2021 (10) TMI 805 - HC - VAT and Sales Tax

Rejection of concessional rate of tax applicable to sales made in favour of Lakshadweep Administration - Seeking declaration that Rule 12C(1) of the Rules as invalid - proviso to Section 6(1) of the Act, read with Rule 12C of Kerala Value Added Tax Rules, 2005 - rejection for want of proof of other requirements prescribed in Rule 12C, namely, shipping bill or similar document duly attested by the port authorities - HELD THAT - The Courts strongly lean against any construction which tends to reduce a statutory requirement to futility. The requirement in legislation or subordinate legislation must be read/construed so as to make it effective, albeit such construction is not possible because of vagueness of language, the language is wholly interactable. The State legislature and the delegatee are having jurisdiction to make law/rules in regard to Value Added Tax. We refuse to sit as a super legislature to weigh the wisdom of requirements in proviso to Section 6(1) or Rule 12C. Courts normally refuse to examine the wisdom of expression of legislature/executive in tax, categories of taxes, rate of taxes, person who are brought under the tax purview etc. As it is said, words are the framework of concept or policy of Legislature/Government and the fact is that the concept or policy could change more quickly than the words. The dealer had a choice whether to sell at the regular/applicable rate or claim a concessional rate of tax. The dealer chooses to sell the goods at concessional tariff and collects tax as applicable to the sale, therefore, the dealer is expected to comply with other requirements prescribed under the Rule for claiming concessional rate of tax. The dealer having sold the goods at concessional rate of tax, cannot be heard to challenge the very prescription as impossible of performance, ineffective in practice etc. In the process of interpretation or application, relevant expression chosen by the legislature or the executive ought not to be ignored or diluted. The case of dealer if accepted, the same would result in overlooking the clear expression of the rule making authority. The claim of dealer for concessional rate without placing on record all the requirements of Rule 12C is misconceived and liable to be rejected. The rule making authority, both from the wisdom and experience gained over years, has stipulated the prescription to give concessional rate of tax to such transactions which reach the Union Territory. The misuse of concessional rate of tax cannot be overlooked while accepting a purposive interpretation, hence the rule insists production of shipping bill or similar document attested by the port authorities. Appeal allowed.

Summary

Issues Involved:
1. Validity and enforceability of Rule 12C(1) of the Kerala Value Added Tax Rules, 2005.
2. Conditions for claiming concessional rate of tax under the proviso to Section 6(1) of the Kerala Value Added Tax Act, 2003.
3. Interpretation of statutory requirements for concessional tax rates.
4. Obligations of dealers and buyers regarding documentation for concessional tax claims.

Detailed Analysis:

1. Validity and Enforceability of Rule 12C(1):
The petitioner challenged the validity of Rule 12C(1) of the Kerala Value Added Tax Rules, 2005, arguing that it was "invalid, inoperative and unenforceable" to the extent it required filing shipping documents to claim concessional tax rates for sales to the Lakshadweep Administration. The court found that the rule was valid and enforceable, emphasizing that the rule’s requirements were clear and necessary to prevent misuse of the concessional tax rate.

2. Conditions for Claiming Concessional Rate of Tax:
The court examined the conditions under the proviso to Section 6(1) of the Kerala Value Added Tax Act, 2003, which stipulates that the concessional rate of tax (4%) applies to sales made to specified entities, including the Administrator of the Union Territory of Lakshadweep, provided certain conditions are met. These conditions include obtaining a declaration in Form No.42 and a shipping bill or similar document attested by port authorities. The court held that these conditions were mandatory and must be complied with to claim the concessional tax rate.

3. Interpretation of Statutory Requirements:
The court applied the "Golden Rule" of statutory interpretation, which requires giving the words of the statute their ordinary meaning. The court rejected the dealer’s argument for a purposive interpretation that would allow concessional rates without full compliance with Rule 12C. The court emphasized that the statutory language was clear and unambiguous, and thus, the requirements for documentation could not be waived or relaxed judicially.

4. Obligations of Dealers and Buyers:
The court underscored that both dealers and buyers have obligations regarding the documentation required for claiming concessional tax rates. The dealer must obtain and file the necessary documents, including the declaration in Form No.42 and the shipping bill or similar document attested by port authorities. The court noted that the buyer, including the Administrator of Lakshadweep, must provide these documents to the dealer. The court granted liberty to the dealers to request the necessary documents from the buyers and directed the buyers to furnish these within a specified timeframe. The Assessing Officer was instructed to reassess the claims based on the newly provided documents.

Conclusion:
The court upheld the validity of Rule 12C(1) and the conditions prescribed under the proviso to Section 6(1) for claiming concessional tax rates. It emphasized the mandatory nature of the documentation requirements and directed compliance by both dealers and buyers. The judgment in Al Mahamood was not followed, and the appeals were allowed with specific directions for reassessment based on the required documents.