1978 (7) TMI 224 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Applicability of concessional tax rate under Section 5(3) of the Kerala General Sales Tax Act, 1963.
2. Interpretation of purchaser's declaration and its impact on the selling dealer's tax liability.
3. Legislative intent and statutory requirements for claiming concessional tax rates.

Detailed Analysis:

1. Applicability of Concessional Tax Rate:
The primary issue revolves around whether the assessee (an oil company) is entitled to a concessional tax rate of 1% under Section 5(3) of the Kerala General Sales Tax Act, 1963, for sales of naphtha to a manufacturer of chemical fertilizers. The manufacturer had declared that naphtha was for use in the manufacture of goods covered by Schedule I, and the assessing officer initially assessed the turnover at 1%. However, the Deputy Commissioner found that naphtha was used as fuel for producing hydrogen, which was then used to manufacture chemical fertilizers, and thus initiated proceedings under Section 35 of the Act to set aside the orders of the assessing authority. The Sales Tax Appellate Tribunal reversed this decision, leading to the current tax revision cases filed by the revenue.

2. Interpretation of Purchaser's Declaration:
The Court examined whether the declaration by the purchaser (manufacturer of chemical fertilizers) could be treated as conclusive for granting the concessional tax rate to the selling dealer. The judgment referenced previous rulings, including Radhakrishna Chetty & Bros. v. Assistant Commissioner of Sales Tax and Premier Electro-Mechanical Fabricators v. State of Madras, which held that once the selling dealer obtains a declaration in the prescribed form, they are automatically entitled to the concessional rate. The Court emphasized that the selling dealer is not obligated to verify the correctness of the declaration or the subsequent use of the goods by the purchaser.

3. Legislative Intent and Statutory Requirements:
The Court referred to the Supreme Court decision in Polestar Electronic (Pvt.) Ltd. v. Additional Commissioner, Sales Tax, which dealt with similar provisions under the Bengal Finance (Sales Tax) Act, 1941. The Supreme Court held that the statutory requirements are satisfied once the selling dealer obtains and furnishes the purchaser's declaration. The legislative intent is to prevent fraud and promote administrative efficiency, and the selling dealer should not be penalized for any breach of faith by the purchaser. The Kerala Act and Rules were found to be analogous to the Bengal Act, leading the Court to conclude that the selling dealer is entitled to the concessional rate upon furnishing the declaration, regardless of the actual use of the goods by the purchaser.

Conclusion:
The Court concluded that the Appellate Tribunal was correct in vacating the Deputy Commissioner's order and restoring the orders of the assessing officer. The selling dealer, having complied with the statutory requirement of obtaining and furnishing the purchaser's declaration, is entitled to the concessional tax rate of 1%. The tax revision cases filed by the revenue were dismissed, with no order as to costs.