2006 (7) TMI 640 - HC - VAT and Sales Tax

Summary

Issues:
1. Denial of compounding facility under section 7(1)(b) of the Kerala General Sales Tax Act, 1963.
2. Disallowance of second sale exemption claimed on granite chips and jelly and metals sold by petitioner.
3. Declining alternate claim of exemption under entry 33 of the Third Schedule to the Kerala General Sales Tax Act, 1963.

Analysis:
1. The petitioner's claim for exemption under the Third Schedule was rejected as they were engaged in crushing stones by a mechanical process, evident from their compounding claim based on machinery. The main issue was the denial of compounding facility under section 7(1)(b) of the Act. The Tribunal confirmed the denial due to the petitioner's failure to submit the application in the prescribed form within the specified time frame. As the petitioner did not comply with statutory formalities by not submitting form No. 21, their claim for compounding was rightfully disallowed. The payment made by the petitioner did not qualify as a compounding fee under section 7(1)(b), leading to the rejection of their claim.

2. The petitioner's challenge against the disallowance of second sale exemption on granite rubbles, chips, and jelly was based on the lack of proof of tax sufferance on the goods. To claim the exemption, proof of tax payment on the same goods through bills or cash memoranda was required as per rule 32(13) of the Kerala General Sales Tax Rules, 1963. The Tribunal found the petitioner failed to provide the necessary documentation, leading to the denial of the exemption. The issue of whether the second sale exemption itself was valid was not addressed as the exemption was declined due to the lack of proof of tax payment on purchases.

3. The tax revision cases were deemed meritless and dismissed. The court directed that the amount remitted by the petitioner as a compounding fee should be credited towards tax, with only the remaining balance to be recovered along with interest. This comprehensive analysis highlights the key legal issues addressed in the judgment, focusing on the denial of compounding facility, disallowance of second sale exemption, and the rejection of an alternate exemption claim under the Third Schedule.