2013 (3) TMI 59 - HC - VAT and Sales Tax

Consignments detained as the value declared by the petitioners in respect of betel nuts was lower than the floor rate fixed by the Commissioner of Commercial Taxes - KVAT Act - Held that - Petitioners specifically aver that these are imported goods, and that they have no local sales in Kerala and the goods are taken out of the State on consignment basis. Therefore, as far as their transactions are concerned, there is no implication of tax justifying the demand for advance tax from them. If that be so, in the nature of the transactions undertaken by the petitioners, there is no warrant for insisting that the floor rate fixed by the Commissioner should be mentioned in the delivery notes nor could the consignments have been detained at the check post for not declaring the value on the basis of the circulars issued. Therefore, the refusal to endorse the delivery notes cannot be approved. Therefore, these writ petitions deserve to be allowed.

Issues:
1. Detention of consignments for not declaring the value based on floor rates fixed by the Commissioner of Commercial Taxes.
2. Refusal to endorse delivery notes due to non-declaration of floor price.
3. Legality of fixing floor rates under Section 47(16A) of the Kerala Value Added Tax Act, 2003.
4. Implications of advance tax on imported goods taken out of the State on consignment basis.

Analysis:

1. The writ petitions involved multiple importers of betel nuts facing detention of consignments at check posts for declaring values lower than the floor rates set by the Commissioner of Commercial Taxes. The petitioners challenged the Commissioner's power to fix floor prices for betel nuts under the KVAT Act, contending it was beyond the Commissioner's authority.

2. Another issue raised was the refusal to endorse delivery notes by the authorities due to the absence of the floor price declaration. This refusal was based on the premise that the declared value did not match the floor rates set by the Commissioner. The petitioners argued against this practice, stating that their transactions involved goods transported out of the State on consignment basis, with no local sales in Kerala.

3. The respondents justified their actions based on Section 47(16A) of the KVAT Act, empowering the Commissioner to direct tax payment for evasion-prone commodities before the prescribed date. The floor rates were deemed necessary to prevent tax evasion for certain goods like betel nuts. The authority to fix these rates was upheld by previous judgments, including Fantasy Sales Corporation v. Sales Tax Inspector and S.P.L. Limited v. Commercial Tax Inspector.

4. The Court examined the legality of fixing floor rates for evasion-prone commodities and upheld the Commissioner's power to do so under Section 47(16A) of the KVAT Act. However, in cases of undervaluation, the floor rates were to be used as guidelines for initiating proceedings under the Act. The petitioners' argument that their imported goods for consignment sale were not subject to local tax implications was considered valid, leading to the conclusion that detaining consignments for non-declaration of floor prices was illegal.

In conclusion, the Court held that the refusal to endorse delivery notes and the detention of consignments based on floor rates were illegal. The writ petitions were allowed, and any security provided by the petitioners was to be released. The judgment clarified the application of floor rates under the KVAT Act and the implications for goods transported on a consignment basis, ensuring a fair interpretation of tax regulations in such cases.

← Previous Next →