2004 (4) TMI 546 - HC - VAT and Sales Tax

Issues Involved:
1. Liability to entry tax on the import of "day-old chicks" under the Kerala Tax on Entry of Goods into Local Areas Act, 1994.
2. Exemption from sales tax under the Kerala General Sales Tax Act, 1963, and its impact on entry tax liability.
3. Interpretation of the terms "chicks" and "chicken" as distinct or identical commodities for tax purposes.
4. Validity and applicability of exemption notifications under the KGST Act.
5. Authority and procedure for determining tax liability and exemption eligibility.

Detailed Analysis:

1. Liability to Entry Tax on the Import of "Day-Old Chicks":
The petitioners argued that they should not be liable to pay entry tax on "day-old chicks" imported for rearing in their farms, as their sales of chicken and its meat are exempt from sales tax under Notification S.R.O. No. 1090 of 1999, as amended by S.R.O. No. 7 of 2002. They contended that the check-post authorities were wrongfully detaining the chicks and insisting on entry tax payment.

2. Exemption from Sales Tax under the KGST Act:
The petitioners relied on the notifications exempting poultry farmers from sales tax on the turnover of poultry reared in their own farms. They argued that since there was no sales tax liability due to these exemptions, there should be no entry tax liability either, referencing the decision in Emmvee Solar Systems Pvt. Ltd. v Sales Tax Inspector.

3. Interpretation of "Chicks" and "Chicken":
The petitioners claimed that "chicks" and "chicken" are distinct commodities, as evidenced by various government notifications and the general understanding that chicks are bought for rearing, not as chicken. The Special Government Pleader, however, argued that "chicks" should be included under "live chicken" for tax purposes, citing the Supreme Court decision in Royal Hatcheries (Pvt.) Ltd. v. State of A.P., which held that chicks are general goods and not livestock.

4. Validity and Applicability of Exemption Notifications:
The court noted that the exemption under the KGST Act was not to the goods but to the dealers who met specific criteria, such as owning the land on which the poultry farm was situated. The court emphasized that the liability to entry tax arises immediately upon the entry of goods into the state, and it would be impractical for check-post authorities to verify compliance with all exemption criteria on the spot.

5. Authority and Procedure for Determining Tax Liability and Exemption Eligibility:
The court held that the issue of tax liability and exemption eligibility involves several factual determinations that should be resolved by the assessing authority under the Act. The court directed the petitioners to pursue their remedies before the assessing authority, which would adjudicate the matter based on evidence and materials presented.

Conclusion:
The court did not make a definitive ruling on the merits of the petitioners' claims regarding exemption from sales tax and entry tax. Instead, it directed the petitioners to seek resolution from the assessing authority. The court suggested that the assessing authority might issue periodic certificates confirming the petitioners' entitlement to sales tax exemptions, which could be used at check-posts to facilitate the release of consignments without immediate entry tax payment, subject to security deposits to ensure compliance if the tax demand is ultimately upheld.

Disposition:
The writ petitions were disposed of with directions for the petitioners to pursue their remedies under the Act, and interim measures were suggested to facilitate the release of goods at check-posts.

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