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Judgment
R. Gururajan, J.—An interesting question with regard to interpretation to be placed on Section 17(6) of the Sales Tax Act in the light of the notification u/s 8A is raised in the case of hand. The petitioner made an application in form 8-AA in terms of Rule 8-B of the Karnataka Sales Tax Rules, 1957 (for short "the Rules") to take the benefit of an assessment u/s 17(6). Returns were submitted and details were furnished to the first respondent. The first respondent proposed action to complete the assessment of the petitioner for a normal assessment without reference to composition application. The second respondent issued a notification dated December 19, 1996 thereby total exemption was extended on the turnover involved in the execution of works contract relating to Information Technology Park Limited.
A writ petition was filed by the petitioner on an earlier occasion. In the light of the order of this Court in the writ petition, the first respondent issued proposition notice in Form 31-A proposing the composition tax at 4 per cent on the consideration received on the execution of works contract from April 1, 1996 to December 18, 1996. The respondent proceeded to assess the turnover from December 19, 1996 to March 31, 1997 u/s 12(3) extending exemption from tax u/s 5B in terms of the notification. The proposed turnover tax u/s 6B on that turnover from December 19, 1996 to March 31, 1997 is at annexure "B". The petitioner submitted his reply on May 17, 2000. Thereafter, an order was passed in terms of annexure "D" followed by a demand in terms of annexure "E".
Aggrieved by the action of the respondents, the petitioner is before me. Respondents have entered appearance.
Sri. Narayana, learned Counsel appearing for the petitioner took me through the scheme of the Act and also the Judgment of Tata Honeywell Ltd. [1999] 115 STC 220 (Kar) to contend that the respondents are wrong in bifurcating the yearly composition order in the case on hand. According to him it is impermissible in law.
Per contra, Sri. Anand, learned Government Advocate says that Section 17(6) has to be read in the light of the judgment of this Court in Hubli Opticals v. Assistant Commissioner of Commercial Taxes [1996] 100 STC 405. Learned Government Pleader says that the tax referable would not include the tax u/s 6B of the Act. He supports the Governmental action.
After hearing, I have carefully perused the material on record.
Section 17(6)(i) provides for composition in the matter of payment of tax. The said section reads as under :
"17(6)(i) Notwithstanding anything contained in Section 5B, but subject to such conditions and in such circumstances as may be prescribed, the assessing authority of the area may, if a dealer liable to tax u/s 5B so elects, accept in lieu of the amount of tax payable by him during the year under this Act, by way of composition an amount on the total consideration for the works contracts executed by him in that year in the State in respect of works contract specified in column (2) of the Sixth Schedule at rates specified in the corresponding entries in column (4) of the said Schedule.
(ii) Any dealer may apply to the assessing authority to be permitted to pay the amount under clause (i) and, on being so permitted, he shall pay tax in advance as provided for u/s 12B and all the provisions of Section 12B mutatis mutandis shall apply to this sub-section ;
(iii) the amount paid under clause (ii), shall be subject to such adjustment as may be necessary on completion of final assessment."
Rules have been framed in this regard in terms of Rule 8-B of the Rules. It is admitted before me that the petitioner did make an application for composition and the same was accepted by the department. They want to levy tax u/s 6B in the light of a notification dated December 19, 1996. This Court in the case of Tata Honeywell Ltd. v. Deputy Commissioner of Commercial Taxes [1999] 115 STC 220, has considered identical facts as in the said case. This Court, after noticing the provisions of sections 17(6), 6B, 5B and 8A ruled in para 3 reading as under :
"The power to exempt u/s 8A of the Act which is exercised by the State Government is to take out the assessee from the charging section. The charge that is created comes to an end the moment exemption is granted. A contention is raised by the learned counsel for the respondent that the composition u/s 17(6) is for the year and therefore, grant of exemption during the year would still make an assessee liable to pay the tax, in terms of Section 17(6) of the Act. This contention cannot be considered to be proper. It is true that the composition is granted on yearly basis, as the unit of assessment is also for an year, the charge is created annually, but if the charging section itself is not in force during part of that year, the liability ceases from the date the exemption is granted. In view of this interpretation, the assessment order dated April 22, 1997 is quashed. The assessing authority will proceed to frame the assessment de novo in the light of the observation made above."
This Court categorically ruled that the charge that is created comes to an end, the moment exemption is granted. This Court has further ruled that the unit of assessment is also for an year, the charge is created annually and therefore, the liability ceases from the date of exemption in terms of the Act. The said case is applicable to the facts of this case. Admittedly, the exemption has been granted for the entire year in terms of the Act. It is not open for the respondent now to bifurcate and demand tax u/s 6B in the light of the notification dated December 19, 1996. The said action on the part of the respondent is impermissible in law.
Sri. Narayana, learned counsel is right in his submission that the action of the respondent in demanding tax u/s 17(6) requires my interference. I must also consider the submission of the learned Government Advocate with regard to the applicability of the Hubli Opticals case in [1996] 100 STC 405 (Kar). The facts of the case, if read would show that the intention was to exempt only the tax and not the turnover tax. That was a case in which the exemption notice specifically read as tax payable u/s 5 of the Act. In the light of the specific wordings in that case, this Court ruled that the inclusion of Section 6B is not permissible on the facts of that case. The said judgment is clearly distinguishable on facts. In the case on hand, a statute has to be given its full meaning and it cannot be read to the detriment of an assessee.
In these circumstances, I reject the arguments of the Government. The writ petition is allowed. The impugned assessment order is set aside. Consequently, the demand notice also is set aside.
Ordered accordingly. No costs