued that the surcharge should be levied only on the balance amount of sales tax payable after deducting the entry tax paid. They relied on a clarification issued by the Commercial Tax Department to TELCO, Bhubaneswar, which they contended was in accordance with the illustration appended to Rule 18 of the OET Rules. They also cited State of Tamil Nadu vs. M.K. Kandaswami and Others (1975) 4 SCC 745, for the principle of preferring a construction that preserves workability and efficacy. Revenue's Contention: The appellants argued that the OET Act and its Rules do not alter the mode of computation prescribed in Section 5A of the OST Act. Section 4 of the OET Act only provides for the reduction of sales tax liability to the extent of entry tax paid, and this reduction pertains to the entry tax itself, not the computation of surcharge. They relied on Shambhu Nath Mehra vs. The State of Ajmer AIR 1956 SC 404 and Lalit Mohan Pandey vs. Pooran Singh and Others (2004) 6 SCC 626, for the principle that illustrations do not curtail or expand the ambit of a section. They also cited several judgments (K. Srinivasan, Madurai District Central Co-operative Bank Ltd., Hoechst Pharmaceuticals Ltd., Ashok Service Centre, Sarojini Tea Co. (P) Ltd.) to establish that surcharge is an additional tax and partakes of the nature of the principal tax.

Which sections of the Income-tax Act were involved?

Section 3(3),Section 5,Section 5A,Section 12(4),Section 4,Section 7-A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
Page 1 JUDGMENT CORRIGENDUM REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOs. 5913-5920 OF 2008 Commissioner of Commercial Taxes & Ors. .... Appellant(s) Versus M/s Bajaj Auto Ltd. & Anr. .... Respondent(s) WITH CIVIL APPEAL NOs. 5921 OF 2008

J U D G M E N T R.K. Agrawal, J. 1) Challenge in the above said appeals is to the legality of the common judgment and order dated 05.01.2007 rendered by a Division Bench of the High Court of Orissa at Cuttack in Writ Petition (C) being No. 233 of 2002 and connected matters 1

Page 2 JUDGMENT wherein the High Court allowed the petitions filed by the respondents herein. 2) Civil Appeal No. 5913 of 2008 is being treated as the leading case, hence, the facts of the said appeal are given below:- a) The respondents are engaged in the sale and purchase of Motor Vehicles and are registered dealers under the Orissa Sales Tax Act, 1947 (in short ‘the OST Act’) as well as under the Central Sales Tax Act. The respondents had been paying entry tax on the goods when they were bought into the State of Orissa under Section 3(3) of the Orissa Entry Tax

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 5

All 810 judgments and leading authorities on Section 5 →

Recent GST High Court judgments

Search GST case law →