2012 (3) TMI 371 - HC - VAT and Sales Tax

Whether the activities carried on in the poultry farm, i.e., buying one or two day old chicks, rearing the same into full grown chicken and sale of the same, entitles the farm to get the benefit of presumptive tax under section 6(5) of the Kerala Value Added Tax Act, 2003? Held that - In our view, irrespective of whether there is manufacture or not in the rearing of chicks to chicken, the petitioner s sale of broiler chicken as full grown birds for meat purpose have to be and rightly treated as first taxable sale. By virtue of the specific exclusion of first taxable sellers from the scheme of payment of presumptive tax under clause (d) of section 6(5), the lower authorities including the Tribunal rightly rejected the claim of the petitioners. Consequently, we dismiss all the O.T. revision cases.

Summary

Issues:
1. Whether activities in a poultry farm entitle the farm to the benefit of presumptive tax under the Kerala Value Added Tax Act, 2003.

Analysis:
The judgment dealt with the issue of whether two poultry farmers engaging in buying one or two-day-old chicks, rearing them into full-grown chicken, and selling them are entitled to the benefit of presumptive tax under section 6(5) of the Kerala Value Added Tax Act, 2003. The farmers claimed the benefit of presumptive tax at 0.5% of the turnover, arguing that the sale of full-grown birds should be treated as the sale of the same commodity as the chicks purchased locally. However, the assessing officer, first appellate authority, and Tribunal held that the chicks and full-grown birds are different commodities, making the farmers first taxable sellers of the full-grown birds and thus ineligible for the benefit of section 6(5) of the Act.

The Tribunal's decision was influenced by a Supreme Court judgment in Indian Poultry v. Sales Tax Officer, which held that rearing chicks into broilers amounts to the manufacture of goods. The farmers argued that the definition of "manufacture" in the Madhya Pradesh General Sales Tax Act is broader than that in the Kerala Act, thus making the Supreme Court decision inapplicable. However, the Government Pleader contended that the Kerala Act's definition of "manufacture" covers rearing chickens, causing the original commodity, the chick, to lose its identity, character, and use.

The High Court, after considering both arguments, concluded that the farmers were not entitled to the benefit of presumptive tax under section 6(5) as they were first taxable sellers of the full-grown broiler chickens. The court emphasized that the definition of "manufacture" in the Act does not cover livestock activities without manufacturing in the literal or technical sense. Additionally, the court highlighted that the commodity purchased should be resold in the same form to avoid being considered a first taxable seller. Since one or two-day-old chicks are not comparable to full-grown broiler chickens sold after rearing, the farmers' claim was rejected. The court dismissed all revision cases, upholding the lower authorities' decisions.

In conclusion, the judgment clarified that the farmers engaging in poultry activities were not eligible for the benefit of presumptive tax under the Act as they were considered first taxable sellers of full-grown broiler chickens, which were distinct commodities from the one or two-day-old chicks purchased initially.