2006 (9) TMI 509 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of entry 24 of Notification S.R.O. No. 1727 of 1993 for exemption on sales turnover of chicks and chicken.
2. Analysis of Notification S.R.O. No. 291 of 2000 and its impact on the exemption criteria.
3. Determination of whether the Tribunal's decision granting exemption to the respondent/assessee was justified.
4. Consideration of the applicability of the amnesty scheme for interest waiver under the Kerala General Sales Tax Act, 1963.

Interpretation of Entry 24 of Notification S.R.O. No. 1727 of 1993:
The issue raised in the S.T. Rev. cases pertained to the Tribunal's decision to grant exemption to the respondent/assessee on the sales turnover of chicks and chicken brought from outside the State and sold in Kerala. The contention was whether the exemption under entry 24 of the Third Schedule to Notification S.R.O. No. 1727 of 1993 was applicable to such sales turnover. The assessing officer had granted exemption on the turnover of chicks produced in the hatchery and chicken reared in the poultry farm maintained in the State but disallowed exemption on the sales turnover of chicks and chicken brought from outside Kerala. The Tribunal, however, granted exemption on the entire turnover, including sales turnover of chicks and chicken brought from outside Kerala.

Analysis of Notification S.R.O. No. 291 of 2000:
The Special Government Pleader argued that the exemption was intended for poultry farms and hatcheries producing goods within the State, implying that when a poultry farm engages in inter-State purchase and sale of chicks or chicken, it should not receive exemption on such turnover. On the other hand, the respondent/assessee's counsel relied on Notification S.R.O. No. 291 of 2000 to support the contention that the exemption was not limited to the turnover of chicks and chicken produced in the State but applied to the entire turnover of the poultry farm or hatchery. The crucial question revolved around whether this notification was clarificatory or imposed new conditions for exemption on the turnover of chicks and chicken.

Justification of Tribunal's Decision:
The High Court opined that the exemption granted under Notification S.R.O. No. 1727 of 1993 was meant for poultry farmers or hatcheries in the State, specifically for the turnover of chicks raised in hatcheries or chicken reared in poultry farms within the State. The Court highlighted that a poultry farmer or hatchery was not considered a trader under the notification but an entity engaged in the production of chicks or rearing of chicken. Allowing the respondent/assessee's interpretation would lead to discrimination between traders and farmers, enabling the latter to engage in trading without tax liability. Consequently, the Court deemed the Tribunal's decision, based on Notification S.R.O. No. 291 of 2000, unsustainable and reversed it, upholding the assessment of turnover for chicks and chicken brought from outside the State.

Applicability of Amnesty Scheme for Interest Waiver:
Considering the respondent/assessee's status as a poultry farmer and the presence of the amnesty scheme during 2004 when the cases were filed, the Court granted a waiver of forty per cent of the interest payable under the Kerala General Sales Tax Act, 1963. This waiver was subject to the petitioner clearing the tax arrears with sixty per cent interest in three equal monthly instalments, with the first payment due by October 15, 2006. Failure to adhere to the payment schedule would result in the forfeiture of the interest waiver.