IN THE HIGH COURT OF KERALA AT ERNAKULAM
TRC No. 134 of 2003()
1. M/S. GIRIPAI JEWELLERS,
... Petitioner
Vs
1. THE STATE OF KERALA,
... Respondent
For Petitioner :SRI.KMV.PANDALAI
For Respondent :GOVERNMENT PLEADER
The Hon'ble the Chief Justice MR.H.L.DATTU
The Hon'ble MR. Justice K.T.SANKARAN
Dated :24/07/2007
O R D E R
H.L.DATTU, C.J. & K.T.SANKARAN, J.
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T.R.C.Nos.134, 138 & 139 of 2003
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Dated, this the 24th day of July, 2007
ORDER
H.L.Dattu, C.J.
Since common questions of law are involved in all these revision
petitions they are clubbed together, heard and disposed of by this common
order.
(2) The assessment years in question are 1994-95, 1995-96,
1996-1997. The Tribunal by its order in T.A.Nos.179 of 2002, 180 of 2002
and 181 of 2002 dated 30th April, 2002 has rejected the appeals filed by the
assessee. That is how the assessee is before us in these tax revision cases.
(3) The questions of law raised by the assessee are as under:
“(a) Section 5A of the KGST Act provides as follows:-
“5A. Levy of purchase tax:- Every
dealer who, in the course of his business,
purchases from a registered dealer or from any
other person any goods, the sale or purchase of
which is liable to tax under this Act, in
circumstances in which no tax is payable under
[Sub-sections (1), (x), (3), (4) or (5) of Section 5]
and either,-
(a) consumes such goods in the
manufacture of other goods for sale or otherwise;
or
(b) use or disposes of such goods
in any manner other than by way of sale in the
State; or
(c) despatches them to any place
outside the State except as a direct result of sale or
purchase in the course of inter-State trade or
TRC.No.134/2003 etc. 2
commerce; shall, whatever be the quantum of the
turnover relating to such purchase for a year, pay
tax on the taxable turnover relating to such
purchase for the year at the rates mentioned in
Section 5.
(2) Notwithstanding anything
contained in sub-section (1), a dealer other than a
casual trader or agent of a non-resident dealer
purchasing goods, the sale of which is liable to tax
under section 5, shall not be liable to pay tax under
sub-section (1) if his total turnover for a year is less
than two lakhs rupees”.
A reading of Section 5A extracted above would go to show that
the said section will apply only in cases no tax is payable under
section 5. Bullion is taxable under section 5. That is why
Government had to issue a notification exempting the State Bank
of India from paying tax under section 5. Thus but for notification
under Section 10 tax is payable under section 5. In other words,
it is absolutely incorrect to say that bullion in the instant case is
not taxable under Section 5. In this beyond the matter is the
Tribunal justified in law in holding that purchase of bullion by the
petitioner is liable to tax under section 5A?
(b) The notification under consideration in the decision of this
Hon’ble Court in Deputy Commissioner (Law) Vs. Supreme
Boards [6 KTR 374], which was relied on by the Tribunal, was
SRO-968/80 which provided for exemption from payment of
sales tax on the sale of goods manufactured by small scale
industries. The sale was exempted when effected by small scale
industries who ever may be the purchaser. However in
Annexure-II notification sale of bullion by State of Bank of India
and Non Resident Indians is exempted only when the sale is to
registered dealers in jewellery. That being the case, is the
Tribunal justified in Law in holding that the decision of this
Hon’ble Court in Supreme Board’s case (6 KTR 374) is squarely
applicable to the facts of this case?
(c) In Annexure-II notification it has been stated in the
explanatory note that the exemption on sale of bullion by NRIs
and State Bank of India is ordered in order to promote jewellery
export from Kerala. Export of jewellery from Kerala is effected
only by the registered dealers in jewellery. When tax is levied
under section 5A on the purchase of bullion by registered dealers
from State Bank of India, the registered dealers stands to loose
the benefit of Annexure-II notification. Is the Tribunal justified in
law in holding that Annexure-II notification is not intended for the
benefit of jewellery exports? Is not the decision of the Tribunal
against the object for which Annexure-II notification was issued
TRC.No.134/2003 etc. 3
by the Government? Is the Tribunal justified in law in holding that
the object behind Annexure-II notification is to discourage
unauthorised purchase of primary gold and thereby to give
quality advantage to the exporters?
(d) Under section 10 of the KGST Act, Government have
powers only to reduce rate of tax or exempt any goods or class
of goods from levy of tax when sold by any specified class of
persons. If the decision of the Tribunal is followed, the effect will
be that by giving exemption to the seller by the Government, the
purchaser will become liable to pay tax. It will in effect result in
shifting of point of levy from sale to purchase. Has the
Government got powers to shift the point of levy of tax under
section 10 of the KGST Act? View from that perspective, does
the decision of this Hon’ble Court in Supreme Board’s case (6
KTR 374) lay down the law correctly? Is it not liable to be
reviewed?
(e) In the decision of the Hon’ble Supreme Court in State of
Tamil Nadu Vs. Kandaswamy (36 STC 191) and of this Hon’ble
Court in Malabar Fruit Products Company Ltd. vs. Sales Tax
Officer (30 STC 537), the circumstances under which section 5A
of the KGST Act and the corresponding provision under the
TNGST Act will be attracted in clear terms. The circumstances
which were considered in those decisions are not the
circumstance of exemption granted by the Government, but they
were circumstances which were beyond the control of the
Government as a result of which tax was not payable by the
sellers. Is the Tribunal justified in law in holding that even a
situation created by the Government will be a circumstance
contemplated under section 5A of the KGST Act to levy tax under
section 5A?
(f) Exactly identical notifications granting exemption from
payment of tax to sellers on sale of goods to specified class of
persons have been issued by the Government. One such
notification is SRO-1727/93. In Schedule VI of the said
notification sale of certain goods to certain dealers are notified as
exempted. For example sale of dyes and chemicals to
coir/handloom industries for use in the manufacture of
coir/handloom products is exempted. But nowhere in the State
the coir/handloom industries which purchase dyes and chemicals
in a circumstance in which no tax is payable by virtue of the
notification is assessed to tax under section 5A. Therefore the
principle regarding applicability of section 5A is applied in a
highly discriminatory fashion. Is the Government justified in law in
applying different principles regarding levy of tax in identical
situations?”
TRC.No.134/2003 etc. 4
(4) The questions of law raised by the assessee are no more
debatable in view of the decision of this Court in the case of M/s.Mayilvahanam
Marketing Shoranur v. Addl. Sales Tax Officer, Ottappalam in O.P.No.34485 of
2000 disposed of on 10th July, 2007.
(5) Following the observations made in the aforesaid decision,
the questions of law raised by the assessee require to be answered against the
assessee and in favour of the revenue.
All pending stay petitions are dismissed.
Ordered accordingly.
(H.L.DATTU)
CHIEF JUSTICE
(K.T.SANKARAN)
JUDGE
vns