2009 (7) TMI 1187 - HC - VAT and Sales Tax

Whether retrospectivity of exhibit P6 Notification S.R.O. No. 958 of 2002 , taking away the benefit of S.R.O. No. 1731 of 1993 from a previous date than the date of actual promulgation of exhibit P6, can be sustained or not? Held that - The petitioner was disabled from collecting tax or from procuring form C declarations during the period when S.R.O. No. 1731 of 1993 was in force. Since the said notification was superseded by exhibit P6 notification (S.R.O. No. 958 of 2002) issued only on November 21, 2002, the petitioner cannot be put to the burden of tax liability or obligation for production of declaration, for any period prior to November 21, 2002. Therefore the retrospectivity given in exhibit P6 is held as unsustainable. Hence it is held that the petitioner is entitled for exemption from payment of tax on the turnover of inter-State sale effected during the period between June 1, 2002 to November 22, 2002. In the result, exhibit P7 assessment is hereby quashed. The matter is remanded to the first respondent for fresh assessment on the basis of the findings rendered above. The liability for payment of interest also need be re-worked accordingly. The revised assessment may be issued as early as possible, at any rate within a period of two months from the date of copy of this judgment.

Summary

The petitioner in this case is the owner of a small-scale industrial unit manufacturing rubber bands, recognized and financed by the Kerala Khadi and Village Industries Board. The petitioner is a registered dealer under the Kerala General Sales Tax Act, 1963 and the Central Sales Tax Act, 1956. The dispute in question relates to the assessment for the year 2002-03, challenging the validity of Notification S.R.O. No. 958 of 2002 and revised assessment of CST for the same year. The petitioner's unit was previously exempt from paying tax on inter-State sales, but subsequent changes in legislation required her to submit form C declarations from June 1, 2002 onwards. The assessment was revised to impose a 10% tax on the entire inter-State sale turnover recouping interest from May 1, 2003.

The crux of the matter revolves around the retrospective effect of the exhibit P6 notification, which was deemed to have come into force from June 1, 2002. The petitioner's exemption under S.R.O. No. 1731 of 1993 was superseded by the exhibit P6 notification, which required the production of C/D forms for availing the concessional rate of two percent. The petitioner argued that the retrospective application of exhibit P6 was unjustified, especially given the subsequent revocation of this retrospective effect for certain products in a later notification, S.R.O. No. 328 of 2004. The petitioner contended that this selective treatment was discriminatory and referenced a prior court judgment supporting their position.

The court ultimately ruled in favor of the petitioner, finding the retrospective aspect of exhibit P6 to be unsustainable. As a result, the exhibit P7 assessment was annulled, and the case was remanded for a fresh assessment based on the court's decision. The petitioner was deemed entitled to exemption from tax on inter-State sales between June 1, 2002, and November 22, 2002. The judgment concluded by allowing the writ petition to the extent described above.