M/S Kerala Shipping & Inland Navigation Corporation Limited v. Commercial Tax Officer, Second Circle, Commercial Taxes, Thripunithura; Commissioner of Commercial Taxes, Kerala; State of Kerala; Superintendent, Central Excise Customs & Service Tax, C'Range, Central Excise Bhavan, Kathrikadavu, Cochin; Inspecting Assistant Commissioner, Commercial Taxes, Kakkanad, Ernakulam

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE WEDNESDAY, THE 30TH DAY OF NOVEMBER 2016/9TH AGRAHAYANA, 1938 WP(C).No. 38164 of 2016 (u) ---------------------------- PETITIONER : -------------------- M/S.KERALA SHIPPING & INLAND NAVIGATION CORPORATION LIMITED, 38/924-A, UDAYANAGAR ROAD, GANDHINAGAR, KOCHI - 682020, A GOVERNMENT OF KERALA UNDERTAKING, REPRESENTED BY SRI.RAJESH K, FINANCE MANAGER. BY ADVS.SRI.E.P.GOVINDAN SMT.G.DEEPA RESPONDENTS : -------------- 1. THE COMMERCIAL TAX OFFICER, SECOND CIRCLE, COMMERCIAL TAXES, THRIPUNITHURA - 682042 2. THE COMMISSIONER OF COMMERCIAL TAXES, KERALA AT PUBLIC BUILDING, VIKAS BHAVAN P.O, TRIVANDRUM, PINCODE- 695001. 3. THE STATE OF KERALA, REPRESENTED BY THE SECRETARY, TAXES DEPARTMENT, GOVT. SECRETARIAT, THIRUVANANTHAPURAM - 695001. 4. THE SUPERINTENDENT, CENTRAL EXCISE CUSTOMS & SERVICE TAX, C'RANGE, CENTRAL EXCISE BHAVAN, KATHRIKADAVU, COCHIN - 682017. 5. THE INSPECTING ASSISTANT COMMISSIONER, COMMERCIAL TAXES, KAKKANAD, ERNAKULAM, KOCHI - 682030. R4 BY ADV. SRI.RAJESH B., SC, CENTRAL BOARD OF EXCISE & CUSTOMS R BY GOVERNMENT PLEADER SRI.V.K.SHAMSUDHEEN THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 30-11-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).No. 38164 of 2016 (u) ---------------------------- ## APPENDIX PETITIONER(S)' EXHIBITS ------------------------------------- EXHIBIT P1 TRUE COPY OF THE REVISED ASSESSMENT ORDER DT. 30-9-2016 PASSED BY THE FIRST RESPONDENT FOR THE YEARS 2011-2012. EXHIBIT P2 TRUE COPY OF THE ST-3 RETURNS DT.11-10-2011 FILED BY THE PETITIONER FOR THE FINANCIAL 2011-12 BEFORE THE CENTRAL EXCISE AUTHORITIES. EXHIBIT P3 TRUE COPY OF THE ST-3 RETURNS DT. 19-4-2012 FILED BY THE PETITIONER FOR THE FINANCIAL 2011-12 BEFORE THE CENTRAL EXCISE AUTHORITIES. EXHIBIT P4 TRUE COPY OF THE REPLY DT.31-8-2016 FILED BY THE PETITIONER BEFORE THE FIRST RESPONDENT. EXHIBIT P5 TRUE COPY OF THE AGREEMENT DT.22-6-2009 BETWEEN THE PETITIONER COMPANY AND FACT. EXHIBIT P6 TRUE COPY OF THE ORDER DT. 30-3-2010 ISSUED BY THE GOVERNMENT OF KERALA FOR TRANSPORTING DRINKING WATER. EXHIBIT P7 TRUE COPY OF THE WORK ORDER DT. 9-11-2011 & AGREEMENT DT.24-112011 ISSUED BY THE INDIAN OIL CORPORATION. EXHIBIT P8 TRUE COPY OF THE STATEMENT OF ACCOUNT ISSUED BY THE CHARTERED ACCOUNTANT OF INDIA. EXHIBIT P9 TRUE COPY OF THE SALE BILL NO. 10/12-13 DT. 26-2-2013 ISSUED IN FAVOUR OF KERALA STATE IRRIGATION DEPT. EXHIBIT P10 TRUE COPY OF THE RETURN FOR THE MONTH OF FEBRUARY, 2013 FILED BY THE PETITIONER COMPANY. EXHIBIT P11 TRUE COPY OF THE REVENUE RECOVERY NOTICE DT.10-11-2016 ISSUED BY THE FIFTH RESPONDENT TO THE PETITIONER COMPANY. RESPONDENT(S)' EXHIBITS : NIL -------------------------------------- /TRUE COPY/ P.A TO JUDGE AV ## **A.M. SHAFFIQUE, J.** -------------------------------------- W.P.(C).No.38164 of 2016 ------------------------------------------------Dated this the 30[th] day of November, 2016 ## **J U D G M E N T** The petitioner challenges Ext.P1 _inter alia_ raising two contentions. Ext.P1 is a revised order of assessment dated 30.09.2016 for the assessment year 2011-12 passed under Section 25(1) of the KVAT Act, 2003. 2. The contention is that in respect of the receipts for carrying out various services, petitioner had paid service tax as evident from Exts.P2 and P3 and therefore, the petitioner cannot be levied with Value Added Tax. Further it is contended that in regard to receipt of a sum for 6,10,95,123/- under the 12₹ th Finance Commission Scheme, the petitioner's liability to pay tax arises when the sale is complete in accordance with the provisions of the Act and when the goods are delivered to the buyer. Petitioner is at a stage when the construction of boats is in progress which does not amount to a works contract and the petitioner has only agreed to sell the dredger after completion of the construction. 3. Learned counsel for the petitioner places reliance on the judgment of the Apex Court in _**M/s.Imagic Creative Pvt. Ltd. v. The Commissioner of Commercial Taxes & Others [(2009) 17 KTR 105 (SC)]**_ as well as in _**Hindustan Shipyard Ltd. v. State of Andhra Pradesh [(2000) Vol.119 STC 533]**_ . The learned W.P.(C).No.38164 of 2016 2 counsel submits that though specific objection had been made by the petitioner with reference to the aforesaid proposal by the respondents, without considering any of the same including the judgments relied upon, the impugned order is passed. 4. Hence, it is contended that the failure to consider the contentions urged in the proper perspective clearly amounts to violation of principles of natural justice and non-application of mind, which is liable to be set aside. The learned counsel therefore seeks for the matter to be remitted back for fresh consideration in accordance with law. 5. Perusal of Ext.P1 would show that the assessing officer had taken note of all the contentions urged by the petitioner. The petitioner had a case that the proposed levy on a sum of ₹3,92,86,961/- cannot be treated as income from right to use under Section 6(1)(c) of the Act. According to the petitioner, they were only transport contractors and the income is not exigible to tax. It is further contended that the petitioner was paying service tax as per the Service Tax Act and related provisions and therefore, there cannot be any further Value Added Tax on the ground that there is a right to use. The assessing officer had however considered this aspect under the head earnings from operations and it is held as under : _“3) Earnings from Operations Rs.3,93,97,995/-_ W.P.(C).No.38164 of 2016 3 _a) Income from Operations : Rs.3,92,86,961.00 b) Income from shipping slipway : Rs. 1,11,034.00 On verification of the Profit and Loss Account filed, the assessee received income from their cargo transportation and income from slipway. On an examination of the reply filed by the dealer and the enclosures filed, it is seen that the transferees in the agreement were in effective control of the barges and boats and so liable to pay tax under 6(1)(c) of the KVAT Act - right to use - @ 5%._ _The assessee filed ST Rev.25/16, 26/16 and 27/16 before the Hon'ble Hight Court of Kerala but no stay has been granted against the assessment for the year 2011-12. The ST Revisions are filed against TA 112/12, 113/12 and 114/12 dtd.7-12-15 of the Hon'ble STAT, Ekm._ _The Hon'ble STAT, Ekm. examined the case in detail in TA 112/12, 113/12 and 114/12. On 17-12-15 relating to the assessment 2002-03, 2003-04 and 2004-05 and opined that “we are of the considered opinion that the transferees in the agreement like FACT, KRL, IOC and the District Collector, Ernakulam were in effective control, possession and custody in the barges and boats, owned by the appellant Company till the expiry of the contract period._ _Similar is the situation in 2011-12 also. Hence the contentions raised against levy of tax under 6(1)(c) of KVAT Act 2003 is not acceptable and so it is taxable @4%.”_ 6. Further, with reference to the proposal regarding the assessment of works contract, the matter is considered as under : _“6) Income from 12[th] Finance Commission works Rs.6,10,95,123/-._ _The assessee admitted that they have received an amount of Rs.6,10,95,123/-. The income so received has not disclosed in the monthly return filed. On verification of the_ W.P.(C).No.38164 of 2016 4 _work order produced herewith, the amount received relates to works contract._ _As it is a contract receipt and the assessee has not disclosed in the return no tax had been paid during 2011-12, the assessee is liable to pay tax @4%. Hence the contention now raised is not acceptable.”_ 7. Therefore, once the assessing authority had considered the claim of the petitioner and rejected it, it cannot be stated that there is non-application of mind. The main reason for challenging the impugned order is that the purport of the judgments relied upon by the learned counsel has not been considered by the assessing officer, while passing the impugned order. But when an authority enjoined with the obligation to assess tax had, right or wrong, made an assessment based on the factual aspects involved in it, I don't think that this Court will be justified in interfering with the same merely for the reason that there is non-application of mind. That apart, when the assessing authority had considered the claim and rejected it, it cannot be _prima facie_ opined that there is nonapplication of mind. It is to prevent any illegality being committed by the assessing authorities that a remedy by way of appeal is provided under the statute. 8. In order to bypass the efficacious remedy available, it has to be shown that the finding is _per se_ illegal. From the materials now available, I don't think that it could be considered that the assessment is _per se_ illegal or in violation of the principles of natural W.P.(C).No.38164 of 2016 5 justice. 9. The petitioner has a case that they have been subjected to double taxation by calling upon them to pay service tax also. There is no dispute regarding the proposition as contended by the learned counsel for the petitioner that the sale tax and service tax are to be charged depending upon the nature of transaction and in their respective parameters. But, the question is how it has to be differentiated and which part of it can be assessed to tax under the Kerala Value Added Tax Act and which part could be assessed tax under the Service Tax Act. This is a matter which requires enquiry and I don't think that this Court will be justified in considering such issues at this stage of proceedings when the matter is still at large. In the impugned order the assessing officer had considered the claim of the petitioner and had rejected the same. May be the consideration is not in accordance with the manner in which the petitioner had put it, but that does not mean that there is no consideration at all. 10. Under such circumstances, when an equally efficacious remedy is available under the statute, I don't think that this Court will be justified in interfering with the impugned order in a writ proceeding. It shall always be open for the petitioner to agitate the claim in a properly constituted appeal. With the above observations, this writ petition is dismissed. W.P.(C).No.38164 of 2016 **==> picture [8 x 9] intentionally omitted <==** However, the petitioner is permitted to file an appeal within a period of 15 days from the date of receipt of a copy of this judgment and in the meantime, further recovery proceedings if any shall be kept in abeyance. Sd/- **A.M. SHAFFIQUE, JUDGE** AV