1996 (10) TMI 383 - SC - VAT and Sales Tax

Whether special boiling point spirit and shell hexane are liable to be assessed at single point under Schedule I of the Kerala General Sales Tax Act, 1963, or on multi-point scheme of taxation under section 5(1)(ii) of the said Act, read, in either case, with the provisions of section 5(1) of the Act? Held that - Appeal allowed. The ultimate conclusion reached by the High Court that the brand of petrol having a flashing point below 24.4 degrees centigrade falls within item 57B in Schedule I is correct. After reaching that conclusion we find it difficult to appreciate why the High Court allowed the assessees revision and remanded the cases to the Tribunal. Presumably the High Court overlooked the fact that it was admitted that the substances in question fell within the definition of petrol under section 2(xvii). Once the High Court found that they fell within item 57B in the First Schedule the levy on these substances would be in accordance with and at the rate stated in the said Schedule against the said item.

Summary

Issues:
Interpretation of tax liability for "special boiling point spirit" and "shell hexane" under Kerala General Sales Tax Act, 1963 - Whether to be assessed at single point or multi-point scheme of taxation.

Analysis:
The Supreme Court considered the issue of tax liability for "special boiling point spirit" and "shell hexane" under the Kerala General Sales Tax Act, 1963. The key question was whether these substances should be assessed at a single point or under a multi-point scheme of taxation. The Court examined the relevant provisions of the Act, particularly Section 5(1)(ii), which governs the levy of tax on goods. The definition of "petrol" and "motor spirit" under Section 2 was crucial in determining the classification of these substances. The definition of "petrol" as dangerous petroleum with a flashing point below 24.4 degrees centigrade played a significant role in the analysis.

The Court delved into the specific items in the First Schedule of the Act, particularly items 57A and 57B, which dealt with motor spirit and petrol, respectively. The interpretation of whether the substances in question fell within the ambit of item 57B, which pertained to petrol other than naphtha, was central to the decision. The Court noted that the substances in question met the definition of "petrol" under the Act, as they were dangerous petroleum with flashing points below 24.4 degrees centigrade. This led to the conclusion that the substances could be classified as petrol falling under item 57B of the First Schedule.

The Court disagreed with the High Court's interpretation that all brands of petrol not covered by item 57B would be subject to multi-point taxation under Section 5(1)(ii). The Supreme Court held that the substances in question, being within the definition of "petrol" under the Act, should indeed be assessed under item 57B of the First Schedule. Consequently, the Court allowed the appeals, set aside the High Court's orders, and determined that the "special boiling point spirit" and "shell hexane" should be taxed under item 57B in the First Schedule. The judgment clarified the tax liability of these substances under the Kerala General Sales Tax Act, 1963, providing a definitive interpretation based on the statutory definitions and provisions.

In conclusion, the Supreme Court's judgment resolved the issue of tax liability for "special boiling point spirit" and "shell hexane" by categorizing them under item 57B of the First Schedule of the Act. The decision clarified the classification of these substances as falling within the definition of "petrol" and provided a clear direction for their taxation under the relevant provisions of the law.