2007 (11) TMI 554 - HC - VAT and Sales Tax

Whether the Appellate Tribunal correct in law in not holding that the revision petitioner is entitled for exemption from purchase tax under section 5A of the KGST Act for the turnover on the soft wood consumed for the manufacture of block board considering S.R.O. No. 403 of 99 as also clarificatory letters dated June 8, 2002 and June 29, 2002 from the Government? Held that - Taking into consideration the pathetic situation of the assessee and persons similarly placed, the State Government has issued a notification S.R.O. No. 593 of 2004 dated June 7, 2004 which has come into effect from January 1, 2000 granting exemption on the purchase turnover of soft wood, if the same is used in the manufacture of block board and block board frames. The State Government has also issued yet another notification S.R.O. No. 689 of 2007 dated July 6, 2007 which has been given retrospective effect from April 1, 1994 to December 31, 1999. In view of these notifications, the State Government has clarified that the manufacturers of block board and block board frames who purchases and consumes soft wood are eligible and entitled for exemption under the notifications S.R.O. No. 403 of 1994, S. R.O. No. 593 of 2004 and S.R.O. No. 689 of 2007. In view of the notifications so issued by the State Government it is now difficult to sustain the orders passed by the Tribunal. Accordingly the sales tax revision is allowed. The matter is now remanded back to the assessing authority to redo the assessment in accordance with law and in the light of the notifications S.R.O. No. 403 of 1994, S.R.O. No. 593 of 2004 and S.R.O. No. 689 of 2007.

Summary

Issues:
Exemption from purchase tax under section 5A of the Kerala General Sales Tax Act, 1963 for soft wood used in manufacturing block board and block board frames.

Detailed Analysis:
The petitioner, a firm engaged in manufacturing block board and block board frames, sought exemption from purchase tax under S.R.O. No. 403 of 1994 for the assessment year 2000-01. The assessing authority rejected the claim, leading to an appeal before the first appellate authority. Subsequently, the State Government issued a clarification through an Under Secretary, stating that soft wood purchased for manufacturing block board and block board frames is eligible for exemption under S.R.O. No. 403 of 1994. The first appellate authority relied on this clarification to grant the exemption, which was challenged by the State in appeal before the Tribunal (T.A. No. 197 of 2003).

The Tribunal held that the clarification was not in the form of a notification under section 10 of the Act and was not binding, thereby ruling in favor of the State. The petitioner then approached the High Court in sales tax revision, raising questions on the entitlement for exemption and the application of relevant case law. The High Court noted the State Government's subsequent notifications, S.R.O. No. 593 of 2004 and S.R.O. No. 689 of 2007, which clarified the eligibility of manufacturers of block board and block board frames for exemption under various notifications.

Considering the notifications, the High Court allowed the sales tax revision, set aside the Tribunal's orders, and remanded the matter to the assessing authority for reassessment in line with the applicable notifications. The High Court emphasized the need for expeditious assessment within six months and made rulings on related applications, ultimately concluding the judgment in favor of the petitioner.

This detailed analysis encapsulates the legal journey of the petitioner seeking exemption from purchase tax for soft wood used in manufacturing block board and block board frames, highlighting the evolution of decisions from lower authorities to the High Court based on statutory notifications and legal interpretations.