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TMI Blog2003 (9) TMI 732X X X X Extracts X X X X X X X X Extracts X X X X ..... of India. It is a small-scale industrial unit registered with the General Manager, District Industries Centre, Palakkad. It was also granted exemption from payment of sales tax under the notification issued under section 10 of the Act as per proceedings No. 10090 of 1993 D.Dis. dated February 21, 1994 for the period from June 9, 1993 to June 8, 2000 on a sum of Rs. 1,48,70,691. In the assessment for the three years mentioned above, the assessee contended that since no tax was payable on the sales turnover of the finished products manufactured by it in the State it is not liable to assessment under the Kerala Surcharge on Taxes Act. The assessing authority, however, rejected the said contention and reckoned surcharge also in the computation of tax though no sales tax was payable under the Act. The surcharge amount was also deducted from the exemption available under the eligibility certificate. Being aggrieved by the assessment, the assessee filed appeals before the Additional Appellate Assistant Commissioner (Commercial Taxes), Palakkad, who by a common order dated February 28, 2001 (annexure B) upheld the assessment of surcharge for the three years. In second appeal, the Sales Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued under section 10 of the Act under which the assessee has claimed the exemption. 7.. Section 5 of the Act, which is the charging provision for levy of tax provides that every dealer (other than a casual trader or agent of a non-resident dealer) whose total turnover for a year is not less than two lakhs rupees and every casual trader or agent of a nonresident dealer, whatever be his total turnover for the year, shall pay tax on his taxable turnover for that year in the case of goods specified in the First or Second Schedule, at the rates and only at the points specified against such goods in the said Schedules. "Taxable turnover" defined in section 2(xxv) means the turnover on which a dealer shall be liable to pay tax as determined after making such deductions from his total turnover of purchase or sale in the course of inter-State trade or commerce or in the course of export of the goods out of the territory of India or in the course of import of the goods into territory of India. 8.. Rule 9 of the Kerala General Sales Tax Rules, 1963, provides for determination of taxable turnover. Clause (e) of rule 9 provides for deduction from the total turnover of the dealer all amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 per centum of the tax payable for that year. 11.. From the proceedings issued by the General Manager, District Industries Centre, Palakkad, referred to in the assessment order it is clear that the assessee had claimed the benefit of exemption under S.R.O. No. 1729 of 1993 issued under section 10 of the Act. Under the said notification the Government of Kerala in exercise of the powers conferred under section 10 of the Act in the public interest has granted tax exemptions to industrial units on the sale or purchase of goods by such industrial units subject to the conditions and restrictions specified thereunder. Under clause 1 in the case of new industrial units under small-scale industries an exemption was granted for a period of seven years from the date of commencement of commercial production (a) in respect of the tax payable by such units under the Act on the turnover of sale of goods manufactured and sold by them within the State; and on the turnover of goods taxable at the point of last purchase in the State which are used by such units for manufacturing other goods for sale within the State or inter-State and (b) in respect of the surcharge payable under section 3 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act is contemplated and by virtue of the provisions of sub-clause (b) of clause 1 exemption is also granted in respect of the surcharge payable under section 3 of the Kerala Surcharge on Taxes Act, 1957 in relation to the goods referred to in sub-clause (a) above. 12.. In the present case, as already noted, the assessing authority in all the three assessment orders have computed the tax payable under the Act. For e.g., for the assessment year 1994-95 the taxable turnover was fixed at Rs. 11,36,55,460, sales tax at the rate of 4 per cent on the said turnover came to Rs. 45,46,218.40 and surcharge at the rate of 10 per cent on the sales tax amount came to Rs. 4,54,621.84. The total tax thus came to Rs. 50,00,840.24. After adjusting the tax already collected Rs. 95,544 the balance amount of Rs. 49,05,296 was adjusted from the tax exemption. According to us, the procedure adopted by the assessing authority was perfectly in order. 13.. In fact the very question arose for consideration before this Court in K.P. Paper Products' case [1989] 74 STC 16. The assessee in the case was a registered small-scale industrial unit engaged in the manufacture and sale of paper covers. The unit was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the statute on the turnover of the sale of such goods and the tax so computed has to be deducted from the amount of exemption granted under the eligibility certificate issued by the General Manager, District Industries Centre. In computing the tax thus payable, it is observed that the liability of the assessee has to be determined. It was further observed that the Kerala Surcharge on Taxes Act, 1957 provides in section 3 that the tax payable under the KGST Act, 1963 shall be increased by a surcharge at the rates specified. When there is no liability to pay the tax by the dealer for the year there cannot be a levy of surcharge in respect of tax not payable. The liability to pay surcharge arises only when there is liability to pay the tax. It is only in the case of specified assessees the tax is increased by a surcharge. When the turnover is statutorily exempted from sales tax, there is no liability to pay surcharge also as the levy pre-supposes the liability to pay sales tax. Thus for the purpose of computing the eligibility for exemption in terms of the Government notification, the assessing authority cannot issue a separate demand for the surcharge after allowing exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... happened to be two independent Acts, it was not open to the assessees to rely upon any of the provisions of the principal Act relating to incidence and levy of tax in support of their contention. The Supreme Court observed as follows: "In view of the foregoing, we hold that any dealer who is not liable to pay tax under the principal Act either by reason of his not having sufficient gross turnover or by reason of exemption given under section 7 of the principal Act is not liable to pay additional tax under the Act. If a dealer is exempted by the State Government under the second proviso to section 3(1) of the Act he is also not liable to pay the additional tax under the Act. If the turnover of a dealer relating to any sales or purchases of goods is exempted under section 6 of the principal Act, such turnover cannot be subjected to the levy of additional tax under the Act by virtue of section 3(2) of the Act. The Government Notification S.R.O. No. 410 of 1979 dated March 23, 1979, issued under the second proviso to section 3(1) of the Act exempting the turnover relating to goods whose turnover is exempted from payment of tax under section 6 of the principal Act from payment of ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax under the Act though tax is not payable by virtue of the notification exempting the small-scale industrial units for a limited period on complying with certain conditions. 17.. A Full Bench of this Court in M.R.F. Limited v. Assistant Commissioner, (Assmt.)-II, Sales Tax Special Circle [1995] 98 STC 233; (1995) 1 KLT 809 (FB) considered the validity of the provisions of section 29A(2B) of the Act. In that context the Full Bench considered the meaning of the expression "tax payable" used in the said sub-section. In paragraph 14 of the said judgment it is observed as follows: "14. In the light of the above rival contentions, it is necessary to consider about the proper meaning to be assigned to the word 'payable' used in sub-section. According to Supreme Court, the word 'payable' is somewhat indefinite in import and its meaning must be gathered from the context in which it occurs (see New Delhi Municipal Committee v. Kalu Ram AIR 1976 SC 1637). A Full Bench of the High Court of Madras has also held that the word payable has 'both a primary and a secondary meaning' or a 'basic' and 'extended meaning'. After referring to the several dictionary meanings, the Full Bench has held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion granted under Notification S.R.O. No. 1729 of 1993 is not a blanket exemption. It is only a conditional one and limited to cent per cent of the fixed capital investment of the unit. Thus as already noted the assessing authority under the Act is obliged to compute the tax payable under the KGST Act read with the provisions of the Kerala Surcharge on Taxes Act. It is only thereafter the question of exemption granted under the eligibility certificate has to be looked into and appropriate adjustments made. In this context, it is also relevant to note that the earlier Notification S.R.O. No. 968 of 1980 had granted exemption only in respect of the tax payable under the Act on the turnover of the sale of goods produced and sold by new industrial units under the small-scale industries and the cumulative sales tax concession granted to a unit at any point of time within the period of five years shall not exceed 90 per cent of the cumulative gross of the fixed capital investment of the unit. It must also be noted that S.R.O. No. 1729 of 1993 grants not only exemption in respect of the tax payable under the KGST Act but also granted exemption in respect of the tax payable under the Ke ..... X X X X Extracts X X X X X X X X Extracts X X X X
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