2019 (11) TMI 826 - HC - VAT and Sales Tax

Concessional rate of tax - inter-state sale - sale of natural rubber and tread rubber - KVAT Act - CST Act - amendments brought about to Section 8(5) of the CST Act with effect from 11.05.2002 - HELD THAT - It is not in dispute that as per the provisions of Section 8(5) as it then stood, the State Government had a power to grant exemption in public interest in respect of the tax to be paid on interstate sales, only in respect of those sales that were effected to registered dealers outside the State of Kerala. Ext.P1 notification, admittedly, did not make a distinction between sales to registered dealers and unregistered dealers outside the State and it is therefore that the petitioner was able to claim the benefit of exemption in terms of Ext.P1 notification. When it was noticed that Ext.P1 notification was beyond the powers of the State Government, Ext.P8 notification was introduced so as to remove the illegality in Ext.P1 notification. Inasmuch as the illegality is one that stems from an exercise of power contrary to the provisions of the parent statute (the CST Act), the petitioner cannot contend that the respondents are estopped from withdrawing the benefits conferred through Ext.P1 notification. It is trite that there cannot be an estoppel pleaded against the express provisions of a statute. Thus, the petitioner cannot take advantage of any benefit that was conferred on him through Ext.P1 notification, when the very benefits have been taken away, on account of the statutory mandate through Ext.P8 notification. The impugned order set aside - the assessing authority is directed to re-do the assessment, within a month from the date of receipt of a copy of this judgment, after hearing the petitioner - petition allowed by way of remand.

Summary

Issues:
1. Interpretation of notifications regarding exemption on interstate sales of tread rubber.
2. Legality of retrospective application of notification withdrawing exemption.
3. Availability of set off of input credit against output tax for interstate sales.

Interpretation of Notifications Regarding Exemption on Interstate Sales of Tread Rubber:
The petitioner, a dealer in tread rubber, utilized notifications issued by the State Government to claim exemption on interstate sales of tread rubber. Initially, Ext.P1 notification granted this exemption subject to certain conditions. However, Ext.P8 notification later restricted the exemption to sales complying with specific requirements under the CST Act, particularly furnishing C-form declarations. The petitioner challenged the assessment orders denying the exemption for various assessment years. The court considered the petitioner's reliance on a previous judgment involving a similar exemption scenario under the Kerala General Sales Tax Act. The court noted the distinction between sales to registered and unregistered dealers and the impact of subsequent amendments on exemptions claimed under notifications.

Legality of Retrospective Application of Notification Withdrawing Exemption:
The State contended that Ext.P8 notification corrected an inherent illegality in Ext.P1 notification, as the latter exceeded the State Government's power under the CST Act. The State argued that Ext.P8 notification rectified this by making sales to registered dealers a prerequisite for claiming the exemption. The court analyzed the legality of Ext.P1 notification in light of the CST Act provisions and found that the State had no authority to grant the exemption initially. Consequently, the court upheld the withdrawal of benefits through Ext.P8 notification, emphasizing that statutory provisions cannot be circumvented by estoppel. The court rejected the challenge to the retrospective operation of Ext.P8 notification and affirmed that the petitioner could not claim the benefits under Ext.P1 notification for the relevant assessment years.

Availability of Set Off of Input Credit Against Output Tax for Interstate Sales:
The petitioner sought set off of input credit against output tax for interstate sales, even if the exemption was denied. The court agreed with this contention and directed the assessing authority to consider the tax paid on input purchases related to tread rubber sold interstate to unregistered dealers. The court set aside the impugned assessment orders and instructed the assessing authority to re-do the assessments, allowing the set off of input credit. The petitioner was directed to appear before the assessing authority for this purpose, with the fresh assessment orders to be issued promptly to enable the petitioner to benefit from any Amnesty Scheme if desired.