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High Court of KeralaDivision BenchAppeals disposed: WA 1021/2015 and connected ma...

WA No. 1021 of 2015 and connected batch matters ( batch of appeals arising from KVAT Act matters involving manufactured sand/M-Sand, Commercial Taxes Department, State of Kerala v. various granite/stone units)

Case / Petition Number:WA No.1021 of 2015 and connected matters

Case Details & Bench

Court
High Court of Kerala
Hon'ble Judges
  • K. Vinod Chandran
  • Ashok Menon
Judgment Date
2018-12-17
Court Decision / Holding
The batch of appeals was disposed of by a common judgment dated 12.11.2018 dismissing the State’s contentions and upholding the Single Judge’s decision that the proviso to Section 8 exempts manufactured sand produced by dealers who opted for compounding, including M-Sand produced using VSI/HSI, i.e., the exemption applies across the board to M-Sand manufactured in units that have opted for compounding. However, WA 1927/2016, filed by Kannamthanam and Co., challenged a notice under Section 67 and was subsequently allowed, setting aside the notice. The court recalled the earlier common judgment to address this aspect, but there was no change in findings affecting the main issue. The final order states that there will be no order as to costs, and overall the batch was disposed of with the exception of WA 1927/2016 which was allowed.
Final Disposition
Appeals disposed: WA 1021/2015 and connected matters dismissed; WA 1927/2016 allowed (notice under Section 67 set aside); no costs. The common judgment was recalled to address WA1927/2016, but findings remained unchanged for the main issue.

Parties to the Case

Appellants / Petitioners

  • Commercial Tax Officer Nedumkandam, Idukki District
  • Intelligence Officer, Squad No. IV, Idukki at Nedumkandam
  • Commissioner of Commercial Taxes, Thiruvananthapuram
  • Commercial Tax Officer, Commercial Taxes, Pathanamthitta
  • State of Kerala represented by its Chief Secretary
  • Deputy Commissioner (Intelligence), Commercial Taxes Edappally
  • Commercial Tax Officer, Angamaly
  • Intelligence Officer, Squad II, Pala, Kottayam District
  • Intelligence Officer, Squad VII, Neyyattinkara
  • Authority for Clarification, Joint Commissioner, Dept. of Commercial Taxes
  • State of Kerala represented by Secretary, Taxes
  • Kannamthanam and Co.
  • Panachayil Industries
  • A.S. Granites
  • Popular Industries
  • Mar Basil Granites and Metals
  • Kinattukara Metal Crusher
  • Mount Valley Granite Industries
  • Thomson Granites
  • Amity Rock Products Pvt. Ltd.
  • Metro Aggregates and Sand India Pvt. Ltd.
  • Edathadan Granites

Respondents

  • M/S. MAR BASIL GRANITES & METALS CHATURANGAPARA, UDDUMPANCHOLA, IDUKKI DISTRICT
  • M/S. A.S. GRANITES, PAYYANAMON, KONNI, PATHANAMTHITTA DISTRICT
  • POPULAR INDUSTRIES, KUZHITHADAM, MANJIPARA
  • KINATTUKARA METAL CRUSHER, CHENKARA, PULLUMEDU, IDUKKI DISTRICT
  • M/S. MOUNT VALLEY GRANITE INDUSTRIES, VENGATHANAM, PARATHODU, KOTTAYAM DISTRICT
  • M/S UNITED GRANIT AND METALS, VAZHITHALA, THODUPUZHA, IDUKKI DISTRICT
  • M/S. THOMSON GRANITES, WEST KODIKULAM, THODUPUZHA
  • PANACHAYIL INDUSTRIES, WEST OTHARA, THIRUVALLA
  • M/S. AMITY ROCK PRODUCTS PVT. LTD., MALLAPPALLY, PATHANAMTHITTA
  • M/S. METRO AGGREGATES AND SAND INDIA PVT. LTD., KOCHI
  • EDATHADAN GRANITES, MATTATHUR, THRISSUR
  • P J CHACKO PROPRIETOR, M/S MOUNT VALLEY GRANITE INDUSTRIES
  • M/S Kannamthanam and Co. (in WA 1927/2016)
  • PANCHAYIL INDUSTRIES
  • M/S. KINATTUKARA METAL CRUSHER
  • P J CHACKO PROPRIETOR, M/S. MOUNT VALLEY GRANITE INDUSTRIES

Legal Representation & Advocates

Counsels for Petitioners

  • • Sri C. E. Unnikrishnan

Counsels for Respondents

  • • Sri Harisankar V. Menon
  • • Smt. Meera V. Menon
  • • Dr. George Abraham
  • • Sri K. I. Mayankutty Mather
  • • Sri K. T. Poulose
  • • Sri N. James Koshy
  • • Smt. R. Leela
  • • Sri Philip J. Vettickattu
  • • Sri Mathew A. Kuzhalnadan
  • • Sri P. Jose Vettickattu

Case Synopsis & Summary

This batch of writ appeals from the Kerala High Court concerns the interpretation of the Kerala Value Added Tax Act, 2003 (KVAT Act) and the treatment of manufactured sand (M-Sand) produced in crushers using various machines, including VSI/HSI, in relation to the compounding scheme under Section 8 and its proviso. The State of Kerala and Commercial Taxes Department challenged the exemptions claimed by dealers primarily engaged in producing granite metals who opted for compounding, arguing that the proviso to Section 8 exempts only M-Sand produced by the specified machines and not otherwise. The Single Judge held that the proviso exempts M-Sand produced by dealers who have opted for compounding, covering all production methods, including VSI/HSI. The State appealed across multiple writ appeals (1021/2015 and connected) with numerous respondents such as Mar Basil Granites, A.S. Granites, Kinattukara Metal Crusher, Panachayil Industries, Thomson Granites, Amity Rock Products, etc., and also challenged notices under Section 67. The court ultimately upheld the learned Single Judge’s view on exemption for M-Sand under compounding, while recalling parts of a common judgment to address a separate aspect in one appeal (W.A.1927/2016) concerning a notice under Section 67, which was held to be issuable or not depending on the interpretation of the exemption and assessment regime. The batch was disposed of with a general dismissal, except WA 1927/2016 which was allowed. The decision emphasizes legislative intent to curb tax loss via the introduction of VSI/HSI and clarifies the scope of the proviso to Section 8 for compounded units.

Provisions of Law Cited

Kerala Value Added Tax Act, 2003, Section 8Kerala Value Added Tax Act, 2003, Section 8(b)Proviso to Section 8Kerala Value Added Tax Act, 2003, Section 67

Submissions & Arguments

Contentions of Appellants / Petitioners

The State/Commercial Taxes Department contends that the proviso to Section 8 of the KVAT Act exempts only manufactured sand produced by units using the specific machines listed in Section 8(b) and that M-Sand produced by VSI/HSI from other machines falls outside the exemption and should be subject to separate assessment. It emphasizes that the exemption was introduced to curb tax losses and was framed prospectively from 2014-15, reflecting the government’s policy to tax-by-compounding for certain M-Sand productions; Poabs Granite P.Ltd. (2011) predates KVAT and is distinguishable because it dealt with general sales tax regime. It further argues that the provision should be read narrowly to exclude products produced by non-listed machines, and that the budget speech corroborates the rationale for a separate compounding scheme for VSI/HSI to cover manufacturing sand produced by those machines. The petitioners/or dealers, however, assert that the proviso provides a blanket exemption to manufactured sand produced in the course of granite-metal production by units choosing compounding, irrespective of machine type, and that VSI/HSI-produced M-Sand should be exempt as well; they rely on Poabs and the general intent of the KVAT regime to simplify taxation by compounding and avoid double taxation.

Contentions of Respondents

The respondents (assessees) argue that the exemption under Section 8 proviso applies to manufactured sand produced by dealers who opt for compounding, covering M-Sand regardless of the machine used, since all such sand is produced 'in the process of production of granite metals' and is within the scope of the compounding mechanism. They contend that VSI/HSI-produced sand, being by-products in the same process, should be exempt as well. They rely on the legislature’s purpose to curb tax leakage and the post-2014 amendments creating a separate compounding fee for M-Sand (VSI/HSI) to avoid tax loss, and assert that the exemption is broad and not restricted to primary crushers alone. They distinguish Poabs Granite and Metals (under general sales tax) as not controlling KVAT interpretation and emphasize the legislative scheme’s focus on compounding-based exemption rather than universal exemption for all M-Sand produced through any machine.

Cited Precedents (2)

Case NameCitationTreatmentExplanation
State of Kerala v. Poabs Granites P.Ltd.2011 (4) KHC 876DistinguishedThe court held that Poabs Granites P.Ltd. relates to general sales tax regime and does not apply to the KVAT Act; thus it is not controlling for the current case.
M/S. Mar Basil Granites and Metals v. Commercial Tax Officer(2015) 2 KLT 58PositiveThe decision has been upheld by the Kerala High Court in the appeals, supporting the interpretation that the proviso to Section 8 exempts manufactured sand produced under compounding, including M-Sand from VSI/HSI.

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Extracted Judgment Text

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## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** ## **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 17TH DAY OF DECEMBER 2018/26TH AGRAHAYANA, 1940 WA.No. 1021 of 2015 AGAINST THE ORDER/JUDGMENT IN WPC 19574/2014 of HIGH COURT OF KERALA DATED 06-03-2015** ## **APPELLANT/S:** **1 COMMERCIAL TAX OFFICER NEDUMKANDAM, IDUKKI DISTRICT. 2 INTELLIGENCE OFFICER SQUAD NO. IV, IDUKKI AT NEDUMKANDAM. 3 COMMISSIONER OR COMMERCIAL TAXES THIRUVANANTHAPURAM.** ## **BY SPECIAL GOVERNMENT PLEADER SRI C E UNNIKRISHNAN** ## **RESPONDENT/S:** **M/S. MAR BASIL GRANITES & METALS CHATURANGAPARA, UDUMPANCHOLA P.O., IDUKKI DISTRICT, REPRESENTED BY ITS MANAGING PARTNER K.C. GEORGE.** **BY ADVS. SRI.HARISANKAR V. MENON SMT.MEERA V.MENON** **THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 17.12.2018, ALONG WITH WA.1009/2015, WA.1023/2015, WA.1031/2015, WA.1032/2015, WA.1063/2015, WA.1081/2015, WA.1096/2015, WA.1097/2015, WA.1098/2015, WA.1157/2015, WA.1158/2015, WA.1292/2015, WA.1927/2016, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** W.A No.1021 of 2015 and conn. 2 # **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 17TH DAY OF DECEMBER 2018/26TH AGRAHAYANA, 1940 WA.No. 1009 of 2015** **AGAINST THE ORDER/JUDGMENT IN WPC 3485/2015 of HIGH COURT** **OF KERALA** **APPELLANT/S:** **1 THE COMMERCIAL TAX OFFICER, COMMERCIAL TAXES, PATHANAMTHITTA. 2 THE STATE OF KERALA, REPRESENTED BY ITS CHIEF SECRETARY, GOVT. SECRETARIAT, THIRUVANANTHAPURAM.** **BY SPECIAL GOVERNMENT PLEADER SRI C E UNNIKRISHNAN** ## **RESPONDENT/S:** **M/S. A.S. GRANITES, PAYYANAMON, KONNI, PATHANAMTHITTA DISTRICT,REPRESENTED BY ITS PARTNER.** **THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 17.12.2018, ALONG WITH WA.1031/2015, WA.1032/2015, WA.1927/2016, WA.1158/2015, WA.1292/2015, WA.1157/2015, WA.1097/2015, WA.1098/2015, WA.1096/2015, WA.1081/2015, WA.1063/2015, WA.1023/2015, WA.1021/2015, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** W.A No.1021 of 2015 and conn. 3 ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 17TH DAY OF DECEMBER 2018/26TH AGRAHAYANA, 1940 WA.No. 1023 of 2015** **AGAINST THE ORDER/JUDGMENT IN WPC 1850/2015 of HIGH COURT OF KERALA DATED 06-03-2015** **APPELLANT/S:** **1 COMMISSIONER OF COMMERCIAL TAXES THIRUVANANTHAPURAM - 695 001.** - **2 THE INTELLIGENCE OFFICER SQUAD NO.II OFFICE OF THE** **INTELLIGENCE OFFICER, PALA, KOTTAYAM DISTRICT.** **BY SPECIAL GOVERNMENT PLEADER SRI C E UNNIKRISHNAN** ## **RESPONDENT/S:** **P J CHACKO PROPRIETOR, M/S.MOUNT VALLEY GRANITE INDUSTRIES,VENGATHANAM P.O., PARATHODU, KANJIRAPPILLY,KOTTAYAM DISTRICT - 686 512.** **THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 17.12.2018, ALONG WITH WA.1031/2015, WA.1032/2015, WA.1927/2016, WA.1158/2015, WA.1292/2015, WA.1157/2015, WA.1097/2015, WA.1098/2015, WA.1096/2015, WA.1009/2015, WA.1081/2015, WA.1063/2015, WA.1021/2015, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** W.A No.1021 of 2015 and conn. 4 # **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 17TH DAY OF DECEMBER 2018/26TH AGRAHAYANA, 1940 WA.No. 1031 of 2015** **AGAINST THE ORDER/JUDGMENT IN WPC 14053/2014 of HIGH COURT OF KERALA DATED 06-03-2015** ## **APPELLANT/S:** - **1 THE COMMISSIONER OF COMMERCIAL TAXES, TAX TOWER, KARAMANA, TRIVANDRUM 695002.** - **2 THE DEPUTY COMMISSIONER (INTELLIGENCE), COMMERCIAL TAXES, EDAPPALLY PO, ERNAKULAM 682002** - **3 COMMERCIAL TAX OFFICER, ANGAMALY 683 572** - **4 INTELLIGENCE OFFICER, SQUAD NO.IV, COMMERCIAL TAXES, MATTANCHERRY AT ALWAYE 683 572** **BY SPECIAL GOVERNMENT PLEADER SRI C E UNNIKRISHNAN** ## **RESPONDENT/S:** **POPPULAR INDUSTRIES, KUZHITHADAM, MANJIPARA, REP BY ITS MANAGING PARTNER, PAULSON P VARKEY PYNADATH HOUSE, NAYATHODE PO ANGAMALY 683 572** ## **BY ADV. DR.GEORGE ABRAHAM** **THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 17.12.2018, ALONG WITH WA.1032/2015, WA.1927/2016, WA.1158/2015, WA.1292/2015, WA.1157/2015, WA.1097/2015, WA.1098/2015, WA.1096/2015, WA.1009/2015, WA.1081/2015, WA.1063/2015, WA.1023/2015, WA.1021/2015, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** W.A No.1021 of 2015 and conn. 5 # **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 17TH DAY OF DECEMBER 2018/26TH AGRAHAYANA, 1940 WA.No. 1032 of 2015** **AGAINST THE ORDER/JUDGMENT IN WPC 17596/2014 of HIGH COURT OF KERALA DATED 06-03-2015** **APPELLANT/S:** **1 THE COMMERCIAL TAX OFFICER, PEERMADE 686 531.** **2 THE COMMISSIONER OF COMMERCIAL TAXES THIRUVANANTHAPURAM.** **BY SPECIAL GOVERNMENT PLEADER SRI C E UNNIKRISHNAN** ## **RESPONDENT/S:** **M/S.KINATTUKARA METAL CRUSHER CHENKARA P.O, SANKARAGIRI, PULLUMEDU, IDUKKI DISTRICT, REPRESENTED BY ITS MANAGING PARTNER, MATHEW JOSEPH.** **BY ADVS.** **SRI.HARISANKAR V. MENON SMT.MEERA V.MENON** **THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 17.12.2018, ALONG WITH WA.1031/2015, WA.1927/2016, WA.1158/2015, WA.1292/2015, WA.1157/2015, WA.1097/2015, WA.1098/2015, WA.1096/2015, WA.1009/2015, WA.1081/2015, WA.1063/2015, WA.1023/2015, WA.1021/2015, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** W.A No.1021 of 2015 and conn. 6 # **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 17TH DAY OF DECEMBER 2018/26TH AGRAHAYANA, 1940 WA.No. 1063 of 2015** **AGAINST THE ORDER/JUDGMENT IN WPC 29184/2014 of HIGH COURT OF KERALA DATED 06-03-2015** ## **APPELLANT/S:** |**1**|**THE INTELLIGENCE OFFICER, SQUAD NO.VII,**| |---|---| ||**COMMERCIAL TAXES, NEYYATTINKARA**| ||**THIRUVANANTHAPURAM.**| |**2**|**STATE OF KERALA**| ||**REP. BY THE SECRETARY, TAXES, DEPARTMENT OF**| ||**COMMERCIAL TAXES, SECRETARIAT,**| ||**THIRUVANANTHAPURAM-695001.**| **BY SPECIAL GOVERNMENT PLEADER SRI C E UNNIKRISHNAN** **RESPONDENT/S:** **K.K.ROCKS & GRANITES INDIA PVT. LTD REGISTERED OFFICE AT KOTTAKKAL, TC 2/3497, PATTAM P.O., THIRUVANANTHAPURAM-695004, REP. BY ITS MANAGING DIRECTOR.** **THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 17.12.2018, ALONG WITH WA.1031/2015, WA.1032/2015, WA.1927/2016, WA.1158/2015, WA.1292/2015, WA.1157/2015, WA.1097/2015, WA.1098/2015, WA.1096/2015, WA.1009/2015, WA.1081/2015, WA.1023/2015, WA.1021/2015, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** W.A No.1021 of 2015 and conn. 7 ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** ## **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON** **MONDAY ,THE 17TH DAY OF DECEMBER 2018/26TH AGRAHAYANA, 1940 WA.No. 1081 of 2015** **AGAINST THE ORDER/JUDGMENT IN WPC 14041/2014 of HIGH COURT OF KERALA DATED 06-03-2015** ## **APPELLANT/S:** - **1 AUTHORITY FOR CLARIFICATION,REPRESENTED BY JOINT COMMISSIONER, DEPARTMENT OF COMMERCIAL TAXES, KARAMANA, THIRUVANANTHAPURAM-695 002.** - **2 COMMISSIONER OF COMMERCIAL TAXES, TAX TOWER, KARAMANA, TRIVANDRUM-695 002.** - **3 DEPUTY COMMISSIONER, COMMERCIAL TAXES, THRISSUR-680 003.** - **4 COMMERCIAL TAX OFFICER, IRINJALAKUDA, PIN-680 121.** - **5 INSPECTING ASSISTANT COMMISSIONER, COMMERCIAL TAXES, IRINJALAKKUDA-680 121.** ## **BY SPECIAL GOVERNMENT PLEADER SRI C E UNNIKRISHNAN** ## **RESPONDENT/S:** **EDATHADAN GRANITES, REPRESENTED BY ITS MANAGING PARTNER-E.N.SHAJAN, OMBATHUNGAL, MATTATHUR PO, THRISSUR-680 684.** **THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 17.12.2018, ALONG WITH WA.1031/2015, WA.1032/2015, WA.1927/2016, WA.1158/2015, WA.1292/2015, WA.1157/2015, WA.1097/2015, WA.1098/2015, WA.1096/2015, WA.1009/2015, WA.1063/2015, WA.1023/2015, WA.1021/2015, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** W.A No.1021 of 2015 and conn. 8 # **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** ## **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 17TH DAY OF DECEMBER 2018/26TH AGRAHAYANA, 1940 WA.No. 1096 of 2015** **AGAINST THE ORDER/JUDGMENT IN WPC 222/2015 of HIGH COURT OF** **KERALA** ## **APPELLANT/S:** **1 STATE OF KERALA REPRESENTED BY THE SECRETARY, TAXES, GOVT.SECRETARIAT, THIRUVANANTHAPURAM-695001. 2 THE ASSISTANT COMMISSIONER, KVAT, SPECIAL CIRCLE, DEPARTMENT OF COMMERCIAL TAXES, KOTTAYAM-686001.** **BY SPL. GOVERNMENT PLEADER SRI C E UNNIKRISHNAN** ## **RESPONDENT/S:** **P.J.CHACKO PROPRIETOR, M/S.MOUNT VALLEY GRANITE INDUSTRIES, VENGATHANAM P.O., PARATHODU KANJIRAPPILLY, KOTTAYAM DISTRICT-686512.** **THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 12.11.2018, ALONG WITH WA.1031/2015, WA.1032/2015, WA.1927/2016, WA.1158/2015, WA.1292/2015, WA.1157/2015, WA.1097/2015, WA.1098/2015, WA.1009/2015, WA.1081/2015, WA.1063/2015, WA.1023/2015, WA.1021/2015, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** W.A No.1021 of 2015 and conn. 9 # **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 17TH DAY OF DECEMBER 2018/26TH AGRAHAYANA, 1940 WA.No. 1097 of 2015** **AGAINST THE ORDER/JUDGMENT IN WPC 14237/2014 of HIGH COURT OF KERALA DATED 06-03-2015** ## **APPELLANT/S:** - **1 STATE OF KERALA REP.BY COMMISSIONER OF COMMERCIAL TAXES, DEPARTMENT OF COMMERCIAL TAXES, THIRUVANANTHAPURAM.** **2 THE INTELLIGENCE OFFICER, SQUAD NO.VIII, COMMERCIAL TAXES, THIRUVANANTHAPURAM AT NEYYATTINKARA, PIN - 695 121.** **BY SPECIAL GOVERNMENT PLEADER SRI C E UNNIKRISHNAN** ## **RESPONDENT/S:** **M/S. METRO AGGREGATES AND SAND INDIA PVT. LTD., 32/2982, B1, SAHRUDAYA BUILDINGS, PONNURUNNI, VYTTILA, KOCHI - 682 019, REP. BY ITS DIRECTOR, KURIKKAL JOSEPH PAUL.** **THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 17.12.2018, ALONG WITH WA.1031/2015, WA.1032/2015, WA.1927/2016, WA.1158/2015, WA.1292/2015, WA.1157/2015, WA.1098/2015, WA.1096/2015, WA.1009/2015, WA.1081/2015, WA.1063/2015, WA.1023/2015, WA.1021/2015, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** W.A No.1021 of 2015 and conn. 10 # **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 17TH DAY OF DECEMBER 2018/26TH AGRAHAYANA, 1940 WA.No. 1098 of 2015** **AGAINST THE ORDER/JUDGMENT IN WPC 2873/2014 of HIGH COURT OF KERALA DATED 06-03-2015** ## **APPELLANT/S:** |**1**|**STATE OF KERALA**| |---|---| ||**REP. BY SECRETARY TAXES,**| ||**GOVT. SECRETARIAT,**| ||**THIRUVANANTHAPURAM.**| |**2**|**INTELLIGENCE OFFICER,**| ||**SQUAD NO.1, COMMERCIAL TAXES,**| ||**IDUKKI AT KATTAPPANA, IDUKKI DISTRICT.**| |**3**|**COMMERCIAL TAX OFFICER,**| ||**DEPARTMENT OF COMMERCIAL TAXES,**| ||**FIRST CIRCLE, THODUPUZHA, IDUKKI DISTRICT.**| **BY SPECIAL GOVERNMENT PLEADER SRI C E UNNIKRISHNAN** ## **RESPONDENT/S:** **GEORGE KOCHUPARAMBIL PROPRIETOR, M/S.UNITED GRANIT AND METALS, VAZHITHALA.P.O., THODUPUZHA, IDUKKI DISTRICT.685 583.** **THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 17.12.2018, ALONG WITH WA.1031/2015, WA.1032/2015, WA.1927/2016, WA.1158/2015, WA.1292/2015, WA.1157/2015, WA.1097/2015, WA.1096/2015, WA.1009/2015, WA.1081/2015, WA.1063/2015, WA.1023/2015, WA.1021/2015, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** W.A No.1021 of 2015 and conn. 11 # **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 17TH DAY OF DECEMBER 2018/26TH AGRAHAYANA, 1940 WA.No. 1157 of 2015** **AGAINST THE ORDER/JUDGMENT IN WPC 4579/2014 of HIGH COURT OF KERALA DATED 06-03-2015** **APPELLANT/S:** - **1 INTELLIGENCE OFFICER, SQUAD NO.II, COMMERCIAL TAXES, PATHANAMTHITTA, 3RD FLOOR, REVENUE TOWER, THIRUVALLA.** - **2 STATE OF KERALA, REPRESENTED BY THE SECRETARY, TAXES DEPARTMENT OF COMMERCIAL TAXES, SECRETARIAT, THIRUVANANTHAPURAM-695 001.** **BY SPECIAL GOVERNMENT PLEADER SRI C E UNNIKRISHNAN** **RESPONDENT/S:** **M/S. PANACHAYIL INDUSTRIES, CHARAKUNNU, HEAD OFFICE AT PANACHAYIL BUILDING, WEST OTHARA, THIRUVALLA, REPRESENTED BY ITS MANAGING PARTNER.** **THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 17.12.2018, ALONG WITH WA.1031/2015, WA.1032/2015, WA.1927/2016, WA.1158/2015, WA.1292/2015, WA.1097/2015, WA.1098/2015, WA.1096/2015, WA.1009/2015, WA.1081/2015, WA.1063/2015, WA.1023/2015, WA.1021/2015, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** W.A No.1021 of 2015 and conn. 12 # **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 17TH DAY OF DECEMBER 2018/26TH AGRAHAYANA, 1940 WA.No. 1158 of 2015** **AGAINST THE ORDER/JUDGMENT IN WPC 18085/2014 of HIGH COURT OF KERALA DATED 06-03-2015** **APPELLANT/S:** **1 THE SECRETARY TO GOVERNMENT, COMMERCIAL TAXES DEPARTMENT, KERALA STATE, THIRUVANANTHAPURAM - 695 001. 2 THE COMMISSIONER OF COMMERCIAL TAXES, THIRUVANANTHAPURAM - 695 001. 3 THE INTELLIGENCE OFFICER, DEPARTMENT OF COMMERCIAL SALES TAX, SQUAD NO.1, IDUKKI - 685 582.** **BY SPECIAL GOVERNMENT PLEADER SRI C E UNNIKRISHNAN** **RESPONDENT/S:** **M/S. THOMSON GRANITES, WEST KODIKULAM, THODUPUZHA - 685 582, REP. BY ITS MANAGING PARTNER, GEORGE THOMAS.** **THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 17.12.2018, ALONG WITH WA.1031/2015, WA.1032/2015, WA.1927/2016, WA.1292/2015, WA.1157/2015, WA.1097/2015, WA.1098/2015, WA.1096/2015, WA.1009/2015, WA.1081/2015, WA.1063/2015, WA.1023/2015, WA.1021/2015, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** W.A No.1021 of 2015 and conn. 13 # **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 17TH DAY OF DECEMBER 2018/26TH AGRAHAYANA, 1940 WA.No. 1292 of 2015** **AGAINST THE ORDER/JUDGMENT IN WPC 18271/2014 of HIGH COURT OF KERALA DATED 06-04-2015** ## **APPELLANT/S:** **1 STATE OF KERALA REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT OF COMMERCIAL TAXES, SECRETARIAT, THIRUVANANTHAPURAM-695 001. 2 THE INTELLIGENCE OFFICER, SQUAD NO.11, COMMERCIAL TAXES, PATHANAMTHITTA, 3RD FLOOR, REVENUE TOWER, THIRUVALLA, PIN -689 101. 3 THE COMMERCIAL TAX OFFICER,COMMERCIAL TAXES, PATHANAMTHITTA, 3RD FLOOR, REVENUE TOWER, THIRUVALLA, PIN - 689 101.** **BY SPECIAL GOVERNMENT PLEADER SRI C E UNNIKRISHNAN** ## **RESPONDENT/S:** **M/S. AMITY ROCK PRODUCTS PVT. LTD., CHUNKAPARA, MALLAPPALLY, PATHANAMTHITTA,REPRESENTED BY ITS MANAGING DIRECTOR,ABRAHAM K.THOMAS - 689 594.** **BY ADV. SRI.PHILIP J.VETTICKATTU** **THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 17.12.2018, ALONG WITH WA.1031/2015, WA.1032/2015, WA.1927/2016, WA.1158/2015, WA.1157/2015, WA.1097/2015, WA.1098/2015, WA.1096/2015, WA.1009/2015, WA.1081/2015, WA.1063/2015, WA.1023/2015, WA.1021/2015, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** W.A No.1021 of 2015 and conn. 14 # **IN THE HIGH COURT OF KERALA AT ERNAKULAM** # **PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 17TH DAY OF DECEMBER 2018/26TH AGRAHAYANA, 1940 WA.No. 1927 of 2016** **AGAINST THE ORDER/JUDGMENT IN WPC 5229/2015 of HIGH COURT OF KERALA DATED 12-07-2016** ## **APPELLANT/S:** **M/S. KANNAMTHANAM AND CO., MALAYAM P.O., THIRUVANANTHAPURAM, REPRESENTED BY ITS MANAGING PARTNER, K.J.THOMASKUTTY.** **BY ADVS. SRI.BECHU KURIAN THOMAS (SR.) SRI.ENOCH DAVID SIMON JOEL SRI.GEORGE A.CHERIAN SRI.PAUL JACOB (P) SRI.RONY JOSE SRI.S.SREEDEV** ## **RESPONDENT/S:** - **1 STATE OF KERALA,REPRESENTED BY SECRETARY, TAXES, DEPARTMENT OF COMMERCIAL TAXES, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM-695 001.** - **2 INTELLIGENCE INSPECTOR SQUAD NO.VII, NEYYATTINKARA, THIRUVANANTHAPURAM-695 001.** **BY SPECIAL GOVERNMENT PLEADER SRI C E UNNIKRISHNAN** **THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 17.12.2018, ALONG WITH WA.1031/2015, WA.1032/2015, WA.1158/2015, WA.1292/2015, WA.1157/2015, WA.1097/2015, WA.1098/2015, WA.1096/2015, WA.1009/2015, WA.1081/2015, WA.1063/2015, WA.1023/2015, WA.1021/2015, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** W.A No.1021 of 2015 and conn. 15 **W.A Nos.1021/2015, 1023/2015, 1031/2015, 1032/2015, 1063/2015, 1081/2015, 1009/2015, 1096/2015, 1098/2015, 1097/2015, 1157/2015, 1292/2015, 1158/2015, 1927/2016** **J U D G M E N T** ## **Vinod Chandran, J** **These appeals were disposed of by a common judgment dated 12.11.2018, rejecting the contentions of the State and upholding the judgment of the learned Single Judge which was impugned by the State in the various appeals. The batch of appeals were hence dismissed. However, this Court failed to notice that one of the appeals, namely W.A No.1927/2016, was filed by the assessee against the issuance of of a notice under Section 67 of the Kerala Value Added Tax Act, threatening imposition of penalty. Since the appeals were dismissed by a** W.A No.1021 of 2015 and conn. 16 **common judgment, necessarily the judgment has to be recalled. Hence we recalled the common judgment dated 12.11.2018. However, since there is absolutely no change in the findings, we pass the following judgment.** **2. The issue raised in the above writ appeals is as to whether the M-Sand produced by the various writ petitioners by using a vertical/horizontal shaft impactor machine is liable to separate assessment under the Kerala Value Added Tax Act, 2003 (for brevity KVAT Act); even when the dealers had opted for compounding under Section 8 of the Act.** **3. The learned Single Judge based on the** **(i) proviso to Section 8, (ii) the fact that there was a subsequent amendment made bringing in a separate compounded fee for VSI/HSI from the year 2014-15 as also (iii) the judgment of** W.A No.1021 of 2015 and conn. 17 **a Division Bench reported in** _**2011 (4) KHC 876 [ State of Kerala V. Poabs Granits P.Ltd.]**_ **found the dealers to be not liable to be separately assessed for the M-Sand produced by VSI/HSI, for the relevant period.** **4. The learned Special Government Pleader has put forth compelling arguments in challenge of the findings of the learned Single Judge. It is pointed out that** _**Poabs Granites P.Ltd.(supra)**_ **was in the general sales tax regime and has no application to the KVAT Act. It is also argued, on a reading of Section 8(b) that only dealers producing granite metals would be entitled to compounding under the provision. Hence any other product distinct from granite metal would not be covered under the compounding scheme and such products would have to readily concede to assessment under the** W.A No.1021 of 2015 and conn. 18 **regular provisions, especially for reason of there being no compounding scheme for that product. The dealers when they produce M-Sand by VSI/HSI are not absolved from the assessment of that product which does not fall under the categorization of granite metals. The proviso, according to the learned Government Pleader, specifically intended that the M-Sand produced with the machines as seen in clause (b) of Section 8 alone would be exempted. It is the further argument that the exemption was only on account of such M-Sand obtained as a by-product, in production of granite metals in the machines specified in sub-section (b) of Section 8 would be of a negligible quantity and also inferior quality. The budget speech for the assessment year in which there was introduction of VSI/HSI also under the** W.A No.1021 of 2015 and conn. 19 **compounding scheme, has also been relied on to further buttress the intention of the legislature in having provided the coverage under the scheme only prospectively from the assessment year 2014-15.** **5. We have heard learned Special Government Pleader Sri. C.E Unnikrishnan for the State and Sri. S.Sreedev for the assesseeappellant. The learned Senior Counsel Sri Raju Joseph & Sri. T.M. Sreedharan as also Sri. Harisankar V Menon, Dr.George Abraham, Sri K.I. Mayankutty Mather, Sri. K.T Poulose, Sri. N. James Koshy, Smt. R.Leela, Sri.Philip J Vettickattu, Sri. Mathew A. Kuzhalnadan appeared for the respondents in the various appeals.** **6. Section 8 has been extracted by the learned Single Judge in the judgment and we deem it appropriate that the proviso alone be extracted herein.** W.A No.1021 of 2015 and conn. 20 **“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.”** **7. The proviso clearly exempts manufactured sand produced by dealers engaged in the production of granite metals who have opted for compounding based on the specification in Sub clause (i) to (iv) of Clause (b) of Section 8. There is no reference to an inferior quality or negligible quantity of M-Sand which alone stands exempted. It cannot also be said that the M-Sand procured from the VSI/HSI are not produced by the machines referred to in Section 8(b). The crusher units use different machines for production of granite metal. The quarried metal of large size is first reduced to smaller size in the primary crusher and then crushed to still smaller aggregates in the secondary crushers. The VSI/HSI is used to further** W.A No.1021 of 2015 and conn. 21 **crush the smaller aggregates to fine sand which along with the crusher sand obtained from the primary and secondary crushers are called M-Sand. Though they are of different quality the terminology is the same and both are saleable as M-Sand in the market.** **8. The learned Single Judge found that it was not in dispute that the products,namely granite metal, crusher sand and manufactured sand are all obtained during the process of production of granite metal using mechanised crushing machines. M-Sand was also found to be a product that is obtained in the process of production of granite metal using mechanised crushing machines. It was specifically held that the mere fact that a dealer had obtained a different type of machine for production of a finer size of granite metal or sand was of no consequence. We agree with the findings; on the legislative scheme envisaging the payment of** W.A No.1021 of 2015 and conn. 22 **compounded fee on the basis of the number of primary and secondary crushers used within a crusher unit. A different type of machine not specifically noticed by the legislature, if and when used by the crusher units, to produce the same product but of a different constitution, for which no separate compounding fee was provided; would not by such user alone make liable the dealers for a separate regular assessment on the M-Sand produced by such machines in the crusher units; which units have admittedly opted to pay tax under the compounding scheme. We specifically notice the proviso extracted above, which speaks of dealers who opt under the compounding scheme, to be not liable to separate assessment in respect of Manufactured Sand produced by them; ie: produced by the dealers or the specific units. If, as contended by the learned Special Government Pleader the exemption was with respect to the M-Sand produced** W.A No.1021 of 2015 and conn. 23 **by the machines referred to in Section 8(b) ie: the primary and secondary crusher machines, then the exemption would have been worded otherwise. It would have been specifically with respect to M-Sand produced by the machines and not by the dealers or the units as the proviso is now worded.** **9. Section 8(b) is very clear and indicates compounding fee only on the specific machines provided there under with respect to a dealer producing granite metals. True, the legislature never contemplated the introduction of vertical or horizontal shaft impactors for the purpose of producing M-Sand from the granite metal produced by a separate process through an impactor. The exemption granted, did not exclude such production by a separate machine other than that specified in clause (b) of Section 8. The exemption granted as per the proviso applies across the board to any production of manufactured sand made by the** W.A No.1021 of 2015 and conn. 24 **dealers producing granite metals whether it be from the machines as specified in Clause (b) or otherwise. The compounding scheme also is for the dealers or the crushing units and on option exercised, they are absolved from regular assessment of the goods produced in the crusher units whether it be larger or smaller aggregates of granite metal or M-Sand by a VSI/HSI.** **10. We also notice that the legislature having found that there is a loss of tax insofar as the M- Sand produced by a different machine had from the assessment year 2014-15 provided a compounding fee for the VSI/HSI. The provision so introduced was also on the following reasoning as available in the budget speech of the Finance Minister:** **“Due to scarcity of river sand, the new product called manufactured sand, produced by crushing granite stones, is currently being used widely in construction. As per** W.A No.1021 of 2015 and conn. 25 **the present provision, a compounded quarry producing granite metals need not pay any tax for quarry dust, a bye-product in the process. Taking advantage of this exemption, many units which primarily produce manufactured sand using dedicated machines, are claiming tax exemption in case of manufactured sand, causing tax loss to the Government. In order to curtail this, it is proposed to introduce a separate compounding provision for manufactured sand. To study the practical issues involved in this matter, a special committee consisting of the Officers of Commercial Taxes Department was set-up. The proposed scheme is based on the study report of the said Committee. It is proposed to introduce an annual compounding scheme for manufactured sand based on the production capacity of the machines used for this purpose, i.e., vertical shaft impactor/horizontal shaft impactor, in the following five slabs”.** **11. The speech itself indicates that the Government realised a drain of tax insofar as an** W.A No.1021 of 2015 and conn. 26 **exemption provided to manufactured or M-Sand by the proviso. It was then sought to introduce a compounding fee for the VSI/HSI also separately. This in fact further fortifies the contention of the dealers that prior to such introduction they were entitled to the exemption, whether the M-Sand produced in the Units, which opted for compounding, did so from the crushers or the impactors. We do not also see any reason to sustain the distinction sought to be drawn between M-Sand and manufactured sand. M-Sand as it is generally understood is manufactured sand produced from quarried metals. In common parlance as also in commercial parlance M-Sand is manufactured sand produced from metals, as distinguished from natural sand.** **12. We have also seen** _**Poabs Granite P.Ltd.**_ _**(supra)**_ **which decision was under the general sales tax regime. The compounding provision under the general sales tax enactment did not have a** W.A No.1021 of 2015 and conn. 27 **provision for exemption as is available in the KVAT Act. Even then a Division Bench of this Court found that there could be no separate assessment for manufactured sand produced from a different machine when such machine was not included under the compounding scheme and provided with a distinct compounding fee. In the present regime under the KVAT Act, there was a specific exemption with respect to manufactured sand produced by the dealers who were primarily engaged in producing granite metals and who had opted for compounding. We hence find no reason to interfere with the judgment of the learned Single Judge and dismiss the appeals filed by the State.** **13. In W.A No.1927/2016, the assessee impugned the judgment of the learned Single Judge refusing to invoke the jurisdiction under Article 226 to interfere with a notice issued under Section 67 of the KVAT Act. We specifically notice** W.A No.1021 of 2015 and conn. 28 **that the learned Single Judge found that if the notice is issued only with reference to the interpretation of Section 8(b), the issue would be covered by the decision in Mar Basil Granites and Metals v. Commercial Tax Officer [(2015) 2 KLT 58]. The decision in Mar Basil Granites and Metals (supra) have now been upheld by us in the appeals of the State. A reading of the notice under Section 67 indicates that the grounds raised for the proceedings under Section 67 is only non-disclosure of the installation of Vertical Shaft Impactor for the manufacture of M-sand. The allegation of books of accounts being not maintained correctly, is also on the ground that the manufacture of M-sand and metal sand and the data of sale in M-sand are not correctly shown. We have held that M-sand, as the provision existed in the subject assessment year was not exigible to tax when compounding has been applied for and sanctioned. We hence set aside the** W.A No.1021 of 2015 and conn. 29 **judgment of the learned Single Judge and allow the appeal setting aside Ext.P2 notice issued under Section 67 of the KVAT Act. W.A No.1927/2016 hence** **would stand allowed.** **Ordered accordingly. There will be no order as to costs; which the respective parties shall bear.** **Sd/-** **K. Vinod Chandran, Judge** **Sd/Ashok Menon,** **Judge** jma