M/S. PLACKKATTU GRANITES v. STATE OF KERALA and COMMERCIAL TAX OFFICER

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR** **FRIDAY, THE 21ST DAY OF JULY 2017/30TH ASHADHA, 1939** ## **WP(C).No. 26517 of 2015 (L)** **----------------------------** **PETITIONER(S): ----------------------M/S. PLACKKATTU GRANITES, VELLAVOOR P.O, MANIMALA, REPRESENTED BY ITS MANAGING PARTNER, CHACKO PLACKKATTU, PLACKATTU HOUSE, KANJIRAPPILLY, KOTTAYAM.** **BY ADV. SRI.LAL GEORGE.** |**RESPONDENT(S):**|**RESPONDENT(S):**| |---|---| |**---------------------------**|| |**1.**|**STATE OF KERALA,**| ||**REPRESENTED BY ITS PRINCIPAL SECRETARY**| ||**TO GOVERNMENT, COMMERCIAL TAXES DEPARTMENT,**| ||**GOVERNMENT SECRETARIAT,**| ||**THIRUVANANTHAPURAM -695 004.**| |**2.**|**COMMERCIAL TAX OFFICER,**| ||**2ND CIRCLE, COMMERCIAL TAX OFFICE,**| ||**CHANGANACHERRY, KOTTAYAM -686 101.**| ||**BY GOVT. PLEADER SMT.JASMINE M.M.**| ||**THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD**| ||**ON 21-07-2017, THE COURT ON THE SAME DAY DELIVERED**| ||**THE FOLLOWING:**| rs. ## **WP(C).No. 26517 of 2015 (L)** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:-** - **P1 TRUE PHOTOSTAT COPY OF THE RETAIL INVOICE DATED 21/09/2012.** - **P2: TRUE PHOTOSTAT COPY OF THE INSPECTION REPORT DATED 09/02/2015.** - **P3: TRUE PHOTOSTAT COPY FOR THE COMPOUNDING APPLICATION OF THE ASSESSMENT YEAR 2013-2014.** - **P4: TRUE PHOTOSTAT COPY OF THE COMPOUNDING APPLICATION FOR THE ASSESSMENT YEAR 2014-2015.** - **P5: TRUE PHOTOSTAT COPY OF THE CLARIFICATION DATED 10/05/2011.** - **P6: TRUE PHOTOSTAT COPY OF THE PROCEEDINGS DATED 06/10/2014.** - **P7: TRUE PHOTOSTAT COPY OF THE REPLY DATED 15/03/2015.** - **P8: TRUE PHOTOSTAT COPY OF THE REPLY DATED 20/04/2015.** - **P9: TRUE PHOTOSTAT COPY OF THE ASSESSMENT ORDER DATED 20/07/2015.** - **P10: TRUE PHOTOSTAT COPY OF THE DEMAND NOTICE DATED 20/07/2015.** ## **RESPONDENT'S EXHIBITS:NIL.** **//TRUE COPY//** ## **P.S. TO JUDGE** rs. ## **A.K.JAYASANKARAN NAMBIAR, J.** **............................................................. W.P.(C).No.26517 Of 2015 -(L) ............................................................. Dated this the 21[st] day of July, 2017** ## **J U D G M E N T** The petitioner is the managing partner of a firm engaged in mechanized crushing operations. The petitioner is also registered as a dealer under the Kerala Value Added Tax Act (hereinafter referred to as 'the KVAT Act'). The petitioner commenced crushing operations during the second half of the assessment year 2013-2014, and inasmuch as he wanted to pay tax on compounded basis, in accordance with Section 8(b) of the KVAT Act, he submitted his option for payment of tax on compounded basis. Ext.P3 is the application submitted by the petitioner seeking permission to pay tax on compounded basis. In the application, the petitioner declared that he had two metal crushers in his unit, one having a jaw size exceeding 30.48 cms x 22.86 cms but less than 40.64 cms x 25.40 cms and the second of jaw size greater than 40.64 cms x 25.40 cms. The provisions of Section 8(b), as they stood during the relevant time, provided for a payment of tax at the following rates depending upon the jaw size of the crushing -2- ## **W.P.(C).No.26517 Of 2015 -( )** machine, namely, “Section 8 (b) Any dealer producing granite metals with the aid of mechanized crushing machine may, at his option, instead of paying tax in accordance with the provisions of the said sections, pay tax at the following rates, namely;- (i) for each crushing machine of size not exceeding 30.48 cm x 22.86 cm=Rs.40,000 per annum; (ii) for the each crushing machine of size exceeding 30.48 cm x 22.86 cm but not exceeding 40.64 cm and 25.40 cm= Rs.1,60,000 per annum (iii) for the each crushing machine of size exceeding 40.64 cm x 25.40 cm=Rs.3,20,000 per annum. (iv) for each cone crusher Rs. 18,00,000 per annum Provided that in the case of dealers, who opted to pay compounded tax under this clause, no separate assessment shall be made in respect of manufactured sand produced by them. Provided further that notwithstanding anything contained in this clause, dealers with a single crushing machine of size not exceeding 30.48 cm x 22.86 cm shall pay rupees thirty thousand only per annum and those with a single crushing machine of size above 30.48 cm x 22.86 cm but not exceeding 40.64 cm x 25.40 cm shall pay rupees one lakh twenty thousand only per annum, as tax under this clause. -3- **W.P.(C).No.26517 Of 2015 -( )** **Explanation** .- For the purpose of this clause, primary crushers shall also be reckoned for the purpose of computation of compounded tax, and the rate applicable to primary crushers shall be at fifty percent of the aggregate of the tax payable on secondary crushers.” 2. It is the case of the petitioner that inasmuch as the jaw size of the crushing machine in his unit did not correspond with the jaw sizes indicated in the statutory provision, he estimated the crushing area of the crusher by multiplying the length of the jaw of the crusher, with the width of the jaws of the crusher, and applied the resultant figure to determine under which categorynamely, b(i), b(ii) or b(iii) he would come under. Based on his estimation, the petitioner was of the view that he would have to pay the tax applicable under b(i) for the secondary crusher owned by him and 50% of the said rate in respect of the primary crusher that was owned by him, going by the terms of the Explanation to the Section. 3. The respondents found that the tax paid by the petitioner -4- ## **W.P.(C).No.26517 Of 2015 -( )** did not correspond with the declaration that he had provided, and hence issued a notice proposing to demand differential amounts from the petitioner by way of compounded tax, by holding that the liability of the petitioner for compounded tax would be in an amount of Rs.9,60,000/- per annum, and therefore, Rs.4,80,000/for the half year period during which he functioned in the half year 2013-2014. Although a notice proposing the said demand was served on the petitioner, and petitioners objections to the said proposal considered, the respondents passed Ext.P9 order confirming the demand in the notice served on the petitioner, and holding that the total tax payable by the petitioner for the half year period in 2013-2014 would be Rs.4,80,000/-. In the writ petition, the petitioner impugns Ext.P9 order, inter alia, on the contention that the petitioner had committed a mistake while declaring the jaw size of the crushing machines in his premises. It is pointed out that the actual jaw sizes, of the machines in his premises, were less than what was reckoned by the respondents for the purposes of finalising the demand in Ext.P9 order. Alternatively, it is contended that, even if the declaration of the petitioner is accepted, the respondents erred in treating the machine with the -5- ## **W.P.(C).No.26517 Of 2015 -( )** larger jaw size as the secondary machine, and adopting the rate of tax applicable on the said machine, and thereafter, applying 50% of that tax to the other machine, which was treated as primary crusher, for the purposes of Section 8(b). 4. A counter affidavit has been filed on behalf of the respondents, wherein Ext.P9 order is sought to be justified for the reasons stated therein. It is stated that the respondents have only gone by the declaration given by the petitioner himself, and hence it would be futile for the petitioner to contend at this belated stage that the declaration given by him was erroneous. 5. I have heard the learned counsel appearing for the petitioner and also the learned Government Pleader appearing for the respondents. 6. On a consideration of the facts and circumstances of the case as also the submissions made across the bar, I find force in the contention of the learned Government Pleader, on instructions, -6- ## **W.P.(C).No.26517 Of 2015 -( )** that the petitioner cannot be permitted to resile from the declarations made before the respondents while opting to pay tax on compounded basis under Section 8(b) of the KVAT Act. The declaration by the petitioner, of the jaw sizes of the crushing machines in his premises, has to be taken as binding on him for the purposes of the exercise of option to pay tax on compounded basis. Since it is not in dispute that the petitioner began to pay tax on compounded basis after filing the declaration, and before the same was accepted by the respondents, going by the decision of this Court in **Johnson & Johnson Limited v. Assistant Commissioner (Assessment), Special Circle, Ernakulam and Others [(2009) 23 VST 274 (Ker.)] ,** the petitioner would have to be deemed as having exercised his option to pay tax on compounded basis, based on the declaration furnished by him. I note, however, that while seeking to demand differential tax, based on the declarations submitted by the petitioner, the respondents have, in Ext.P9 order, erroneously taken the crusher machine with the larger crushing area as the secondary machine, and applied the rate of tax applicable to secondary machine on the said machine. Thereafter, 50% of the tax payable on that crusher -7- ## **W.P.(C).No.26517 Of 2015 -( )** was taken as the rate of tax payable in respect of the machine with the smaller crushing area, which was treated as a primary crusher for the purposes of Section 8(b). In my view, this computation of tax by the respondents is flawed since, the classification of crushers as primary and secondary has necessarily to be on the basis of the crushing area of each of the machines. Needless to say, if a unit has only one machine, then there cannot be a classification as either primary or secondary because, such a classification is always relative, to the other machines available in the same unit. When there are more than one crushing machines in a unit, the classification as primary and secondary must be in relation to each of the machines and, accordingly, the crusher with the larger crushing area has to be classified as the primary crusher, and the one with a lesser crushing area as the secondary crusher. Applying the said test to the declaration submitted by the petitioner, the machine that was declared as having a jaw size more than 40.64 cms x 25.40 cms had to be taken as the primary crusher and the crusher with the jaw size greater than 30.48 cms x 22.86 cms but less than 40.64 cms x 25.40 cms had to be taken as the secondary crusher. If that be the case, the tax liability of -8- ## **W.P.(C).No.26517 Of 2015 -( )** the petitioner would have to be determined as follows: 1. For the secondary crusher - Rs.1,60,000/- per annum 2. For the primary crusher - Rs.80,000/- per annum (50% of Rs.1,60,000/-) ----------------------------------------Total tax payable - Rs.2,40,000/- per annum ================= Accordingly, I find that, the computation in Ext.P9 based on an erroneous application of rates of tax cannot be legally sustained. Accordingly, I quash Ext.P9 order and direct the 2[nd] respondent to pass fresh orders of assessment for the assessment year 2013-2014 after taking note of the observations in this judgment, and after hearing the petitioner, within a period of one month from the date of receipt of a copy of this judgment. Sd/- **A.K.JAYASANKARAN NAMBIAR JUDGE** mns/21.07.17