2006 (10) TMI 409 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of section 5A of the Kerala General Sales Tax Act, 1963 regarding assessment on purchase turnover of timber from agriculturists for use in manufacturing furniture for sale in the State.

Analysis:
The judgment addressed the common question raised in two revisions filed by the State against the Tribunal's order for the assessment years 1994-95 and 1995-96. The main issue was whether the Tribunal was correct in canceling the assessment under section 5A on the purchase turnover of timber from agriculturists by the respondent-assessee for manufacturing furniture for sale in the State. The Tribunal's decision was based on the classification of timber as an item falling under the Fifth Schedule to the Act, taxable at two points, making assessment under section 5A not feasible. The Government Pleader argued that section 5A is applicable even for commodities falling under the Fifth Schedule. The purchases were made from agriculturists with turnover below the non-taxable limit, and the seller was not liable to pay tax, making the respondent liable to pay tax under section 5A for using the timber in manufacturing furniture for sale in the State.

The judgment delved into whether section 5A applies to commodities falling under the Fifth Schedule of the Act. It was noted that there is no restriction under section 5A limiting liability to specific goods or classes of goods or to goods falling under any particular Schedule. Section 5A is a standalone charging section, and if the conditions specified are met, it is applicable to commodities falling under any Schedule of the Act, including the Fifth Schedule. However, the tax payable for a commodity under the Fifth Schedule when sold to a registered dealer was determined at specific rates, which were 6% for 1994-95 and 10% for 1995-96. Even though the timber purchased was used in manufacturing and not sold directly, the liability under section 5A was to be limited to the tax payable under the relevant column of the Fifth Schedule. The judgment allowed the revision cases by overturning the Tribunal's order but directed the officer to recalculate the liability at the applicable rate under column (4) of the Fifth Schedule for the relevant years.