9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2009 (11) TMI 291 - HC - VAT and Sales TaxPaper Article- whether notebook produced and sold by the petitioner out of paper locally purchased qualifies for second sale exemption. Held that- second sale exemption is available only to second sale of same goods purchased within the state. Even though paper is predominant item in the making of notebook, it has got thick bond cover, and it is a value added product and by no stretch of imagination one can treat notebook with standard dimension same as paper purchased in reams by the petitioner to make notebooks. Even without explanation to entry 106(ii) of First Schedule to Kerala General Sales Tax, 1963 a notebook is entirely a different product from the paper used making it. Departmental Clarification- Letter/clarification issued by the highest authority should be after detailed consideration of statutory provision on which clarification is issued.
Issues: Whether notebook produced and sold by the petitioner qualifies for second sale exemption under Entry 106(11) of the First Schedule to the KGST Act.
Analysis: 1. The main issue in this case revolves around whether the notebook produced and sold by the petitioner, made out of locally purchased paper, qualifies for second sale exemption under Entry 106(11) of the KGST Act. The assessing officer, the first appellate authority, and the Tribunal held that the notebook is a different product from the paper used to make it, and thus, the first sale of the notebook attracts tax. However, the petitioner was granted a set-off of tax paid on the local purchase of paper under the Explanation to Entry 106(h) of the Act. The Court heard arguments from both the petitioner's counsel and the Government Pleader representing the respondent. 2. The petitioner relied on a letter from the Commissioner of Commercial Taxes stating that the scheme of Entry 106 is to levy tax on the notebook and grant a rebate of tax paid on local purchases. The petitioner argued that the Explanation to the Entry is irrelevant based on a previous court decision. The Government Pleader contended that the court decision did not consider the Explanation and cited a Supreme Court decision to support the position that clarifications in conflict with statutory provisions hold no legal standing. The petitioner's counsel mentioned that other parties have received exemptions based on a different letter. 3. The Court rejected the petitioner's claim, stating that even without the Explanation, a notebook and the paper used to make it cannot be considered the same item. The second sale exemption is only applicable to the second sale of the same goods purchased within the State. Despite paper being a primary material in notebook production, the finished product is distinct with added value, including a cover, manufacturer's name, and brand. The Court emphasized that a notebook is a different product from the paper used to create it, even without the Explanation to Entry 106(h). The Court concluded that the taxation scheme levies tax on notebooks as new products made from paper in Kerala and grants rebates on tax paid for paper purchased within the State. 4. The Court criticized the reliance on the letter/clarity by the petitioner, highlighting the absurd consequences of overlooking statutory provisions based on a court decision. The Court directed the Commissioner to investigate the matter, rectify any errors caused by the clarification, and ensure that eligible tax rebates are granted. The Court dismissed the ST Revisions and instructed the assessing officer to provide the necessary tax rebates based on the Tribunal's directions, with the Government Pleader tasked with forwarding a copy of the order to the Commissioner.
|
