1993 (6) TMI 241 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of the assessment orders under the Kerala General Sales Tax Act, 1963.
2. Applicability of the Division Bench ruling in Deputy Commissioner of Sales Tax v. Keveyam & Co. [1986] 63 STC 387.
3. Competency of the Legislature to enact laws on purchase tax.
4. Retrospective operation of the Kerala General Sales Tax (Amendment) Act, 1988.
5. Directions for expeditious completion of assessments and disposal of appeals.

Detailed Analysis:

1. Legality of the Assessment Orders:
The court addressed the legality of the assessment orders under challenge, which were argued to be invalid based on the Division Bench ruling in Deputy Commissioner of Sales Tax v. Keveyam & Co. [1986] 63 STC 387. The petitioners contended that no purchase tax could be levied on the turnover representing the value of goods transported to other states on a consignment basis. However, the court noted that the Kerala General Sales Tax (Amendment) Act, 1988, specifically aimed to address this issue by amending the explanation to section 2(xxvi) and section 8 of the principal Act. The amendment clarified that the taxable event occurs when goods are transported out of the state, making such purchases the last purchases within the state. Thus, the court rejected the argument based on the Keveyam & Co. decision and upheld the validity of the assessment orders.

2. Applicability of the Division Bench Ruling in Keveyam & Co.:
The court discussed the relevance of the Keveyam & Co. ruling, which held that goods sent on consignment basis did not acquire the character of last purchase until sold. The Amendment Act 6 of 1988 introduced the words "but subject to the provisions of section 8" in the explanation to section 2(xxvi), effectively overriding the Keveyam & Co. decision. Section 8(b) of the Act states that the series of purchases concludes at the stage immediately before the export of goods, thus making the purchase the last purchase within the state. The court concluded that the amendment successfully addressed the loophole identified in the Keveyam & Co. decision, thereby validating the assessment orders.

3. Competency of the Legislature to Enact Laws on Purchase Tax:
The petitioners did not contest the Legislature's competency to enact laws on purchase tax. The court reiterated that the Legislature is competent to exercise power in respect of subsidiary or ancillary matters, including preventing tax evasion. Section 8 of the Act, which helps determine the situs of the last purchases, was deemed a valid exercise of legislative power. The court upheld the Legislature's authority to enact section 8 and related amendments.

4. Retrospective Operation of the Amendment Act:
The court examined whether the Kerala General Sales Tax (Amendment) Act, 1988, had retrospective effect. The petitioners argued that the amendment should not apply retrospectively. The court noted that the amendment was intended to clarify the object of section 8 and not to introduce it for the first time. However, the court found that the amendment was not merely clarificatory but brought about a significant change in the law. Consequently, the amendment was deemed to operate prospectively from February 19, 1988, affecting only the closing stock as of March 31, 1988, and subsequent years. The court held that the assessments for the years 1984-85, 1985-86, and 1986-87 should be modified to exclude the purchase value of the closing stock held outside the state.

5. Directions for Expeditious Completion of Assessments and Disposal of Appeals:
The court issued specific directions to expedite the completion of assessments and the disposal of appeals. The first respondent in O.P. No. 4057 of 1988 was directed to complete the assessments for the years 1983-84 and 1984-85 expeditiously and in accordance with the law. Similarly, the Appellate Authority in O.P. No. 4897 of 1988 was instructed to dispose of the appeals, exhibits P12 and P16, expeditiously.

Conclusion:
The court dismissed the original petitions and upheld the validity of the assessment orders under the Kerala General Sales Tax Act, 1963, as amended by Act 6 of 1988. The court clarified that the amendment was intended to address the issues identified in the Keveyam & Co. decision and was applicable prospectively from February 19, 1988. The court also issued directions for the expeditious completion of assessments and disposal of appeals.