By TIOL News Service

NEW DELHI, MAR 29, 2019: THE ISSUE AT HAND IS - Whether a court is bound to apply the Strict rule of interpretation when construing penal and taxation statutes. YES IS THE VERDICT.

Thus, the court also held that if the relevant provisions of the Karnataka Sales Tax Act provide for tax on the total turnover, then an assessee cannot propound an alternative interpretation, seeking taxation of taxable turnover.

Facts of the case

The assessee-company manufactures and deals in cashew kernels & cashew shell oil. Assessment orders were passed for the relevant AYs. The assessee filed appeals against such orders, on grounds that the levy of tax u/s 6B of the Act on the 'total turnover', was a mis-construction of the provision and that the same had to be 'taxable turnover', so as to be in conformity with Article 286 of the Constitution of India. Such claims were not accepted by the AO or by the Appellate Authority. The High Court too dismissed the assessee's appeals. Hence the present appeals were filed.

On appeal, the Supreme Court was of the view that,

++ the expression "total turnover" + "turnover" which has been used u/s 6B has the same meaning as defined under Section 2(1)(u2) and 2(v) of the Act. Moreover, u/s 6B, reference is made on ‘total turnover' and not the ‘turnover' as defined u/s 2(v) of the KST Act and taking note of the exemption provided under first proviso clause(iii), exclusion has been made in reference to use of sale or purchase of goods in the course of interstate trade or commerce. It clearly indicates that the expression ‘total turnover' which has been incorporated as referred to under Section 6B(1) is for the purpose of identification of the dealers and for prescribing different rates/slabs. The first proviso to Section 6B(1) provides an exhaustive list of deductions which are to be made in computation of such turnover with a further stipulation as referred to in second proviso that except for the manner provided for in Section 6B(1), no other deduction shall be made from the total turnover of a dealer;

++ the economic superiority principle for the purpose of levy of turnover tax while holding that the interpretation of statute would not depend upon contingency. It is trite law which the Court would ordinary take recourse to golden rule of strict interpretation while interpreting taxing statutes. In construing penal statutes and taxation statutes, the Court has to apply strict rule of interpretation and this is what has been considered by this Court in Commissioner of Customs(Import), Mumbai Vs. Dilip Kumar and Company and Others;

++ in the instant scheme of the Act of which reference has been made in detail, the expression ‘total turnover' has been referred to for the purpose of identification/classification of dealers for prescribing various rates/slabs of tax leviable to the dealer and read with first and second proviso to Section 6B(1), this makes the intention of the legislature clear and unambiguous that except the deductions provided under the first proviso to Section 6B(1) nothing else can be deducted from the total turnover as defined u/s 2(u2) for the purpose of levy of turnover tax u/s 6B of the Act. Thus, the present appeals lack merit.

(See 2019-TIOL-133-SC-CT)