2002 (12) TMI 593 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to sales tax assessment based on clarification issued by the Commissioner of Commercial Taxes under section 59A of the Kerala General Sales Tax Act, 1963.

Analysis:
The petitioner contested the sales tax assessment based on a clarification issued by the Commissioner of Commercial Taxes under section 59A of the Kerala General Sales Tax Act, 1963. The petitioner argued that even though the clarification was not explicitly mentioned in the assessment order, it was relied upon by the assessing officer. The petitioner contended that since the appellate authority was bound by the clarification, there was no scope for filing an appeal. The petitioner, engaged in the manufacture of wooden furniture, purchased timber at a concessional rate of tax under section 5(3) of the Act. The assessing officer reopened the assessment and demanded tax at 2 per cent on the purchase turnover of timber under section 5(1)(v)(a). The petitioner challenged this levy, asserting that section 5(3) benefits the purchaser, not the supplier, as clarified by the Commissioner. The petitioner argued that the Commissioner's interpretation was illogical and contrary to the statutory scheme.

The Fifth Schedule of the Act governs the levy of tax on timber, with different rates applicable based on the type of sale. The petitioner, a registered dealer, purchased timber for manufacturing furniture, not for resale, attracting a 12 per cent tax rate under column (8) of the Fifth Schedule. The petitioner availed the concessional rate under section 5(3) by issuing form 18, which was not disputed by the assessing officer. The Commissioner's clarification, applicable to a similar dealer, was deemed to apply to the petitioner. The analysis of section 5(1)(v)(a) revealed that it pertained to cases where the purchaser declared the purchase for resale but failed to do so, paying tax at 2 per cent. Since the petitioner did not issue the required form for resale, the 2 per cent tax did not apply. The Commissioner's interpretation that section 5(1)(v)(a) applied to purchases covered by section 5(3) was deemed incorrect, as the applicable tax rate under section 5(3) was different. Consequently, the clarification was overturned, and the petitioner was not liable to pay tax under section 5(1)(v)(a) for the timber purchased against form 18. The assessing officer was directed to modify the assessment accordingly, resulting in the petition being allowed.