State of Kerala v. Savex Computers Ltd.

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC & THE HONOURABLE MR. JUSTICE ANIL K.NARENDRAN TUESDAY, THE 8TH DAY OF APRIL 2014/18TH CHAITHRA, 1936 OT.Rev.No.36 of 2013 ------------------------- AGAINST THE ORDER/JUDGMENT IN TAVAT 114/2010 of KERALA VAT APPELLATE TRIBUNAL, ERNAKULAM DATED 30-11-2012 ## REVISION PETITIONER/APPELLANT/REVENUE: ---------------------------------------- STATE OF KERALA, REP. BY THE DEPUTY COMMISSIONER OF LAW, COMMERCIAL TAXES, ERNAKULAM. BY SR.GOVERNMENT PLEADER SRI.LIJU STEPHEN ## RESPONDENT/RESPONDENT/ASSESSEE: ------------------------------------ M/S.SAVEX COMPUTERS LTD., 36/1653, KALATHIPARAMBIL LANE, ERNAKULAM - 682 011. R1 BY ADV. SRI.HARISANKAR V. MENON R1 BY ADV. SMT.MEERA V.MENON R1 BY ADV. SRI.MAHESH V.MENON THIS OTHER TAX REVISION (VAT) HAVING BEEN FINALLY HEARD ON 08-04-2014, ALONG WITH OTRV. 37/2013 & OTRV. 38/2013, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: ## OT.Rev.No.36 of 2013 ## APPENDIX PETITIONER'S ANNEXURE :- ANNEXURE A : COPY OF THE PENALTY ORDER DTD.28/3/2008 PASSED BY THE ASST. COMMISSIONER, COMMERCIAL TAXES, SPECIAL CIRCLE II, ERNAKULAM. ANNEXURE B : COPY OF COMMON FIRST APPELLATE ORDER DTD.7/12/2009 PASSED BY THE DEPUTY COMMISSIONER (APPEALS)III, ERNAKULAM IN T.A.Nos.701/2009, 700/2009 & 702/2009. ANNEXURE C : COPY OF THE ORDER DTD.30.11.12 PASSED BY THE KERALA VAT APPELLATE TRIBUNAL, ERNAKULAM IN TA (VAT)Nos.114/2010, 115/2010 AND 116/2010. RESPONDENTS' ANNEXURE : NIL. True copy P.S. to Judge **ANTONY DOMINIC & ANIL K.NARENDRAN, JJ. -------------------------------------------------O.T.(REV.)Nos.36, 37 & 38 of 2013 -------------------------------------------------DATED THIS THE 8[th] DAY OF APRIL, 2014** ## **ORDER** ## **ANTONY DOMINIC,J.** The assessee, the respondent in these cases, is a registered dealer under the Kerala Value Added Tax Act('KVAT Act' for short) and Central Sales Tax Act ('CST Act' for short) and is engaged in the purchase and sale of computers and accessories. 2. The assessment year relevant for these cases are 2005-06, 2006-07 and 2007-08. During the said period, the assessee purchased computers, peripherals and accessories in the course of inter-State trade against 'C' Form declaration availing of concessional rate. Out of the goods so purchased by the assessee, a portion thereof was stock transferred to their branches outside the State against Form 'F' declaration. On the basis that the assessee had violated the conditions of purchase of goods interState on concessional rate against 'C' Form as provided under Section 8(3)(b) of the CST Act, penalty under Section 10A of the CST Act was levied. O.T.(REV.)Nos.36, 37 & 38/13 -2- 3. These penalty orders were challenged in the statutory appeals which were allowed by the appellate authority concerned. The State filed appeals before the Tribunal, which by a common order, dismissed the appeals. It is aggrieved by the above, these revisions are filed. 4. We heard the learned Government Pleader for the revision petitioners and also the learned counsel appearing for the assessee. 5. The only question that arises is whether in effecting stock transfer of a portion of the goods purchased by the assesse in the course of inter-State trade against 'C' Form, any violation of Section 8(3)(b) of the CST Act has been committed by them rendering themselves liable for penalty under Section 10A of the Act. Section 8(3)(b) of the CST Act reads thus: ## “8. **Rates of tax on sales in the course of inter-State trade or commerce** .- (3) [The goods referred to in sub- section (1).] [(a) x x x x] (b) [xxxxx] are goods of the class or classes specified in the certificate of registration of the O.T.(REV.)Nos.36, 37 & 38/13 -3- registered dealer purchasing the goods as being intended for resale by him or subject to any rules made by the Central Government in this behalf, for use by him in the manufacture or processing of goods for sale or [in the telecommunications network or] in mining or in the generation or distribution of electricity or any other form of power.” Reading of the above provision shows that though the goods are meant for resale, the statutory provision does not contain any restriction that such resale shall be within the State of Kerala itself. In fact, interpreting the very same provision, a Division Bench of this Court in its judgment in **Deputy Commissioner of** ## **Sales Tax** Vs. **Lakshmichand Vasanji & Co.** [1990 (Vol.79) STC 209] held as follows: “3. It is not disputed that the goods were purchased by the assessee in Tamil Nadu for the purpose of sale and after bringing them to Kerala it transported them to Bombay for the purpose of sale. What is contended is that the sale should have been effected in Kerala and in so far as it was not done, the assessee has violated the provisions of clause (b) of sub-section (3) of section 8 thereby attracting the penal provisions of section 10(d). 4. The Tribunal has, in our view, correctly stated ## O.T.(REV.)Nos.36, 37 & 38/13 -4- that, in the absence of a specific provision under the Act or the Rules requiring that the goods purchased by the assessee outside Kerala on the strength of C form should be sold within the State of Kerala itself, the penal provision is not attracted. We agree with this conclusion. In the circumstances, we see no merit in the contention of the State on the question of penalty.” 6. Similar question was considered by the Apex Court in its judgment in **Polestar Electronic (Pvt.) Ltd.** v. **Addl.Commr.** (1978 Vol.41) STC 409 )where in the context of the provisions of the the Sales Tax Act in force in Delhi, the Apex Court held thus: “Now, the first question that arises for consideration is whether “resale” in section 5(2)(a)(ii) and the second proviso means resale anywhere without any geographical limitation or it is confined only to resale inside Delhi. The contention of the revenue was that though the words “inside the Union Territory of Delhi” are not to be found in section 5(2)(a)(ii) and the second proviso, they must be read in these provisions as a matter of construction and three reasons were given in support of this contention. The first reason was that if resale outside Delhi were held to be within the terms of section 5(2)(a)(ii) and the second proviso, the Union Territory of Delhi would lose tax ## O.T.(REV.)Nos.36, 37 & 38/13 -5- altogether in cases where the goods were resold outside Delhi, because in that event the first sale would escape tax by reason of the deduction granted under section 5(2)(a) (ii) and the resale would also be free from tax since it is outside Delhi and hence covered by the exempting provision contained in section 27. The legislature could never have intended to bring about such a result where the Union Territory of Delhi would be deprived altogether of tax. The intention of legislature was to recover tax at only one point whilst the goods were in the stream of trade and the legislature, therefore, granted the deduction in respect of the first sale on the basis that it would be levying tax when the goods were resold and that postulated the requirement that the resale should be inside Delhi. Secondly, it was urged that the legislature had no legislative competence to tax sale outside Delhi and, moreover, by reason of section 27 sale outside Delhi was taken out of the purview of the Act and resale within the meaning of section 5(2)(a)(ii) and the second proviso could not, therefore, possibly include resale outside Delhi. The last argument was that the words “by him” following upon the word “resale” in section 5(2)(a)(ii) and the second proviso clearly indicated that the resale contemplated under these provisions was resale by the purchasing dealer as registered dealer and since the concept of registered dealer has relation only to sale inside Delhi, the resale must be within the territory of Delhi. We do not think there is any substance or validity in these arguments and we see O.T.(REV.)Nos.36, 37 & 38/13 -6- no cogent or compelling reasons to add the words “inside the Union Territory of Delhi” to qualify “resale” in section 5 (2)(a)(ii) and the second proviso.” 7. Referring to the judgments of the Apex Court in **Himatsingka Timber Co.Ltd.** V. **State of Orissa** (1966 (Vo.XVIII) STC 235), **Endupuri Narasimham & Son** v. **The State of Orissa** (1961 (Vol.XII) STC 282) and **State of Assam** v. **Ramesh Chandra Dey** (1961(XII) STC 441), the learned Government Pleader contended that the goods purchased in the course of inter-State sale are meant to be re-sold within the State itself and that otherwise, there is a violation attracting penalty provided under Section 10A. In our view, these judgments relied on by the learned Government Pleader do not support the case canvassed by him. As far as the assessee is concerned, he is governed by Section 8(3)(b) of the CST Act, which does not contain any fetter on his freedom to resell the goods even outside the State as done in this case. Therefore, we are not prepared to hold that the judgments relied on by the learned Government Pleader warrants a different view in the matter. O.T.(REV.)Nos.36, 37 & 38/13 -7- 8. In the result, we are not satisfied that the lower authorities have committed any illegality justifying interference with the orders impugned in these revision petitions. These Revision Petitions are accordingly dismissed. Sd/- **ANTONY DOMINIC, JUDGE** Sd/- **ANIL K.NARENDRAN, JUDGE** dsn