2005 (2) TMI 777 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Petitioners' eligibility for exemption from turnover tax on the purchase turnover of rubber.
2. Inclusion of sales tax, additional sales tax, and surcharge in the calculation of commission for exemption purposes.
3. Applicability and interpretation of Notifications S.R.O. No. 1341 of 1987, S.R.O. No. 715 of 1988, and S.R.O. No. 716 of 1988.

Detailed Analysis:

1. Petitioners' Eligibility for Exemption from Turnover Tax:
The primary issue is whether the petitioners, acting as buying agents for rubber in Kerala for principals located outside the State, are eligible for exemption from turnover tax on the purchase turnover of rubber. The petitioners argued that they are entitled to exemption under Notification S.R.O. No. 1341 of 1987 since their commission is below 1.5 percent. However, the Tribunal disallowed the exemption, including reimbursements for sales tax, additional sales tax, and surcharge in the commission calculation, which exceeded 1.5 percent.

2. Inclusion of Sales Tax, Additional Sales Tax, and Surcharge:
The petitioners contested the inclusion of sales tax, additional sales tax, and surcharge in the commission calculation. They argued that these should not be included under Notification S.R.O. No. 1341 of 1987. The Tribunal, following a previous decision, included these amounts, leading to the disallowance of the exemption. The petitioners cited several Supreme Court decisions to support their claim that these amounts should not be included.

3. Applicability and Interpretation of Notifications:
The court examined the applicability of various notifications:

- S.R.O. No. 1341 of 1987: This notification provides an exemption from turnover tax if the aggregate commission, including all expenses and interest, does not exceed 1.5 percent. The petitioners argued that this notification should apply to them, excluding sales tax, additional sales tax, and surcharge from the commission calculation.

- S.R.O. No. 715 of 1988 and S.R.O. No. 716 of 1988: These notifications pertain specifically to turnover tax on rubber. S.R.O. No. 715 of 1988 limited turnover tax to the penultimate purchase point, while S.R.O. No. 716 of 1988 applied the tax at the last purchase point. The court noted that the petitioners had accepted their position as the last purchasers of rubber and had paid sales tax accordingly. The court emphasized that exemptions under these notifications require producing declarations proving payment of turnover tax by another dealer.

The court found that the Tribunal erred by not considering S.R.O. Nos. 715 and 716 of 1988 when deciding the appeals. The court highlighted that the petitioners had produced some declarations under S.R.O. No. 716 of 1988 for the assessment year 1989-90, indicating their awareness and partial compliance with this notification.

Conclusion:
The court concluded that S.R.O. No. 1341 of 1987 does not affect the levy of turnover tax on rubber, which is governed by S.R.O. Nos. 715 and 716 of 1988. The petitioners, being the last purchasers of rubber, are liable to pay turnover tax unless they produce valid declarations under the relevant notifications. The court set aside the Tribunal's orders and remanded the cases for reconsideration of the petitioners' exemption claims based on S.R.O. Nos. 715 and 716 of 1988. The questions referred to the court were deemed academic and not addressed directly.