IN THE HIGH COURT OF KERALA AT ERNAKULAM
WP(C).No. 25445 of 2003(D)
1. GEORGE THOMAS
... Petitioner
Vs
1. STATE OF KERALA
... Respondent
For Petitioner :SRI.SHAJI P.CHALY
For Respondent :GOVERNMENT PLEADER
The Hon'ble MR. Justice P.R.RAMACHANDRA MENON
Dated :28/10/2010
O R D E R
P.R. RAMACHANDRA MENON J.
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W.P (C) No. 25445 OF 2003
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Dated, this the 28th day of October, 2010
JUDGMENT
The issue involved in this Writ Petition is, whether the
petitioner is entitled to get exemption from the purview of sales tax, based
on the relevant notifications issued by the Government in this regard and
whether the rejection of the benefit, in respect of the value invested by the
petitioner for purchasing the ‘brand new vehicle’, which was subsequently
sold of in the year 1992, as ordered by the State Level Committee vide Ext.
P7 is correct or not.
2. The petitioner is an SSI unit engaged in manufacturing and sale of
fruit products. By virtue of the relevant notification (SRO No. 968 of 1980)
issued by the Government, the petitioner is entitled to get exemption up to
90 % of value investment made on the fixed asset/machinery, delivery van
etc. The petitioner preferred Ext. P1 application showing the exemption
eligible to him as Rs. 9,00,941.48. After considering the facts and figures,
the 4th respondent granted exemption of Rs. 4,99,618.60/- as borne by
Ext. P2. The rejection of the amounts under the other heads was mainly in
respect of the value of land, machinery etc. besides the value of newly
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2
purchased vehicle to an extent of Rs.1,15,143.28/-. The dispute involved
in the present Writ Petition stands confined to the rejection in respect of the
said vehicle alone.
3. Being aggrieved of the rejection of exemption in respect of the
value of the vehicle vide Ext. P2, the petitioner preferred Ext. P4 appeal
before the 3rd respondent, the State Level Committee. While the said
proceedings were pending before the 3rd respondent, the 5th respondent
passed an order invoking the power of rectification and passed the revised
assessment order, followed by initiation of penalty proceedings in respect
of assessment years 1991-’92 and 1992-’93. According to the petitioner,
the said periods were eligible for exemption. The orders imposing penalty
were subjected to challenge by filing appropriate proceedings before the
Deputy Commissioner. During the pendency of the said proceedings,
coercive steps were initiated against the petitioners, which were subjected
to challenge by filing O.P. 24475 of 2000, wherein interference was
declined, which made the petitioner to file W.A. 2123 of 2000. This appeal
was disposed of, as borne by Ext. P5, observing that the issue could be
resolved, once Ext. P4 pending consideration before the 3rd respondent
was finalized and accordingly, the 3rd respondent was directed to finalise
Ext.P4; simultaneously intercepting the coercive proceedings till such time.
4. Pursuant to Ext. P5, Ext. P4 was considered by the 3rd
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3
respondent and dismissed on the main grounds; however granting some
paltry relief, providing exemption to an extent of Rs. 54,139/-. Pointing out
that the said order was passed without giving an opportunity of hearing to
the petitioner, O.P. 1584 of 2002 was filed before this Court, which was
disposed of, directing the 3rd respondent to reconsider the matter, as borne
by Ext. P6. Accordingly, the petitioner was heard and Ext. P7 order was
passed, whereby the very stand already taken in respect of the claim for
exemption with regard to the value of the vehicle was reiterated, dismissing
Ext. P4 appeal, which forms subject matter of challenge in this Writ
Petition.
5. The learned counsel for the petitioner submits that the reasoning
given in Ext.P7 order passed by the 3rd respondent is quite wrong and
unfounded. The only reason pointed out therein is that the ‘brand new
vehicle’ purchased by the petitioner in the year 1989 was subsequently
sold off in the year 1992 and as such, the petitioner is not entitled to get the
benefit of exemption. The learned counsel, with reference to Ext. P3
norms issued by the Government in this regard submits that, clause 10 is
very much categoric, which does not contemplate any such situation as
now stated by the third respondent. The said clause reads as follows :
10. All brand new identifiable items of plant and machinery
including tools, jigs, dies and moulds shall be eligible for tax
exemption. All claims in this regard shall be supported by a
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4certificate by the Chartered Accountant. In case if items
where materials are bought and fabricated in house, the cost
should be certified by the Chartered Accountant with regard
to cost of materials and fabrication charges and by a
Chartered Engineer with regard to the value of the fabricated
plant and minimum of these shall be taken (Plant and
machinery on hire purchase from NSIC shall be eligible for
tax exemption on the basis of original value). No vehicles,
other than delivery vehicles, items of office equipment and
furniture, crates, pallets and consumable stores will be
eligible for tax exemption. Second hand machinery items will
not quality for tax exemption.
The learned counsel submits that, the matter has been considered and
finalized by the 3rd respondent quite in a casual and mechanical manner
and contrary to the relevant provisions of the Scheme, which hence is
sought to be set aside.
6. The learned Government Pleader appearing for the respondents
submits with reference to the ‘manual’ that, the Scheme was proclaimed by
the Government for providing exemption as a measure to boost up the
industries. It is brought to the notice of this Court that SRO 968 issued in
the year 1980 has undergone substantial changes in the passage of time.
Pursuant to various orders issued at different points of time, SRO No. 1729
was issued in 1993, specifying the relevant norms in this regard; wherein
the term fixed capital investment has been defined with clarity, as provided
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under Clause 11 (vii) stipulating that the investments (for the purpose as
shown therein) for the industrial purpose are eligible for exemption.
Placing reliance and emphasis on the words ‘like, required for the
industrial purpose’, the learned Government Pleader submits that value
of the vehicle which was admittedly sold off cannot be reckoned for the
purpose of granting exemption, as the vehicle is no more available at the
hands of the the petitioner, to be put to use for industrial purpose. It is
also stated that, the above said notification (SRO 1729 of 2003) has
undergone further changes, by virtue of SRO 588 of 1996 and also by
virtue of Ext. P3 norms prescribed by the Government, incorporating
Clause 10 as extracted herein before.
7. The questions to be considered are: whether the vehicle
purchased by the petitioner in the year 1989 was a ‘brand new vehicle’ and
the same comes within the purview of the notification for claiming the
exemption; and if so, whether the sale of the said vehicle after few years
would dis-entitle the person concerned for claiming the benefit of
exemption (claimed by the petitioner for a period of 5 years from
November, 1988 to November 1993) by virtue of the sale of the said
vehicle in the year 1992 i.e., whether the petitioner could be denied the
benefit in toto, in spite of the fact that the vehicle was put to industrial use,
till it was sold.
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8. Going by the contents of the relevant notifications and Ext. P3,
the vehicle ought to have been kept at the hands of the assessee, putting
the same to industrial use, so as to have entertained the claim for
exemption, which is admittedly investment-oriented. The extent of
investment and extent of exemption offered in the concerned assessment
years are given separately, taking only such reckonable extent as given in
Ext. P2. The factual position that the vehicle (delivery van) was purchased
by the petitioner for industrial purpose and the delivery van was made use
of for the industrial purpose till it was sold are not the subject matter of any
dispute. In Ext. P7, the only reason stated to reject the benefit is, the
disposal of the vehicle in the financial year 1991-’92. Since the notification
does not say that the entire investment should be ‘intact’ for the entire
period of exemption and since the aspect whether the petitioner could have
been given the benefit in respect of the period during which the vehicle was
put to industrial use after the purchase in the year 1989, till the disposal in
1992, has not been considered by the appellate authority in Ext. P7. This
Court finds that the matter requires to be dealt with more elaborately, with
specific reference to the purport of the notification, its scope, object and
extent of applicability.
9. In the said circumstances, Ext. P7 is set aside and the 3rd
respondent is directed to reconsider the matter in the light of the above
observations and the relevant provisions of the Scheme and pass
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appropriate orders in accordance with law, of course after giving an
opportunity of hearing to the petitioner. This exercise shall be finalized, as
expeditiously as possible, at any rate within 3 months, from the date of
receipt of a copy of this judgment. This Court does not express anything
on merits as to the eligibility of the petitioner or otherwise which is to be
established before the 3rd respondent with reference to the actual facts and
figures.
The Writ Petition is disposed of as above.
P. R. RAMACHANDRA MENON, JUDGE
kmd