1993 (4) TMI 281 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of the notifications S.R.O. Nos. 715, 716, and 717 of 1988.
2. Impracticality and reasonableness of the condition for the production of declarations.
3. Retrospective effect of the notifications.
4. Constitutional validity of the turnover tax under section 5(2A).
5. Sufficiency of form 25 declarations for availing exemption.
6. Validity of notices issued in form No. 14D.

Detailed Analysis:

1. Validity of the Notifications S.R.O. Nos. 715, 716, and 717 of 1988:
The notifications issued by the Government of Kerala provided exemptions from turnover tax under specific conditions. The court concluded that the notifications were valid in their entirety. The primary purpose was to collect turnover tax from one point in a series of transactions, specifically from the penultimate or last purchaser. The court emphasized that the State's intention was not to waive the tax entirely but to limit it to one point for administrative convenience and efficiency.

2. Impracticality and Reasonableness of the Condition for the Production of Declarations:
The petitioners argued that the condition requiring the production of declarations from the dealer who paid the turnover tax was impractical and unreasonable. The court acknowledged that while the condition might cause difficulties in certain cases, it was not impossible to comply with. The court reasoned that the condition was necessary to identify the dealer liable to pay the tax and to prevent fraud and administrative inconvenience. The court also allowed that dealers could prove the requisite facts by other satisfactory evidence in lieu of the declaration.

3. Retrospective Effect of the Notifications:
The petitioners contended that the retrospective effect of the notifications was problematic as it required them to procure declarations for past transactions. The court dismissed this argument, stating that the notifications were exemptions and not impositions of tax. The dealers were liable to pay tax under section 5(2A), and the exemption was a benefit that they could choose to avail by complying with the conditions.

4. Constitutional Validity of the Turnover Tax Under Section 5(2A):
The petitioners argued that the turnover tax was a tax on income and thus outside the purview of entry 54 of List II to the Seventh Schedule to the Constitution. The court rejected this argument, clarifying that the tax was related to the turnover of sales or purchases and not to the net income of the assessee. The court upheld the constitutional validity of the turnover tax, referencing a previous decision in Das Agencies v. State of Kerala.

5. Sufficiency of Form 25 Declarations for Availing Exemption:
The petitioners argued that declarations in form 25, which showed that the purchasers were assessable to tax, should suffice for availing the exemption. The court overruled this contention, stating that form 25 declarations did not testify to the payment of turnover tax by the declarant, which was a requirement under the notifications.

6. Validity of Notices Issued in Form No. 14D:
In O.P. No. 7582 of 1990, the petitioner challenged the notices issued in form No. 14D demanding tax and threatening penalties. The court found these notices invalid as they were issued without an admission of liability in the returns. The court quashed the notices but allowed the assessing authority to make an assessment in accordance with the law.

Conclusions:
1. The notifications S.R.O. Nos. 715, 716, and 717 of 1988 are valid in their entirety.
2. Dealers must produce the declaration in the form annexed to the notifications to avail the exemption, but they may prove the requisite facts by other satisfactory evidence.
3. The turnover tax is liable to be paid monthly after the taxable turnover exceeds the prescribed minimum limit.
4. The levy of turnover tax is constitutionally valid.
5. Notices in form No. 14D cannot be issued without an admission of liability in the monthly returns; the assessing authority must follow the prescribed procedure for assessment and demand.

The original petitions, except O.P. No. 7582 of 1990, were dismissed. Exhibits P6 and P7 in O.P. No. 7582 of 1990 were quashed, with liberty to the assessing authority to make an assessment in accordance with the law. There was no order as to costs.

← Previous Next →