2005 (5) TMI 625 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of section 5A of the Kerala General Sales Tax Act, 1963 regarding purchase tax on turnover of local purchase of cashew kernels from unregistered dealers sold to exporters within and outside Kerala for export to foreign buyers.

Analysis:
The court consolidated the questions raised by the assessee into one issue for determination. The primary contention revolved around whether the Sales Tax Appellate Tribunal was correct in upholding the assessment of purchase tax under section 5A of the KGST Act on the turnover of local purchase of cashew kernels from unregistered dealers by the assessee, which were subsequently sold to exporters within and outside Kerala for export. The Tribunal relied on a Supreme Court decision in State of Karnataka v. B.M. Ashraf & Co. to support its decision, while the assessee's counsel argued that the decision was based on different circumstances. The Government Pleader contended that the Supreme Court decision was applicable to the case at hand, emphasizing the binding nature of Supreme Court decisions under Article 141 of the Constitution of India.

The court examined the provisions of section 5A of the KGST Act in comparison to section 6 of the Karnataka Sales Tax Act, as both sections were found to be similar. The key distinction between the case decided by the Supreme Court and the petitioner's case was that the petitioner sold goods to exporters outside Kerala against form H, in addition to sales to exporters within Kerala against form 18A. The assessee argued that purchases made from unregistered dealers and sold locally or inter-State should not attract purchase tax under section 5A(1)(b) and (c).

The court delved into the interpretation of section 5A, highlighting the petitioner's impressive argument based on sales made to exporters exempted under section 5(3) of the CST Act. However, the court concluded that local purchases sold to exporters within the State were not entitled to exemption under section 5A(1)(b). The court further analyzed whether purchases from unregistered dealers sold to exporters outside the State were exempt under section 5A(1)(c), ultimately holding that the Supreme Court decision applied to such transactions, making the petitioner liable to pay tax on the purchase of cashew kernels from unregistered dealers.

In another issue regarding the addition of turnover sustained by the Tribunal, the court found the rejection of accounts to be valid, and the addition upheld by the Tribunal was considered reasonable given the volume of business. Consequently, the court dismissed the sales tax revision cases filed by the assessee, ruling in favor of the Revenue.