2015 (1) TMI 945 - HC - VAT and Sales Tax

Transporting agencies not liable for registration under Kerala VAT Act. Circular beyond statutory powers. Compliance obligations remain.

The court concluded that transporting agencies are not liable for registration under the Kerala Value Added Tax Act, 2003. The definition of 'dealer' does ... Validity of Notices issued based on Circular 33 of 2006 - Whether appellants were transporters and not dealers - Held that:- There was no intention discernible to treat the transporter as a dealer and consequently no obligation was cast on him to pay any tax, interest or penalty; which a dealer is required to pay - only a false declaration and a finding of collusion could invite penalty - the need to make correct and complete declaration and filing of the same before the officer in charge of a check post or barrier, was also upheld on the very same reasoning - the challenge based on violation under 301 of the Constitution of India was hence negatived. Penalty imposed for non-registration and the subsequent issuance of registration - Requirement for registration u/s 15 of the Kerala Value Added Tax Act, 2003 – Held that:- The mandate of registration was upheld on the premise that this too merely aided the authorities in checking the evasion of tax and finding that registration makes it feasible for the authorities to trace out the defaulting dealers through the transporters - a State, making an enactment under Entry 54 of List II of Seventh Schedule would be competent to provide for registration of transporters of goods, intended for sale within or without the State and providing for measures to check evasion of tax, by requiring such registered transporters to file returns and to make declaration as prescribed for effective implementation of the enactments. The power though not specifically enumerated, were held to be incidental and ancillary powers, conferred on the legislature to further the purpose of taxation enactments and to ensure due payment of tax and check evasion thereon - There can be no quarrel that if such provisions are available under a statute, the same have to be upheld on the principles of legislative competence as declared by the aforesaid binding precedents - The reliance placed by the learned Government Pleader, to that extent is only proper - it is not the constitutionality of such provision that arise, and it is the lack of a provision obliging the transporters, to take registration, that has been urged - there is absolutely no bar on the legislature, to provide for registration of transporting agencies, who have an intimate and proximate connection, to the sales and purchase of goods, and also provide for filing of returns, and inspection of accounts of such transporting agencies - The statute have not provided for the same, the Commissioner as was noticed, is not entitled to bring in such transporting agencies invoking the administrative powers conferred u/s 3 of the KVAT Act - the petitioner is not liable to be registered. Issues Involved:1. Liability of transporting agencies for registration under Section 15 of the Kerala Value Added Tax Act, 2003.2. Definition and scope of the term 'dealer' under the Kerala Value Added Tax Act, 2003.3. Validity of Circular No. 33/2006/CT issued by the Commissioner of Commercial Taxes.4. Legislative competence regarding the registration of transporting agencies.5. Compliance obligations of transporting agencies under Section 52 of the Kerala Value Added Tax Act, 2003.Issue-Wise Detailed Analysis:1. Liability of Transporting Agencies for Registration under Section 15:The primary issue addressed was whether transporting agencies functioning within Kerala are liable for registration under Section 15 of the Kerala Value Added Tax Act, 2003. The court concluded that the statute does not specifically mandate the registration of transporting agencies. Section 15 outlines the registration requirements for dealers whose turnover exceeds a specified limit, but it does not explicitly include transporting agencies.2. Definition and Scope of the Term 'Dealer':The court examined the definition of 'dealer' under Section 2(xv) of the Act. A 'dealer' is defined as any person engaged in the business of buying, selling, supplying, or distributing goods, among other activities. The court found that transporting agencies do not fit within this definition as they merely transport goods and charge freight based on weight, quantity, or distance. Therefore, transporting agencies are not considered dealers under the Act.3. Validity of Circular No. 33/2006/CT:The court evaluated the validity of Circular No. 33/2006/CT issued by the Commissioner of Commercial Taxes, which mandated the registration of transporting agencies. The court held that the circular exceeded the powers conferred on the Commissioner under Section 3 of the Act. Since the Act does not mandate the registration of transporting agencies, the circular was found to be beyond the scope of the Commissioner's authority and was set aside.4. Legislative Competence Regarding Registration:The court referenced several precedents, including the Tripura Goods Transport Association case, to analyze the legislative competence of the state to mandate registration of transporters. It was noted that while states have the power to enact provisions under Entry 54 of List II of the Seventh Schedule to prevent tax evasion, such provisions must be explicitly stated in the statute. Since the Kerala Value Added Tax Act, 2003 does not contain such provisions, the court concluded that the Commissioner cannot unilaterally impose registration requirements on transporting agencies.5. Compliance Obligations under Section 52:The court acknowledged that under Section 52 of the Act, transporting agencies are required to submit returns and information regarding the goods they transport. They must also produce books of account or other documents when demanded by the assessing authority. However, these obligations do not equate to a requirement for registration under Section 15.Conclusion:The court concluded that transporting agencies are not liable for registration under the Kerala Value Added Tax Act, 2003. The definition of 'dealer' does not encompass transporting agencies, and the circular issued by the Commissioner was beyond his statutory powers. The compliance obligations under Section 52 remain, but they do not include a mandate for registration. Consequently, the court set aside the registration of the petitioner transporting agency and dismissed the related writ petition challenging the notice for registration.