1990 (5) TMI 220 - HC - VAT and Sales Tax

Court upholds constitutionality of Kerala Sales Tax Act sections, rules petitioner liable for purchase tax.

The court upheld the constitutionality of Sections 5, 5A, and 8 of the Kerala General Sales Tax Act, 1963, dismissing the petition. It affirmed the ... - Issues Involved:1. Constitutionality of Sections 5, 5A, and 8 of the Kerala General Sales Tax Act, 1963.2. Legality of the assessment order under Exhibit P3.3. Taxability of consignment transfer of goods.4. Determination of taxable turnover and last purchase point.5. Applicability of the Supreme Court decision in Goodyear India Ltd. v. State of Haryana.Issue-Wise Detailed Analysis:1. Constitutionality of Sections 5, 5A, and 8 of the Kerala General Sales Tax Act, 1963:The petitioner challenged the constitutionality of Sections 5, 5A, and 8 of the Kerala General Sales Tax Act, 1963, asserting that these provisions were ultra vires. The court observed that Section 5A had been upheld by both the Kerala High Court and the Supreme Court in previous decisions, such as Malabar Fruit Products Co. v. Sales Tax Officer and State of Tamil Nadu v. Kandaswami. The court emphasized that Section 5A aims to tax goods that would normally be taxed at some point within the state but are not available for such taxation due to their dispatch outside the state. The court concluded that Sections 5, 5A, and 8 are valid legislative measures under Entry 54 of List II of the Seventh Schedule to the Constitution, and are not unconstitutional or ultra vires.2. Legality of the Assessment Order under Exhibit P3:The petitioner sought to quash the assessment order under Exhibit P3, claiming it was based on an illegal imposition of consignment tax. The court noted that the respondents clarified no consignment tax was levied; rather, the tax was imposed on the purchase turnover of goods, treating the petitioner as the last purchaser within the state. The court found that the petitioner failed to produce necessary documents to establish the consignment transfer of goods, justifying the assessing officer's decision to treat the petitioner as the last purchaser and levy the tax accordingly.3. Taxability of Consignment Transfer of Goods:The petitioner argued that the turnover related to consignment transfers should be exempt from tax. The court referred to Section 8 of the Act, which deems the series of purchases to conclude at the stage of purchase immediately before the export of goods. The court held that the petitioner's purchase of pepper became the last purchase liable to tax under Sections 5 and 5A read with Section 8 upon export. This interpretation aligns with the legislative intent to tax goods that would otherwise evade taxation within the state.4. Determination of Taxable Turnover and Last Purchase Point:The court examined the determination of taxable turnover and the concept of the last purchase point. It reiterated that under Section 5A, the taxable turnover includes goods dispatched outside the state unless they are sold in the course of inter-state trade or commerce. The court emphasized that the purchase of pepper by the petitioner attained the quality of the last purchase upon dispatch outside the state, making it exigible to tax. The court also referenced previous judgments affirming that the rate of tax applicable is the rate prevalent at the time of purchase, which later becomes the last purchase.5. Applicability of the Supreme Court Decision in Goodyear India Ltd. v. State of Haryana:The petitioner relied on the Supreme Court decision in Goodyear India Ltd. v. State of Haryana to argue the unconstitutionality of Section 5A(1)(c). The court distinguished the Goodyear case, noting that it dealt with a different factual scenario involving the consignment of manufactured goods, which is not applicable to the present case. The court highlighted that the Supreme Court in Goodyear addressed the validity of a provision that taxed the consignment of goods in the course of inter-state trade or commerce, whereas the present case involved the tax on the last purchase within the state. Therefore, the Goodyear decision did not support the petitioner's argument.Conclusion:The court dismissed the original petition, upholding the constitutionality of Sections 5, 5A, and 8 of the Kerala General Sales Tax Act, 1963. It affirmed the legality of the assessment order under Exhibit P3, concluding that the petitioner was liable to pay purchase tax as the last purchaser of goods within the state. The court found no merit in the petitioner's reliance on the Goodyear decision, as it pertained to a different legal context. The petition was dismissed with costs.