2015 (11) TMI 870 - HC - VAT and Sales Tax

Denial of concessional rate of tax - KVAT - sales effected by the petitioner are mainly to the Lakshadweep Administration - Held that - the provisions of the Act read with Rule 112C (1) of the KVAT Rules have to be seen as a complete code in respect of the grant of concessional rate of tax to dealers effecting supply of articles to the Lakshadweep Administration. Conditions stipulated in Rule 12C (1) have to be interpreted in such a way that they would further the object, that is envisaged in the 1st proviso to Section 6(1). When so read, it would follow that in cases where the dealer in question supplies goods to the Lakshadweep Administration in the archipelago, by effecting transportation of the goods from the mainland to the archipelago, then for claiming a concessional rate of tax in respect of the supply so effected, the dealer would have to satisfy the twin requirements of furnishing a declaration in Form No-42, duly signed and sealed by the Administrator of Lakshadweep Administration, and also produce a copy of the shipping bill or other similar document attested by the Port authority, evidencing the fact of transportation of the goods to the archipelago. It would also follow, on a reasonable construction of the statutory provision, that in a situation where the dealer effecting supplies to the Lakshadweep Administration, is not required in terms of the contract between the parties to effect supplies of the goods in the archipelago, but rather has to effect supplies to the Lakshadweep Administration only in the mainland, then the requirement of production of a copy of the shipping bill duly attested by the Port authorities cannot be fulfilled by the supplying dealer, since he is not in any way involved with the transportation of the goods to the archipelago. Petitioners had produced the necessary declaration in Form No.42 duly signed and sealed by the buyer concerned and in that respect, there was substantial compliance with the requirement of Rule 12C for the purposes of claiming the concessional rate of tax envisaged under the 1st proviso to Section 6(1) of the KVAT Act. I am, therefore, of the view that the impugned orders of assessment in all these writ petitions pertaining to assessment year 2012-13 and Ext.P7 in WP(C) No.1331 of 2013 pertaining to assessment year 2008-09, cannot be legally sustained and I therefore, quash the said orders with a direction to the respective assessing authority to redo the assessment in relation to the petitioners for the said assessment years after granting them the benefit of concessional rate of tax envisaged under the 1st proviso to Section 6(1) of the KVAT Act, by accepting the Form No-42 declaration produced by them in compliance with the provision of Rule 12C of the KVAT Rules. - Decided in favour of assessee.

Summary

Issues Involved:
1. Concessional rate of tax under the 1st proviso to Section 6(1) of the KVAT Act.
2. Compliance with Rule 12C of the KVAT Rules.
3. Impossibility of producing shipping bills attested by Port authorities.
4. Reassessment of tax liability.
5. Alternate remedy for issues under the CST Act.

Detailed Analysis:

1. Concessional Rate of Tax under the 1st Proviso to Section 6(1) of the KVAT Act:
The petitioner, a dealer registered under the KVAT and CST Acts, claimed a concessional rate of tax for sales to the Lakshadweep Administration. The 1st proviso to Section 6(1) of the KVAT Act allows a reduced tax rate of 4% (up to 01.04.2012) and 5% (after 14.04.2012) for sales to specified entities, subject to conditions prescribed in the KVAT Rules.

2. Compliance with Rule 12C of the KVAT Rules:
Rule 12C(1) mandates that dealers must obtain a declaration in Form No.42, signed and sealed by the buyer, along with a shipping bill or similar document attested by Port authorities, to claim the concessional rate. The petitioner faced practical difficulties in producing these documents since the shipping activities were managed by the Lakshadweep Administration, not the petitioner.

3. Impossibility of Producing Shipping Bills Attested by Port Authorities:
The petitioner argued that it was impossible to comply with Rule 12C because the goods were stored in Kochi and Beypore and shipped to Lakshadweep by the Administration, not the petitioner. Letters from the Lakshadweep Administration confirmed that the transportation responsibility lay with them, not the petitioner.

4. Reassessment of Tax Liability:
The court found that the statutory provisions and rules should be interpreted to effectuate the legislative intent. Since the petitioner was not involved in transporting goods to Lakshadweep, they could not produce the shipping bills. The court held that the petitioner had substantially complied with Rule 12C by providing Form No.42 and that the impossibility of producing shipping bills should not deny them the concessional rate. The impugned assessment orders were quashed, and the assessing authority was directed to redo the assessments, granting the benefit of the concessional rate based on the Form No.42 declarations.

5. Alternate Remedy for Issues under the CST Act:
In WP(C) No.1331 of 2014, the petitioner also challenged an assessment under the CST Act and filed a rectification application for factual errors. The court directed the assessing authority to consider the rectification application while reassessing the KVAT liability. For the CST Act issue, the petitioner was advised to pursue an appellate remedy, with a stay on recovery proceedings granted for one month to allow time for filing an appeal.

Conclusion:
The court emphasized the need to interpret tax provisions in a manner that aligns with legislative intent and practical realities. The petitioner was granted relief from the stringent requirement of producing shipping bills attested by Port authorities, recognizing the impossibility of compliance due to the unique logistics of supplying goods to Lakshadweep. The assessing authorities were instructed to reassess the tax liability, considering the substantial compliance with Rule 12C and the specific circumstances of the case.