2010 (1) TMI 1145 - HC - VAT and Sales Tax

Whether the price declared before customs authorities is much less than the floor rate fixed? Held that - Argument of the appellant cannot be accepted as the basis for challenging the validity of circular issued by the Commissioner fixing the price because it is for the customs authorities to examine whether invoice price or the declared price for payment of duty is right. In fact the correct procedure to fix the price for timber for the purpose of collection of advance tax is to collect from the market the prevailing retail market price at a given time and reduce therefrom the dealer margins to fix the dealer s price which is the price at which advance tax could be collected. As we have already observed going by the current market price of varieties of imported timber for which the Commissioner has fixed floor rate price for the purpose of payment of advance tax, the price fixed cannot be said to be unreasonable or arbitrary, more so when the appellant has no case that sales are made at below the floor rate fixed by the Commissioner. Appeal dismissed.

Summary

Issues:
Challenge to the validity of a circular fixing the value of imported timber for advance tax payment under the Kerala Value Added Tax Act, 2003.

Analysis:
The High Court heard a writ appeal filed by a firm involved in timber import and sales, challenging a judgment upholding the validity of a circular issued by the Commissioner under section 47(16A) of the Kerala Value Added Tax Act, 2003. The constitutional validity of the Act authorizing the identification of evasion-prone goods and collection of advance tax was previously upheld by a Division Bench judgment. The appellant's argument focused on the arbitrariness of the floor rates set for various imported timber varieties for advance tax collection, claiming they were not based on market value. However, the Government Pleader argued that the fixed rates were below wholesale prices, and the challenge was based on the appellant's suppliers' invoice prices.

The Court noted that most legal questions regarding the Commissioner's jurisdiction were already addressed in the lower court's judgment. Upholding the statutory provision meant advance tax collection for identified goods was permissible, requiring value estimation before sale. The Commissioner fixed values to prevent disputes and ensure uniformity. The Court rejected the appellant's claim that the fixed values were excessive, emphasizing that advance tax was provisional and refundable if it exceeded actual tax liability. Disputes over under-invoicing were to be resolved by assessing officers, not through challenges to the circular.

The appellant's argument on fixed prices regardless of wood size being arbitrary was dismissed by the Court, as adjusting values based on size could lead to higher rates for larger timber. The Court found no merit in the appellant's challenge based on declared prices to customs authorities, stating that market prices should determine advance tax rates. Since the appellant did not demonstrate sales below the fixed rates, the Court upheld the circular's validity, concluding that the fixed prices were reasonable based on prevailing market rates.

In summary, the Court dismissed the appeal, finding no merit in the appellant's arguments against the circular fixing values for imported timber varieties for advance tax payment.