2004 (11) TMI 104 - SC - VAT and Sales Tax

Whether in the present case, the revised Schedule introduced in the 1960 Act, by the Finance Act 18 of 1987, results in two assessments? Held that - In the present case, the revised Schedule altered the tariff categories. Therefore, the revision in question in this case squarely came within the ambit of section 3(2) of the 1960 Act and such a revision could be given effect to only in the next immediate financial year 1988-89. As stated above, chargeability is independent of the passing of the Finance Act. Therefore, one has to read the Finance Act in consonance with the provisions of the charging section. The function of the Finance Act primarily is to prescribe the rate of tax and the manner of calculation of tax; and it is not intended to incorporate the entire procedural and substantive law relating to tax. In the circumstances, we do not find merit in the contention advanced on behalf of the appellant-State that the object of the Finance Act 18 of 1987 was only to revise the rates of plantation tax. We answer the above question in favour of the assessees and against the Department.

Issues Involved:
1. Scope and operation of section 1(2) of the Kerala Finance Act 18 of 1987.
2. Applicability of revised plantation tax rates during the financial year 1987-88.
3. Legality of two assessments within the same financial year.
4. Interpretation of the charging section and machinery provisions of the Kerala Plantations Tax Act, 1960.

Detailed Analysis:

1. Scope and operation of section 1(2) of the Kerala Finance Act 18 of 1987:
The Kerala Finance Act 18 of 1987, which received the Governor's assent on August 20, 1987, was enacted to give effect to the budget proposals for the financial year 1987-88. The Act substituted Schedule I of the Kerala Plantations Tax Act, 1960, revising the rates of plantation tax with effect from July 1, 1987. The revised Schedule introduced new rates and altered the tariff categories and structure.

2. Applicability of revised plantation tax rates during the financial year 1987-88:
The primary question was whether the revised rates could be applied during the financial year 1987-88. The High Court held that the revised rates could not affect the assessment for the financial year 1987-88 and could only be applied from the financial year 1988-89. The Supreme Court affirmed this view, stating that the revision in rates and the alteration of tariff categories fell within the ambit of section 3(2) of the 1960 Act, which mandates that such revisions can only take effect from the next financial year.

3. Legality of two assessments within the same financial year:
The appellant-State contended that the revision in rates did not result in two assessments within the same financial year but was merely a demand for differential tax. However, the Supreme Court held that the revised Schedule, which altered the tariff structure and categories, resulted in two assessments during the same year, which is not permissible under the Act. The tax liability crystallized on April 1 of each financial year, and any revision could only be applied from the subsequent financial year.

4. Interpretation of the charging section and machinery provisions of the Kerala Plantations Tax Act, 1960:
Section 3(1) of the 1960 Act is the charging section, which imposes a tax on plantations based on the extent of land held on the first day of each financial year. The Supreme Court emphasized that the charging section is distinct from the machinery provisions, which provide for the assessment and collection of tax. The revision in rates and categories introduced by the Finance Act 18 of 1987 required a revision in the assessment, which could only be implemented from the next financial year (1988-89), as per section 3(2) of the 1960 Act.

Conclusion:
The Supreme Court dismissed the appeals, holding that the revised plantation tax rates introduced by the Kerala Finance Act 18 of 1987 could not be applied during the financial year 1987-88. The revised rates and altered tariff categories could only take effect from the financial year 1988-89. The judgment clarified that the charging section and the machinery provisions must be read in consonance, and any revision in tax rates affecting the assessable extent could only be applied from the subsequent financial year. The decision is confined to the Kerala Plantations Tax Act, 1960, and does not apply to amendments to other enactments such as the Kerala General Sales Tax Act, 1963, and the Kerala Motor Vehicles Taxation Act, 1976. The appeals were dismissed with no order as to costs.

← Previous Next →