Sree Traders, Hill Produce Merchants and Commission Agents v. Commissioner of Commercial Taxes, Thiruvananthapuram and Commercial Tax Inspector, Walayar Palakkad District

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR.JUSTICE ANTONY DOMINIC** ## **WEDNESDAY, THE 5TH DAY OF DECEMBER 2012/14TH AGRAHAYANA 1934** ## **WP(C).No. 7028 of 2011 (C)** **--------------------------** **PETITIONER :** **---------------------** **SREE TRADERS, HILL PRODUCE MERCHANTS AND COMMISSION AGENTS, 416-B EYYAL ROAD, MARATHENCODE P.O., KUNNAMKULAM TRICHUR DISTRICT.** ## **BY ADV. SRI.GEORGE POONTHOTTAM** **RESPONDENT(S):** **--------------------------** ## **1. THE COMMISSIONER OF COMMERCIAL SALES TAX, THIRUVANANTHAPURAM.** **2. THE COMMERCIAL TAX INSPECTOR, COMMERCIAL TAX CHECK POST, WALAYAR PALAKKAD DISTRICT.** **R1 & R2 BY GOVT. PLEADER SRI. S. SUDHEESH KUMAR** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 16/11/2012, ALONG WITH WPC. 9439/2011 & CONNECTED CASES, THE COURT ON 05/12/2012 DELIVERED THE FOLLOWING:** **Mn** **...2/-** ## **WP(C).No. 7028 of 2011 (C)** ## **APPENDIX** ## **PETITIONER'S EXHIBITS :** **EXT.P1 : COPY OF THE ADVANCE TAX RECEIPT DATED 4-3-2011. EXT.P2 : COPY OF THE DELIVERY NOTE DATED 4-3-2011. EXT.P3 : COPY OF THE ORDER NO. VCR.OR/334/B/10-11 DATED 5-3-2011. EXT.P4 : COPY OF THE ORDER NO. C2.13255/06/CT DATED 9-2-2011.** ## **RESPONDENT'S EXHIBITS : NIL** **//TRUE COPY//** **P.S. TO JUDGE** ## **Mn** ## **ANTONY DOMINIC, J. ================ W.P.(C) NOs. 7028, 9439, 11428, 14093 & 14537 OF 2011 =======================** **Dated this the 5[th] day of December, 2012** ## **J U D G M E N T** Issues raised in these writ petitions are common and therefore these cases were heard together and are disposed of by this common judgment. 2. Petitioner in WP(C) No. 7028/11 is an importer of betel nuts through Cochin Port. It is stated that the goods were imported for M/s.Harsha Trading Company, Nagpur and were to be delivered at their godown. In WP(C) No. 9439/11, petitioner states that the goods transported to Nagpur is for entrustment to a commission agent for sale. 3. The grievance in these writ petitions is that when the goods reached the check post, the consignments were detained on the ground that the value declared by the petitioners was lower than the floor rate fixed by the Commissioner of Commercial Taxes as per Ext.P4 in WP(C) No. 7028/11. It is in these circumstances the writ petitions were filed contending that the Commissioner did not have power under the KVAT Act to fix floor price in respect of betel nuts in question. **WPC.Nos.7028, 9439, 11428, 14093 & 14537 /11** **:2 :** 4. In so far as WP(C) Nos. 11428, 14093 and 14537/11 are concerned, in these cases also, the issues raised are similar. The petitioners in these cases are also importers of betel nuts which are transported outside the State for sale on consignment basis. Their grievance is that the delivery notes were refused to be endorsed on the ground that in the Delivery Notes, they did not declare the floor price fixed by the Commissioner of Commercial Taxes as the value of the goods. It is in these circumstances these writ petitions were filed. 5. In the counter affidavit filed in WP(C) No. 14093/11, it has been stated in para 6 as follows; “ _As per Section 47(16A) of the Kerala Value Added Tax Act, 2003 the Commissioner may direct that the tax in respect of the sale of any evasion prone commodities as may be specified shall be paid before the date prescribed for the payment under this Act. As per Section 9(2) of the CST Act the provisions relating to payment of Advance tax in KVAT Act will also apply to those sales under CST Act. State's authority to collect tax includes all incidental powers to attain the objects, including collection of Advance Tax. Since sale of Arecanut and Kaliadakka is prone to evasion due to its under valuation, a floor rate was prescribed for the purpose of collections of Advance Tax from the dealers. The price fixed is only a provisional floor rate for the collection Advance Tax. Moreover the floor rate was fixed based on the report of Committee of_ **WPC.Nos.7028, 9439, 11428, 14093 & 14537 /11** **:3 :** _Deputy Commissioners after hearing the dealer. The floor rate was prevalent much earlier and the traders had not objected to the same earlier, but were paying Advance Tax on the basis of floor value so fixed.”_ Thus, it is on the basis of the powers under Section 47(16A) of the KVAT Act that the respondents are justifying the impugned action. 6. Section 47(16A) of the KVAT Act is the enabling provision and this section reads thus; _“(16A) Notwithstanding anything contained in this Act or the rules made there under, the Commissioner may where he deems it necessary to prevent any evasion of tax, direct that the tax in respect of the sale of any evasion prone commodities, as may specified by him, shall be paid before the date prescribed for its payment under this Act.”_ 7. The validity of this provision has been upheld by this Court in _**Fantacy Sales Corporation v. Sales Tax Inspector**_ (2007(2) KLT 174) and this judgment has been confirmed by the Division Bench of this Court in _**S.P.L. Limited v. Commercial Tax Inspecto**_ r [(2009) 26 VST 220]. In so far as the validity of the floor rates that are fixed by the Commissioner for Commercial Taxes are concerned, such circulars also have been upheld in _**Beeran Koya C v. Commissioner, Commercial Taxes, Tvm**_ **WPC.Nos.7028, 9439, 11428, 14093 & 14537 /11** **:4 :** [(2009) 4 KHC 431], which judgment was upheld by this Court in _**KMP Timbers and Saw Mills v. Commercial Tax Inspector**_ [(2012) 50 VST 195]. These judgments have been followed in _**Cashew Manufacturers and Exporters Association v. State**_ _**of Kerala**_ [(2012) 50 VST 199], where circular issued by the Commissioner of Commercial Taxes for cashew nuts and cashew kernels for collection of advance tax was upheld. However, in the judgment, it was held that floor rate fixed by circulars issued under Section 47(16A) of the KVAT Act can be relied on only for the purpose of levy of advance tax and that in cases where undervaluation is detected, the floor rate can be adopted as the guideline for initiating proceedings under the KVAT Act. 8. Going by the averments in the counter affidavit, the betel nuts have been identified as evasion prone commodities and power to fix floor rate in respect of such commodities has been conferred under Section 47(16A) of the Act and such circulars have been upheld by this Court in the judgments noticed above. Therefore, the fixation of floor rate cannot be said to be illegal. **WPC.Nos.7028, 9439, 11428, 14093 & 14537 /11** **:5 :** 9. In so far as these cases are concerned, petitioners specifically aver that these are imported goods, and that they have no local sales in Kerala and the goods are taken out of the State on consignment basis. Therefore, as far as their transactions are concerned, there is no implication of tax justifying the demand for advance tax from them. If that be so, in the nature of the transactions undertaken by the petitioners, there is no warrant for insisting that the floor rate fixed by the Commissioner should be mentioned in the delivery notes nor could the consignments have been detained at the check post for not declaring the value on the basis of the circulars issued. Therefore, the refusal to endorse the delivery notes complained of in WP(C) No. 11428, 14093 and 14537/11 cannot be approved. Therefore, these writ petitions deserve to be allowed. 10. In so far as WP(C) Nos.7028 and 9439/11 are concerned, there again the detention of the consignments were not for the advance tax or for undervaluation. On the other hand, the detention was for non declaration of price at the rates as fixed **WPC.Nos.7028, 9439, 11428, 14093 & 14537 /11** **:6 :** by the Commissioner for Commercial Taxes. This again in my view is illegal and therefore could not have been done. For the aforesaid reasons, these writ petitions are disposed of holding that the refusal to endorse the delivery notes and the detentions, which are challenged in these writ petitions, are illegal. Any security furnished by the petitioners pursuant to the interim orders passed in these writ petitions shall be released to them. Sd/- **ANTONY DOMINIC, JUDGE** Rp //True Copy// PA to Judge