Kerala High Court
Pioneer Industries vs Additional Sales Tax Officer-I And Ors. on 6 March, 2002
Equivalent citations: [2003]129STC84(KER)
Author: C.N. Ramachandran Nair
Bench: C.N. Ramachandran Nair
JUDGMENT C.N. Ramachandran Nair, J.
1. The petitioner is a small-scale industrial unit engaged in manufacture and installation of rolling shutters for customers. The petitioner admittedly is not engaged in any window sales. The items are custom-made and fixed at the site of the customer against purchase orders. These are in the nature of works contract as defined under the Kerala General Sales Tax Act. There is no dispute about it. The petitioner furnished application in form No. 21B for payment of tax at the compounded rate under Section 7(7A) of the Kerala General Sales Tax Act, 1963 which was accepted by the assessing authorities and since the petitioner's turnover was below rupees fifty lakhs, the petitioner was entitled to the benefit of concessional rate of tax at 5 per cent and therefore the officer assessed the turnover at the rate of 5 per cent under Section 7(7A). The petitioner filed appeals against these assessments with substantial delay stating that being an SSI unit the petitioner is entitled to the benefit of S.R.O. No. 1728 of 1993 which provides for reduced rate of tax at 4 per cent on the products manufactured and sold by SSI units with turnover below rupees fifty lakhs in a year. The appellate authority found no justification for the delay in the appeal and he further held that no appeal is maintainable against an assessment under Section 7(7A) of the Kerala General Sales Tax Act, 1963 and therefore dismissed the appeal vide exhibit P3. The petitioner is challenging the said order refusing to entertain the appeal on the ground that the orders are not appealable. Alter-natively he has prayed for a direction to modify the assessment by reducing the tax to 4 per cent in terms of S.R.O. No. 1728 of 1993.
2. One of the issues raised by the petitioner is that an order of assessment under Section 7(7A) is also a regular assessment under Section 17(3) of the Kerala General Sales. Tax Act, 1963 and therefore the same is appealable under Section 34 of the Kerala General Sales Tax Act, 1963. I feel there is justification in this argument because the procedure for assessment in respect of payment of tax at compounded rate under Section 7 is contemplated under Section 17(3) and therefore appeal may be maintainable, However in view of the finding of the Appellate Assistant Commissioner that there is no ground to entertain the appeal on account of the inordinate delay and in view of the nature of the issues, I am of the view that the matter need not be referred to the appellate authority because for the following reasons the petitioner is not entitled to the benefit claimed by him which is concessional rate of tax under S.R.O. No. 1728 of 1993.
3. If the petitioner is an SSI unit, it is entitled to concessional rate, if the turnover is below rupees fifty lakhs on the sale of goods manufactured by the petitioner. It is a matter to be examined as to whether the deemed sales under works contract also come within the scope of sale of goods as contemplated under S.R.O. No. 1728 of 1993. In order to avail the said benefit the assessment of the SSI unit has to be completed in terms of Section 5C. That is first by deducting labour charges from the total turnover and then by breaking up the net turnover into various components to identify the taxable turnover of the products manufactured by the SSI unit. In the case of works contract, there will be supply of various articles and components partly manufactured and partly sourced by the petitioner from other manufacturers. But the turnover that qualifies for concessional rate under S.R.O. No. 1728 of 1993 is the turnover on the goods manufactured by the petitioner. Therefore the concessional rate at 4 per cent cannot be applied, unless the taxable turnover of the petitioner on the product manufactured by the petitioner is identified and fixed by the assessing officer. In case of payment of tax at compounded rate under Section 7(7A), the question of dissection of turnover or breaking up of the said turnover into different components do not arise at all. All that the petitioner has to pay under Section 7(7A) is 70 per cent of the rate of tax provided in the Fourth Schedule to the Kerala General Sales Tax Act applicable to the category of works contract executed by the petitioner. Since there is no bifurcation of the turnover and the turnover on the sale of products manufactured by the SSI unit is not ascertainable in the system of payment of tax under compounding, the benefit of S.R.O. No. 1728 of 1993 cannot be given. The petitioner claimed the benefit of proviso to Section 7(7A) of the Act which provides for concessional rate of 5 per cent because the turnover of the petitioner is below rupees fifty lakhs. Admittedly, the petitioner made an application for compounding and the same was accepted by the officer. Between the two, i.e., 4 per cent concession on the "taxable turnover" on the products manufactured by the petitioner and 5 per cent concessional rate on the entire turnover, the petitioner chose the latter. If the petitioner wanted to claim the benefit of concessional rate under S.R.O. No. 1728 of 1993, the petitioner should have opted for a regular assessment under Section 5C of the Kerala General Sales Tax Act, 1963 and the petitioner would have been entitled to the benefit of concessional rate in respect of the taxable turnover on the item "rolling shutter" manufactured and supplied by the petitioner. In view of the option exercised by the petitioner by filing an application in form No. 21A under Section 7(7A), the petitioner cannot claim the benefit of any other concessional rate. When the petitioner has opted for payment of tax at compounded rate and availed the concessional rate of tax, the petitioner cannot simultaneously avail another con-cession in rate under S.R.O. No. 1728 of 1993 which is not contemplated in the scheme of assessment under Section 7(7A) of the Act.
4. The next grievance of the petitioner is with regard to exhibit P11 order of the revisional authority declining to entertain the revision petition filed against demand of penal interest based on the decision of this Court in P.P. Sons v. Assistant Commissioner (Assessment) of Sales Tax [1994] 95 STC 69, This decision is reversed by this Court in the decision reported in P.P. Sons v. Assistant Commissioner (Assessment) of Sales Tax [1999] 113 STC 617 whereunder this Court has held that an order demanding penal interest is also revisable in revision by the Deputy Commissioner. In the circumstances, I vacate exhibit P11. The petitioner pointed out that two revisions filed for 1995-96 and 1996-97 were rejected on the same ground. I vacate the order of the Deputy Commissioner rejecting the revision petitions based on the earlier decisions on the ground that they are not maintainable and restore the same to the file of the Deputy Commissioner. He is directed to issue notice to the petitioner and hear the petitioner on merits on the question of liability of penal interest for these two years. The petitioner will produce a copy of this judgment before the Deputy Commissioner. The Commissioner will hear the petitioner and dispose of the revision petitions within two months from the date of receipt of a copy of this judgment. Since the demand of tax stands confirmed vide findings above, the petitioner will remit another rupees twenty-five thousand towards tax in addition to the amount of rupees twenty-five thousand already paid pursuant to the interim order of this Court. If the amount of Rs. 25,000 is paid within one month from today, recovery of the balance mainly representing penal interest due under exhibits P5 and P6 will stand stayed till disposal of the revisions by the Deputy Commissioner.
Original petition is disposed of as above.
Order on C.M.P. No. 61523 of 2000 in O.P. No. 36033 of 2000M dismissed.