1994 (2) TMI 282 - HC - VAT and Sales Tax

Summary

Issues:
1. Restoration of original petition and setting aside dismissal for default.
2. Interpretation of Government Order regarding sales tax concession for rubber industries.
3. Discrepancy in sales tax payment by the petitioner and demand notices issued by the Sales Tax Officer.
4. Validity of notices demanding higher sales tax rate and petitioner's challenge.
5. Legal basis of Government Order and its applicability to the petitioner.
6. Lack of counter-affidavit from respondents.
7. Justification for petitioner's liability to pay only 3% sales tax on finished rubber products.
8. Consideration of final assessment by sales tax authorities.

The judgment begins with the dismissal of the original petition for default due to the absence of the petitioner and their counsel. A subsequent petition for restoration is filed, supported by an affidavit from the petitioner's counsel, which the court finds justifiable, leading to the setting aside of the dismissal and a decision to hear the matter on merits. Despite the absence of the petitioner, the court proceeds to consider the case based on the affidavit provided.

Moving on to the crux of the matter, the petitioner, a partnership firm registered under the Partnership Act, operates as a small-scale industrial unit in Kerala. The petitioner claims entitlement to a sales tax concession for rubber industries as per a Government Order reducing the tax rate from 10% to 3%. However, the Sales Tax Officer issued notices demanding payment at the higher rate, leading to a dispute regarding the applicable tax rate for the petitioner's rubber products.

The petitioner contests the validity of the notices issued by the Sales Tax Officer, highlighting compliance with the Government Order and asserting the right to pay tax at the reduced rate of 3%. The court notes the lack of a counter-affidavit from the respondents despite the service of notice, emphasizing the petitioner's argument based on the Government Order's provisions.

The court delves into the interpretation of the Government Order, emphasizing that it effectively reduces the sales tax on finished rubber goods to 3%, a fact that the State cannot dispute. The judgment clarifies that the notification in question falls under section 10 of the Kerala General Sales Tax Act, thereby binding the petitioner to the 3% tax rate as per the Order.

Ultimately, the court sets aside the notices demanding payment at the higher rate, declaring the petitioner's liability limited to 3% sales tax on finished products. It prohibits any recovery exceeding this rate and allows the original petition to that extent. The judgment highlights that the assessing authority must consider the effect of the Government Order in making the final assessment, emphasizing the petitioner's entitlement to the reduced tax rate as per the Order.

In conclusion, the court allows the petition without costs, affirming the petitioner's right to pay sales tax at 3% on finished rubber goods in accordance with the Government Order's provisions.