2015 (11) TMI 47 - HC - VAT and Sales Tax

Levy of purchase tax - Section 5A - Reopening of assessment - exemption from sales tax on sale of rice and bran - Tribunal held that the assessing authority cannot levy tax on purchase under Section 5A of the Act 1963, when the stage of levy is already fixed in the State Enactment - Held that - assessee having purchased paddy from agriculturists, no tax was leviable or realised on the first sale of paddy, since the sale was from agriculturists, who were exempted to pay any sales tax. - Paddy being a declared goods under the Central Sales Tax Act, 1956 as well as the second schedule of the Act, 1963, the provisions of Section 15 of the Central Sales Tax Act, 1956 are also attracted. Section 14 of the Central Sales Tax Act, 1956 enumerates the goods, which have been declared as goods of special importance in Inter State trade or commerce. Under Section 14, paddy and rice both have been declared as goods of special importance. Under Section 5 read with second schedule to the Act, 1963, sales tax was leviable on sale of paddy. Although the tax is leviable on the sale of paddy as per second schedule, tax could not be collected on account of exemption to the agriculturists in sale of their paddy. The assessing officer although initially did not assess the assessee for any purchase tax on paddy, but subsequently, assessment was reopened and assessee was held liable to pay purchase tax under Section 5A on the purchase of paddy. - first sale was by agriculturists in favour of the assessees, who were not liable to pay tax. The mere fact that payment of tax was exempted cannot furnish any basis for the respondents to shift the liability of tax on purchase, whereas, under second Schedule, liability is only on first sale. As per Section 15(a), there is restriction in levying tax by a State Legislature on more than one stage. When the second schedule has levied the tax on the first sale, there is no jurisdiction in the respondents to shift the levy on purchase. Tribunal which rightly deleted the levy of purchase tax on the assessee and committed no error in following the Apex Court judgment in Peekay Re-Rolling Mills s case (2007 (3) TMI 356 - SUPREME COURT OF INDIA). - Decided against Revenue.

Issues Involved:
1. Correctness of earlier judgments by the High Court.
2. Applicability of Section 5A of the Kerala General Sales Tax Act, 1963.
3. Levy of purchase tax on paddy purchased from unregistered dealers.
4. Compliance with Section 15(a) of the Central Sales Tax Act, 1956.
5. Interpretation of taxing statutes.

Detailed Analysis:

1. Correctness of Earlier Judgments by the High Court:

The Division Bench expressed doubt on the correctness of three earlier judgments: State of Kerala v. P.D. Thomas, Empees Modern Rice Mills v. State of Kerala, and another judgment following Empees Modern Rice Mills. These judgments were scrutinized in light of the Apex Court's decision in Peekay Re-Rolling Mills (P) Ltd. v. Assistant Commissioner.

2. Applicability of Section 5A of the Kerala General Sales Tax Act, 1963:

The assessee, a Rice Mill, was initially not levied purchase tax on paddy. The assessment was later reopened, and purchase tax was levied under Section 5A. The Tribunal allowed the assessee's appeal, holding that the assessing authority cannot levy tax under Section 5A when the stage of levy is already fixed in the State Enactment. The Tribunal relied on the Apex Court's decision in Peekay Re-Rolling Mills.

3. Levy of Purchase Tax on Paddy Purchased from Unregistered Dealers:

The State contended that the assessee was liable to pay tax on the purchase of paddy from unregistered dealers. The Division Bench noted that the judgments in P.D. Thomas and Empees Modern Rice Mills cannot be followed due to the law laid down by the Apex Court in Peekay Re-Rolling Mills, which held that taxability under Section 5 remains unaffected by an exemption, and shifting the burden of tax to the purchaser under Section 5A would violate the condition of single-stage tax under Section 15 of the Central Sales Tax Act.

4. Compliance with Section 15(a) of the Central Sales Tax Act, 1956:

Section 15(a) restricts the levy of tax on declared goods at more than one stage. The Apex Court in Peekay Re-Rolling Mills held that the State cannot validly shift the burden of tax to the purchaser under Section 5A, as it would violate the single-stage tax condition. The High Court observed that the liability to pay tax on the first sale of paddy was exempted for agriculturists, and hence, the levy of purchase tax on the assessee under Section 5A was not permissible.

5. Interpretation of Taxing Statutes:

The High Court emphasized the principle of strict construction of taxing statutes. It reiterated that a subject is not to be taxed without clear words for that purpose. The Court referred to various judgments, including A.V. Fernandez v. State of Kerala and Mathuram Agrawal v. State of Madhya Pradesh, to underline that the intention of the legislature in a taxation statute is to be gathered from the language of the provisions, and there is no room for any intendment or equity about a tax.

Conclusion:

The High Court confirmed the Tribunal's judgment, which deleted the levy of purchase tax on the assessee, holding that the Tribunal committed no error in following the Apex Court's judgment in Peekay Re-Rolling Mills. The judgments in Empees Modern Rice Mills, P.D. Thomas, and State of Kerala v. C.R. Augustine Sree Muruga Rice Mills were disapproved for not laying down the correct law. The reference was answered accordingly, and both Sales Tax Revisions were dismissed.

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