WA Nos. 241/2016, 379/2016, 1770/2016 and 1891/2016 v. State of Kerala & Administrator, Union Territory of Lakshadweep, Ernakulam

**“C.R.”** # **IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT** **THE HONOURABLE MR.JUSTICE S.V.BHATTI** **&** **THE HONOURABLE MR.JUSTICE VIJU ABRAHAM THURSDAY, THE 26[TH] DAY OF AUGUST 2021 / 4TH BHADRA, 1943** **WA NO. 241 OF 2016** **AGAINST THE JUDGMENT IN WPC 1331/2014 OF HIGH COURT OF KERALA,** ## **ERNAKULAM** ## **APPELLANT/S:** - 1 ASSISTANT COMMISSIONER (ASSMNT) COMMERCIAL TAXES, SPECIAL CIRCLE-I, SALES TAX COMPLEX, COCHIN- 682 015. - 2 STATE OF KERALA REPRESENTED BY SECRETARY TO TAXES DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM - 695 001. - 3 INSPECTING ASSISTANT COMMISSIONER COMMERCIAL TAXES, COCHIN - 682 030. BY SR.ADV GOVERNMENT PLEADER SHAMSUDHEEN V K ## **RESPONDENT/S:** - 1 M/S.GODREJ & BOYCE MFG.CO.LTD. 2ND FLOOR, ANGELS ARCADE, COCHIN UNIVERSITY P.O., SOUTH KALAMASSERY, KOCHI - 682 022, ERNAKULAM DISTRICT, REPRESENTED BY ITS BRANCH COMMERCIAL MANAGER, KOCHI - A.S. MURTHY. - 2 ADMINISTRATOR UNION TERRITORY OF LAKSHADWEEP, W. ISLAND, COCHIN -682 003. BY ADVS.SRI.TOMSON T.EMMANUEL SRI.MANU.S, CGC, ADMINISTRATION OF THE UNION TERRITORY OF LA ## **W.A. Nos. 241, 379, 1770 & 1891/2016** **-2-** ## **OTHER PRESENT:** SR GP SHAMSUDHEEN V. K. THIS WRIT APPEAL HAVING COME UP FOR HEARING ON 26.08.2021, ALONG WITH WA.379/2016, 1770/2016 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: **W.A. Nos. 241, 379, 1770 & 1891/2016** **-3-** ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT** **THE HONOURABLE MR.JUSTICE S.V.BHATTI** **&** **THE HONOURABLE MR.JUSTICE VIJU ABRAHAM THURSDAY, THE 26[TH] DAY OF AUGUST 2021 / 4TH BHADRA, 1943** ## **WA NO. 379 OF 2016** ## **AGAINST THE JUDGMENT IN WPC 8022/2011 OF HIGH COURT OF KERALA,** ## **ERNAKULAM** ## **APPELLANT/S:** - 1 COMMERCIAL TAX OFFICER, 1ST CIRCLE, ERNAKULAM-682015 - 2 DEPUTY COMMISSIONER APPEALS COMMERCIAL TAXES, ERNAKULAM, PIN-682015. - 3 INSPECTING ASSISTANT COMMISSIONER ERNAKULAM AT KAKKANAD-682030. - 4 STATE OF KERALA REPRESENTED BY SECRETARY TO GOVERNMENT, TAXES DEPARTMENT, GOVERNMENT SECRETARIAT, THRIUVANANTHAPURAM, PIN-695 001. BY SR. GOVERNMENT PLEADER SHAMSUDHEEN V K ## **RESPONDENT/S:** - 1 AL-MAHAMOOD IS PRESS ROAD, ERNAKULAM, KOCHI. (REPRESENTED BY PROPRIETOR, MAHAMOOD SUBAIR) ## **W.A. Nos. 241, 379, 1770 & 1891/2016** **-4-** - 2 ADMINISTRATOR UNION TERRITORY OF LAKSHADWEEP, WILLINGTON ISLAND, COCHIN682003. SRI VIJAYAN K U SRI.MANU.S, CGC, ADMINISTRATION OF THE UNION TERRITORY OF LA THIS WRIT APPEAL HAVING COME UP FOR HEARING ON 26.08.2021, ALONG WITH WA.241/2016 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: **W.A. Nos. 241, 379, 1770 & 1891/2016** **-5-** ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE S.V.BHATTI** ## **&** **THE HONOURABLE MR.JUSTICE VIJU ABRAHAM THURSDAY, THE 26[TH] DAY OF AUGUST 2021 / 4TH BHADRA, 1943** ## **WA NO. 1770 OF 2016** ## **AGAINST THE JUDGMENT IN WPC 6286/2013 OF HIGH COURT OF KERALA,** ## **ERNAKULAM** ## **APPELLANT/S:** - 1 THE COMMERCIAL TAX OFFICER 3RD CIRCLE, ERNAKULAM, COCHIN 18. - 2 THE STATE OF KERALA REPRESENTED BY SECRETARY TO GOVERNMENT, TAXES DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM - 695 001. BY SR. GOVERNMENT PLEADER SHAMSUDHEEN V K ## **RESPONDENT/S:** - 1 N.K.PRABHAKARA NAIK SHREYAS HARDWARE, 40/7061, G.P.PRABHU ROAD, ERNAKULAM - 2 ADMINISTRATOR U T OF LAKSHADWEEP, W.ISLAND, COCHIN 3. ## **W.A. Nos. 241, 379, 1770 & 1891/2016** **-6-** BY ADVS. SRI.K.N.SREEKUMARAN SRI.MANU.S, CGC, ADMINISTRATION OF THE UNION TERRITORY OF LA SMT.V.P.SEENA DEVI THIS WRIT APPEAL HAVING COME UP FOR HEARING ON 26.08.2021, ALONG WITH WA.241/2016 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: **W.A. Nos. 241, 379, 1770 & 1891/2016** **-7-** **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT** **THE HONOURABLE MR.JUSTICE S.V.BHATTI** ## **&** **THE HONOURABLE MR.JUSTICE VIJU ABRAHAM** **THURSDAY, THE 26[TH] DAY OF AUGUST 2021 / 4TH BHADRA, 1943** ## **WA NO. 1891 OF 2016** **AGAINST THE JUDGMENT IN WPC 12163/2016 OF HIGH COURT OF KERALA,** ## **ERNAKULAM** ## **APPELLANT/S:** - 1 COMMERCIAL TAX OFFICER, 3RD CIRCLE, ERNAKULAM, KOCHI-682 011. - 2 THE STATE OF KERALA REPRESENTED BY SECRETARY TO GOVERNMENT, TAXES DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM-695 001. BY ADV GOVERNMENT PLEADER ## **RESPONDENT/S:** - 1 N.K.PRABHAKARA NAIK SHREYAS HARDWARE, 40/7061, G.P.PRABHU ROAD, ERNAKULAM-682 011. - 2 ADMINISTRATOR U.T.OF LAKSHADWEEP, W.ISLAND, KOCHI-682 011. ## **W.A. Nos. 241, 379, 1770 & 1891/2016** **-8-** BY ADVS. SRI.K.N.SREEKUMARAN; ADV. ANIL KUMAR P J SRI.MANU.S, CGC, ADMINISTRATION OF THE UNION TERRITORY OF LA THIS WRIT APPEAL HAVING COME UP FOR HEARING ON 26.08.2021, ALONG WITH WA.241/2016 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: **W.A. Nos. 241, 379, 1770 & 1891/2016** **-9-** ## **J U D G M E N T** [WA Nos.241/2016, 379/2016, 1770/2016, 1891/2016] S.V. Bhatti, J. The instant four appeals are directed against the judgment dated 04.11.2015 in W.P.(C) Nos.1331/2014, 8022/2011, 6286/2013 and 12163/2015. The respondents before the learned Single Judge are the appellants (for short, 'the Revenue') and the respondents herein/petitioners are dealers registered under Kerala Value Added Tax Act, 2003 (for short, 'the Act'). The common question of law raised in these writ appeals centres around proviso to Section 6(1) of the Act, read with Rule 12C of Kerala Value Added Tax Rules, 2005 (for short, 'the Rules'). 2. The circumstances set out in W.P.(C) No.1331/2014 are briefly adverted to and we are of the view that the **-10-** ## **W.A. Nos. 241, 379, 1770 & 1891/2016** circumstances are similar or no fact in issue is separately stated in other writ petitions, hence reference to the circumstances in one writ petition would be sufficient for disposing of all the appeals. ## W.P.(C) No.1331/2014 [W.A. No.241/2016] 2.1 The petitioner is a registered dealer and an assessee under the Act. The controversy arises from the return filed by the dealer for the Assessment Year 2008-09. The petitioner, _inter alia_ , challenges Exts P7 and P7(a) orders made under Section 25 of the Act. The petitioner prays for a declaration that Rule 12C(1) of the Rules, is invalid, inoperative and unenforceable to the extent it stipulates for filing shipping documents or similar documents, to wit to claim concessional rate of tax for the sales made in favour of the Administrator of Lakshadweep Union Territory etc. The Assessing Officer, through the orders impugned in the writ petition, rejected the ## **W.A. Nos. 241, 379, 1770 & 1891/2016** **-11-** claim of dealer for concessional rate of levy and collection of tax for the sales made in favour of Lakshadweep Administration. The case of respondents is that the dealer, in compliance with the requirement of Rule 12C, has furnished Form No.42 however for want of proof of other requirements prescribed in Rule 12C, namely, shipping bill or similar document duly attested by the port authorities, the concessional rate of tax applicable to sales made in favour of Lakshadweep Administration has been rejected. 3. The case of Revenue is that for a dealer to avail concessional rate of tax applicable under the Act, the dealer must conform to the requirements of proviso to Section 6(1) of the Act read with Rule 12C of the Rules. The concessional rate could be accorded only, firstly, upon the sale of goods in favour of one or the other named authority in the proviso to section 6 and further upon complying with all the requirements **W.A. Nos. 241, 379, 1770 & 1891/2016** **-12-** prescribed in Rule 12C of the Rules. 4. _Per contra_ , the argument of the dealer is that the dealer is in a position to furnish a declaration in Form No.42 duly signed and sealed by the buyer, and the dealer is unable to, either on account of the impossibility of performance or after the sale is completed the affairs are beyond the reach of the dealer, produce the shipping bill or similar documents duly attested by the port authorities to establish that the sale, which is subjected to concessional rate of tax, is finally utilised in the area in which it is intended to be utilised. The proof of both the conditions, i.e., submission of Form No.42 and also the shipping bills or similar documents, are not mandatory prescriptions, and in the absence of any one of them, denial of the concessional rate of tariff claimed by the dealer is illegal. The dealer avers that production of shipping bills or similar documents is impossible of performance and the Rule must be ## **W.A. Nos. 241, 379, 1770 & 1891/2016** **-13-** read in such a way that the concessional rate of tax accorded by the proviso to Section 6(1) is extended to the dealer when the sale was in favour of (i) the Administrator, Union Territory of Lakshadweep, (ii) Laccadive Co-operative Marketing Federation, Kozhikode, (iii) Lakshadweep Harbour Works, and (iv) registered dealers certified by the Administrator, Union Territory of Lakshadweep. For the said concessional rate of tax, the submission of declaration in Form No.42 would suffice. 5. The further details/contentions on both sides are not adverted to inasmuch as the judgment under appeal, in the batch of cases, was considered by a Division Bench of this Court in O.T.Rev. Nos.131 & 136/2019. Vide order dated 19.10.2020, the Division Bench noted that “ _We hence do not subscribe to the view expressed and the dictum laid down in Al Mahamood_ ” i.e. judgment under appeal in the present batch of cases. The learned Judges while disposing of the O.T. Revisions were ## **W.A. Nos. 241, 379, 1770 & 1891/2016** **-14-** examining the legal contention raised by the dealer on the strength of dictum laid down in _Al Mahamood,_ and, we respectfully observe, that the Division Bench has rightly considered the principle laid down in _Al Mahamood v. Commercial Tax Officer_[1] to the extent required to disposing of the O.T.Revs. The reasons recorded by the Division Bench since are useful and persuasive, we excerpt the operative portion hereunder: “5. We are unable to agree with the said proposition even if the sale is directly to the Lakshadweep Administration; which herein is not the case. The sale invites the concessional rate as per the proviso only if it is made to the Administrator, the Marketing Federation, Harbour Works or registered dealers certified by the Administrator, on conditions prescribed in Rule 12C. Rule 12C provides for Form No.42, a declaration from the buyer and a copy of the shipping bill or similar document, attested by the Port authorities to be produced. The prescription made does not permit the different category of purchasers to be treated differently; even if it is the Administration itself. The intention as discernible from the 1 Judgment dated 04.11.2015 in W.P.(C) No.8022/2011 **-15-** ## **W.A. Nos. 241, 379, 1770 & 1891/2016** statutory provision as also the Rule is that a concession be granted for the goods which will eventually be utilised in the Islands. It is to ensure the utilisation that the shipping bill, or a similar document is directed to be produced along with the declaration as per Rule 12C. The prescription is also to ensure that the goods purchased by availing the concessional rate are then, not sold within the State of Kerala; thus defeating the very purpose of the concession granted. We perfectly agree that there need not be a suppressed sale assumed by the Administration if the purchase is made directly by that Administration. But that was a benefit which could have been extended when the prescription is made, by the Executive Government in the Rules, to effectuate the first proviso to Section 6(1). The Rules having not prescribed such a benefit insofar as the sales made directly to the Administration, we do not think that there can be such a benefit conferred judicially. We hence do not subscribe to the view expressed and the dictum laid down in _Al Mahamood_ .” 5.1 The legal principle enunciated in _Al Mahamood_ is directly questioned by the Revenue in the batch of appeals and we are required to take up the contention independently and record our reasons. **-16-** ## **W.A. Nos. 241, 379, 1770 & 1891/2016** ## 5.2 Proviso to Section 6(1) of the Act and Rule 12C of the Rules read thus: ## “Section 6(1) of the Act Provided that where the sale is to the Administrator, Union Territory of Lakshadweep, Laccadive Co-operative Marketing Federation, Kozhikode or the Lakshadweep Harbour Works and registered dealers certified by the Administrator, Union Territory of Lakshadweep, the tax payable under clause (d) shall be at the rate of four per cent, subject to such conditions : as may be prescribed (emphasis supplied) ## Rule 12C of the Rules 12C. Procedure for claiming exemption or reduction in rates of tax. - (1) Every dealer who makes any sale to the Administrator, Union Territory of Lakshadweep, Laccadive Cooperative marketing Federation, Kozhikode or the Lakshadweep Harbour Works or any registered dealer certified by the Administrator, Union Territory of Lakshadweep under the proviso to subsection (1) of section 6 shall obtain a declaration in Form No.42, duly signed and sealed by the buyer along with the copy of the shipping Bill, or similar document duly attested by the Port Authorities and file a copy each of the same along with the return filed under Rule 22. The originals shall be retained by **W.A. Nos. 241, 379, 1770 & 1891/2016** **==> picture [22 x 8] intentionally omitted <==** the dealer and shall be provided on demand by any authority under the Act.” (emphasis supplied) The proviso deals with the concessional rate of tax payable by the dealer under the Act for the sales made in favour of Administrator, Union Territory of Lakshadweep, Laccadive Cooperative Marketing Federation, Kozhikode or the Lakshadweep Harbour Works and registered dealers certified by the Administrator, Union Territory of Lakshadweep, the tax . payable shall be 4%, subject to conditions as may be prescribed The proviso, in terms, restricts the classes of buyers in whose favour the sale at concessional rate of tax could be made and concessional rate claimed. Apart from a few authorities/legal entities, the other class relates to dealers certified by the Administrator. In spite of complying with the statutory requirement of sale in favour of specialized entity, such sale automatically does not entail the concessional rate of tax. The ## **W.A. Nos. 241, 379, 1770 & 1891/2016** **-18-** concessional rate of tax is applicable upon complying with the requirements prescribed by Rule 12C. Rule 12C prescribes that to avail concessional rate of tax, the sale firstly shall be in favour of the identities referred to above, and secondly, that a declaration in Form No.42 duly signed and sealed by the buyer along with the copy of the shipping bill or similar document duly attested by the port authorities are obtained and the dealer files a copy of each of the documents along with return filed under Rule 22. The Rule obligates the dealer firstly to obtain a signed and sealed declaration in Form No.42 along with the shipping bill or similar documents duly attested by the port authorities. On obtaining the said documents, the proviso enables the dealer to claim concessional rate of tax. The copies of documents shall be filed by the dealer along with the return under Rule 22 and originals are retained for verification if need be. ## **W.A. Nos. 241, 379, 1770 & 1891/2016** **-19-** 6. The charging section, through a proviso, extends the concessional rate, the language and the requirements for claiming the eligibility are sufficiently clear. The first rule of construction, i.e., the Golden Rule or literal construction, is that the words of a Statute must _prima facie_ be given their ordinary meaning and that language of Section is read as it is. Let us examine whether the golden rule of interpretation is applicable to the case on hand or other tools of interpretation are needed to resolve the controversy. The learned Judge has considered the requirements prescribed in Rule 12C more by referring to purposive interpretation of Rule 12C to give effect to proviso to Section 6(1). We are persuaded that in the contract where the liberal construction does not suffer from ambiguity, inconsistency or uncertainty, resorting to purposive interpretation of a Rule is to be avoided. 6.1 The Courts strongly lean against any construction ## **W.A. Nos. 241, 379, 1770 & 1891/2016** **-20-** which tends to reduce a statutory requirement to futility. The requirement in legislation or subordinate legislation must be read/construed so as to make it effective, _albeit_ such construction is not possible because of vagueness of language, the language is wholly interactable. The State legislature and the delegatee are having jurisdiction to make law/rules in regard to Value Added Tax. We refuse to sit as a super legislature to weigh the wisdom of requirements in proviso to Section 6(1) or Rule 12C. Courts normally refuse to examine the wisdom of expression of legislature/executive in tax, categories of taxes, rate of taxes, person who are brought under the tax purview etc. As it is said, words are the framework of concept or policy of Legislature/Government and the fact is that the concept or policy could change more quickly than the words. But, in our construction of Statute/Subordinate Legislation, we are concerned with the expression of Section/Rule, as the case ## **W.A. Nos. 241, 379, 1770 & 1891/2016** **-21-** may be. If the Government changes concept/policy, the expression of requirement in words would also change. But through our construction, it shall not appear that we change the meaning of words framed on concept or policy of the Government. The Legislature has a wide latitude in the matter of choice of persons, things and applicable requirements for extending concessional rate of tax. The Legislature/Government is the best Judge of these matters. As Courts, we construct the Statute/Rule and apply the facts in issue. 6.2 The dealer had a choice whether to sell at the regular/applicable rate or claim a concessional rate of tax. The dealer chooses to sell the goods at concessional tariff and collects tax as applicable to the sale, therefore, the dealer is expected to comply with other requirements prescribed under the Rule for claiming concessional rate of tax. The dealer **W.A. Nos. 241, 379, 1770 & 1891/2016** **-22-** having sold the goods at concessional rate of tax, cannot be heard to challenge the very prescription as impossible of performance, ineffective in practice etc. The concessional rate of tax, firstly, is attracted when the sale is effected in favour of named identities, secondly, the obligation is fastened on the dealer to secure documents in proof of shipment etc, from the buyer for claiming concessional rate. Then alone, the concessional rate of tax is applicable. In the process of interpretation or application, relevant expression chosen by the legislature or the executive ought not to be ignored or diluted. The case of dealer if accepted, the same would result in overlooking the clear expression of the rule making authority. The claim of dealer for concessional rate without placing on record all the requirements of Rule 12C is misconceived and liable to be rejected. The rule making authority, both from the wisdom and experience gained over years, has stipulated the ## **W.A. Nos. 241, 379, 1770 & 1891/2016** **-23-** prescription to give concessional rate of tax to such transactions which reach the Union Territory. The misuse of concessional rate of tax cannot be overlooked while accepting a purposive interpretation, hence the rule insists production of shipping bill or similar document attested by the port authorities. Firstly, we are in agreement with the view expressed by the Division Bench in O.T.Revs. on _Al Mahamood_ , and secondly, for the reasons mentioned above, we are unable to agree with the judgment under appeal. Consequently, the judgment under appeal is liable to be set aside and is accordingly set aside. The Writ Appeals stand allowed. The above narrative could not conclude the consideration, for we are dealing with obligation of a dealer and a buyer with respect to concessional rate of tax under proviso to Section 6(1) of the Act read with Rule 12C of the Rules. 6.3 We have taken note of Section 6(1) proviso which ## **W.A. Nos. 241, 379, 1770 & 1891/2016** **-24-** deals with the concessional rate of tax and the requirements prescribed by Rule 12C. In a case of sale and purchase covered by Section 6(1) proviso, the buyer is purchasing the goods at a concessional rate of tax, the buyer; whether it could be Administrator, Union Territory of Lakshadweep, Laccadive Cooperative Marketing Federation, Kozhikode or the Lakshadweep Harbour Works and registered dealers certified by the Administrator, Union Territory of Lakshadweep; having purchased the goods at concessional rate of tax cannot be allowed to wash off its hands by stating that it is impossible or difficult to produce shipping bills or similar documents duly attested by the port authorities evidencing shipment of the consignment. These are matters of record and the evidence, either in the form of shipping bills or similar documents duly attested by the port authorities, ought to be made available by the buyer to the seller/dealer. ## **W.A. Nos. 241, 379, 1770 & 1891/2016** **-25-** 6.4 Hence, for the said purpose we grant liberty to dealers, in these cases, to represent to the Administrator, Union Territory of Lakshadweep or the buyer under respective invoices, by enclosing a copy of this judgment to furnish copies of shipping bills or similar documents duly attested by port authorities evidencing shipment of goods covered by respective invoices, within four weeks from the date of receipt of a copy of the judgment. Upon such request being received, the Administrator, Union Territory of Lakshadweep, the Administrator/buyer as the case may be, shall verify and furnish the best of evidence available in this behalf of shipment of goods to Lakshadweep within eight weeks from the date of receipt of the request from the writ petitioners/dealers. Thereafter, the dealer is given liberty to place the said proof before the Assessing Officer. The Assessing Officer shall reassess and pass orders by adverting to the documents now ## **W.A. Nos. 241, 379, 1770 & 1891/2016** **-26-** produced by the dealer in accordance with law. In cases where the dealer has already furnished declaration in Form No.42 and utilisation certificate by authority from Union Territory, the same could be considered in terms of Rule 12C and reassessment orders are made. ## W.A. Nos. 379, 1770 & 1891/2016 For the reasons recorded supra W.A. Nos.379, 1770 and 1891 of 2016 are allowed Writ Appeals are allowed with the above directions. Sd/S.V.BHATTI JUDGE Sd/VIJU ABRAHAM JUDGE jjj