2005 (12) TMI 531 - HC - VAT and Sales Tax

Issues Involved:
1. Entitlement to exemption from purchase tax under section 5A of the Kerala General Sales Tax Act, 1963.
2. Applicability of S.R.O. No. 403/94 and clarificatory letters dated June 8, 2002, and June 29, 2002.
3. Binding nature of government and commissioner clarifications on tax authorities.
4. Distinct commercial identity of block board and block board frames versus plywood.
5. Retrospective application of exemption notifications.

Detailed Analysis:

Entitlement to Exemption from Purchase Tax:
The primary issue was whether the petitioners were entitled to an exemption from purchase tax under section 5A of the Kerala General Sales Tax Act, 1963, for the manufacture of block board as per S.R.O. No. 403/94, including the clarificatory letters dated June 8, 2002, and June 29, 2002, effective from January 1, 1994. The earlier claim for exemption under S.R.O. No. 419/90 was rejected by the sales tax authorities and the Tribunals, upheld by the Supreme Court in State of Kerala v. Vattukalam Chemicals Industries [2001] 124 STC 233.

Applicability of S.R.O. No. 403/94 and Clarificatory Letters:
Petitioners argued that S.R.O. No. 403/94, along with the clarificatory letters, provided an exemption for using soft wood in the manufacture of block boards. However, the Tribunals uniformly held that these letters were not binding, rejecting the plea for exemption. The court examined S.R.O. No. 403/94, which listed exemptions for manufacturers of matches, packing cases, plywood, etc., but did not explicitly include block boards.

Binding Nature of Government and Commissioner Clarifications:
The court referred to multiple Supreme Court decisions, including Bengal Iron Corporation v. Commercial Tax Officer [1993] 90 STC 47 and Commissioner of Sales Tax v. Indra Industries [2001] 122 STC 100, establishing that clarifications and circulars issued by government authorities are not binding on courts or quasi-judicial authorities. These clarifications represent the government's understanding of statutory provisions but cannot override the law. The court emphasized that there can be no estoppel against statutes, and such administrative instructions are not legally binding on courts or Tribunals.

Distinct Commercial Identity of Block Board and Block Board Frames:
The court rejected the argument that block board and block board frames are the same as plywood, noting that they are distinct commercial products with different manufacturing processes and uses. This distinction justified their exclusion from S.R.O. No. 403/94. The court emphasized that exemption notifications must be strictly interpreted, and items not explicitly listed cannot benefit from the exemption.

Retrospective Application of Exemption Notifications:
The court noted that the government issued S.R.O. No. 593/04, granting exemption for block board and block board frames from January 1, 2000, and not retrospectively from January 1, 1994. The court held that the government's and commissioner's letters could not grant retrospective exemption as they lacked statutory authority. The court reiterated that exemptions must be granted through proper notifications published in the Gazette, as per section 10 of the Kerala General Sales Tax Act, 1963.

Conclusion:
The court dismissed the petitions, holding that the assessees were entitled to exemption only from January 1, 2000, as per S.R.O. No. 593/04. The clarificatory letters issued by the government and the commissioner were not legally binding and could not grant retrospective exemption. The court affirmed that block board and block board frames are distinct from plywood, and the exemption under S.R.O. No. 403/94 did not apply to them.

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