V. Ramaswami, J. - (1.) Leave granted in Special Leave Petitions Nos. 8417 and 8492-93 of 1987.
(2.) In this batch of appeals the appellants are the State of Kerala. The respondents are registered dealers under the Kerala General Sales Tax Act, 1963, hereinafter called the State Act as well as under the Central Sales Tax Act, 1956, hereinafter called the Central Act. Some of the assessees carry on the business of sales and purchase of Coir products which is taxable under the State Act at 2%, some of the dealers carry on business of Hosiery which is taxable at 3%. The respondents-assessees in Civil Appeal Nos. 1426-27 of 1988 deal in automobile spares which is taxable at 15% and the assessee in Civil Appeal No. 1015 of 1988 deals in transformer which is taxable at 10%. The respondent in Civil Appeal No. 4386 of 1988 is a dealer in titanium dioxide, Cement, and Paints products which are taxable at 10% and the respondent in Civil Appeal No. 189 of 1990 is a dealer of Sewing Thread which is taxable at 3%. The assessee in Civil Appeal No. 5557 of 1990 is a dealer in rice taxable at 2%. Under the Kerala Additional Sales Tax Act (20 of 1.978) all taxable sales and purchases in the State including the local sales of Coir, Hosiery, Rice, Automobile parts, titanium dioxide, Cement, Paints and transformers etc. with which we are concerned, were subjected to an additional sales tax calculated at 10% of the rate of tax already imposed under the Kerala General Sales Tax Act, 1963. The result of it was where the rate of tax was 2% the tax payable became 2.2% where it was 3% it was 33%, 10% became 11%, 15% became 16.5%. In all these cases the assessments in question were under the Central Sales Tax Act. The Kerala Additional Sales Tax Act came into force with effect from 1st April, 1978. In the present appeals the assessment year in question were either 1978-79 or subsequent thereto. The assessing officers sought to levy tax in respect of the inter-State sales of the assessees by including the additional sales tax. The assessees questioned the inclusion of the additional sales tax levy in respect of their inter-State sales on the ground that the levy under the Kerala Additional Sales Tax Act is not and could not be considered as a levy "under the sales tax law of the appropriate State" within the meaning of Section 8(2-A) of the Central Act and for the purpose of levying Central Sales Tax in view of the provisions of Section 8 (2-A) of the CST Act only the rate of tax as per the original Kerala General Sales Tax Act, 1963 shall be taken into account. They also contended that the rate of tax on inter-State sales payable under section 8 of the Central Act cannot be increased by any amendment of the State Act or any legislation by the State. All the revision petitions filed by the assessees were allowed by the High Court of Kerala accepting their contention following the judgment of the Division Bench of the same Court reported in Assistant Commr. (Assessment) Sales Tax v. Janatha Expeller Company (1987) 64 STC 435 which confirmed a single Judge judgment in Janatha Expeller Company v. Assistant Commr. (Assessment) Sales Tax, Special Circle, Trichur (1982) 49 STC 216.
(3.) Before we deal with the decision relied on by them it is better we set out the relevant provisions and understand the scope and implications of the same. "8. Rates of tax on sales in the course of inter-State trade or commerce.- (1) Every dealer, who in the course of inter-State trade or commerce- (a) sells to the Government any goods; or (b) sells to a registered dealer other than the Government goods of the description referred to in sub-section (3); shall be liable to pay tax under this Act, which shall be four percent of the turnover. (2) The tax payable by any dealer on his turnover in so far as the turnover or any part thereof relates to the sale of good in the course of inter-State trade or commerce not falling within sub-section (1)- (a) in the case of declared goods shall be calculated at twice the rate applicable to the sale or purchase of such goods inside the appropriate State; and (b) in the case of goods other than declared goods, shall be calculated at the rate of ten percent. or at the rate applicable to the sale or purchase of such goods inside the appropriate State, whichever is higher; and for the purpose of making any such calculation any such dealer shall be deemed to be a dealer liable to pay tax under the sales tax law of the appropriate State, notwithstanding that he, in fact, may not be so liable under that law. (2A) Notwithstanding anything contained in sub-section (1A) of Section 6 or sub-section (1) or clause (b) of sub-section (2) of this section, the tax payable under this Act by a dealer on his turnover in so far as the turnover or any part thereof relates to the sale of any goods, the sale or, as the case may be, the purchase of which is, under the sales tax law of the apropriate State, exempt from tax generally or subject to tax generally at a rate which is lower than four per cent. (whether called a tax or fee or by any other name), shall be nil or, as the case may be, shall be calculated at the lower rate. Explanation.- For the purposes of this sub-section a sale or purchase of any goods shall not be deemed to be exempt from tax generally under the sales tax law of the appropriate State if under that law the sale or purchase of such goods is exempt only in specified circumstances or under specified conditions or the tax is levied on the sale or purchase of such goods at specified stages or otherwise than with reference to the turnover of the goods. (3) and (4).********** (5) Notwithstanding anything contained in this section, the State Government may, if it is satisfied that it is necessary so to do in the public interest, by notification in the official Gazette, and subject to such conditions as may be specified therein, direct.- (a) that no tax under this Act shall be payable by any dealer having his place of business in the State in respect of the sales by on him, in the course of inter-State trade or commerce, from any such place of business of any such goods or classes of goods as may be specified in the notification, or that the tax on such sale shall be calculated at such lower rates than those specified in sub-section (1) or sub-section (2) as may be mentioned in the notification; (b) that in respect of all sales of goods or sales of such classes of goods as may be specified in the notification, which are made, in the course of inter-State trade or Commerce, by any dealer having his place of business in the State or by any class of such dealers as may be specified in the notification, to any person or to such class of persons as may be specified in the notification, no tax under this Act shall be payable or the tax on such sales shall be calculated at such lower rates than those specified in sub-section (1) or sub-section (2) as may be mentioned in the notification." ;