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TMI Blog2008 (2) TMI 289X X X X Extracts X X X X X X X X Extracts X X X X ..... urt was delivered by S. H. Kapadia J.- M/s. Kurian Abraham P. Ltd.-the assessee is engaged in the business of buying rubber, processing the same and selling the processed rubber. The assessee purchases field latex (raw material) in Kerala, but, since its processing factories are in Tamil Nadu, it transports field latex to Tamil Nadu for processing into centrifuged latex and returns it back to Kerala. Thereafter, the centrifuged rubber is sold by the assessee either locally in Kerala or inter-State. 2. In respect of its sales turnover, the respondent is an assessee under the Kerala General Sales Tax Act, 1963 ( 1963 Act ) as well as under the Central Sales Tax Act, 1956 ( 1956 Act ). 3. For the assessment year 1997-98, with respect to centrifuged latex sold locally, the assessee furnished Form No. 25 declaration from the concerned buyers, and claimed exemption from payment of tax on the purchase turn-over of field latex (raw rubber). With respect to inter-State sale of centrifuged latex, the assessee paid the tax under the 1963 Act on the purchase of field latex and claimed exemption in respect of Central sales tax ( CST ) under Notification S. R. O. No. 1731/93 read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tex purchased in Kerala and the centrifuged latex sold inter-State were two different commodities and, accordingly, the KGST paid by the assessee on the field latex was not sufficient to claim exemption for CST on the sale of centrifuged latex. The Department also reopened the assessments on the ground that the assessee had taken the field latex out of Kerala to its factory in Tamil Nadu and had brought it back as centrifuged latex and, therefore, the assessee was liable to sales tax on the sales turnover of centrifuged latex under entry 110(a)(ii) on the ground that the assessee had sold centrifuged latex brought from outside the State of Kerala. In other words, the assessee was sought to be reassessed both for purchase turnover of field latex and for sales turnover of centrifuged latex, both under the 1963 Act and under this stage, it may the 1956 Act. At be noted that, till today the said Circular No. 16/98 issued by the Board of Revenue has remained in force. It has not been withdrawn till today. 8. Aggrieved by the reopening of the assessments, the respondent-assessee herein moved the High Court under article 226 of the Constitution for quashing the orders of reassessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crepe rubber, dry block rubber, crumb rubber, skimmed rubber and all other qualities and grades of latex, (i) purchased within the State at the point of last purchase in the State by a dealer who is liable to tax under section 5 10 (ii) brought from outside the State at the point of first sale in the State by a dealer who is liable to tax under section 5 10 (b) reclaimed rubber, all grades and qualities do. 10 (c) synthetic rubber do. 12.5. 12. Circular No. 16/98 dated May 28, 1998, issued by the Board of Revenue reads as follows : Circular No. 16/98 Dated : 28-5-1998 Sub : KGST Act 1963- Conversion of field latex into centrifuged latex-Impact of the decision of the honourable High Court in Padinjarekkara Agencies Ltd. v. Asst. Commissioner -clarification issued. A doubt has been raised as to the rate of tax and point of levy to be adopted in respect of centrifug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rate may have to be applied, i.e., a dealer engaged in the processing of centrifuged latex will have to pay tax on field latex purchased within the State and also pay tax on centrifuged latex sold within the State or inter-State as goods falling under entry 39. This position would continue till March 31, 1988 (even though with effect from July 1, 1987 the First Schedule was substituted and the serial No. relating to the entry rubber was changed as 161, the entry remained the same namely 'rubber excluding synthetic rubber'). 3. But from April 1, 1988, entry 161 was substituted as follows : '161. Rubber, that is to say : (a) raw rubber latex, dry rubber sheet of all R, M, A, grades, tree lace earth scrap, ammoniated latex, preserved latex concentrate, centrifuged latex, .and all other qualities and grades of latex except ran rubber latex, dry crape rubber, dry block rubber, crumb rubber, skimmed rubber ; and, at the point of sale within the at the point of last purchase in the State by a dealer also is liable to tax under section 5 (b) reclaimed rubber, all grades and qua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the term 'finished rubber products'. 7. As per Notification S. R. O. No. 1003/91 exemption was granted, inter alia, in respect of the tax payable by small-scale industrial units on the purchase of rubber for use in the manufacture of rubber goods subject to the condition that tax is levied on the products manufactured out of such rubber. Here again, since during 1991-92 the entry relating to rubber, namely, entry 161, takes within its ambit field latex and centrifuged latex, no new commodity emerges in the conversion of field latex into centrifuged latex. Such industrial units will not therefore be eligible for exemption under S. R. O. No. 1003/91 and R. O. No. 1727/93 in respect of the S. purchase of field latex for conversion on centrifuged latex. 13. Notification S. R. O. No. 946/2007 dated November 13, 2007 reads as follows : S. R. O. No. 946/2007.-In exercise of the powers conferred by section 10 of the Kerala General Sales Tax Act, 1963 (Act 15 of 1963), read with sub-section (5) of section 98 of the Kerala Value Added Tax Act, 2003 (30 of 2004), the Government of Kerala, having considered it necessary in the public interest so to do hereby, rescind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 3(1A), it is clear that the said Board was only authorised to issue administrative circulars. That, prior to April 1, 1988, raw rubber excluding synthetic rubber attracted KGST at the rate of five per cent. at the point of last purchase in the State by a dealer liable to tax under section 5 whereas under entry 110, field latex is a separate taxable commodity vis-a-vis centrifuged latex. According to learned counsel, each item of entry 110 is a separate commodity which is exigible to KGST at the point of last purchase in the State by a dealer liable to tax under section 5 at 10 per cent. According to learned counsel, by equating field latex with centrifuged latex, the former escapes duty. According to learned counsel, the power to grant exemption from payment of duty was not conferred on the Board. The power to grant exemption was a matter of policy. It was for the State to grant or not to grant such exemption. In the circumstances, it was urged that the power of the Board was executive in nature. According to learned counsel, section 3(1A) did not confer on the Board the power to issue orders/notifications which may partake of the character of legislative exercise. Accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is reduced to 40 per cent. Basically, field latex is raw rubber whereas centrifuged latex is a product. This is the rationale behind giving or setting off/deduction under the notification dated November 13, 2007. 18. Tax administration is a complex subject. It consists of several aspects. The Government needs to strike a balance in the imposition of tax between collection of revenue on one hand and business-friendly approach, on the other hand. Today, Governments have realised that in matters of tax collection, difficulties faced by the business have got to be taken into account. Exemption, undoubtedly, is a matter of policy. Interpretation of an entry is undoubtedly a quasi-judicial function under the tax laws. Imposition of taxes consists of liability, quantification of liability and collection of taxes. Policy decisions have to be taken by the Government. However, the Government has to work through its senior officers in the matter of difficulties which the business may face, particularly in matters of tax administration. That is where the role of the Board of Revenue comes into play. The said Board takes administrative decisions, which includes the authority to grant admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of the Act and to provide fair and just administration in the matter of imposition and collection of tax. This is where it becomes the incumbent duty of the Board to grant administrative relief in appropriate cases. In such exercise, incidentally the Board has to consider the effect of the items enumerated in the entry. Therefore, it is not open to the State Government to contend that the Board in this case had entered into an area which is earmarked for the Legislature/Executive. In our view, the said circular grants administrative relief to the business. It was entitled to do so. Therefore, it cannot be said that the Board had acted beyond its authority in issuing the said circular. One more reason needs to be stated. Whenever such binding circulars are issued by the Board granting administrative relief(s) business arranges its affairs relying on such circulars. Therefore, as long as the circular remains in force, it is not open to the subordinate officers to contend that the circular is erroneous and not binding on them. 20. In the case of Union of India v. Azadi Bachao Andolan reported in [2004] 10 SCC 1 1 , a circular was issued by the CBDT under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enior officers in the Revenue Department. These circulars are to be respected by the officers working under the supervision of the Board. These circulars are binding on all the authorities administering the tax department. The power of the Board to issue such circular is traceable to section 3(1A)(c) of the Act. The said circular is statutory in nature. Therefore, it is binding on the Department though not on the courts and the assessees. In the present case, as stated above, completed assessments were sought to be reopened by the Assessing Officer on the ground that the said Circular No. 16/98 was not binding. Such an approach is unsustainable in the eyes of law. If the State Government was of the view that such circulars are illegal or that they are ultra vires section 3(1A), which it is not, it was open to the State to nullify/withdraw the said circular under section 60 of the 1963 Act. Till today, the circular continues to remain in force. Till today, it has not been withdrawn. In the circumstances, it is not open to the officers administering the law working under the Board of Revenue to say that the said circular is not binding on them. If such a contention was to be accepted ..... X X X X Extracts X X X X X X X X Extracts X X X X
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