(2012) 268 KLR 095 IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT: THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON WEDNESDAY, THE 22ND DAY OF AUGUST 2012/31ST SRAVANA 1934 WP(C).No. 25448 of 2006 (D) --------------------------- PETITIONER(S): ------------------------------ M/S.TROPICAL FARMS, MARAMON, KOZHENCHERRY-689 549, REPRESENTED BY ASHA THAMPI, PARTNER. BY DR.K.B.MUHAMED KUTTY,SENIOR ADVOCATE ADV.SRI.K.M.FIROZ RESPONDENT(S): ----------------------------- 1. THE ASSISTANT COMMISSIONER (AUDIT ASSESSMENT), COMMERCIAL TAXES, PATHANAMTHITTA. 2. THE COMMERCIAL TAX OFFICER, COMMERCIAL TAXES, THIRUVALLA. 3. THE STATE OF KERALA, REPRESENTED BY SECRETARY TO GOVERNMENT, TAXES DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM. 4. DEPUTY TAHSILDAR(RR), THIRUVALLA. R1 TO R4 BY GOVERNMENT PLEADER SRI.SHAIJ RAJ.T.K. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 21-06-2012, THE COURT ON 22-08-2012 DELIVERED THE FOLLOWING: sts WP(C)NO.25448/2006 APPENDIX PETITIONER'S EXHIBITS:
RESPONDENT'S EXHIBITS:
/TRUE COPY/ P.S.TO.JUDGE sts (CR) P.R. RAMACHANDRA MENON, J. .............................................................................. W.P. ) No.25448 of 2006 ......................................................................... Dated this the 22nd August, 2012 Head Note:- Kerala Value Added Tax Act, 2003 - Section 6(5) - 'presumptive dealer' - Poultry Farm - The benefit of lesser rate of tax available to a Presumptive Tax Dealer under Section 6 (5) is carved out by way of exemption in respect of such dealers, who satisfy the different parameters as prescribed under the Statute. It is for the law making authorities to prescribe various conditions so as to extend the benefit of exemption, by way of reduced rate of tax and incorporation of such provisions with retrospective effect cannot be misunderstood as enhancement of any rate of tax, by virtue of any amendment. Constitution of India, 1950 - Article 301 r/w Article 304(a) - Kerala Value Added Tax Act, 2003 - Section 6(5) - Constitutional Validity of - 'presumptive dealer' - Poultry Farm - denying the concessional rate of presumptive tax to persons engaged in inter-state purchases, discriminates them so as to impose higher rate of tax in respect of goods imported and sold within the State, compared to the goods locally purchased and sold - Discussed. Held:- There is absolutely no challenge or discrimination with regard to the rate of tax in respect of Broiler Chicken, which is 12.5%, whether it is imported from outside the State or procured within the State. However, in respect of certain specified class of dealers, who satisfy the conditions stipulated under Section 6(5) and having a place lower in the hierarchy with maximum turnover of less than Rs.50 lakhs, are given the benefit of option of paying tax as a 'Presumptive Tax Dealer' on the total sales Turnover at the prescribed rate, subject to satisfaction of the requirements. This, in no way, violates the mandate under Article 301 or 304(a) of the Constitution of India. That apart, when the petitioner raises a blanket challenge against Sec. 6(5) referring to the discrimination to the imported commodity and if the said provision is to go on this count, the benefit of option also goes and the petitioner cannot be heard to say that he is entitled to have the benefit of Section 6(5) as a Presumptive Tax Dealer. The challenge is quite wrong and unfounded. J U D G M E N T Rejection of application opting to have registration under Section 6(5) of the KVAT Act, as a 'presumptive dealer' with liability to pay tax at lesser rate and the assessment finalised under Section 25(1) of the KVAT Act, ordering to satisfy the liability under Section 6(1) of the Act, is mainly under challenge; simultaneously challenging the constitutional validity of Section 6(5), particularly with regard to the retrospective amendment (made on 28.08.2005) w.e.f. 01-04-2005. 2. The petitioner firm is running a 'poultry farm' engaged in the sale of broiler chicken, having registration, both under the KGST and CST Acts. In the course of business, the petitioner used to bring the live chicken and such other goods from outside the State, to be sold within the State. However, pursuant to the new enactment , i.e. KVAT Act, which was brought into force with effect from 01.04.2005, the petitioner decided to have the benefit of reduced rate of tax applicable to the 'presumptive dealers', who were not importers or dealers liable to tax under Section 6(2) or dealers effecting first taxable sale of goods within the State and whose total turnover for an year was below Rs. 50 lakhs. The petitioner cut down the taxable turnover, stopped import from outside the State, surrendered the CST registration and confined the business within the State, with a maximum turn over of less than Rs.50 lakhs, effecting the local purchase, which came to the first sale in the State. It was accordingly, that Ext.P1 application was submitted for registration under Section 6(5), giving the factual particulars and satisfied the tax at the reduced rate for the different quarters ending on 30.06.2005, 30.09.2005 and 31.12.2005, effecting the payments on 16.07.2005, 16.11.2005 and 15.02.2006 respectively. 3. While so, the petitioner was served with Ext.P2 notice dated 06.03.2006 issued by the first respondent, observing that, on verification of the application for registration as a 'presumptive tax dealer', it was seen that the turnover of the dealer for the preceding year was Rs.84.87 lakhs and as such, the petitioner was not eligible for option for payment of presumptive tax; thus requiring the petitioner to file an application in Form I as a VAT dealer under Section 16 of the KVAT Act and to pay tax in terms of Section 6(1). On receipt of Ext. P2, the petitioner submitted Ext.P3 reply pointing out that the tax payment was already effected under Section 6(5) and that, the amendment and incorporation of the new proviso , placing a bar with reference to the turnover of the preceding year, exceeding Rs.50 lakhs was brought about only on 28.08.2005, though with retrospective effect from 01.04.2005, which according to the petitioner was not applicable to the petitioner's case, who had already filed the application paying the tax in tune with the relevant provision, as it existed then. It was further pointed out that the amendment was not applicable also in view of Sec.24 of the Act, placing a clear bar, stipulating that, where the rate of tax in respect of any goods has been enhanced as a result of amendments, such enhancement shall be applicable only from the date of such amendment. In respect of the closing stock of the taxable goods worth Rs.13.45 lakhs on 01.04.2005 (which included materials of import), it was pointed out that the petitioner had not purchased 'taxable goods', Inter- State, during the year 2004-05 and that the entire stock mentioned was in respect of 'Maize', a poultry feed which was feeding the petitioner's poultry and not for sale. 'Maize' being not a taxable commodity, having been exempted as per Entry 12 of the First Schedule to the KVAT Act , the petitioner was not liable to be treated as an 'importer' as defined under Section 2(xxii), obviously since the term 'importer' means only a person who obtains or brings any taxable goods from outside. 4. After considering the said reply , the first respondent found that there was no merit in it and by virtue of the statutory prescription, as amended, the petitioner was liable to pay the tax, as prescribed under Section 6(1). In the said circumstance, Ext. P4 pre-assessment notice under Section 25 was issued to the petitioner on 22.08.2006 by Registered Post. 5. On service of notice, as observed by the first respondent, though two weeks' time was sought for on 11.09.2006 to comply with the requirement , the dealer had not responded further and accordingly, the assessment was finalised as per Ext.P6 order dated 29.09.2006, fixing the tax liability in respect of the year 2005-06, as proposed, followed by Ext.P7 demand. The petitioner is challenging the above proceedings in this writ petition, also contending that the petitioner had preferred Ext.P5 reply dated 03.10.2006 in response to Ext.P4 notice, which was served to the first respondent before despatching Ext. P6 and hence the said reply ought to have been considered, in the light of the law declared by this Court in Ext.P8 judgment, reported in (1998) 6 KTR 466 (Ker.) [B.T. Mammoo vs. Assistant Commissioner (Assessment)]. 6. Heard Dr .K.B. Muhammedkutty, the learned Sr. Counsel for the petitioner as well as Mr.Shaij Raj T.K, the learned Government Pleader, at length. 7. Section 6(5) of the VAT Act as it existed on 01.04.2005 reads as follows: "(5)Notwithstanding anything contained in sub-section (1) any registered dealer other than an importer or a dealer liable to tax under sub-section (2) or a dealer effecting first taxable sale of goods within the State, whose total turnover for a year is below rupees fifty lakhs may at his option, pay tax at the rate of one per cent of the turnover of taxable goods as presumptive tax instead of paying tax under sub-section(1). Provided that a dealer who has been paying tax under sub-section (1) shall not be entitled to opt for payment of tax under this sub-section unless his total turnover continue to be within the limit specified in this sub-section consecutively for three years. " 8. As admitted by the petitioner in paragraph 1 of the writ petition, the Commissioner of Commercial Taxes had issued a Circular No.5 of 2005 dated 01.04.2005, explaining the scope of provision; wherein it was observed that the rate of presumptive tax was '1%' of the taxable turnover of the dealer. However, there was some serious proposal to bring about amendment to the Act, particularly to reduce the rate from '1%' to '0.5%', which was expected shortly. The amendment was brought about on 28.08.2005, giving retrospective effect from 01.04.2005. Section 6(5) as amended with retrospective effect from 01.04.2005 as per Act 39 of 2005 is as follows: ... "(5) Notwithstanding anything contained in sub-section (1), but subject to sub-section (2), any registered dealer not being,- (a) an importer; or (b) a dealer making any sale in the course of interstate trade or commerce or export; or (c) a dealer registered under the central Sales Tax Act, 1956 (Central Act 74 of 1956); or (d) a dealer effecting first taxable sale of goods within the State ; or (e) a dealer covered by sub-section (1A); or (f) a contractor, whose total turnover for a year is below fifty lakh rupees, may, at his option, pay tax at the rate of half percent of the turnover of sale of taxable goods as presumptive tax instead of paying tax under sub-section (1). Provided that a dealer holding stock of goods purchased in the course of interstate trade on the date of coming into force of the Act, will have the option to pay tax under this sub-section from the beginning of the quarter following the quarter in which he has sold such goods in the state and paid tax under sub-section (1) of Section 6 and his registration under the Central Sales Tax Act, 1956 (Central Act 74 of 1956) is cancelled. Provided further that any dealer covered by sub-section (1A) may, at his option pay tax under this sub-section from such period as may be prescribed. Provided also that a dealer shall not be eligible to opt for payment of tax under this sub-section if his total turnover in respect of goods to which this Act applies, whether under this Act or under the Kerala General Sales Tax Act, 1963 (15 of 1963) had exceeded fifty lakh rupees during the year preceding the year to which such option relates. Provided also that a dealer shall not be liable to pay presumptive tax under this sub section, if his total turnover is less than ten lakh rupees. Provided also that dealers covered under this sub-section whose total turnover for a year is below rupees twenty lakhs, may pay a lump-sum amount of rupees three thousand annually as presumptive tax , and the payment shall be at the rate of rupees seven hundred and fifty per quarter along with a statement as may be prescribed. Such dealers shall also file an annual declaration as may be prescribed. Explanation: "First taxable sale" for the purpose of this sub-section shall mean the sale of taxable goods effected by a registered dealer immediately after the import of such goods into the State or its manufacture in the State as the case may be, but shall not include the sale of goods in respect of which tax under section 5 or under sub-section (4) of section 59 of the KGST Act, 1963 (15 of 1963) had been paid and which are held as opening stock on the date of coming into force of the Act. 9. As per the above amended provision, the rate of tax payable by an eligible 'presumptive tax dealer' has been brought down to '0.5%' of the turnover of the sales of the taxable goods. The 'first proviso' places some embargo in availing the benefit with reference to the stocks purchased and held by the dealer in the course of Inter-State trade as on 01.04.2005. Similarly, the 'second proviso' made it clear in explicit terms that the dealer shall not be eligible for the benefit of Section 6(5), if its total turn over, in respect of the preceding year to which the option relates, exceeds 50 lakhs. Going by the amended provision as above, which was brought into effect from 01.04.2005, the first question is, whether the petitioner is eligible to have the benefit as a matter of right. Ext.P1 application preferred by the petitioner on 01.05.2005 itself shows against Col.No.10, that the total turn over for the previous year was Rs.8487378/- and as such, it is clearly hit by the 'second proviso' to Section 6(5). 10. With regard to the stock held by the petitioner as on 01.04.2005, it has been conceded that there was a total stock of Rs.13.45 lakhs , which however was sought to be explained by the petitioner stating that it was only in respect of 'Maize', which was purchased for feeding the petitioner's own poultry and not for sale; adding that it was not a taxable commodity . 11. True, by virtue of Entry No.12 of the First Schedule of the KVAT Act, 'Maize' is not a taxable item in the State. It is also true that the term 'importer' as defined under Section 2 (xxii) of the Act means any person who obtains or brings any taxable goods from any place outside the State or Country, whether as a result of purchase or otherwise, for the purpose of business. But referring to the other incriminating circumstances brought to light, particularly, the 'C' Forms given by the petitioner (particulars of which have been given in Ext.P6 order), the first respondent has found that the petitioner had issued the 'C' Forms even on 31.03.2005 and as such , had not surrendered the CST registration as on 31.03.2005, as stated in the letter dated 31.03.2005 while opting and applying for the 'Presumptive Tax' registration. Various other adverse circumstances were also referred to in Ext. P6, which is not necessary to be looked into or discussed, for the purpose of this writ petition, since the issue can be decided with reference to the admitted turn over in respect of the previous year, which is more than Rs.50 lakhs, as declared against Col.No.10 of Ext.P1 application form, subject to the challenge raised by the petitioner with reference to Sec.24 of the VAT Act and the constitutional validity of retrospective amendment. 12. There is a case for the petitioner that the change in rate of tax is not applicable to the petitioner by virtue of Section 24 of the KVAT Amendment Act (Act 39 of 2005), contending that 'Presumptive Taxation Scheme' is a matter relating to rate of tax. Section 24 as aforesaid reads as follows: "24. Validation: Notwithstanding anything contained in any other provisions of this Act, or any judgment, decree or order of any Court or Tribunal, where the rate of tax in respect of any goods has been enhanced as a result of the amendments made under the Kerala Value Added Tax (Amendment )Act, 2005, such enhanced rate of tax shall be applicable from the date of such amendment and where such rate has been reduced, it shall be deemed to have come into force on the first day of April, 2005 provided that where any dealer had collected the tax at a higher rate, such collection shall be deemed to have been validly made and the tax so collected shall be paid over to Government ". 13. The circumstances contemplated in the above provision do not come to the rescue of the petitioner. As far as the present case is concerned, the commodity is the same and the rate of tax is also the same, as it is 12.5%. The benefit of lesser rate of tax available to a Presumptive Tax Dealer under Section 6 (5) is carved out by way of exemption in respect of such dealers, who satisfy the different parameters as prescribed under the Statute. It is for the law making authorities to prescribe various conditions so as to extend the benefit of exemption, by way of reduced rate of tax and incorporation of such provisions with retrospective effect cannot be misunderstood as enhancement of any rate of tax, by virtue of any amendment. The idea and understanding of the petitioner is thoroughly wrong and misconceived. 14. Coming to the challenge with reference to the constitutional validity of the relevant provisions, the petitioner contends in paragraph '10' and Ground 'K' that Section 6(5), by denying the concessional rate of presumptive tax to persons engaged in inter-state purchases, discriminates them so as to impose higher rate of tax in respect of goods imported and sold within the State, compared to the goods locally purchased and sold and hence it is ultravires being violaltive of Article 301 r/w Article 304(a) of the Constitution of India. The above provisions read as follows: Article 301: "301. Freedom of trade, commerce and intercourse-- Subject to the other provisions of this Part, trade, commerce and intercourse throughout the territory of India shall be free". "304. Restrictions on trade, commerce and intercourse among States:-- Notwithstanding anything in article 301 or article 303, the Legislature of a State may by law-- (a) impose on goods imported from other States or the Union territories any tax to which similar goods manufactured or produced in that State are, subject , so, however, as not to discriminate between goods so imported and goods so manufactured or produced; and (b) xx xxx xx" 15. Even going by the undisputed pleadings and proceedings, there is absolutely no challenge or discrimination with regard to the rate of tax in respect of Broiler Chicken, which is 12.5%, whether it is imported from outside the State or procured within the State. However, in respect of certain specified class of dealers, who satisfy the conditions stipulated under Section 6(5) and having a place lower in the hierarchy with maximum turnover of less than Rs.50 lakhs, are given the benefit of option of paying tax as a 'Presumptive Tax Dealer' on the total sales Turnover at the prescribed rate, subject to satisfaction of the requirements. This, in no way, violates the mandate under Article 301 or 304(a) of the Constitution of India. That apart, when the petitioner raises a blanket challenge against Sec. 6(5) referring to the discrimination to the imported commodity and if the said provision is to go on this count, the benefit of option also goes and the petitioner cannot be heard to say that he is entitled to have the benefit of Section 6(5) as a Presumptive Tax Dealer. The challenge is quite wrong and unfounded. 16. Despite the challenge as to the constitutional validity, the only Ground incorporated, other than Ground (k), dealt with already, is 'Ground (l)', contending that retrospective operation of the amendment to Section 6(5) is unreasonable and violative of Article 14. This Court finds it difficult to accept the said proposition. Retrospective operation of an amendment to a statutory provision is not alien in fiscal law. Reasonableness or unreasonableness has to be assessed with reference to the scope and object of legislation. The very provision for having registered as a 'Presumptive Tax Dealer' with liability to satisfy the tax at the prescribed rate, was brought into the statute book only w.e.f. 01.04.2005. The circumstance, under which such benefit has to be extended, was considered with more precision and necessary safeguards to meet the interest of the Revenue, were prescribed by way of amendment dated 28.08.2005, i.e. within four months; also reducing the existing rate of 1% to 0.5%, which was brought into effect from 01.04.2005. It is by virtue of the said amendment, that the petitioner has satisfied the 'Presumptive Tax' at the lesser rate of '0.5%' instead of '1%' as it originally existed. It is only by way of 'option' and not by virtue of any mandatory requirement, that the course provided under Section 6(5) is brought in and if the petitioner is not happy with the same, it is always open for the petitioner to proceed on the normal and regular track for satisfaction of the tax under Section 6(1), which alone has been done by the first respondent, passing Ext.P6 assessment order. But for the vague challenge as to the constitutional validity of the amended provision, the petitioner has not stated anything, in what way the provision is ultravires to the Constitution or in what manner the State has exceeded in exercising its law making power. 17. There is a case for the petitioner that Ext.P2 notice was issued to the petitioner only on 06.03.2006, as a result of which, the petitioner could not collect tax at the normal rates from the customers. This argument does not persuade this Court to draw an inference in favour of the petitioner in any manner. The liability to satisfy tax is not depending upon the right or chance of the dealer to have it passed on to the purchaser. Tax is payable at the instance of sale and only by virtue of the statutory prescription that the dealers have been permitted to pass on the liability to buyers; which in no case can be a 'pre- condition' to have mulcted with the tax liability. 18. Ext.P1 application for registration as a Presumptive Tax Dealer,was preferred by the petitioner in May, 2005, while the amendment to the statute was brought in August, 2005 with retrospective effect from 01.04.2005. There is a case for the petitioner that the application preferred by the petitioner for registration had already been accepted and the petitioner was permitted to satisfy the tax accordingly, as per the then existing statute and full payment has been effected already. Particulars of the payment effected by the petitioner have been given in paragraph '2' of the writ petition and in Ex.P3 reply preferred by the petitioner, which has been extracted by the first respondent in Ext. P6 order impugned in the writ petition. This reads as follows: Quarter ending Turnover Tax paid Date of payment 30.06.2005 Rs.17,10,658/- Rs.8553.29 16.07.2005 30.09.2005 Rs.9,30,858/- Rs.6972.00 16.11.2005 31.12.2005 Rs.11,07,979/- Rs.5,540.00 15.02.2006 19. Undisputedly, the rate of presumptive tax under Section 6(5) as per the original statute, as on 01.04.2005, was at the rate of '1%'. In respect of the quarter ending on 30.06.2005, the Turnover was Rs.17,10,658/-, for which the tax paid by the petitioner on 16.07.2005 was Rs.8553.29/-. In other words, the payment effected by the petitioner on 16.07.2005 i.e, before the amendment dated 28.08.2005, was only at the rate of '0.5%', which actually ought to have been at the rate of 1% amounting to Rs.17106.58/-. In other words, it could be said that the tax paid by the petitioner under Section 6 (5) on the strength of Ext.P1 application, was not in full conformity with the statutory prescription and as such, the option exercised and satisfaction of the requirements could be said as incomplete. 20. There is another contention for the petitioner that some other additional Grounds are incorporated in Ext.P6 Assessment Order, which were not there in Ext.P4 pre- assessment notice and hence, the petitioner could not get an opportunity to explain the same. This does not appear to be palatable to this Court, primarily for the reason that, no proper reply was submitted by the petitioner before passing Ext. P6 order ( but for the admittedly belated reply of Ext.P5 dated 03.10.2006) and further since Ext.P6 order can be justified merely with reference to infringement of the 'second proviso' to Section 6(5), i.e. the admitted turnover of the petitioner for the previous year, as conceded in Column No.10 of Ext.P1 application having more than Rs.50 lakhs and hence it stands excluded by the statutory prescription itself. As such, no other ground is relevant or necessary to be looked into. 21. With regard to the contention of the petitioner that the first respondent ought to have referred to and considered Ext.P5 statement of objections, though preferred belatedly, as the same was served prior to despatch of Ext. P6 order, reliance is sought to be placed on the decision rendered by this Court (vide Ext.P8) in B.T. Mammu vs. Asst. Commissioner (Assessment )Sales Tax Office, Special Circle, Kannur [(1998) 6 KTR 466 (Ker.)]. The factual position in the said case is entirely different as discernible from the description given therein. It was the specific contention of the petitioner therein, that the statement of objection preferred by the petitioner was available in the records of the respondent. Availability of said statement of objection was conceded in the statement filed before the Court by the respondent. It was in the said circumstance, that the impugned order was intercepted and the concerned authority was directed to pass fresh orders in the said case. Coming to the instant case, Ext.P4 notice was sent to the petitioner on 22.08.2006 by registered post and on receipt of the same, the petitioner submitted a letter on 11.09.2006, requesting two more weeks' time to comply with the notice, as specifically observed in Ext. P6 order. Despite the filing of the said letter, no reply was submitted, till the order was passed on 29.09.2006, which was immediately forwarded by registered post and served to the petitioner on 14.10.2006. Admittedly, Ext.P5 statement of objection is dated 03.10.2006 and there is no case for the petitioner that it was forming part of the records before Ext.P6 order was passed or that the first respondent was aware of Ext.P5 statement of objection preferred by the petitioner at the time of despatch, unlike the factual position reflected from the decision reported in (1998) 6 KTR 466 (Ker.) (cited supra), which hence is not applicable to the case. 22. In the course of hearing, the learned Government Pleader brought it to the notice of this Court, that a Division Bench of this Court has very recently held in petitioner's case itself (i.e. in Tropical Farms vs. State of Kerala [2012 (2) KLT 902], that buying one or two days' old chicks, rearing the same into full grown chicken and sale of the same does not entitle the poultry farm to get the benefit of 'presumptive tax' under Section 6(5), irrespective of whether there is manufacture or not in the rearing of chicks to chicken. It has been held in the said decision, that irrespective of whether there is manufacture or not in the rearing of chicks to chicken, the petitioner's sale of broiler chicken as full grown birds for meat purpose, has to be and rightly treated as 'first taxable sale'. By virtue of the specific exclusion of 'first taxable sellers' from the scheme of payment of presumptive tax under 'clause (d)' of Sec.6(5), the lower authorities including the Tribunal have rightly rejected the claim of the petitioners. It is to be noted that Section 6(5) (d) was very much there in existence, right from the beginning when the VAT Act was brought into force w.e.f. 01.04.2005,independent of any amendment subsequently brought about on 28.08.2005 (with retrospective effect from 01.04.2005). In other words, in view of the authoritative pronouncement of law by the Division Bench in the petitioner's own case, that the petitioner is not entitled to have the benefit of 'presumptive tax' under Section 6(5) (even by virtue of the unamended provision itself), this Court finds that the petitioner is not entitled to have any relief in this writ petition. 23. In the above facts and circumstances, the challenge raised by the petitioner with regard to the course and proceedings of the first respondent, leading to Ext.P6 order of assessment or as to the constitutional validity of the amended provision of Section 6(5) of the KVAT Act is not correct or sustainable, either on facts on in law. The writ petition fails and it is dismissed. P.R. RAMACHANDRA MENON, JUDGE. lk |
