TaxTMI 
TaxTMI 
2015 (11) TMI 47
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing rise to the reference order dated 19.6.2014 need to be noted. 3. S.T. Rev. No. 4 of 2012 relates to assessment year 1998-99 and S.T. Rev. No. 5 of 2012 relates to assessment year 2001-2002. The assessee is a Rice Mill engaged in manufacture of rice. Assessment was completed under the Kerala General Sales Tax Act, 1963 (hereinafter referred to as 'the Act, 1963'), in which no purchase tax was levied on the assessee on the purchase of paddy. The assessment was reopened on the basis of suo motu revision under the Act, 1963 initiated by the Deputy Commissioner. Paddy purchased from agriculturists/unregistered dealers was computed for arriving taxable turnover and the tax due was adjusted against the sales tax exemption available. The assessee, a small scale industrial unit, is eligible for exemption from sales tax on sale of rice and bran. Tax under Section 5A of the Act, 1963 was levied, against which First Appeal was filed by the dealer, which was dismissed. The assessee approached the Sales Tax Appellate Tribunal. The Tribunal vide its judgment dated 26.9.2009 allowed the appeal of the assessee holding that the assessing authority cannot levy tax on purchase under Secti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment of sales tax for the goods manufactured and sold. In the present case assessee has been assessed under Section 5A of the Act, 1963 on the purchase of paddy. We, thus, are only concerned with leviability of purchase tax under Section 5A on the assessee. 8. Section 5 of the Act, 1963 is the charging Section. Paddy as well as rice, both are mentioned in serial No. 9 of second schedule of the Act and are declared goods in respect of which only a single point tax is leviable. Second schedule as well as serial No. 9 is quoted as below:- "SECOND SCHEDULE Declared goods in respect of which a single point of tax only is leviable under sub-section (1) or sub-section (2) of section 5 Sl. No. Description of goods Point of levy Rate of tax % 9. Cereals, that is to say paddy, rice, jower or milo, bajra, maize, ragi kodon, kutki and barli. At the point of first sale in the State by a dealer who is liable to tax under section 5. 4" Section 5A provides for levy of purchase tax. Section 5A(1) is quoted as below:- "5A. Levy of purchase tax:- (1) Every dealer who, in the course of his business, purchases from a registered dealer or from any oth....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... tax was leviable on sale of paddy. Although the tax is leviable on the sale of paddy as per second schedule, tax could not be collected on account of exemption to the agriculturists in sale of their paddy. The assessing officer although initially did not assess the assessee for any purchase tax on paddy, but subsequently, assessment was reopened and assessee was held liable to pay purchase tax under Section 5A on the purchase of paddy. 12. Now we proceed to note in detail judgment of the Apex Court in Peekay Re-Rolling Mills's case (supra). In the said case the Apex Court had occasion to consider the provisions of the Act, 1963 and Sections 5, 5A as well as 15 of the Central Sales Tax Act, 1956. In the said case the assessee was carrying on the business of Steel re-rolling Mills. The raw material was steal ingots. The manufacturing unit, from whom the assessee purchased the steal ingots, were exempted from payment of sales tax by virtue of exemption notification. The facts in the above case is noticed in paragraph 4 of the judgment, which is quoted as below:- "4. The appellant is a company registered under the Companies Act, 1956 having its registered office at Kozikode. It....
X X X X Extracts X X X X
X X X X Extracts X X X X
....llection of tax, there is no levy and since the goods were exempted from payment of sales tax, the goods could be subjected to levy of purchase tax under Section 5A of the State Act. That the levy did not mean imposition only, the same included the collection of tax as well. Where there is no collection, there is no levy and accordingly, the goods which are not subjected to levy of tax at the point of sale could be subjected to levy of purchase tax under Section 5A." Before the Apex Court the assessee raised submissions on the basis of Section 15 of the Central Sales Tax Act. The Apex Court noted provisions of Section 15 of the Central Sales Tax Act and noted the issue to be adjudicated. The following was laid down in paragraphs 20 and 22 of the judgment:- "20. Article 286(3) of the Constitution of India places restriction on the power of every State to impose or authorise the imposition of tax on sale or purchase of declared goods. Article 286 and Sections 14/15 of the Central Act are solely concerned with the declared commodities. We are concerned with the taxation of goods which under Section 14 of the Central Act have been declared to be of special importance in inter-State ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Act remains unaffected by an exemption under Section 10 of the State Act. Consequently, the respondent cannot validly shift the burden of tax to the purchaser under Section 5A of the State Act for the same would violate the condition of single-stage tax under Section 15 of the Central Act." 13. It is relevant to note that along with Peekay Re-Rolling Mills's case (supra), the Apex Court also has decided another case, i.e., Civil Appeal No. 4406 of 2006. The Apex Court allowed all the appeals. 14. Now we note the Division Bench judgments on which reliance has been placed by the learned Government Pleader in support of his submission. First we consider the judgment in P.D. Thomas's case (supra). In the said case the assessee was a Rice Mill. The Tribunal in the aforesaid case held that Rice Mill is not liable to pay purchase tax relying on Peekay Re-Rolling Mills's case (supra). The State filed the revision. The Division Bench in P.D. Thomas's case (supra) distinguished Peekay Re-Rolling Mills's case (supra) by laying down the following in paragraphs 3 and 4:- 3. Before us Government Pleader submitted that Peekay Restrv 104/2010 3 Rolling Mills (P) Ltd.'....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and so much so, the decision of the Tribunal has to be reversed and we do so. 4. It is seen from the assessment order that the assessee is given set-off of tax levied on paddy against tax liability on rice and only net amount is allowed set-off from the exemption available in the certificate. In view of the scheme of levy stated as above, it will be STRV 104/2010 5 perfectly in order to set off the tax liability determined under Section 5A also against exemption available under certificate of exemption along with net tax determined on rice after reducing the tax levied on paddy. In other words, the total amount to be set off against exemption granted under certificate should be the tax levied on rice without granting rebate of tax on paddy. The assessing officer is directed to verify the exemption granted for all the years based on the certificate and the scheme suggested above will be applied only if the assessee continued business till full exemption available under certificate is set off as indicated above. 15. The other Division Bench judgment in Empees Modern Rice Mills's case (supra) was again case of a Rice Mill, on whom purchase tax was levied under Section 5A. Follo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r words, Explanation to Entry 9 of the Second Schedule to the Act which is extracted hereunder, specifically entitles a dealer in rice to get the rebate if he pays tax on the purchase of paddy. Sl. No. Description of goods Point of levy Rate of tax % 9. Cereals, that is to say paddy, rice, jower or milo, bajra, maize, ragi kodon, kutki and barli. At the point of first sale in the State by a dealer who is liable to tax under section 5. 1 Explanation.-Where a tax has been levied in respect of paddy, the tax leviable on rice produced out of such paddy shall be reduced by the amount of tax levied on such paddy. The rebate available apply not only to sales tax paid at first sale point, but the tax leviable under Section 5A on the very same dealer. So much so, sales tax payable on the sale of rice is reduced by the tax borne on the purchase turnover of paddy. In view of the provision for rebate contained in the charging entry, the petitioner cannot have any grievance because the tax liability set off from the total amount of exemption certified will be only the net liability for sales tax payable on rice as reduced by the tax paid on paddy. We, therefore, dismiss....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rn Rice Mill's (supra) wherein how levy of tax on paddy in industrial unit has to be levied so far as exemption of sales tax taking into consideration sale of different products i.e. rice, bran etc., learned Judge opined that Empees Modern Rice Mill's (supra) is the perfect law which is applicable to the facts of the said case. The facts in the present case are similar to the one in Empees Modern Rice Mill's (supra) and so also the unreported revision referred to above." 17. The learned Government Pleader, in support of the revisions submitted that the Miller, who purchased paddy from unregistered dealer is liable to pay purchase tax, since paddy and rice are two commercially different commodities, hence levy of purchase tax cannot be considered as double tax on the same commodity. He submitted that the restriction contained in Section 15(a) of the Central Sales Tax Act against the levy of tax at multipoint regarding declared goods, is applicable only if the commodity is same, hence, the said restriction is not applicable in the present case. Sales tax under Section 5 of the Act, 1963 is levied on one commodity, i.e., rice and purchase tax under Section 5A on another c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ods in circumstances in which no tax under Section 5 is leviable on the sale price of such goods and, (i) either consumes such goods in the manufacture of other goods for sale or otherwise or disposes of such goods in any manner other than by way of sale in the State, or" The Apex Court rejected the submission of the assessee and laid down the following:- "There is no merit in the submission made on behalf of the assessees that they had not consumed paddy when they produced rice from it by merely carrying out the process of dehusking at their mills. Consumption in the true economic sense does not mean only use of goods in the production of consumers' goods or final utilisation of consumers' goods by consumers involving activities like eating of food, drinking of beverages, wearing of clothes or using of an automobile by its owner for domestic purposes. A manufacturer also consumes commodities which are ordinarily called raw materials when he produces semi-finished goods which have to undergo further processes of production before they can be transformed into consumers' goods. At every such intermediate stage of production, some utility or value is added to goods wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....evying tax by a State Legislature on more than one stage. When the second schedule has levied the tax on the first sale, there is no jurisdiction in the respondents to shift the levy on purchase. 21. In Peekay Re-Rolling Mills's case (supra) Sections 5, 5A as well as second schedule has been considered by the Apex Court. The Apex Court noticed in the said case that tax is sought to be levied on Section 5A on the same goods that are taxable under Section 5, but exempted. The Apex Court noted that the question to be required to be adjudicated was whether the tax sought to be levied under Section 5A on declared goods would amount to tax at a second stage, therefore, violative of Section 15 of the Central Act. The Apex Court further held that Sections 5 and 5A of the Act, 1963 are independent Sections referring to the judgment of the Apex Court in Shanmuga Traders v. State of Tamil Nadu: (1999) 114 STC 1). 22. In the above case, the Apex Court had occasion to consider the provisions of Section 15 of the Central Sales Tax Act as well as the provisions of Tamil Nadu General Sales Tax Act, 1959 as well as the circular dated 29.1.1993 issued by the Commissioner of Commercial Tax. The....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ny intermediate sale in the State and if the single point is fixed by the State, the point of first sale and the State exempts the first sale, sold goods may not be subjected to tax at either that point of first sale or any subsequent sale in the State. Following was laid down in paragraphs 12 and 13 of the judgment:- "12. We do not think that the conclusion reached by the Madras High Court in the order under appeal can be upheld. The goods with which we are concerned being declared goods, they can only be taxed at a single point, that is, only one sale in the State can be subjected to tax. It is for the State to determine whether the single point should be the point of first sale in the State or the last sale in the State or any intermediate sale in the State. If the single point is fixed by the State at, say, the point of first sale and the State exempts the first sale from payment of tax, either by a general provision or a specific provision applicable to a class of seller, the particular seller or the goods sold may not be subjected to tax at either that point of first sale or any subsequent sale in the State. 13. The Second Schedule of the State Act specifies the single po....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l's case as such though factual position is different in the case of rice mill. As already stated, Legislature itself has provided safeguard against multiplicity of levy of tax on both paddy and rice falling under declared goods. So much so, the position is such that levy of tax on both paddy and rice has to be considered at the hands of dealer. In Peekay Re-rolling Mills (P) Ltd.'s case Supreme Court found that there is levy of tax at the point of purchase of ingots by the SSI unit because it was purchased from another industrial unit which was liable to pay tax, but for the exemption granted to that unit. So much so, the Supreme Court held that there is levy at the hands of the seller of ingots, no matter such levy did not lead to collection of tax. So far as the case of paddy is concerned, there is no such position available here. It is not known wherefrom respondent procured paddy. If purchase is not from any dealer liable to pay tax, then there cannot be any levy of tax on paddy at all. In fact, purchase may be from farmers, petty dealers, etc. who are not liable to tax as dealers under the Act. However, unless there is proof of levy of tax at the hands of selling deal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be rad in, nothing is to be implied. One can only look fairly at the language used. Relying upon this passage LORD UPJOHN said: "Fiscal measures are not built upon any theory of taxation." 28. The Apex Court in A.V. Fernadez v. State of Kerala: AIR 1957 SC 657) had occasion to interpret Travancore-Cochin General Sales Tax Act. While examining the principle of construction of the said Act, the following was laid down in paragraph 29:- "29. It is no doubt, true that in construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of the law and not merely to the spirit of the statute or the substance of the law. If the Revenue satisfies the Court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the legislature and by considering what was the s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y the tax and the rate at which the tax is to be paid. If there is any ambiguity regarding any of these ingredients in a taxation statute then there is no tax in law. Then it is for the legislature to do the needful in the matter. 13. In the case of Bank of Chettinad Ltd. v. CIT the Privy Council quoted with approval the following passage from the opinion of Lord Russell of Killowen in IRC v. Duke of Westminster:- "I confess that I view with disfavour the doctrine that in taxation cases the subject is to be taxed if in accordance with a court's view of what it considers the substance of the transaction, the court thinks that the case falls within the contemplation or spirit of the statute. The subject is not taxable by inference or by analogy, but only by the plain words of a statute applicable to the facts and circumstances of his case. As Lord Cairns said many years ago in Partington v. Attorney General at p. 122: 'As I understand the principle of all fiscal legislation, it is this; if the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seek....