2003 (8) TMI 503 - HC - VAT and Sales Tax

Issues Involved:
1. Entitlement to reduction in entry tax for a vehicle purchased outside Kerala.
2. Interpretation of Section 4(2) of the Kerala Tax on Entry of Motor Vehicles into Local Areas Act, 1994.
3. Validity of assessment and demand notice issued after a lapse of more than three years.
4. Relevance of a government circular in interpreting statutory provisions.

Issue-wise Detailed Analysis:

1. Entitlement to Reduction in Entry Tax:
The primary issue was whether a person who purchases a car for personal use from outside Kerala is entitled to a reduction in entry tax equivalent to the sales tax already paid in that State. The court examined Section 4(2) of the Kerala Tax on Entry of Motor Vehicles into Local Areas Act, 1994, which was relevant at the time of the appellant's purchase.

2. Interpretation of Section 4(2):
Section 4(2) provides that an importer who is not a dealer and purchases a motor vehicle for personal use in any Union Territory or another State is entitled to a reduction in entry tax by the amount of tax paid under the general sales tax law in that Union Territory or State. The language of the statute was found to be clear and unambiguous, indicating that the benefit of reduction in entry tax is available to a person who imports a vehicle into Kerala for personal use, irrespective of whether the vehicle was used in the State of purchase.

3. Validity of Assessment and Demand Notice:
The appellant received a notice under Section 8(4) of the Act after more than three years, demanding a tax at the rate of 6%. The Sales Tax Officer assessed the appellant liable to pay Rs. 23,640, which was contested. The appellant argued that the assessment was barred by limitation under Section 8(5), which prescribes a three-year limit for passing an assessment order. However, this point was not raised in the reply to the show cause notice or before the single judge, and thus, the court did not consider it necessary to delve into this issue.

4. Relevance of Government Circular:
The learned single judge had relied on a government circular to interpret Section 4(2), which stated that the reduction in tax is allowable only if the vehicle was first registered in the Union Territory or State of purchase and then brought to Kerala. However, the court noted that there was no statutory provision authorizing such a circular to be binding. The circular's interpretation was found to be irrelevant and incorrect as it attempted to add conditions not present in the statute.

Conclusion:
The court concluded that:
1. The plain language of Section 4(2) should be construed without considering legislative intent or economic consequences.
2. A person purchasing a vehicle for personal use outside Kerala is entitled to a reduction in entry tax by the amount of sales tax paid in the State of purchase.
3. The appellant, having paid sales tax in Karnataka, was entitled to a reduction in the entry tax demanded.
4. The government circular could not alter the clear statutory provision.

Both appeals were allowed, the impugned orders were set aside, and the matter was remanded to the authority for reconsideration in light of the court's observations. Each party was ordered to bear its own costs.

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