2007 (6) TMI 492 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of the exemption under the Kerala Value Added Tax Act and its impact on exemption under the Central Sales Tax Act.
2. Validity of circular instructions issued by the Commissioner of Commercial Taxes.
3. Authority of the Commissioner of Sales Tax under the Central Sales Tax Act.

Analysis:
1. The petitioners sought relief regarding the exemption of 21 items under the Kerala Value Added Tax Act from tax liability under the Central Sales Tax Act based on section 8(2)(c) of the CST Act. The contention was that their products, splints and veneers, fall under the exempted category and thus should be exempt from CST as well. The court examined the provisions of section 6(4) of the Act, entry 55 of the First Schedule, and section 8(2)(c) of the CST Act. It was observed that the exemption under the KVAT Act was specific to manufacturing units approved by the Kerala Khadi and Village Industries Board, indicating a conditional exemption rather than a general one. The court held that the exemption was not applicable under all circumstances, as it was limited to specified conditions, thereby not meeting the criteria for general exemption under the CST Act.

2. The issue of the circular instructions issued by the Commissioner of Commercial Taxes was raised, challenging their legality. The petitioners argued that these instructions hindered their ability to present their case before the assessing authority, as the authority was bound by the circular. The court analyzed sub-section (5) of section 8 of the CST Act, which pertains to granting exemptions through notifications by the State Government. It was clarified that the circulars issued by the Commissioner aimed at maintaining uniformity in tax procedures and were within the powers granted under the CST Act. The court concluded that the Commissioner had the authority to issue such circulars, dismissing the contention against their validity.

3. The authority of the Commissioner of Sales Tax under the CST Act was deliberated upon, emphasizing the powers granted to State authorities for assessments, penalties, appeals, and other related functions. The court highlighted that the Commissioner was empowered to issue circulars for maintaining consistency in tax quantification and levy procedures. By interpreting the relevant sections of the CST Act, the court affirmed the Commissioner's authority to issue circulars in line with the statutory provisions. Consequently, the court rejected the appeal, upholding the validity of the circular instructions and affirming the Commissioner's powers under the CST Act.