2009 (3) TMI 554 - SC - VAT and Sales Tax

Whether the said notification could have a retrospective effect or retroactive operation being a jurisdictional fact should have been determined by the High Court in exercise of its writ jurisdiction under article 226 of the Constitution of India as it is well known that when an order of a statutory authority is questioned on the ground that the same suffers from lack of jurisdiction alternative remedy may not be a bar - it is a fit case where the High Court should have entertained the writ petition. The impugned order is set aside accordingly and the appeal is allowed.

Summary

Issues:
Interpretation of tax liability under the Kerala Value Added Tax Act, 2003 for mosquito repellent products based on relevant notifications and HSN codes.

Analysis:
The judgment pertains to a case involving the tax liability of a manufacturer of mosquito repellent products under the Kerala Value Added Tax Act, 2003. The State of Kerala had notified certain goods, including mosquito repellents, to be taxable at a rate of 12.5 percent. The appellant contended that their products should be taxed under section 6(1)(a) of the Act, while the Revenue argued for the application of section 6(1)(d) for goods not falling under specific clauses. The dispute centered around the interpretation of relevant provisions and HSN codes.

The appellant relied on the Customs Tariff Act entry 3808 for insecticides and similar products, arguing that their products fell under this category and not under the specific item in the notification. They emphasized the importance of interpreting the commodities based on HSN numbers and common commercial parlance. In contrast, the Revenue maintained that the clear language of the notification rendered reference to HSN unnecessary.

The appellant challenged the assessment levying 12.5 percent tax, contending that it was ultra vires the Act as it sought to alter the tax rate on pesticides and insecticides. The appellant sought various reliefs in the writ petition, including quashing the assessment order and declaring the tax levy illegal. However, the High Court refused to entertain the petition, citing alternative appeal remedies.

The Supreme Court held that the High Court should have entertained the writ petition as the validity of the notification and its retrospective effect were crucial jurisdictional issues. The Court emphasized that lack of jurisdiction can be challenged even without exhausting alternative remedies. Therefore, the impugned order was set aside, allowing the appellant to amend the prayer portion of the writ petition. The Court clarified that it did not delve into the merits of the case, leaving all contentions open for further consideration.