IN THE HIGH COURT OF KERALA AT ERNAKULAM
ST Rev No. 183 of 2004()
1. M/S. JANATHA WOOD CRAFTS,
... Petitioner
Vs
1. STATE OF KERALA, REPRESENTED BY THE
... Respondent
For Petitioner :SRI.C.KOCHUNNY NAIR
For Respondent :GOVERNMENT PLEADER
The Hon'ble the Chief Justice MR.H.L.DATTU
The Hon'ble MR. Justice K.M.JOSEPH
Dated :23/11/2007
O R D E R
H.L.DATTU, C.J. & K.M.JOSEPH, J.
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S.T.Rev.No.183 of 2004
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Dated, this the 23rd day of November, 2007
ORDER
H.L.Dattu, C.J.
The petitioner is a firm and it is registered under the provisions of the
Kerala General Sales Tax Act, 1963 (‘the Act’ for short). The petitioner firm is
engaged in the manufacture and sale of block board and block board frames.
In its manufacturing activity, the petitioner firm purchases and consumes soft
wood.
(2) The notification issued by the State Government under SRO
No.403/1994 grants exemption from payment of purchase tax under Section 5A
of the Act provided the end product is exigible to the sales tax.
(3) In the returns filed for the assessment year 2000-01, the assessee
had claimed exemption from payment of purchase tax relying upon SRO
No.403/1994. The claim so made by the assessee was rejected by the
assessing authority.
(4) Aggrieved by that order the assessee had filed appeal before the
first appellate authority. During the interregnum, persons similarly placed like
the assessee had approached the State Government to issue appropriate
clarification with regard to the exemption available to the assessee and to the
other assessees similarly situated like the petitioner who also manufactures
block board and block board frames. The Under Secretary to the State
Government has issued a clarification by his order dated 8.6.2002, clarifying
that soft wood purchased for manufacture of block board and block board
S.T.Rev.No.183/2004 2
frames is also eligible for exemption under SRO No.403/1994.
(5) Relying upon the clarification so issued by the Under Secretary, the
first appellate authority had allowed the assessee’s appeal and further had
directed the assessing authority to grant exemption on the purchase turnover of
the soft wood purchased by the assessee. The State, as usual, had carried the
matter in appeal before the Tribunal in T.A.No.197 of 2003. The Tribunal by its
order dated 23rd January, 2004 is of the view that the clarification issued by the
Under Secretary to the State Government is not in the nature of a notification
issued under Section 10 of the Act and therefore, the first appellate authority
could not have relied upon the said clarification. Apart from this, the Tribunal is
also of the opinion that the clarification issued by the Under Secretary is not
binding on them. Therefore, had allowed the State’s appeal and had confirmed
the orders passed by the assessing authority. Being aggrieved by the findings
and conclusions so reached by the Tribunal in T.A.No.197 of 2003 dated
23.1.2004, the assessee is before us in this sales tax revision.
(6) The assessee has framed the following questions of law for our
consideration and decision, They are as under:
“(1) Was the Appellate Tribunal correct in law in not
holding that the revision petitioner is entitled for exemption from
purchase tax under Section 5A of the KGST Act for the turnover
on the soft wood consumed for the manufacture of block board
considering SRO No.403/99 as also clarificatory letters dated
8.6.2002 and 29.6.2002 from the Government?
(2) Has the appellate Tribunal rightly applied the dictum
of the case cited 90 STC 49 laid down by the Honourable
S.T.Rev.No.183/2004 3
Supreme Court in rendering the turnover of soft wood
purchased by the revision petitioner unqualified for exemption
from purchase tax U/S.5A?”
(7) The State Government has issued the notification SRO No.403/1994
in exercise of its powers under Section 10 of the Act. By the said notification,
the State Government has granted exemption from payment of purchase tax on
certain commodities such as soft wood, etc. if it is used in the manufacture of
plywood, tea chests, wooden crates, wooden cable drums, veneers, etc. and
further end products so manufactured are exigible to sales tax on the first point
of sale.
(8) The petitioner being of the opinion that the block board and block
board frames manufactured by them is more or less similar to the manufacture
of plywood, tea chests, wooden crates, etc., had sought for exemption from
payment of purchase tax in the annual returns filed for the assessment year
2000-01.
(9) The assessing authority taking into consideration the products
mentioned in the notification, has come to the conclusion that the State
Government has exempted purchase of soft wood from payment of purchase
tax provided it is used in the manufacture of plywood, tea chests, wooden
crates, etc. and not in the case of block board and block board frames.
(10) As we have already noticed, the petitioner and persons similarly
placed had approached the State Government to issue an appropriate
notification clarifying that the manufacturers of block board and block board
S.T.Rev.No.183/2004 4
frames are also eligible and entitled to the exemption granted under SRO
No.403/1994. The Under Secretary to the State Government by his order dated
8.6.2002 has clarified that the manufacturers of block board and block board
frames are also eligible and entitled to claim exemption under SRO
No.403/1994. The clarification issued by the Under Secretary to the State
Government is as under:
“I am directed to invite your attention to the letter cited as
to inform that if the raw materials come under the purview of the
soft wood, the SSI Unit – qualifies for tax exemption provided the
other requirements are satisfied under the notification concerned.”
(11) The first appellate authority, keeping in view the purport of the
notification SRO No.403/1994 and the clarification issued by the Under
Secretary to the State Government dated 8.6.2002, had allowed the assessee’s
appeal and had directed the assessing authority to grant exemption to the
petitioner industry on its purchase turnover of the soft wood used for the
manufacture of block board and block board frames.
(12) The Tribunal, in appeal filed by the State, has come to the
conclusion that the State Government can issue appropriate notification in
exercise of its powers under Section 10 of the Act granting exemption from
payment of tax under the Act. The clarification issued by the Under Secretary
is not in the nature of a notification issued under Section 10 of the Act and
therefore, the first appellate authority could not have relied upon such
clarification issued by the Under Secretary to the Government while allowing
the appeal filed by the assessee. Further, the Tribunal has observed that the
clarification issued by the Under Secretary to the Government is not binding on
S.T.Rev.No.183/2004 5
the Tribunal. We cannot take exception to the finding and conclusion reached
by the Tribunal.
(13) Taking into consideration the pathetic situation of the assessee
and persons similarly placed, the State Government has issued a notification
SRO No.593/2004 dated 7th June, 2004 which has come into effect from 1st of
January, 2000. The said notification grants exemption on the purchase
turnover of soft wood, if the same is used in the manufacture of block board
and block board frames. The State Government has also issued yet another
notification SRO No.689/2007 dated 6th July, 2007 which has been given
retrospective effect from 1st of April, 1994 to 31st December, 1999.
(14) In view of these notifications, we are of the opinion that the State
Government has clarified that the manufacturers of block board and block
board frames who purchases and consumes soft wood are eligible and entitled
for exemption under the notifications SRO No.403/1994, SRO No.593/2004
and SRO No.689/2007.
(15) In view of the notifications so issued by the State Government, in
our opinion, it is now difficult for us to sustain the orders passed by the Tribunal
in T.A.No.197 of 2003 dated 23.1.2004.
(16) Accordingly the following:
Order
i) The Sales Tax Revision is allowed.
ii) The orders passed by the Tribunal in T.A.No.197 of 2003 dated
23.1.2004 for the assessment year 2000-01 is set aside.
iii) The matter is now remanded back to the assessing authority to redo
S.T.Rev.No.183/2004 6
the assessment in accordance with law and in the light of the notifications SRO
No.403/1994, SRO No.593/2004 and SRO No.689/2007 as expeditiously as
possible, at any rate within six months from the date of receipt of a copy of this
Court’s order.
iv) The applications, I.A.No.2633 of 2007 and 2848 of 2007, to accept
documents are allowed.
v) I.A.No.1349 of 2004 is dismissed.
Ordered accordingly.
(H.L.DATTU)
CHIEF JUSTICE
(K.M.JOSEPH)
vns/DK. JUDGE