State of Kerala Vs. Alex
George & another Etc [2004] Insc 698 (18 November 2004)
S.N. Variava, Dr. Ar.
Lakshmanan & S.H. Kapadia with Civil Appeals No.987-1000 of 1999. Kapadia, J.
This batch of civil appeals by special leave against the judgment and order
of the Kerala High Court dated 28.8.1998 raises the question as to the true
scope and operation of section 1(2) of the Kerala Finance Act, 18 of 1987
substituting schedule-I to the Kerala Plantations Tax Act, 1960 w.e.f.
1.7.1987.
Since the aforestated question arises in all the civil appeals, the same are
taken up together and disposed of by this common judgment.
Since the facts in this batch of civil appeals are almost identical, we
mention hereinbelow the facts of Civil Appeal No.983 of 1999.
E.K. Mathew & Brothers is a registered partnership firm carrying inter
alia the business of planting tea in Alampally estate in Pasuppara in the State
of Kerala. For the assessment year commencing from 1.4.1987, the firm was
assessed under section 3 of the Kerala Plantations Tax Act, 1960 (hereinafter
for the sake of brevity referred to as "the 1960 Act"). Under
assessment order dated 6.9.1988, the said firm was assessed to tax @ Rs.130/-
per hectare for the period from 1.4.1987 to 30.6.1987 and at the revised rate
of Rs.350/- per hectare for the remaining nine months period from 1.7.1987 to
31.3.1988. The said assessment was made pursuant to the substitution of
schedule-I to the said 1960 Act by the Kerala Finance Act, 18 of 1987 w.e.f.
1.7.1987. By the said amendment, the tariff in existence as on the first day of
the financial year, viz.
1.4.1987 stood revised in the midst of the year w.e.f.
1.7.1987. Consequently, in terms of the demand notice, the assessee was
asked to pay the tax at the rate of Rs.130/- per hectare for the period
1.4.1987 to 30.6.1987 and at the rate of Rs.350/- per hectare for the period
1.7.1987 to 31.3.1988.
Aggrieved, by the assessment order dated 6.9.1988, the said firm preferred
an appeal before the Sub-Collector, Devicolam, Idukki district. By order dated
20.6.1989, the Sub-Collector, as an Appellate Authority, confirmed the
assessment order dated 6.9.1988 and consequently dismissed the appeal.
Against the said order of dismissal, the said firm moved an application
under section 9A of the 1960 Act requesting the Sub-Collector to refer the
following question of law to the District Judge:
"Whether in the facts and circumstances of the case, plantation tax at
the revised rate of Rs.350/- per hectare introduced by the Kerala Finance Act,
18 of 1987 w.e.f.
1.7.1987 was leviable for any part of the financial year 1987-88?" In
the meantime, by judgment and order dated 21.10.1988, in O.P. No.3610 of 1988
entitled M.J.
Vijaya Padman v. The State of Kerala & another, the learned Single Judge
of the High Court of Kerala held that the amended rates applied from the
commencement of the financial year 1987-88 as the object of the said Act 18 of
1987 was to give effect to the budget proposals for that year. Consequently,
the applicability of the levy was upheld and original petitions filed by the
assessees stood dismissed.
Placing reliance on the above judgment of the High Court, the Sub-Collector
dismissed the application for reference under section 9A filed by the said
firm.
At this stage, it may be mentioned that prior to 21.10.1988, there was
conflict of opinion in the decisions of the District Judges under section 9A.
In the case of Udayagiri Rubber Co. Ltd. v. State of Kerala, it was held,
that, the plantation tax was assessable under section 3 at the rate prevalent
on the first day of each financial year and that the same could not be altered
during the year.
Consequent upon this difference of opinion, the assessees and the State,
both being the aggrieved parties, came before the Division Bench by filing writ
appeals and writ petitions respectively.
By the impugned judgment dated 28.8.1998, the Division Bench has held that
the assessees were liable to be taxed for the assessment year 1987-88 on the
basis of the rates specified in schedule-I as on 1.4.1987; that the revision in
tariff in the middle of the assessment year would result in two assessments
during the same year;
that the substitution of the schedule w.e.f. 1.7.1987 cannot affect the
assessment for assessment year 1987- 88; that the liability to pay the tax got
crystallized on Ist April each year as mentioned in section 3(2); and
consequently, assessment as per the new schedule could be made only from the
assessment year 1988-89. The appellant-State then applied to this Court and
obtained special leave to appeal against the impugned judgment of the High
Court.
Mr. John Mathew, learned advocate for the appellant herein submitted that
revision in the rates under the new schedule w.e.f. 1.7.1987 would not result
in two assessments during the assessment year 1987-88; that the demand in
question was for the differential tax and consequently, the question of two
assessments during the same assessment year did not arise. He further contended
that the object of enacting the State Finance Act, 18 of 1987 was to give
effect to the budget proposals for the financial year 1987-88; that the effect
of substituting schedule-I w.e.f. 1.7.1987 was to revise the rates of
plantation tax during the financial year 1987-88 and that object would stand defeated
if the revised rates were held to be applicable on and from financial year
1988-89. Learned Advocate submitted, that, in the circumstances the High Court
had erred in holding that the revised rates were applicable only from
assessment year 1988-89.
Mr. Jayant Bhushan, learned senior advocate appearing on behalf of the
assessees, submitted that under section 3(1) of the said 1960 Act, exigibility
to tax was with reference to the extent of the lands comprised in the
plantation as on the first day of each financial year;
that under section 3(2), the tax assessed is payable for each financial year
till the extent of the holding is revised; that such revised tax is payable
only from the financial year immediately following the revision and
consequently, it was urged, that, the revised rates could apply from the
assessment year 1988-89. It was urged that the scheme of the said Act rules out
two assessments during the same year. In this connection, it was pointed out
that the assessing authority has demanded the said tax at the rate of Rs.130/-
per hectare for the period 1.4.1987 to 30.6.1987 and at the rate of Rs.350/-
per hectare for the period 1.7.1987 to 31.3.1988 which indicated that the
assessees were assessed twice during the same year which was not permissible
under the said Act. In the circumstances, it was urged, that, no interference
was called for as there was no merit in the civil appeals.
The basic point for determination is : whether in the present case, the
revised schedule introduced in the 1960 Act, by the Finance Act, 18 of 1987,
results in two assessments? To answer the aforestated question, we need to
examine the provisions of the said 1960 Act. The said Act is enacted to provide
for the levy of an additional tax on plantations in the State of Kerala.
Section 2(9) defines the expression "valuation date", in relation to
the financial year for which an assessment is to be made to mean the first day
of April of that year. Section 3(1) is the charging section. Under the said
section, for every financial year, there shall be charged in respect of lands
in the plantations, a tax at the rates specified in schedule-I. Under section
3(2), the tax assessed under the Act shall be payable for every financial year
till the extent of plantation held by the assessee is revised. That, from the
financial year, immediately following the revision, the tax assessed on the
basis of such revision, shall be payable. Under section 3(3), the assessing
authority may at any time, suo motu, revise the extent of plantation held by an
assessee after hearing him. Under section 4(2), every assessee who, on the
first day of the financial year holds two hectares or more of the lands in the
plantation shall furnish to the assessing authority a return before the first
day of June of that year. Under section 5, the assessing authority is
authorized to determine the extent of plantation and the assessment of
plantation tax. Section 6A deals with the cases of plantations escaping
assessment. Section 8 deals with the authority of the assessing authority to
serve notice of demand. Section 9 provides for an appeal against the order of
assessment. Section 9A provides for reference to the District Court. Sections
13 & 14 deal with recovery.
Schedule-I refers to the rates of tax. Prior to 1.4.1987, it read as under:
RATES OF PLANTATION TAX 1 Where the aggregate extent of plantations held by
a person does not exceed four hectares.
Nil 2 Where the aggregate extent of plantations held by a person exceeds
four hectares but does not exceed eight hectares.
Seventy rupees per hectare on the extent of plantations in excess of four
hectares.
3 Where the aggregate extent of plantations held by a person exceeds eight
hectares but does not exceed twenty hectares.
Ninety rupees per hectare on the extent of plantations in excess of four
hectares.
4 Where the aggregate extent of plantations held by a person exceeds twenty
hectares.
One hundred and thirty rupees per hectare on the extent of plantations in
excess of four hectares.
In exercise of the powers conferred by section 27 of the 1960 Act, the
Government of Kerala has framed the Kerala Plantations (Additional Tax) Rules,
1960.
Rule 16 provides for various forms prescribed for the purposes specified
against them. For the purpose of deciding the present civil appeals, form-IA is
relevant and it reads as under:
"FORM IA [Notice of assessment under section 5/3(3) of the Kerala
Plantation Tax Act, 1960 as amended by the Kerala Plantations (Additional Tax)
Amendment Act, 1967] To Whereas under the Kerala Plantation Tax Act, 1960 as
amended by the Kerala Plantations (Additional Tax) Amendment Act, 1967 (19 of
1967) which has come into force on the Ist November, 1967, the rate of
Plantation Tax has been raised from Rs.8 per acre to Rs.56 per hectare and the
amount of tax fixed in the assessment already made under section 5/3(3) of the
Kerala Plantations (Additional Tax) Act, 1960 and communicated to you as per
notice of demand No.
dated .. requires revision on the basis of the rate of Plantation tax fixed
under the said Act as amended with effect from the financial year 1968-69 and
whereas the details available in this office show that you hold Plantations to
the extent shown below, it is hereby informed that you are assessed to pay
Plantation Tax amounting to Rs... under the said Act as amended by Act 19 of
1967.
Notice is hereby given that you may file objections, if any on the above
assessment to the undersigned within fifteen days of receipt of this notice
failing which the assessment shown above will be made absolute on the
presumption that you have no objections to the above assessment." Thus,
the scheme of the Act read with rules framed thereunder indicates that section
3(1) is the charging section; that the subject of the charge is the extent of
plantation held by an assessee on the first day of each financial year; that
the tax is payable at the rates prescribed in schedule-I to the Act; that the
tax assessed is payable for the financial year until the extent is revised;
that even in the event of such revision, the tax assessed on the revised basis
shall be payable only from the financial year immediately following such
revision.
This position is also made clear by form-IA quoted above under which the
revision was given effect to from the next financial year 1968-69, though the
rates stood revised by Amending Act 19 of 1967, which came into force on
1.11.1967 i.e. during the financial year 1967-68.
Lastly, under the Act, the basis of the charge is the extent of the
plantation (hereinafter referred to as "the assessable extent").
We may now examine the Kerala Finance Act, 18 of 1987, which received the
Governor's assent on 20.8.1987. The said Finance Act was passed to give effect
to financial proposals of the Government for the financial year 1987-88. It
appears that the presentation of the budget got delayed during the relevant
year and accordingly the date of commencement, fixed under the said Act, was
Ist day of July, 1987. By the said Finance Act, three distinct and separate
Acts were amended, namely : the Kerala General Sales Tax Act, 15 of 1963; the
Kerala Plantations Tax Act, 17 of 1960; and the Kerala Motor Vehicles Taxation
Act, 19 of 1976. In this matter, we are concerned with the amendment to the
1960 Act. By the Finance Act, a revised schedule of rates was introduced in the
said 1960 Act, which read as under:
RATES OF PLANTATION TAX 1 a b Where the aggregate extent of plantations
(except conconut and arecanut plantations) held by a person does not exceed two
hectares.
Where the aggregate extent of coconut or arecanut plantations held by a
person does not exceed four hectares.
Nil Nil 2 Where the aggregate extent of plantations (other than coconut and
arecanut) held by a person exceeds two hectares but does not exceed four hectares.
One hundred rupees per hectare on the extent of plantations in excess of two
hectares.
3 Where the aggregate extent of plantations held by a person exceeds eight
hectares.
i) ii) In the case of plantations other than coconut and arecanut.
In the case of coconut and arecanut plantations.
One hundred and fifty rupees per hectare in excess of two hectares.
One hundred and fifty rupees per hectare in excess of four hectares.
4 Where the aggregate extent of plantations held by a person exceeds eight
hectares but does not exceed fifteen hectares.
i) ii) In the case of plantations other than coconut and arecanut.
In the case of coconut and arecanut plantations.
Two hundred rupees per hectare in excess of two hectares.
Two hundred rupees per hectare in excess of four hectares.
5 Where the aggregate extent of plantations held by a person exceeds fifteen
hectares but does not exceed twenty-five hectares.
i) ii) In the case of plantations other than coconut and arecanut.
In the case of coconut and arecanut plantations.
Two hundred and fifty rupees per hectare in excess of two hectares.
Two hundred and fifty rupees per hectare in excess of four hectares.
6 Where the aggregate extent of plantations held by a person exceeds
twenty-five hectares.
i) ii) In the case of plantations other than coconut and arecanut.
In the case of coconut and arecanut plantations.
Three hundred and fifty rupees per hectare in excess of two hectares.
Three hundred and fifty rupees per hectare in excess of four hectares.
In order to appreciate the contentions of the rival parties, one must bear
in mind the essential components entering into the concept of a tax.
In the case of M/s Govind Saran Ganga Saran v.
Commissioner of Sales Tax & others reported in [AIR 1985 SC 1041], this
Court has held that the first component in the concept of a tax is the
character of imposition, the second is a clear indication of the person on whom
the levy is imposed and who is obliged to pay the tax, the third is the rate at
which the tax is imposed and the fourth is the value to which the rate is
applied for computing the tax liability.
In the case of M/s Goodyear India Ltd. v. State of Haryana & another
reported in [AIR 1990 SC 781], it has been held that a taxable event is that
which on its occurrence creates the liability to tax, which liability does not
exist at later point of time. Even though the taxable event of a tax happens to
be at a particular point of time, the levy and collection of such tax may be
postponed, for administrative convenience, to a later date. Thus, in the
context of the Central Excise Act, 1944, even though the taxable event is the
manufacture of an excisable article, the duty is levied and collected at a
later date for administrative convenience. Such later date is the date of
removal of goods from the factory. As a corollary, the charging section cannot
be limited or circumscribed by the machinery provisions of the Act. The
machinery provisions cannot be interpreted so as to restrict the scope of the
charging section. Liability to tax is distinct from quantification by
assessment.
In the case of Kesoram Industries and Cotton Mills Ltd. v. The Commissioner
of, Wealth Tax (Central), Calcutta reported in [AIR 1966 SC 1370], it has been
held that the chargeability is independent of the passing of the Finance Act.
In the light of our above discussion, we have to examine the effect of the
Finance Act, 18 of 1987 qua section 3 of the 1960 Act. The said Finance Act, 18
of 1987 was enacted to give effect to the budget proposals for the financial
year 1987-88. To augment the revenues of the State, schedule-I to the 1960 Act
was sought to be amended by revising the existing rate of plantation tax.
In the present case, we are concerned with the content of the expression
"revision". Revision simpliciter in the rate of tax is different from
revision which alters the tariff structure and the tariff categories. Revision
in the rate of tax simpliciter does not affect the assessable extent of the
lands in the plantation. This category of revision in the rates does not come
within the ambit of section 3(2) of the 1960 Act and consequently, such
revisions do not require revision in the assessment of tax.
However, in the present case, the revision brought upon by substitution of
revised schedule not only effects revision in the rates, it also revises the
tariff categories as well as the tariff structure and consequently, such a
revision would fall within the ambit of section 3(2) of the 1960 Act. In the
case of revision in the rates simpliciter, the assessable extent of the holding
remains constant throughout the year, whereas in the case of revision in the
tax structure, the assessable extent of the holding undergoes a change. In this
case, the revised schedule increased the assessable extent of the holding. In
the present case, the revised schedule altered the tariff categories.
Therefore, the revision in question in this case squarely came within the ambit
of section 3(2) of the 1960 Act and such a revision could be given effect to
only in the next immediate financial year 1988-89. As stated above,
chargeability is independent of the passing of the Finance Act. Therefore, one
has to read the Finance Act in consonance with the provisions of the charging
section. The function of the Finance Act primarily is to prescribe the rate of
tax and the manner of calculation of tax; and it is not intended to incorporate
the entire procedural and substantive law relating to tax.
In the circumstances, we do not find merit in the contention advanced on
behalf of the appellant-State that the object of the Finance Act, 18 of 1987
was only to revise the rates of plantation tax.
We may reiterate that the State can always revise the rates in the middle of
the financial year provided the assessable extent of the lands comprised in the
plantation as on Ist April of each year is not altered.
In the case of The Karimtharuvi Tea Estate Ltd. v. The State of Kerala
reported in [AIR 1966 SC 1385], it has been held that by the imposition of a
different tariff in the course of the year, the incidence of the tax liability
may be altered by the Legislature, but for effecting that alteration, the
Legislature must devise machinery for computing it and if the Legislature has
failed to do so, the Court cannot resort to a fiction which is not prescribed
by the Legislature and seek to effectuate that alteration by the devising
machinery not found in the enactment.
For the aforestated reasons, we answer the above question in favour of the
assessees and against the department.
Before concluding, we may clarify, that, this judgment is confined only to
insertion of schedule-I in the said 1960 Act by the Kerala Finance Act, 18 of
1987 and it will not apply to the amendments to other enactments, namely, the
Kerala General Sales Tax Act, 1963 and the Kerala Motor Vehicles Taxation Act,
1976.
In the result, the appeals fail and are dismissed, with no order as to
costs.
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