1997 (12) TMI 613 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether compounded rubber manufactured by the assessee-company is a finished rubber product eligible for a concessional tax rate.
2. Whether S.R.O. No. 1516 of 1990 is clarificatory in nature with retrospective application.
3. Whether the sale of items like empty drums, old newspapers, and gunny bags should be taxed at the general rate or the rates specified in the Schedule to the Kerala General Sales Tax Act, 1963.

Detailed Analysis:

Issue 1: Compounded Rubber as a Finished Rubber Product
The Tribunal held that compounded rubber is a finished rubber product and a marketable commodity, even though it is a raw material for manufacturing tyres. The Tribunal relied on affidavits from suppliers and purchasers, advertisements in rubber journals, and a certificate from the Superintendent of Central Excise. The Tribunal's approach was justified by the principle that terms in statutes like the Sales Tax Acts should be interpreted based on their popular meaning or the meaning attached by those dealing with them, not their scientific or technical meaning. The Tribunal's finding that compounded rubber is a finished product was based on substantial evidence and the commercial understanding of the term.

Issue 2: Nature and Retrospective Effect of S.R.O. No. 1516 of 1990
The Tribunal concluded that S.R.O. No. 1516 of 1990, which excluded compounded rubber from the concessional rate, was not clarificatory in nature but an amendment to S.R.O. No. 641 of 1981. It was determined that this amendment could only have prospective effect from November 2, 1990, as the Government has no power to issue a notification with retrospective effect under section 10(3) of the Kerala General Sales Tax Act. The Tribunal's decision was supported by the language of the notification itself, which stated it would come into force on April 1, 1989, indicating no intention for retrospective application.

Issue 3: Tax Rate on Sale of Items like Empty Drums and Gunny Bags
The Tribunal found that items like empty drums, brass valves, and gunny bags, which were sold as scrap, should be taxed at the rate applicable to scrap materials. This conclusion was based on the intention of both the seller and buyer to treat these items as condemned articles. The Tribunal's decision was supported by case law, which held that the intention behind the sale and purchase of condemned items is crucial in determining their tax rate.

Conclusion:
The High Court upheld the Tribunal's findings on all issues. The compounded rubber was deemed a finished product eligible for a concessional tax rate under S.R.O. No. 641 of 1981 until November 2, 1990. S.R.O. No. 1516 of 1990 was considered an amendment with only prospective effect. The sale of items like empty drums and gunny bags was to be taxed at the rate applicable to scrap materials. The petitions were dismissed, affirming the Tribunal's decisions.