2007 (12) TMI 441 - HC - VAT and Sales Tax

Tax levy - defective show cause notice - whether the sales turnover of petitioner products is liable to be taxed only at four per cent and that the levy of tax at 12.5 per cent is illegal and unauthorized? Held that - In this case, the petitioner does not contend that the show-cause notice is defective for any reason as in exhibit P10 order and the petitioner has not even produced the show-cause notice dated June 7, 2007 that is referred to in exhibit P11 order of assessment. Therefore there is nothing on record to indicate that defective showcause notices has any relevance in so far as the assessment order that is under challenge in this case is concerned. Having, regard to all the above, no justification to entertain the writ petition. If at all the petitioner is aggrieved, it has to take recourse to the statutory remedies that are provided for in the Act itself in which event, the appeal will be disposed of untrammelled by the findings in this judgment.

Summary

Issues:
Challenge to final assessment order under Kerala Value Added Tax Act, 2003 for the year 2005-06. Interpretation of applicable tax rate on household pesticides and insecticides. Validity of levy at 12.5% tax rate. Effectiveness of statutory appeal remedy. Impact of Commissioner of Commercial Taxes' clarification. Comparison with previous judgments.

Analysis:
The petitioner sought to quash the final assessment order (exhibit P11) for 2005-06 under the Kerala Value Added Tax Act, claiming the sales turnover should be taxed at four percent, not 12.5 percent. The petitioner argued that household pesticides and insecticides manufactured fell under a lower tax bracket. The petitioner contended that the assessment order was based on S.R.O. No. 82/06 and a clarification (exhibit P12) from the Commissioner of Commercial Taxes.

The petitioner had previously challenged similar assessment orders and notices, leading to a judgment (exhibit P1) against them. A subsequent Special Leave Petition (SLP) before the Supreme Court (exhibit P10) was disposed of, but the petitioner argued that exhibit P11 should be set aside based on the reasons in exhibit P10. The petitioner also claimed that the remedy of appeal was illusory due to the Commissioner's clarification (exhibit P12).

The court noted that the petitioner essentially sought a declaration on the applicable tax rate, emphasizing that the statutory remedy of appeal should have been pursued. The argument that the Commissioner's clarification hindered the appeal process was rejected, citing a previous judgment (exhibit P13) that clarified the binding nature of such clarifications on Departmental officers, not the petitioner.

Regarding the apex court's order (exhibit P10), it was highlighted that the petitioner's case did not involve defective show-cause notices as in exhibit P10. The court found no basis to entertain the writ petition, emphasizing the need for the petitioner to exhaust statutory remedies. The court dismissed the writ petition but allowed a two-week deferral on further proceedings to seek orders from the appellate authority.

In conclusion, the judgment focused on the petitioner's failure to utilize statutory appeal remedies, the impact of the Commissioner's clarification, and the differentiation of the current case from previous judgments. The court emphasized the importance of following statutory procedures and dismissed the writ petition while providing a brief deferral for pursuing appellate remedies.