1998 (8) TMI 555 - HC - VAT and Sales Tax

Summary

Issues: Interpretation of the Explanation to entry 51 of the First Schedule of the Kerala General Sales Tax Act, 1963 for reduction of tax on coconut oil.

Analysis:
1. The main issue in this case was the interpretation of the Explanation to entry 51 of the First Schedule appended to the Kerala General Sales Tax Act, 1963 regarding the reduction of tax leviable on coconut oil. The question was whether the assessee would be entitled to the reduction of tax on coconut oil from the tax levied on the purchase turnover of copra or coconut, from which the coconut oil was produced.

2. The Appellate Tribunal held that reduction would only be available if tax was leviable on both coconut oil and coconut oil cake produced from the copra or coconut purchased by the assessee. However, for the relevant assessment year, tax was not leviable on coconut oil cake as it was exempt. Therefore, the Tribunal concluded that reduction could not be claimed by the assessee.

3. The Court referred to a previous judgment in Muttam Oil and Flour Mills v. State of Kerala, where it was held that the language of the Explanation is clear and reduction should not be dependent on both coconut oil and coconut oil cake being subject to tax. The Court emphasized that the tax collected by the assessee with regard to coconut oil cake being forfeited to the Government should be considered for the benefit of the Explanation.

4. Following the precedent set in Muttam Oil and Flour Mills case, the Court extended the benefit of the Explanation to the assessee in this case, even though coconut oil cake was not chargeable to tax. The Court reiterated that the purpose of the Explanation was to avoid double taxation and reduce the tax leviable on the finished products by the amount of tax on the raw material.

5. The Court clarified that the conjunction "and" between "coconut oil" and "coconut oil cake" in the Explanation does not imply that reduction is only available if both products are taxable. Since both products are produced simultaneously, the use of "and" in the drafting was necessary. The Court held that the Appellate Tribunal misinterpreted the clear language of the Explanation and ruled in favor of the assessee, allowing the reduction of tax leviable on coconut oil by the amount of tax on the purchase of raw material.

6. Consequently, the revision filed by the assessee was allowed, and the order of the Appellate Tribunal was set aside. The Court upheld that the assessee was entitled to the reduction of tax on coconut oil as per the provisions of the Explanation to entry 51 of the First Schedule of the Kerala General Sales Tax Act, 1963.