Agencies Limited Vs. State of Kerala  Insc
159 (8 February 2008)
H. Kapadia & B. Sudershan Reddy
APPEAL NOS. 5700-5712 OF 2007 with Civil Appeal Nos. 5699/07 and 5713-5726/07
the sake of convenience we state the facts occurring in Civil Appeal Nos.
This batch of civil appeals is filed by the assessee. It is directed against
common judgment dated 8.6.2007 in Sales Tax Revision Nos. 177- 189/07 decided
by the Division Bench of the High Court of Kerala. By the impugned judgment,
the High Court dismissed revisions filed by the appellant-assessee in limine at
the admission stage.
These matters are a sequel to the lead matter in which we have delivered our
judgment in the case of State of Kerala & Ors. v. M/s Kurian Abraham Pvt.
Ltd. & Anr. (Civil Appeal Nos. 7965-7966/2004).
M/s Padinjarekara Agencies Ltd., is engaged in production of sale of
centrifuged latex. It is a registered dealer under Kerala General Sales Tax
Act, 1963 ("KGST Act") and Central Sales Tax Act, 1956 ("CST
Act"). The assessee's unit is registered as a SSI Unit.
this batch of civil appeals we are concerned with assessment years 1982-83 to
1996-97. Assessee is the processor of centrifuged latex from field latex
herein claimed the benefit of exemption provided in the Government Notification
SRO No. 1003/91 which was subsequently replaced by Government Notification SRO
No. 1727/93. Under Government Notification SRO 1003/91, the conditions for
availing exemptions were that rubber should be used for manufacture of
"goods" and that tax was leviable on the products manufactured by
Assessing Authority did not allow the benefit of exemption to the assessee
under the above Government Notifications on the ground that centrifuged latex
and field latex were one and the same commodity. It may be noted that in the
earlier case of Kurian Abraham Pvt. Ltd. (supra) the Department had taken the
view that field latex and centrifuged latex were two different and distinct
commodities whereas, in the present case, the Department has taken the view
that they were one and the same commodity.
in the matter of exigibility to tax, the Department took the stand that field
latex and centrifuged latex were different commodities and when it came to the
question of exemption/concession, the same Department contended that the two
commodities were same.
continue the narration of events, it may be stated that, aggrieved by the
decision of the AO, the matter was carried in appeal by the assessee to the
first appellate authority, who took the view that the centrifuged latex
satisfied the definition of "goods" in the Government Notification
SRO No. 1003/91 and, therefore, concessional rate was admissible to the assessee.
(see page 96 of the Paper Book in Civil Appeal Nos. 5700-5712/07).
above Government Notification SRO No. 1003/91 was superseded by Government
Notification SRO No. 1727/93, which came into effect w.e.f. 1.1.1994. Here, the
AO once again did not allow the claim of exemption on the ground that field
latex and centrifuged latex were one and the same commodity falling under Entry
110 of the First Schedule to the KGST Act. The AO relied on circular No. 16/98
dated 28.5.1998. This time, in appeal, the first appellate authority held that,
field latex is not a rubber product and, therefore, the assessee was not
entitled to exemption vide Notification SRO NO. 1727/93. (see page 98 of the
Paper Book in Civil Appeal Nos. 5700-5712/07).
the appeals relating to assessment years 1988-89 to 1993-94, the assessee
contended before the Tribunal that they were entitled to concessional rate of
3%, which was rejected by the Tribunal on the ground that field latex and
centrifuged latex were two separate and distinct commodities by placing
reliance on the judgment of the Kerala High Court in the case of Padinjarekara
Agencies Ltd. v. Asst. Commissioner reported in 1996 (2) KLT 641.
Aggrieved by the decision of the Tribunal, the matter was carried in revision
to the High Court being Sales Tax Revision Nos. 177-189/07. The High Court took
the view that it had limited revisional powers under Section 41 of the KGST
Act. By the impugned judgment, it was held that there was no error committed by
the Appellate Tribunal in its judgment nor had the Tribunal failed to decide
any question of law. The High Court further held that the AO was right in
denying the benefit of exemption/concession to the assessee in view of the
clarification issued by the Board/Commissioner, which was binding on him, to
the effect that there was no manufacturing activity involved in conversion of
raw-rubber into centrifuged latex as both the commodities were same. According
to the High Court, since raw-rubber and centrifuged latex are one and the same
commodity under Entry 110 (preceded by Entry 161) the assessee was not entitled
to claim concessional rate of duty under Government Notification SRO 1727/93,
hence these civil appeals by the assessee.
to tax is a concept which is different from the concept of
exemption/concession. As stated above, when it came to exigibility, the
Department contended that after 1.4.1988, field latex and centrifuged latex
were two distinct and separate commodities and, at the same time, when it came
to exemption, the same Department contended that field latex and centrifuged
latex are one and the same commodities, hence, assessee was not entitled to
claim concessional rate of duty under circular No. 16/98 dated 28.5.1998. Exigibility
to tax is different from the concept of exemption/concession. The rules of
interpretation which apply to classification of items in a taxing statute can
differ in appropriate cases from the terms and conditions of exemption
notification. Interpretation adopted in a classification dispute need not be
the same as interpretation of Exemption Notification under the same Act. Every
Exemption Notification has to be read on its own terms. One cannot confuse the
terms used in the Notification by comparing the language of the Notification
with the language of the taxing statute. In the present case, the Government
Notification SRO No. 1003/91 (preceded by Government Notification SRO No.
585/80) uses the word "goods". Because of the use of the word
"goods" the first appellate authority came to the conclusion that
centrifuged latex can be considered as an item of "goods" for the
purposes of SRO No. 1003/91. According to the first appellate authority, there
was no difference of opinion on the point that centrifuged latex satisfied the
definition of the word "goods" in the KGST Act. According to the
first appellate authority, centrifuged latex as an item of goods stood
manufactured from field latex and, therefore, the assessee was entitled to
claim the benefit of exemption.
our view, the High Court has failed to consider the question of law, which
arose for determination before it in Sales Tax Revision Nos. 177- 189/07. As
stated above, in this case, we are concerned with interpretation of various
Exemption Notifications. We are not concerned with interpretation of circular
No. 16/98 dated 28.5.1998. We do not wish to express our views at this stage on
the interpretation of the Exemption Notification(s). Suffice it to state that,
in this case, we are not concerned with classification. In this case, we are
concerned with the words and expressions used in the Notification(s). This
point has been missed by the High Court in its impugned judgment. It is no
doubt true that, the AO is bound by the directions issued by the Commissioner
even with regard to the terms used in the exemption Notification(s). However,
as held in our earlier judgment in the case of Kurian Abraham Pvt. Ltd.
(supra), circulars/orders issued by the Commissioner are not binding on the assessee.
Therefore, de hors the directives given by the Commissioner, it is open to the assessee
to claim the benefit of exemption/concession on the basis of various exemption
Notification(s) issued by the Government from time to time. We express no opinion
on the interpretation of those Notification(s). Suffice it to state that, the assessee
was not bound by the orders/directions issued by the Commissioner to the AO,
therefore, on the scope and effect of each of the above exemption
Notifications, the matter needs to be remitted to the AO for fresh decision in
accordance with law. In other words, if the assessee satisfies the terms and
conditions mentioned in the Exemption Notification, the assessee would be
entitled to the benefit thereunder notwithstanding the circular issued by the
Board/Commissioner. This is on the principle mentioned hereinabove that such
Circular does not bind the assessee if the assessee demonstrates that it
fulfils the conditions mentioned in the Exemption Notification.
For the reasons given hereinabove, we set aside the impugned judgments of the
High Court in Sales Tax Revision Nos. 177-189/07, 192/2007, 117/07 and
126-138/07 and remit the matters to the AO for de novo consideration in
accordance with law. AO will look into the contentions of the assessee
uninfluenced by the observations of the High Court and decide the claim for
exemption on the basis of the words used in the Exemption Notification(s) and
the terms and conditions mentioned therein.
Accordingly, the civil appeals filed by the assessee are allowed with no order
as to costs.