Kerala High Court
Babu Cyriac vs Sales Tax Officer And Anr. on 14 August, 2003
Equivalent citations: [2004]135STC375(KER)
Bench: G. Sivarajan, M. Ramachandran
JUDGMENT Jawahar Lal Gupta, C.J.
1. Is a person who purchases a car for his own use from a place outside Kerala entitled to the reduction in the amount of "entry tax" to the extent of the sales tax already paid in that State ? This question arises in the context of Section 4(2) of the "Kerala Tax on Entry of Motor Vehicles into Local Areas Act, 1994". A division Bench of this Court had answered this question in favour of the purchaser. However, another Bench of this Court had some reservation and considered it appropriate that a Full Bench should hear the matter. Thus, these two appeals have been placed before this Bench.
2. It may be noticed at the outset that Section 4(2) was repealed in the year 1997. However, it was on the statute book at the relevant time. Thus, we are examining the issue. Learned counsel for the parties have referred to the facts in W.A. No. 113 of 1999. These may be briefly noticed.
3. On October 1, 1994 the appellant purchased a Maruti 1000 from M/s. Solar Automobiles, Mangalore in the State of Karnataka. He had paid a total amount of Rs. 3,94,043.68. Out of this, he had paid an amount of Rs. 22,285.39 by way of sales tax at the rate of 6 per cent of the price of the car, which was Rs. 3,71,423.10. An amount of Rs. 304.72 had been paid as the price for the accessories. On that too, sales tax of Rs. 30.47 was paid at the rate of 10 per cent. The appellant brought the car to Kerala. On November 4, 1994 the car was registered by the registering authority. No demand for entry tax was made. After a lapse of more than three years, a notice dated February 19, 1998 was issued to the appellant under Section 8(4) of the Act. A copy of this notice has been produced as exhibit P3. By this notice, the appellant was called upon to pay a tax at the rate of 6 per cent. The estimated purchase value of the vehicle was fixed at Rs. 3 lakhs. On receipt of this notice, the appellant submitted a reply dated March 17, 1998. He maintained that the tax was not leviable. A copy of this reply is exhibit P4. On March 26, 1998 he also filed a return in form II as envisaged under the Rules framed under the Act.
4. The matter was considered by the Sales Tax Officer, who is also the assessing authority under the Kerala Tax on Entry of Motor Vehicles into Local Areas Rules, 1994. The appellant was held liable to pay an amount of Rs. 23,640 by way of tax at the rate of 6 per cent. A notice of demand as contemplated under the Rules was also served on him on June 12, 1998. A copy of the order of assessment is exhibit P5 and that of the notice of demand is exhibit P6.
5. Aggrieved by the order of assessment and the notice of demand, the appellant approached this Court through a petition under Article 226 of the Constitution. The respondents did not file any counter-affidavit. However, a brief statement was filed on behalf of the Sales Tax Officer by the Senior Government Pleader. It was, inter alia, stated that the tax had been rightly levied and demanded.
6. The matter was considered by a learned single Judge of this Court. Relying upon a circular issued by the State Government, the learned single Judge held that the tax was leviable. The decision of the division Bench in Rajan v. State of Kerala (1995) 2 KLT 369 was noticed. However, it was observed that "the division Bench was not concerned with the interpretation of Section 4(2)". Thus, the writ petition was dismissed. Hence this appeal.
7. Mr. Abraham Mathew, learned counsel for the appellant, contended that the impugned orders are contrary to the plain language of Section 4(2). The view taken by the learned single Judge is based on a circular, which had no statutory sanction. Thus, he submitted that the judgment of the learned single Judge be set aside and the impugned orders quashed. On the other hand, Mr. Raju Joseph submitted that the demand was in conformity with the provisions of the Act.
8. A brief reference may be made to the provisions of the Act and the Rules.
9. The Act was enacted "to provide for the levy of tax on the entry of motor vehicles into local areas for use or sale therein". Section 2 defines various expressions. Under Clause (d), "entry of motor vehicle into a local area" means entry "from any place outside the State for use or sale therein." Clause (g) defines an "importer" to mean "a person who brings motor vehicle into a local area from any place outside the State for consumption, use or sale therein or who owns the vehicle at the time of its entry into the local area." The State means "the State of Kerala". Section 3 provides for the levy of tax. Section 4 deals with the reduction in tax liability. It provides as under :
"4. Reduction in tax liability.--Where an importer of a motor vehicle liable to pay tax under this Act, being a dealer in motor vehicles, becomes liable to pay tax under the Kerala General Sales Tax Act as a result of the sale of such motor vehicle, then the amount of tax payable under the General Sales Tax Act shall be reduced by the amount of tax paid under this Act.
(2) Where an importer who, not being a dealer in motor vehicles, had purchased a motor vehicle for his own use in any Union Territory or any other State, then the tax payable by him under this Act shall, subject to such conditions as may be prescribed, be reduced by the amount of tax paid, if any, under the law relating to general sales tax in force in that Union Territory or State."
A perusal of the above provision shows that under Clause (1) the liability of a dealer in motor vehicles to pay tax under the General Sales Tax Act is reduced to the extent of the amount of tax paid under the Act. Clause (2) deals with a person who is not a dealer in motor vehicles. If such a person purchases a vehicle in any Union Territory or any other State for his own use, the "tax payable by him under this Act" is to be "reduced by the amount of tax paid, if any, under the law relating to General sales tax in force in that Union Territory or State". The language is clear. There is no ambiguity.
10. Mr. Raju Joseph contended that the concession under Clause (2) is admissible only when the person purchases a motor vehicle "for his own use in any Union Territory or any other State." In other words, if the person just purchases the vehicle, though for his own use and brings it to the State of Kerala, he would be liable to pay the tax.
11. The contention as raised by the learned counsel is too tenuous. The words of the statute are plain and unambiguous. These clearly contemplate the grant of benefit of reduction in payment of entry tax to a person who imports a vehicle into the State of Kerala for his own use. The words "in any Union Territory or any other State" qualify the purchase and not the use of the vehicle.
12. The matter can be examined from another angle. Section 19 of the Act empowers the Government to make Rules by notification. In exercise of the powers under the Act, the State Government had framed the Kerala Tax on Entry of Motor Vehicles into Local Areas Rules, 1994. The title of the Rules as initially framed was in conformity with the Act, which had received the assent of the Governor on June 9, 1994. On July 29, 1996 the title of the Act as well as the Rules were modified. The words "motor vehicles" were substituted by "Goods". In the present case, the Rules, which were prevalent at the relevant time are being noticed. On November 4, 1994 when the vehicle was registered in the State of Kerala, rule 20A was inserted in the Rules. It provided as under :
"20A. Set-off of tax paid by an importer under the general sales tax law in force in any other State or Union Territory.--(1) In assessing the amount of tax payable by an importer in respect of any period falling under Sub-section (2) of Section 4 of the Act, there shall be granted a set-off of the tax equal to the amount of tax paid by him under the law relating to general sales tax in force in any other State or Union Territory :
Provided that if in any case the amount of sales tax paid by the importer in the Union Territory or State referred to in Sub-rule (1) exceeds the amount of tax payable under the Act, the importer shall not be eligible to claim any refund.
(2) No set-off under this rule shall be granted unless the importer proves that tax has actually been assessed by a competent authority and has been paid into the Government treasury of the Union Territory or State referred to in Sub-rule (1)."
A perusal of the above provision shows that the importer was entitled to "a set-off of the amount equal to the amount of tax paid by him under the law relating to the General Sales Tax Act in force in any other State or Union Territory". The rule as framed by the Government is clearly indicative of the fact that the benefit was not contingent upon the use of the vehicle in the State of purchase. Thus, it is clear that under the provision, as understood by the Government itself, the importer of the vehicle was entitled to the reduction in the tax liability.
13. Faced with this situation, Mr. Raju Joseph submitted that the Act had been enacted to make up for the loss of sales tax on account of the purchase of vehicles outside the State. If the plea as raised by the appellant is accepted, the basic object of the Legislature shall be defeated.
14. The contention as raised by the learned counsel cannot be accepted. The court has to see the plain language of the statute. The legislative intent is irrelevant. The rule in this behalf was laid down in Cape Brandy Syndicate v. Commissioner of Inland Revenue (1921) 1 KB 64. At page 71, Rowlatt J., had observed as under :
"In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used."
15. The above rule was approved by their Lordships of the Supreme Court in Calcutta Jute Manufacturing Co. v. Commercial Tax Officer [1997] 106 STC 433 (SC) ; AIR 1997 SC 2920. Still further, the matter was considered by a Constitution Bench of the Supreme Court in Mathuram Agrawal v. State of Madhya Pradesh AIR 2000 SC 109. In paragraph 11, their Lordships were pleased to lay down the following rule :
"...........The intention of the Legislature in a taxation statute is to be gathered from the language of the provisions particularly where the language is plain and unambiguous. In a taxing Act it is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language. It is not the economic results sought to be obtained by making the provision, which is relevant in interpreting a fiscal statute. Equally impermissible is an interpretation, which does not follow from the plain, unambiguous language of the statute. Words cannot be added to or substituted so as to give a meaning to the statute, which will serve the spirit and intention of the Legislature. The statute should clearly and unambiguously convey the three components of the tax law, i.e., the subject of the tax, the person who is liable to pay 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."
In view of the above, it is clear that the intention of the Legislature has to be gathered from the language of the provision and the economic results are irrelevant. In view of this clear enunciation of law, the contention that the intention of the Legislature shall be defeated cannot be accepted.
16. Mr. Raju Joseph then referred to Circular No. 7/95/TX issued by the Government with the object of explaining the true import of Section 4(2). He submitted that the learned single Judge has rightly relied upon this circular. It represents the contemporaneous exposition of the provision and can be a good guide in interpreting the provision. In this circular, after noticing the provision and the view taken by various assessing authorities, it was stated as under:
"The reduction under Section 4(2) is allowable only when the assessee purchases a motor vehicle in any Union Territory or any other State for his own use in such Union Territory or State. The sale to the consumer should be a local sale within the Union Territory or the other State to the consumer direct. So this applies only to cases where the vehicles are first registered in the Union Territory or the other State and then brought to the State of Kerala within 15 months of such purchase."
17. Admittedly, there is no provision in the Act authorising the Government or the Board to issue a binding clarificatory circular. Thus, the above clarification as embodied in the circular is wholly irrelevant for the purpose of interpreting the provision in the statute. Still further, the clarification brings out the fact that the provision, as it stood at the relevant time, did not in terms require that the purchase of vehicle had to be for "use in such Union Territory or State". These were sought to be added under the garb of a clarification. Even if it is assumed that the Legislature had intended to say what has been actually said in the clarificatory circular, the fact remains that it had not said so. The circular cannot, thus, be invoked to sustain the impugned orders.
18. Mr. Raju Joseph then submitted that the contention of the appellant, if upheld, would not only defeat the very object of the statute but would also result in a substantial loss of revenue to the State. On the other hand, Mr. Abraham Mathew pointed out that the appellant had purchased the car in Karnataka only because it was not available in the State of Kerala. At the relevant time, the rate of sales tax of cars in the State of Kerala was 5 per cent. The appellant had actually paid sales tax at the rate of 6 per cent in the State of Karnataka. Thus, the appellant's effort was not to defeat the purpose of the statute or to cause loss of revenue to the State.
19. The contention of Mr. Mathew appears to be well founded. In the facts and circumstances, it cannot be said that the appellant had purchased the car in Karnataka to save any money on account of levy of sales tax. Still further, as already noticed, the legislative intent or the loss of revenue are really not relevant considerations while considering the validity of a levy.
20. Mr. Abraham Mathew had also contended that the assessment was barred by limitation. He referred to Section 8(5) to contend that no order of assessment could be passed "after the expiry of three years from the last date prescribed for filing of returns for that period". He also pointed out that the vehicle had been registered on November 4, 1994. The notice was issued after the expiry of the limitation. In the facts and circumstances of this case, we do not consider it necessary to go into this issue as no such point was raised in the reply to the show cause notice or before the learned single Judge.
21. Mr. Raju Joseph then submitted that so far as W.A. No. 257 of 1999 is concerned, the position is different. He contended that the appellant in this appeal was not the first purchaser. He had not proved payment of any tax in the State of Karnataka. Thus, the tax had been correctly levied.
22. A perusal of the paper book shows that the appellant had produced a certificate dated June 18, 1996 showing that an amount of Rs. 21,390.26 had been paid by way of sales tax at the rate of 8 per cent and cess at the rate of 5 per cent to the Government of Karnataka on the purchase of the jeep. He had also produced the invoice from "India Garage" indicating that the total price of the vehicle inclusive of all taxes was Rs. 2,83,961. He had also paid Rs. 210 by way of road tax for one month as temporary registration charges. Thus, it cannot be said that there was no evidence regarding the payment of tax.
23. No other point was raised.
24. In view of the above, it is held that :
(1) The provisions of Section 4(2) have to be construed on the basis of the plain language. The intention of the Legislature or the economic consequences are irrelevant.
(2) According to the plain language of the provision, a person who purchases a motor vehicle for his own use outside the State of Kerala was entitled to the reduction in the amount of entry tax to the extent of the tax paid by him outside the State. In the present case, the appellant had admittedly paid an amount of Rs. 22,315.86 by way of sales tax in the State of Karnataka. Notice was given to him after a lapse of more than three years on February 19, 1998. He was called upon to show cause as to why a tax of Rs. 18,000 be not levied. However, ultimately a demand for Rs. 23,640 was raised. The appellant was entitled to the reduction to the extent of the tax he had already paid. To that extent, the demand was not sustainable.
(3) Even in the connected case, the benefit shall be admissible to the appellant.
In view of the above, both the appeals are allowed. The impugned orders are set aside. The authority shall decide the matter in the light of the observations. However, the parties are left to bear their own costs.
Order on C.M.P. No. 269 of 1999 in W.A. No. 113 of 1999 dismissed.