M/S Blue Mountain Biscuit Co. v. Commissioner of Commercial Taxes

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HON'BLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE A.K.BASHEER MONDAY, THE 18TH AUGUST 2008 / 27TH SRAVANA 1930 ST.Appeal..No. 14 of 2006 ------------------------------AGAINST THE ORDER DATED 28/07/06 IN CT IN R2.58557/2002 of COMMR. OF COMMERCIAL TAXES, TRIVANDRUM .................... APPELLANT / ASSESSEE: ----------------------------------- M/S.BLUE MOUNTAIN BISCUIT CO., AMALAVAYAL, WAYANAD. BY ADV. SRI.N.MURALEEDHARAN NAIR & SRI.V.K.SHAMUSUDHEEN RESPONDENT/RESPONDENT: ----------------------------------------- COMMISSIONER OF COMMERCIAL TAXES, PUBLIC OFFICE BUILDINGS, THIRUVANANTHAPURAM. BY SENIOR GOVERNMENT PLEADER SRI.MUHAMMED RAFIQ THIS SALES TAX APPEAL HAVING BEEN FINALLY HEARD ON 18/08/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: ## H.L. DATTU, C.J. & A.K. BASHEER, J. **==> picture [298 x 71] intentionally omitted <==** ## H.L. Dattu, C. J: Assessee is a dealer registered under the provisions of Kerala General Sales Tax Act (KGST Act for short). It is also a small scale industrial unit. 2. This revision petition pertains to the assessment year 1997-98. 3. The assessee had filed its annual return before the assessing authority and in that had claimed “Nil” tax liability in view of the pendency of its application before the General Manager, District Industries Centre claiming exemption from payment of the tax under the Act. 4. The assessing authority has rejected the returns filed by the assessee and thereafter has proceeded to complete the best judgment assessment. After completion of the best judgment assessment, the assessing authority has also levied interest under section 23(3) of the Act. 5. Appellant had carried the matter by way of revision before the Deputy Commissioner, Department of Commercial Taxes, Wayanad in STRP.16/2002. The revisional authority by its order dated 5/9/2002 has allowed the revision petition filed by the assessee. The orders so passed by the first revisional authority is taken exception to by the Commissioner of Commercial Taxes and therefore has initiated proceedings under section 37 of the Act , to revive the orders passed by the first revisional authority for the assessment year in question. S.T.A.14/2006 : 2 : 6. After complying with the principles of natural justice, the revisional authority by its order dated 28/7/2006 has cancelled the orders passed by the first revisional authority and has restored the interest levied by the assessing authority, while completing the assessment for the assessment year 1997-98. The revisional authority in its order has stated as under: _“The contentions raised have been examined._ _The biscuit unit started production_ _with effect from 3.4.95. As per SRO.1729/93 as amended by SRO.404/94, Government had withdrawn Sales Tax exemption for Industrial Unit producing Biscuits. Since the unit is registered after 1.4.94, it is not eligible for exemption. The dealers has not obtained and produced the exemption certificate from Industrial Department as yet. Against the demand of tax and surcharge the dealer filed appeal before the Appellate Assistant Commissioner, Kozhikkode, who in STA No.1125/00 dated 19.9.1992 has dismissed the appeal on the ground that the assessee's application for Sales tax exemption had been returned by the_ S.T.A.14/2006 : 3 : _Industrial Department. In the above circumstances the dealer is liable to pay interest on the tax due from 5/98 to till the date of payment as per section 23(3) of the KGST Act 1963._ _The dealer has filed revised return admitting tax liability and conceding taxable turnover. In the absence of any order granting exemption, section 23(3) will come into operation and since it is admitted tax the decision in Maruthi Wires case is not applicable.”_ 7. Aggrieved by the findings and conclusions reached by the Commissioner of Commercial Taxes, the assessee is before us in this Sales Tax Appeal. 8. Sri.V.K.Shamsudheen, learned counsel appearing for the assessee would submit, that, the assessing authority was not justified in levying interest under section 23(3) of the Act, since the assessee had claimed exemption from payment of the KGST Act, on the ground, that the assessee's application for grant of exemption from payment of tax is pending before the General Manager, District Industries Centre. The learned counsel would further submit that it is only after service of the demand notice by the assessing authority after S.T.A.14/2006 : 4 : completion of the assessment proceedings and if the demand is not complied with, then only the provisions of Section 23(3) is not attracted and not otherwise. In support of that contention learned counsel has brought to our notice the observations made by the Apex Court in the case of _**State of Kerala and Others**_ v. _**Joy Varghese,**_ 112 STC 651. 9. Per contra, Sri. Muhammed Rafiq, learned counsel appearing for the Revenue has brought to our notice the decision of this Court in the case of _**M/s.Chandramani Traders**_ v. _**State of Kerala**_ (S.T.Rev.No.339 of 2003 disposed of on 7[th] of April 2008). Further, learned counsel would submit that the decision rendered by the Apex Court in Joy Varghese's case was prior to the amendment of sub-section (3) of Section 23 of the Act. 10. In M/s.Chandramani Traders' case, a Bench of this Court, while considering more or less a similar contention as canvassed by Sri.V.K.Shamsudheen has answered the issue as under: _“Sub-section (3) of Section 23 of the Act provides for levy of interest under different circumstances. Firstly, if the tax or any other amount assessed is not paid by the dealer or other person within the time prescribed for, i.e. the tax assessed is not paid within the time prescribed under the Act. The expression “tax_ S.T.A.14/2006 : 5 : _assessed” is explained by Lord Dunedin in Whitney vs. Commissioner of Inland Revenue (1926) AC 37, wherein it is stated,_ _“Now there are three stages in the imposition of tax. There is a declaration of liability, that is part of the statute which determines what persons in respect of what property are liable. Next, there is the assessment. Liability does not depend upon assessment. That, ex hypothesi has already been fixed. But, the assessment particularises the exact sum which a person is liable to pay. Lastly, comes the methods of recovery, if the person taxed does not voluntarily pay”._ _29. Therefore, tax assessed means the exact sum which a dealer or other person is liable to pay under the Act. The tax assessed, if it is not paid after service of demand notice within the time prescribed, the provision for payment of interest is attracted._ _30. The “tax due under the Act” as explained by the Apex Court in J.K. Synthetics case is that amount which becomes due_ S.T.A.14/2006 : 6 : _ex hypothesi on the turnover shown in or based on the return. Therefore, so long as the assessee pays the tax which according to him is due on the basis of the information supplied in the return filed by him, there would be no default on his part to meet the statutory obligation under Section 7 of the Act and therefore, it would be difficult to hold that the tax payable by him is not paid to visit him with the liability to pay interest. Even going by the decision on which heavy reliance was placed by the learned counsel for the petitioner, it may not support his contention. In the instant case, as we already noticed, the assessee has filed his returns as required under the Act and while doing so, was fully aware of the fact that he would be entitled to concessional rate of tax only if he produced declaration Form No. 18 obtained from the purchasing dealer, but still had paid only concessional rate of tax and the payment so made is not tax due under the Act, and therefore, in view of the language employed in sub-section (3) of Section 23 of the Act, and in view of what has been said by the Apex Court in J.K. Synthetics case, the assessee is liable for payment of interest under the Act.”_ _.............._ S.T.A.14/2006 : 7 : _33. In Maruthi Wire Industires case, the Apex Court was dealing with the question as to whether the assessee was liable to pay interest under section 23(3) of the Act from the date the return was due though neither return as envisaged under the Act had been filed nor tax had been paid on self assessment basis. The Apex Court has taken the view that the liability of the assessee to pay sales tax could have arisen on return of turnover being filed by self assessment or else an order of assessment being made. To come to the aforesaid conclusion, reliance is placed on the decision of the Apex Court in Associated Cement Co. Ltd.'s case and J.K.Synthetics case. In our view, the decision on which reliance is placed by the learned counsel for the assessee may not be of much assistance to the assessee, since the fact situation in that case was entirely different from the fact situation in the present case. In the present case, the assessee has field his return conceding a particular turnover by way of self assessment and in that had claimed concessional rate of tax. The assessee was fully aware, unless he produces declaration forms No.18 from the purchasing dealer, that he would be disentitled_ S.T.A.14/2006 : 8 : _to claim concessional rate of tax, in view of the language employed in the section itself and in spite of it, he had paid lesser rate of tax than what is specified in the Schedule to the Act. Since the assessee had not paid tax on the admitted turnover at the specified rate of tax, this is a case where tax due under the Act is not paid and therefore, the petitioner cannot escape the rigour of the penal provision under the Act.”_ 11. In view of what has been stated by a Division Bench of this Court, in our opinion, the submission of the learned counsel Sri.Shamsudheen, is difficult to accept. Accordingly, following the observations made by this Court in M/s.Chandramani Traders case, the appeal requires to be rejected and it is rejected. Ordered accordingly. **H.L. DATTU Chief Justice** **A.K. BASHEER an/DK Judge.**