High Court of KeralaSingle Judge2013-02-21Writ petition dismissed; reassessment upheld at...

M/S Calcutta Tarpaulin Co. v. State of Kerala

Case / Petition Number:WP(C).No. 33495 of 2010 (J)

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: ANTONY DOMINIC, J.
Judgment Date: 2013-02-21
Court Decision / Holding: The writ petition is dismissed. The assessment reopened under Section 17D(2)(d) based on the Accountant General’s audit is permissible, and the HDPE sheets are taxed at 12% under Entry 113 as a plastic article, a factual finding not violative of natural justice.
Final Disposition: Writ petition dismissed; reassessment upheld at 12% under Entry 113; natural justice not vitiated by the process.

Parties to the Case

Appellants / Petitioners

M/S CALCUTTA TARPAULIN CO., Kochi

Respondents

State of Kerala
Fast Track Team No.111, Commercial Taxes Department

Legal Representation & Advocates

Counsels for Petitioners

• S. Abu Baker Kunju
• Rahmathunnisa Balachandran

Counsels for Respondents

• T.K. Shaij Raj

Case Synopsis & Summary

M/S Calcutta Tarpaulin Co., an assessee under the KGST Act, challenged Ext.P10, a reassessment order issued in 2008 for the years 2003-04 and 2004-05 under Section 17D of the KGST Act, reopening the assessment based on an Accountant General audit. The original assessments had taxed HDPE packing sheets at 4% under Entry 102, labeling the product as packing material, but Ext.P10 classified HDPE sheets as a plastic material under Entry 113, taxing at 12%. The petitioner contended that reopening under 17D(2)(d) requires fresh material and that the Commissioner’s order to reopen was improper; they relied on Ext.P1 (earlier 4% order) and Trends Polymer Pvt. Ltd. v. Assistant Commissioner III, (2009) 17 KTR 266, to argue that packing materials should be taxed at 4%. The respondents argued the reopening was based on a fresh audit material (an Accountant General report) and that the HDPE product’s use as tarpaulin sheets justified a 12% levy under Entry 113. The court upheld the reopening as based on fresh material (citing STR No.108 of 2011), rejected the 4% framing for this product, and held that the 12% determination was a factual finding not violative of natural justice. The writ petition was dismissed.

Provisions of Law Cited

Section 17D of the KGST Act17D(2)(d) of the KGST ActEntry 102 of the 1st Schedule to the KGST Act, 1963Entry 113 of the 1st Schedule to the KGST Act, 1963KGST Act, 1963

Legal Doctrines & Maxims

Principles of natural justice

Submissions & Arguments

Contentions of Appellants / Petitioners

The petition contends that reopening under Section 17D(2)(d) is permissible only on receipt of fresh materials and that Ext.P10 was issued on the basis of an order by the Commissioner rather than fresh materials. They rely on Ext.P1 (4% assessment) and Trends Polymer Pvt. Ltd. v. Assistant Commissioner III to argue that HDPE is packing material under Entry 102, meriting a 4% levy. They challenge the validity of the 12% assessment as contrary to the earlier classification and natural justice claims, noting supposed lack of notice if the 12% determination was reached without proper notice.

Contentions of Respondents

The respondents submit that reopening under Section 17D(2)(d) is permissible on the basis of fresh material, here the Accountant General’s audit report (cited with STR No.108 of 2011). They argue that the HDPE product is not packing material but a plastic article under Entry 113, justifying a 12% levy. Notice and opportunities to explain were provided (Ext.P5), and the 12% finding is a factual determination that cannot be disturbed on mere assertions; the earlier 4% classification under Entry 102 does not apply to HDPE sheets used as tarpaulins.

Cited Precedents (2)

Case Name	Citation	Treatment	Explanation
Trends Polymer Pvt. Ltd. v. Assistant Commissioner III	[(2009) 17 KTR 266]	Distinguished	HDPE sheets used as tarpaulins are found to be plastic and taxable at 12% under Entry 113; Trends Polymer held that polythene films packing material attract 4% under Entry 102, a ruling not applicable to the HDPE case.
STR No.108 of 2011	STR No.108 of 2011	Positive	Division Bench held that reopening of assessment based on audit reports is permissible; the present case relies on this principle to sustain reopening under 17D(2)(d).

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Extracted Judgment Text

Exact text extracted from official judgment records.

## IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC THURSDAY, THE 21ST DAY OF FEBRUARY 2013/2ND PHALGUNA 1934 WP(C).No. 33495 of 2010 (J) ------------------------------------- PETITIONER(S): -------------------------- M/S.CALCUTTA TARPAULIN CO., BAZAR ROAD, KOCHI-2, REPRESENTED.BY ITS MANAGER, PRAKASH GUPTA. BY ADVS.SRI.S.ABU BAKER KUNJU SRI.RAHMATHUNNISA BALACHANDRAN RESPONDENTS: ---------------------------- 1. STATE OF KERALA, REPRESENTED BY SECRETARY, TAXES, TAXES DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM, PIN 695 001. 2. FAST TRACK TEAM NO.111, COMMERCIAL TAXES DEPARTMENT, MATTANCHERRY PIN 682 002. BY ADV. GOVERNMENT PLEADER MR.T.K.SHAIJ RAJ THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 21-02-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ## W.P.C.33495/10 ## APPENDIX PETITIONER'S EXTS.: EXT.P1: TRUE COPY OF THE ORDER OF THE DEPUTY COMMISSIONER(APPEALS), ERNAKULAM IN STA 3245 & 6474 DT. 24.8.2005. EXT.P2: TRUE COPY OF THE ASSESSMENT ORDER NO.24111662/2003-2004 DT. 29.7.2008 FAST TRACK TEAM V, MATTANCHERRY. EXT.P3: TRUE COPY OF THE ASSESSMENT ORDER NO.24111662/2004-2005 DT. 29.7.2008 OF THE FAST TRACK TEAM V, MATTANCHERRY. EXT.P4: TRUE COPY OF THE OBJECTION DT. 23.11.2009 FILED BY THE PETITIONER. EXT.P5: TRUE COPY OF THE NOTICE NO.24111662/03-04 & 04-05 DT. 17.6.10 OF CTO 1ST CIRCLE, MATTANCHERRY. EXT.P6: TRUE COPY OF THE ORDER IN W.P.(C) NO.20265 OF 2010 DT. 16.7.10. EXT.P7: TRUE COPY OF THE NOTICE DT. 12.8.10. EXT.P8; TRUE COPY OF THE ORDER IN W.P.(C) NO.27794 OF 2010 DT. 8.9.10. EXT.P9: TRUE COPY OF THE OBJECTION DT. 27.9.10. EXT.P10: TRUE COPY OF THE ASSESSMENT ORDER NO.24111662/03-04 & 2004-05 OF THE COMMISSIONER OF COMMERCIAL TAXES. EXT.P11: TRUE COPY OF THE ORDER NO.C5-11164/01/CT DT. 5.4.2001 OF THE COMMISSIONER OF COMMERCIAL TAXES. EXT.P12: TRUE COPY OF THE ORDER NO.C3-36694/0/CT DT. 3.2.2009 OF THE COMMISSIONER OF COMMERCIAL TAXES. EXT.P13: TRUE COPY OF ORDER NO.R1-41186/09/CT DT. 21.10.2009 OF COMMERCIAL C.T. RESPONDENTS EXTS.: NIL. Srd (True copy) P.S. To Judge. ## **ANTONY DOMINIC,J** ## **--------------------------------** ## **W.P.(C) No.33495 of 2010** ## **------------------------------------Dated this the 21[st] day of February, 2013** ## **JUDGMENT** Petitioner was an assessee under the KGST Act. Ext.P1 is an order of assessment passed against the petitioner for the years 2001-2002 and 2002-2003, levying tax at 4% on their products classifying it as packing materials. Although, initially tax was levied at 4%, that was revised and 12% tax was levied. That order was challenged in appeal and Ext.P1 is the order passed in pursuance to the appellate order, where tax has been levied at 4%. 2. Subsequently, for the assessment years 20032004 and 2004-2005, assessments were completed in 2008 by Exts.P2 and P3 orders issued under Section 17D of the KGST Act. In these orders also, tax was levied at 4%. Subsequently, based on an audit conducted by the Accountant General, the respondents got the permission W.P.(c) No.33495 of 2010 : 2 : of the Commissioner as contemplated in 17D(2)(d) for reopening the assessment. The proceedings of the Commissioner has been produced by the learned Government Pleader along with his memo dated 25.1.2011. Based on the above, assessments for the years 2003-2004 and 2004-2005 were reopened and Ext.P10 assessment order has been issued levying tax at 12%. In this writ petition, the petitioner challenges Ext.P10. 3. First contention raised is that reopening of assessment completed under Section 17D is permissible under Section 17D(2)(d) only on receipt of fresh materials pertaining to tax evasion. It is stated that despite the above, based on an order passed by the Commissioner, assessment has been reopened. 4. Insofar as this contention is concerned, admittedly, the reopening of the assessment was initiated based on the audit report of the Accountant General. W.P.(c) No.33495 of 2010 : 3 : That report of the Accountant General certainly is a fresh material and at any rate, a Division Bench of this Court in the judgment in STR No.108 of 2011 held that reopening of assessment based on audit reports is permissible. Therefore, the contention against the reopening of the assessment cannot be accepted. 5. Counsel then contended that the commodity involved is packing material as understood under Entry 102 of the 1[st] schedule to the KGST Act and that therefore, tax could have been levied only at 4%. In support of this, they relied on Ext.P1 order referred to above and also this Court judgment in **Trends Polymer Pvt. Ltd. v. Assistant Commissioner III [(2009) 17 KTR 266** ] 6. I have considered this submission also. Reading of the judgment relied on by the learned counsel shows that in respect of polythene films, this Court has held that it is a packing material and on that basis, this Court also W.P.(c) No.33495 of 2010 : 4 : concluded that tax leviable under Entry 102 of the first schedule to the KGST Act is only at 4%. However, in Ext.P10, the impugned order, the assessing authority examined the nature of the product involved and has concluded thus: “ _We have gone through the reply filed meticulously. Their claim that HDPE is only packing material is factually erroneous. Entry 102 of the 1[st] schedule of the KGST Act, 1963 includes packing cases and packing materials including cork, cork sheet, gunny bags, shooks, tea sheets, waste paper, wooden boxes, wooden shavings, wooden crates, wooden cable, drum or other material notified by Government on this behalf and taxable @ 4%. But the item in question i.e. HDPE does not form part of any of this items, but it used as tarpaulin sheets in autorikshaw and jeeps etc. Entry 113 of the 1[st] schedule reads plastic and articles of plastics including PVC pipes, plastic paper, cellophane, polythene, ploywirethene, Polythene polyster whether expanded or not, polystern formated sheet,_ W.P.(c) No.33495 of 2010 : 5 : _sun controll polyster film, polyster self adhesive insulation tapes, fibre reinforced plastics not coming under any other entry in this schedule or in the fifth schedule taxable @ 12%. HDPE is definitely a plastic article and hence falls under entry 113 of the 1[st] schedule and hence taxable @ 12%(the sample pieces are filed)_ _Not only that several dealers dealing in HDPE voiced in unison that HDPE is not a packing material item and used as roofing sheets of autorikshaw and also for fencing and supplied sample pieces of HDPE, they deal with only a cursory verification of the material is needed to spurn the claim of the assessee that HDPE is a packing material. Such being the fact, it is clear that HDPE is a plastic material and is taxable @ 12%.”_ 7. Reading of the above shows that according to the Fast Track Team, the product in question is not a packing material and is one used as a roofing sheet of autorickshaws and also for fencing purposes. It is on that basis, the Team has concluded that the product falls W.P.(c) No.33495 of 2010 : 6 : within Entry 113 of the first schedule and is taxable at 12%. This is a factual finding and cannot be upset in a proceedings under Article 226 of the Constitution of India. 8. Counsel for the petitioner contended that the conclusion in Ext.P10 that the HDPE sheets is not a packing material and is used for roofing was arrived at without notice and that therefore, the order is violative of the principles of natural justice. However, Ext.P5 notice issued by the Fast Track Team under Section 17D(2)(d), it is stated thus: “ _Please take notice that while finalizing your accounts for the years 2003-2004 & 2004-2005 Rs.40,28,200/and Rs.44,32,200/- respectively towards the sale of HDPE were assessed @ 4% treating sales goods as packing materials under entry 102 of the 1[st] schedule. But HDPE sheets used as tarpaulin sheet in autorikshaw, jeeps etc. are not packing materials but plastic sheet coming under entry 113 of the 1[st] schedule._ W.P.(c) No.33495 of 2010 : 7 : 9. Reading of the above shows that the petitioner was put on notice of this allegation. Therefore, I cannot conclude that there was any violation on the principles of natural justice justifying interference on that ground also. In such circumstances, both the contentions raised by the learned counsel for the petitioner cannot be accepted. The writ petition fails and is dismissed. Sd/- **ANTONY DOMINIC, JUDGE** ln