TaxTMI 
TaxTMI 
2014 (9) TMI 370
X X X X Extracts X X X X
X X X X Extracts X X X X
.... raised, contending that, in the absence of any specific entry in the First Schedule to the Kerala General Sales Tax Act, to cover "soda makers" for rate purpose, the rate of tax can only be eight per cent, under the "residuary entry". There is no dispute on the factual aspects. The petitioner in W.P. (C) No. 2914 of 2005, a company constituted under the relevant provisions of the Companies Act, is a registered dealer under the relevant taxation statutes in the State of Kerala as well as the State of Tamil Nadu. The said petitioner is manufacturing various items; such as pickles, jams, squashes, artificial soft drink concentrates, vinegar, etc., under the name and style "Mr. Butlers" and is a dealer of the said items. The products are manufactured in the factory situated at Coimbatore, in the State of Tamil Nadu and such products are brought over to Kerala, by way of "branch transfer" and are sold in the State as well. The factory started commercial production of the concerned items from September 18, 2004 and the manufacturing unit is registered with General Manager, District Industries Centre, Coimbatore as an SSI unit, as per exhibit P1, though the name was subsequently chang....
X X X X Extracts X X X X
X X X X Extracts X X X X
....005, contending that, the claim put forward by the petitioner is totally wrong and misconceived and that the benefit provided as per exhibit P2 notification, in respect of the manufacturing units situated and registered in the State of Kerala, is based on reasonable classification. It is pointed out that, such concession is available only in respect of the small-scale industries in the State, that too in respect of such turnover so manufactured within the State, making use of the infrastructure available here. It is stated that such a stipulation has been brought about, for promoting industrial activities in the State, providing a congenial atmosphere for the growth of industry. It is also stated that, there is absolutely no discrimination, nor is there any violation of the constitutional provisions, in any manner. Heard Mr. V.V. Asokan, the learned counsel appearing for the petitioners and Mr. Sudheesh Kumar the learned Senior Government Pleader appearing for the respondents at length. The learned counsel for the petitioners placed reliance on the decisions reported in [1963] 14 STC 355 (SC); AIR 1963 SC 928 (Firm A.T.B. Mehtab Majid & Co. v. State of Madras), [1988] 70 STC ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the State of Kerala, holding that, the benefit of concessional rate of tax given to the poultry farms in Kerala is a reasonable restriction. It is also stated that the writ petitioner in W.P. (C) No. 2914 of 2005 has already satisfied the tax liability availing of the benefit under the "Amnesty Scheme" and issue has become merely "academic" in the said case. With regard to the specific entries in the Schedule of the KGST Act in respect of the product "soda maker" involved in W.P. (C) No. 35617 of 2009, the learned Government Pleader submits that, the said item clearly comes within the purview of entry 116 and is not liable to be treated as under the residuary entry No. 177, with lesser tax at eight per cent. It is also pointed out that, the petitioners themselves have described the product as "home soda maker". As such, there cannot be any user outside the home and hence, it forms a "home appliances/such other item" coming under entry 116 of the First Schedule to the KGST Act, attracting tax liability at 12 per cent. It is also contended that the decision sought to be relied on by the petitioners in Chitra P. Prabhan v. State of Kerala [2000] 119 STC 351 (Ker); [2000] 8 KTR 487,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rcity of goods in any part of the territory of India. 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) impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest: Provided that no Bill or amendment for the purposes of clause (b) shall be introduced or moved in the Legislature of a State without the previous sanction of the President." While article 301 stipulates that trade, commerce and intercourse throughout the territory of India shall be free, subject to other provisions of Part XIII, article 302 is an "exemption", whereby power is vested with the Parliament to impose such restrictions on the aforesaid right, to be brought about in the public interest by necessary enactment. Article 303 however a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd skins are tanned within the State, merely on account of his having imported the hides and skins from outside, and having therefore not paid any tax under sub-rule (1). The apex court observed that the mere circumstance of a tax having been paid on the sale of such hides or skins in their raw condition did not make the goods of different kind from the tanned hides or skins which had been imported from outside. At the time of sale of those hides or skins in the tanned state, there was no difference between them as goods and the hides or skins tanned outside the State as goods. According to the apex court, the similarity contemplated by article 304(a) is in the nature of the quality and kind of the goods, and not with respect to whether they were subject of a tax already paid or not. Observing that, the provisions of rule 16(2) thus did discriminate against the imported hides or skins, which had been purchased or tanned outside the State and therefore, that they contravened the provisions of article 304(a) of the Constitution, the impugned rule, i.e., rule 16(2) of the aforesaid Rules was accordingly declared as invalid and the tax illegally collected was directed to be refunded to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r business factors, which are more or less in force in different localities. The apex court observed that prevalence of differential rate of tax on sales of the same commodity cannot be regarded in isolation as determinative of the object to discriminate between one State and another. Where the general rate applicable to goods locally made and all those imported from other States is the same, nothing more normally and generally is to be shown by the State to dispel the argument of discrimination under article 304(a), even though the resultant tax amount on imported goods may be different. In Shree Mahavir Oil Mills v. State of Jammu and Kashmir reported in [1997] 104 STC 148 (SC), it was held that, though the States are free to encourage and promote the establishment and growth of industries within their State by all such means as they think proper, they cannot, in the process, subject goods imported from other States to a discriminatory rate of taxation. The apex court relying on the decision in Video Electronics case [1990] 77 STC 82 (SC); AIR 1990 SC 820, held that the State action in granting exemption from tax on edible oil manufactured by small-scale units within the State....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ade, but every imposition of tax does not do so. (iii) Article 301 does not merely protect inter-State trade or operate against inter-State barriers: all trade is protected whether it is intraState or inter-State by the prohibition imposed by article 301, and there is nothing in the language or the context for restricting the power of the Parliament which it otherwise possesses in the public interest to impose restrictions on the freedom of trade, commerce or intercourse, operative only as between one State and another as two entities. (iv) Exercise of the power to tax may normally be presumed to be in the public interest. (v) An Act which is merely enacted for the purpose of imposing tax which is to be collected and to be retained by the State does not amount to a law giving, or authorising the giving of, any preference to one State over another, or making, or authorising the making of, any discrimination between one State and another, merely because varying rates of tax prevail in different States. (vi) The flow of trade does not necessarily depend upon the rates of sales tax; it depends upon a variety of factors, such as the source of supply, place of consumption, ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
....State sales tax nor inter-State sales tax operates directly or immediately on the free-flow of trade or the free movement or the transport of goods from one part of the country to another. None of the provisions of the Central Sales Tax Act, 1956, directly impedes the movement of goods or the free-flow of trade. Even assuming that the Central Sales Tax Act, 1956, is within the mischief of article 301, it is a law made by Parliament in the public interest and is saved by article 302." Per Hegde J., it was observed that: "(i) Mere difference in rates is neither showing preference nor making discrimination but other things being equal, the difference in rates would result in showing preference to some States and making discrimination against others. Hence difference in rates is a prima facie proof of preference or discrimination. It is for the State to justify this difference. (ii) The differences in the rates under section 8 of the Central Sales Tax Act, 1956, are in the public interest, and these differences do not materially affect the free-flow of trade in the country. (iii) None of the sub-sections (viz., sub-sections (2), (2A) and (5) of section 8) has direct or imme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al provisions under Part XIII and it is in exercise of the said power, that the notification bearing SRO No. 1091/1999 has been issued by the State, which incorporates "entry No. 6" to Schedule II, whereby it is provided that, the rate of tax applicable to the small-scale industries registered with the Director of Industries and Commerce in the State of Kerala will be confined to eight per cent. The general rate of tax, as applicable to any other manufacturer, whether situated outside the State or within the State, is of course at a higher rate, as provided under the First Schedule to the KGST Act. The exemption stands confined only to such industries, who are registered with the Director of Industries and Commerce in the State as aforesaid, and it is with the intent to achieve a definite purpose to promote the social and economic scene and procure more employment opportunities within the State. The scope of such notification as involved in P.P. Baby v. Additional Sales Tax Officer [2002] 126 STC 368 (Ker); [2002] 10 KTR 269, having already been considered and explained by a Division Bench of this court, placing reliance on the decisions rendered by the apex court in Video Electron....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assified under "entry 145" and that the same could be reckoned only under the "residuary entry", attracting tax at all points. From the year 1992 onwards, new entries were introduced in the First Schedule and under "entry No. 104", pressure cooker, cook and serve ware to keep food warm, casserole, water filters and similar home appliances not coming under any other entry in the First Schedule or in the Fifth Schedule, were included attracting the tax liability at 12% per cent, at the point of first sale in the State, by a dealer who is liable to pay tax under section 5. All other goods not coming under any entry in any other Schedule were grouped together at the "residuary entry 156" (as then existed) attracting tax liability at eight per cent. The position almost remained the same during and after 1994 till the year 2000, except that the rate of tax payable in respect of the "residuary entry No. 156" came to be reduced as six per cent in the year 1994. The rates were subsequently varied in respect of the above two entries, which happened to be included under entries 116 and 177, respectively from the year 2000 onwards, where the rate of tax was 12 per cent and eight per cent, resp....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., attracting the tax liability at the prescribed rate, which in fact is in no way connected with cooking in kitchen, nor solely allocable for user in kitchen. In the year 2000 and afterwards, some other additional items were also included under the said entry. The petitioner-company themselves have described their product as "home soda maker" and hence it cannot but be a home appliance. This is more so, when, the "home soda maker" cannot have any application/utility other than the home use, as it is an alien product, so far as any commercial use is concerned. Applying the rule of harmonious interpretation and the principle of "ejusdem generis", the term "similar home appliances" in entry No. 116 of the First Schedule to the KGST Act very much takes in a "home soda maker" as well and it is liable to be treated as a classified item, attracting the tax at the rate as prescribed. It is relevant to note that, classification has to be made as per the "popular meaning" of the term/item. The law has been made clear by this court as per the decision reported in Southern Gas Ltd. v. State of Kerala [2005] 139 STC 504 (Ker); [2004] 2 ILR 534 (Ker). Considering the facts of the present case....