2009 (8) TMI 1106 - HC - VAT and Sales Tax

Whether the Commissioner is authorised to issue the impugned circulars fixing the minimum sale price for calculating the advance tax realisable under section 47(16A) of the Kerala Value Added Tax Act, 2003? Whether the sale price fixed in respect of live chicken as involved in W.P. (C) No. 17708 of 2008 and that of timber involved in other cases is based on the actual market value and legally reckonable, for quantifying the advance tax? Held that - Every bona fide dealer, who is promptly submitting the returns every month as specified, is entitled to obtain the green cards and on such an event, there is absolutely no liability to pay any advance tax at the check-post for clearing his goods. The petitioners herein, having an opportunity to obtain necessary green cards as contemplated under section 19A, read with rule 21A and thus to cross the check-post/ border without any necessity to pay the advance tax or else to remit the advance tax as assessed by the assessing authority on the basis of the invoice/bill price transportation charges and other amounts as specified in circular No. 53/06, it can never be said that the petitioners are left with no remedy because of the fixation of the sale price by the Commissioner vide the impugned circular 28/08 dated June 19, 2008. The contention raised in this regard miserably fails and it is only to be rejected. Thus all the contentions raised by the petitioners against the impugned circulars fixing the sale price of live chicken and timber (exhibit P4 circular/order No. Cl-70910/04CT dated May 15, 2008 in W.P. (C) No. 17708 of 2008 and circular No. 28/2008 dated June 19, 2008 in other cases) are devoid of any merit. The challenge against the above circular/order fails and the validity is upheld as not assailable. Appeal dismissed.

Issues Involved:
1. Whether the Commissioner is authorized to issue circulars fixing the "minimum sale price" for calculating advance tax under section 47(16A) of the Kerala Value Added Tax Act, 2003.
2. Whether the sale price fixed for "live chicken" and "timber" is based on actual market value and legally reckonable for quantifying advance tax.

Issue-wise Detailed Analysis:

Issue 1: Authority of the Commissioner to Issue Circulars Fixing Minimum Sale Price
The court examined whether the Commissioner had the power to issue circulars fixing the minimum sale price for calculating advance tax under section 47(16A) of the Kerala Value Added Tax Act, 2003. The petitioners contended that the Commissioner lacked such authority, asserting that the power under section 3 of the VAT Act pertains only to "administrative affairs" and does not extend to legislative powers for fixing sale prices. They argued that tax should be assessed based on the "sale price/purchase price" and not on any "saleable price," referencing various legal precedents to support their stance.

The court, however, upheld the Commissioner's authority, noting that section 47(16A) was introduced to prevent tax evasion on "evasion prone commodities." The court referenced the decision in Fantacy Sales Corporation v. Sales Tax Inspector, Walayar, which upheld the constitutional validity of section 47(16A) and the related circulars. It emphasized that the Commissioner's power to issue such circulars is derived from section 47(16A) read with section 3(2)(c) of the Act, which allows the Commissioner to issue orders, instructions, and directions for the proper administration of the Act.

Issue 2: Basis and Legal Reckonability of Fixed Sale Prices for Live Chicken and Timber
The petitioners argued that the fixed sale prices for "live chicken" and "timber" were exorbitant and did not reflect the actual market value. For "live chicken," the petitioners highlighted the fluctuating market prices and the perishable nature of the commodity, asserting that the fixed price of Rs. 60 per kg was unreasonable compared to the market price of Rs. 29 per kg. For "timber," the petitioners pointed out that the price depends on various factors such as quality, size, and defects, and that the fixed prices ignored these variables.

The court held that the fixation of sale prices by the Commissioner was provisional and intended solely for the purpose of collecting advance tax. It noted that the actual tax payable would be determined by the assessing authority based on the actual sale price, allowing for refunds or set-offs as necessary. The court emphasized that the provisional prices were based on market studies and aimed at preventing tax evasion. It also highlighted the alternative provided to dealers to remit tax before the assessing authority based on the invoice value, transportation charges, and other expenses, thus ensuring fairness and flexibility.

The court further noted that the provision for advance tax collection did not impose any new tax but was a measure to prevent tax evasion. It clarified that the advance tax was adjustable against the output tax due, ensuring that dealers were not unduly burdened.

Conclusion:
The court dismissed the writ petitions, upholding the validity of the impugned circulars fixing the sale prices for "live chicken" and "timber." It concluded that the Commissioner's actions were within the legal framework and aimed at preventing tax evasion, providing sufficient mechanisms to ensure that the actual tax liability was based on the true sale price. The court emphasized that the petitioners had alternative remedies available, including the option to obtain green cards for expedited clearance and exemption from advance tax.

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