2018 (11) TMI 1440 - HC - VAT and Sales Tax

Separate assessment under KVAT Act, 2003 - M-Sand produced by the various writ petitioners by using a vertical/horizontal shaft impactor machine - the dealers had opted for compounding under Section 8 of the Act - Held that - The proviso to section 8 clearly exempts manufactured sand produced by dealers engaged in the production of granite metals who have opted for compounding based on the specification in Sub clause (i) to (iv) of Clause (b) of Section 8. There is no reference to an inferior quality or negligible quantity of M-Sand which alone stands exempted. It cannot also be said that the M-Sand procured from the VSI/HSI are not produced by the machines referred to in Section 8(b). Section 8(b) is very clear and indicates compounding fee only on the specific machines provided there under with respect to a dealer producing granite metals. True, the legislature never contemplated the introduction of vertical or horizontal shaft impactors for the purpose of producing M-Sand from the granite metal produced by a separate process through an impactor. The exemption granted, did not exclude such production by a separate machine other than that specified in clause (b) of Section 8. There are no reason to sustain the distinction sought to be drawn between M-Sand and manufactured sand. M-Sand as it is generally understood is manufactured sand produced from quarried metals. In common parlance as also in commercial parlance M-Sand is manufactured sand produced from metals, as distinguished from natural sand. Appeal dismissed - decided against appellant.

Summary

Issues:
Whether M-Sand produced using specific machines is liable for separate assessment under the Kerala Value Added Tax Act when dealers opt for compounding under Section 8 of the Act.

Analysis:
The judgment revolves around the interpretation of Section 8 of the Kerala Value Added Tax Act, 2003 (KVAT Act) concerning the assessment of M-Sand produced by dealers using vertical/horizontal shaft impactor machines. The initial judgment found that dealers opting for compounding under Section 8 were not liable for separate assessment of M-Sand based on the proviso to Section 8 and a previous Division Bench decision. The government challenged this decision, arguing that only dealers producing granite metals were entitled to compounding under Section 8(b), and any other product, like M-Sand, would not be covered under the compounding scheme.

The court analyzed the proviso of Section 8, which exempts manufactured sand produced by dealers engaged in granite metal production who have opted for compounding. The judgment emphasized that the exemption does not specify inferior quality or negligible quantity of M-Sand, and the machines used for M-Sand production fall within the scope of Section 8(b). The court rejected the argument that M-Sand produced by different machines should be separately assessed, highlighting that the legislative scheme focuses on compounding based on the crushers used within a unit.

Furthermore, the court noted that the legislature did not anticipate the use of vertical or horizontal shaft impactors for M-Sand production but granted a blanket exemption for manufactured sand produced by dealers engaged in granite metal production. The introduction of a compounding fee for VSI/HSI from 2014-15 indicated the government's acknowledgment of tax loss due to the M-Sand exemption. The judgment dismissed the distinction between M-Sand and manufactured sand, emphasizing that both terms refer to sand produced from quarried metals.

Regarding a previous decision under the general sales tax regime, the court found that the specific exemption under the KVAT Act for M-Sand produced by dealers engaged in granite metal production justified the initial judgment's conclusion. The court upheld the Single Judge's decision, dismissing the appeals and ordering no costs to be awarded to either party.

In conclusion, the judgment clarifies the application of the compounding scheme under the KVAT Act to M-Sand production by dealers using specific machines, emphasizing the legislative intent and previous judicial interpretations to determine the liability for separate assessment under the tax law.