2006 (8) TMI 570 - HC - VAT and Sales Tax

Summary

Issues:
1. Entitlement to exemption on turnover tax under annexure D notification for an arrack dealer who paid sales tax at a compounded rate.
2. Interpretation of Notification S.R.O. No. 1401/92 and its application to sales turnover of arrack.
3. Determination of whether the petitioner falls under sub-clause (g) of the notification for exemption from turnover tax.

Analysis:
The judgment of the court addressed the issue of whether an arrack dealer, who paid sales tax at a compounded rate under section 7(14) of the Kerala General Sales Tax Act, 1963, is entitled to exemption on turnover tax under annexure D notification, S.R.O. No. 1401 of 1992. The Tribunal, relying on a previous decision, initially held the petitioner liable to pay turnover tax on the sales turnover of arrack for the year 1992-93. However, the court examined the notification and relevant provisions, emphasizing that items not covered by specific sub-clauses and falling under the First or Fifth Schedule would be exempt from turnover tax, except for certain circumstances. The court referred to a previous case where it was established that local dealers are entitled to exemption from turnover tax on first sales of goods not specified in the notification's sub-clauses. The court concluded that the petitioner, being a dealer in arrack, falls under sub-clause (g) of the notification and is not liable to pay any turnover tax on the sales turnover of arrack.

Furthermore, the court delved into the interpretation of Notification S.R.O. No. 1401/92, specifically focusing on the items subject to turnover tax at all points. It was highlighted that foreign liquor and Indian-made foreign liquor were included in the items for turnover tax, while arrack was excluded from these categories. This distinction was crucial in determining the petitioner's eligibility for exemption under sub-clause (g) of the notification. By clarifying that arrack does not fall under the entries subject to turnover tax, the court affirmed that the petitioner indeed qualifies for exemption under the notification.

In light of the above analysis, the court allowed the sales tax revision by overturning the Tribunal's decision and reinstating the order of the first appellate authority. The judgment provided a detailed examination of the notification, relevant provisions, and previous legal precedents to establish the petitioner's entitlement to exemption from turnover tax on the sales turnover of arrack for the specified year.