1999 (11) TMI 848 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction of sales tax authorities to reopen earlier assessment proceedings.
2. Inclusion of items of expenditure incurred by the purchaser after the sale as money consideration.
3. Constitutionality of turnover tax demanded on the element of excise duty incurred by the Corporation.
4. Validity of section 2(xxvii) of the Kerala General Sales Tax Act, 1963.
5. Imposition of penalty for non-payment of turnover tax on excise duty actually paid by the Beverages Corporation.

Issue-wise Detailed Analysis:

1. Jurisdiction of Sales Tax Authorities to Reopen Earlier Assessment Proceedings:
The petitioners contended that the sales tax authorities lacked jurisdiction to reopen earlier assessment proceedings. The Court examined the powers under section 35 of the Kerala General Sales Tax Act (KGST Act) and found that the Deputy Commissioner had exercised his powers within the permissible limits. However, the Court noted that the assessments were completed within the stipulated period, and the reopening was based on the inclusion of excise duty paid by the Beverages Corporation, which was not part of the turnover of the petitioners. The Court held that the reopening of assessments was not justified as the excise duty paid by the Corporation should not be included in the turnover of the petitioners.

2. Inclusion of Items of Expenditure Incurred by the Purchaser After the Sale as Money Consideration:
The Court examined whether the excise duty paid by the Beverages Corporation should be included in the turnover of the manufacturer. It was held that the excise duty paid by the Corporation at its warehouse cannot be considered as the price received by the petitioners. The Court emphasized that the duty is levied at the stage of removal from the warehouse, which is after the sale transaction between the petitioners and the Corporation. Therefore, the excise duty paid by the Corporation is not part of the turnover of the petitioners.

3. Constitutionality of Turnover Tax Demanded on the Element of Excise Duty Incurred by the Corporation:
The Court addressed the issue of whether the turnover tax demanded on the excise duty element was violative of Chapter XIII of the Constitution of India. It was held that the imposition of turnover tax on the excise duty paid by the Corporation was ultra vires, beyond legislative competence, and unconstitutional. The Court declared that the turnover tax on such amounts of excise duty is not permissible under the KGST Act.

4. Validity of Section 2(xxvii) of the Kerala General Sales Tax Act, 1963:
The petitioners challenged the constitutionality of section 2(xxvii) of the KGST Act, which defines "turnover" to include excise duty paid by the Corporation. The Court held that this provision was unconstitutional and void as it sought to include amounts of excise duty paid by the Corporation in the turnover of the petitioners, which is not permissible. The Court declared section 2(xxvii) of the KGST Act as unconstitutional and void.

5. Imposition of Penalty for Non-payment of Turnover Tax on Excise Duty Actually Paid by the Beverages Corporation:
The Court examined the validity of penalty imposed under section 45A of the KGST Act for non-payment of turnover tax on excise duty. It was held that the penalty proceedings were misconceived as the petitioners had disclosed the turnover actually reflected in their bills, and the excise duty was paid by the Corporation. The Court emphasized that the penalty proceedings are quasi-criminal in nature and require a definite intention to evade tax, which was not present in this case. Therefore, the imposition of penalty was set aside as arbitrary and unreasonable.

Conclusion:
The Court quashed the proceedings relating to the inclusion of excise duty paid by the Beverages Corporation in the turnover of the petitioners and declared that the petitioners are not liable to pay turnover tax on such amounts. The Court also declared section 2(xxvii) of the KGST Act as unconstitutional and void. The imposition of penalty for non-payment of turnover tax on excise duty was also set aside. The writ petitions were disposed of accordingly.