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TMI Blog2002 (5) TMI 844X X X X Extracts X X X X X X X X Extracts X X X X ..... 02, Ext. P4 in O.P. No. 2371 of 2002. 2. Section 10 of the Kerala General Sales Tax Act provides for exemptions. It reads as follows:- 10. Power of Government to grant exemption and reduction in rate of tax :- (1) The Government may, if they consider it necessary in the public interest, by notification in the Gazette, make an exemption or reduction in rate, either prospectively or retrospectively in respect of any tax payable under this Act,- (i) on the sale or purchase of any specified goods or class of goods, at all points or at a specified point or points in the series of sales or purchases by successive dealers, or (ii)by any specified class of persons in regard to the whole or any part of their turnover. (2) Any exemption from tax, or reduction in the rate of tax, notified under Sub-section (1),- (a) may extent to the whole State or to any specified area or areas therein, (b) may be subject to such restrictions and conditions as may be specified in the notification. (3) The Government may by notification in the. Gazette, cancel or vary any notification issued under Sub-section (1) . In exercise of the power under the said section the Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und of estoppel also. The challenge on estoppel is based on the clarification issued by the Commissioner under Section 59A of the Kerala General Sales Tax Act whereby it was clarified that the exemption would be extended to those who run poultry farm on leased land also. Section 59A(1), which alone is relevant for the purpose of these cases, reads as follows:- 59A. Power of Commissioner of Commercial Taxes to issue clarification - (1) If any dispute arises, otherwise than in a proceeding before any appellate or revisional authority or in any court or tribunal, as to whether, for the purpose of this Act,- (a) any person is a dealer; or (b) any transaction is a sale; or (c) any particular dealer is required to be registered; or (d) any tax is payable in respect of any sale or purchase, or if tax is payable, the point and the rate thereof; or (e) any activity carried out in any goods amounts to or results in the manufacture of goods; Such dispute shall be decided by the Commissioner of Commercial Taxes on application by a dealer or any other person. 3. Arguments were mainly advanced by senior counsel Sri. C. Natarajan for the petitioners and the Special ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land. So long as a restrictive meaning for 'own land' was not there in the pre-amended notification it cannot be said that the poultry Farms in Kerala, even if they are run on leased, mortgaged or licensed land, do not qualify for exemption. In that view of the matter, the Commissioner is perfectly justified in issuing Ext. P3 clarification dated 27.9.2001 to the effect that as per the terms of the pre-amended notification a poultry farm run on leased, mortgaged or licensed land within the State of Kerala is entitled for sales tax exemption. The reference in the pre-amended notification is only to the activity within the State. That the activity should be in own land is a new concept as such introduced by the amended notification. It is neither a clarification nor an explanation of the earlier notification. Therefore, the impugned notification cannot have any retrospective operation at all, if it is otherwise valid. 4. It is also significant to refer to the explanatory note to the impugned notification which would show that the State itself was of the view that the pre-amended notification could lead to an interpretation regarding the poultry farming within the State wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be followed while construing a taxing statute. It is profitable to refer to a few decisions of the Apex Court. In Commissioner of Income Tax v. Kulu Valley Transport Co. P. Ltd., (1970) 77 ITR 518, the Apex Court held Even if two views are possible the view which is favourable to the assessee must be accepted while construing the provisions of a taxing statute . In Commissioner of Income Tax v. Naga Hills Tea Co. Ltd., (1973) 89 ITR 236, the Supreme Court while construing the provisions of Finance Act, 1959 it observed as follows:- If a provision of a taxing statute can be reasonably interpreted in two ways, that interpretation which is favourable to the assessee has got to be accepted. In Hindustan Lever Ltd. v. Municipal Corporation of Greater Bombay, (1995) 3 SCC 716, while considering a property tax matter it was held that in the case of a taxing provision an interpretation beneficial to the assessee, in case two interpretations are reasonable possible, has to be given. This is a well settled position in law. In the light of such guidance I have no hesitation to hold that the position prior to the amendment being capable of interpreting in favour of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le granting exemption to identical poultry farmers in the State of Kerala is highly discriminatory violating the guarantee of Article 304(a) of the Constitution. When the matter came up for hearing we directed respondents to file an affidavit detailing the correct position. Affidavit was filed by the Assistant Commissioner (Law) II, Office of the Deputy Commissioner (Law), Ernakulam. Affidavit reads as follows:- In the instant case chicks or chickens reared in hatcheries or poultry farms within the State is exempted from payment of tax under the KGST Act; even though such persons have the liability to pay tax, the same is not collected from them. Therefore, the goods namely chick or chicken are not exempted from the levy of tax....................Economic development of the State or any part of the State is also a duty cast on the State by the Constitution. As a part of discharge of that particular area or through out the State to a category of the industry it cannot be called a colourable legislation. In order to compensate any such concession or subsidy given by one State the other State can invoke such power by giving exemption or subsidy. Therefore, there is no basis in say ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a settled position. That apart on the facts of the instant case, it cannot be said that the power of exemption is used in a colourable manner to create unfavourable bias. There are 'justifiable and rational reasons for differentiation' as noted from the counter affidavit. Therefore the impugned notification is perfectly intra vires the constitutional provisions mentioned above. It needs no elaborate discussion to also hold that it is intra vires Section 10 of the KGST Act since under the said provision the Government is competent to issue a notification in the matter of tax concession or exemption. 7. The legislative competence being not in dispute, what is to be considered is the manner of exercise of it and whether it hits other provisions under the statute, or the constitutional provisions. What remains to be considered in this context is only the aspect of reasonableness. Being a matter of concession, it is for the State to decide on its policy in the matter of granting tax concessions and it is not for this Court to interfere with the policy decisions of the State since they are well within their powers to adopt such policy. Whether that policy is wise or foolish is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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