Kerala High Court
Malabar Regional Co Operative Milk ... vs State Of Kerala on 21 October, 2021
Author: S.V.Bhatti
Bench: S.V.Bhatti
OTA No.9 of 2016 and
batch cases 1
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE S.V.BHATTI
&
THE HONOURABLE MR.JUSTICE BASANT BALAJI
THURSDAY, THE 21ST DAY OF OCTOBER 2021 / 29TH ASWINA, 1943
OT.APPEAL NO. 9 OF 2016
AGAINST THE ORDER No.C3/5444/2016/CT DATED 13.4.2016 OF
COMMISSIONER OF COMMERCIAL TAXES, THIRUVANANTHAPURAM
APPELLANT/Petitioner/Assessee:
M/S.MALABAR REGIONAL CO-OPERATIVE MILK PRODUCERS UNION
LTD.(M.R.C.M.P.U.LTD) MILMA KOZHIKODE DAIRY
KUNNAMANGALAM, KOZHIKODE.
BY ADV SMT.K.LATHA
RESPONDENT/Respondent/Revenue:
STATE OF KERALA
REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT, GOVT.
SECRTARIAT, THIRUVANANTHAPURAM 695 001
OTHER PRESENT:
SR GP SHAMSUDHEEN V.K.
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON
21.10.2021 ALONG WITH WP(C).17873/2018 AND 22273/2016, THE COURT
ON THE SAME DAY DELIVERED THE FOLLOWING:
OTA No.9 of 2016 and
batch cases 2
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE S.V.BHATTI
&
THE HONOURABLE MR.JUSTICE BASANT BALAJI
THURSDAY, THE 21ST DAY OF OCTOBER 2021 / 29TH ASWINA, 1943
WP(C) NO. 17873 OF 2018
PETITIONER:
MALABAR REGIONAL CO. OPERATIVE MILK PRODUCERS UNION
LIMITED
WAYANAD DIARY,CHUZHALI,KALPETTA-673121,REPRESENTED BY
IT'S MANAGER)MR.S.RADHAKRISHNAN.
BY ADVS.
SMT.K.LATHA
SMT.JESSY MANUEL
RESPONDENTS:
1 THE ASSISTANT COMMISSIONER OF STATE TAX
DEPARTMENT OF STATE GOODS TAX, WAYANAD AT KALPETTA
673121.
2 THE COMMISSIONER OF STATE TAXES
TAX TOWER,KILLIPALAM,KARAMANA.P.O,THIRUVANANTHAPURAM-
695002.
3 SECRETARY
TAXES DEPARTMENT,GOVERNMENT OF
KERALA,SECRETARIAT,THIRUVANANTHAPURAM-695001.
4 CENTRAL BOARD OF EXCISE & CUSTOMS
DEPARTMENT OF REVENUE, MINISTRY OF FINANCE,GOVERNMENT
OF INDIA,NEW DELHI-110001.
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON
21.10.2021, ALONG WITH OT.Appeal.9/2016 AND CONNECTED CASES, THE
COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
OTA No.9 of 2016 and
batch cases 3
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE S.V.BHATTI
&
THE HONOURABLE MR.JUSTICE BASANT BALAJI
THURSDAY, THE 21ST DAY OF OCTOBER 2021 / 29TH ASWINA, 1943
WP(C) NO. 22273 OF 2016
PETITIONER:
MALABAR REGIONAL CO OPERATIVE MILK PRODUCERS UNION
LIMITED
(M.R.C.M.P.U. LTD), (MILMA PALAKKAD DAIRY),PALAKKAD
REPRESENTED BY ITS MANAGERMR.P.GOPALAKRISHNAN.
BY ADV SMT.K.LATHA
RESPONDENTS:
1 STATE OF KERALA
REPRESENTED BY THE CHIEF SECRETARY TO THEGOVT. OF
KERALA, SECRETARIAT,THIRUVANANTHAPURAM - 695001.
2 THE ASSISTANT COMMISSIONER
SPECIAL CIRCLE, OFFICE OF THE ASSISTANT
COMMISSIONER,PALAKKAD - 678103.
3 THE COMMISSIONER,
COMMERCIAL TAXES,THIRUVANANTHAPURAM-695 001.
4 THE INSPECTING ASSISTANT COMMISSIONER
REVENUE RECOVERY OFFICER IN CHARGE,COMMERCIAL TAXES,
PALAKKAD-678 101.
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON
21.10.2021, ALONG WITH OT.Appeal.9/2016 AND CONNECTED CASES, THE
COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
OTA No.9 of 2016 and
batch cases 4
JUDGMENT
[OT.Appeal Nos.9/2016, 17873/2018, 22273/2016] S.V.Bhatti, J.
Heard the learned counsel Smt.Latha K. for appellant/petitioner and the learned Senior Government Pleader Mr.Shamsudheen for respondents.
2. M/s Malabar Regional Co-operative Milk Producers Union Ltd., a dealer registered under the Kerala Value Added Tax Act, is the appellant/petitioner in the instant three cases. The State of Kerala represented by the Secretary, Tax Department is the respondent. Common issues of fact and law arise between the same set of parties; hence disposed of by this common judgement. For convenience, the parties are referred to as 'Dealer' and 'Revenue' respectively. O.T.Appeal No.09/2016 has been treated as the lead matter and the decision therein would have effect on the outcome of the other two Writ Petitions. OTA No.9 of 2016 and batch cases 5 O.T.Appeal No.09 of 2016
3. Dealer is a Milk Chilling Centre and manufacturer of Milk products under the brand name 'Milma'. The Dealer has established its facilities in 6 northern Districts of Kerala. Milma being a successor entity to the Kerala Live Stock Development and Milk Marketing Board continued the separate registrations held by the Kerala Live Stock Development and Milk Marketing Board for all the three establishments in northern districts of Kerala. The effect of the said continuation is that these separate establishments in six Districts, owned by of Dealer are also given separate TIN numbers under Kerala Value Added Tax Act, 2003.
4. The Dealer filed Writ Petition (c) No.21946 of 2015 challenging assessment order dated 25.6.2015 of the Asst.Commissioner, KVAT Special Circle, Commercial Taxes, Kasaragod principally on the ground that the assessment order dated 25.6.2015 included the movement/transfer of milk products from Kasargod District to other units of dealer, as sale liable to tax under KVAT Act. In other words, the Dealer contended that the movement/transfer of milk products from one unit of dealer to another unit/godown of dealer does not attract the definition of sale under KVAT OTA No.9 of 2016 and batch cases 6 Act. There is no receipt of consideration and the ownership of the milk products continues to be with Milma Apex body whether it is in the godown of one unit or the other. Therefore, including movement of milk products from one unit to another in Sales Turnover is illegal and beyond the scope of KVAT Act. On 1.9.2015, W.P.(C) No.21946 of 2015 was disposed of and the operative portion of the judgment reads thus:
"On a consideration of the facts and circumstances of the case and the submissions made across the bar, I find that in Ext. P11 order, there is no finding by the 2 nd respondent, based on any valid material, as regards the nature of the transaction involved in the transfer of milk and other products between various units of the petitioner society. Inasmuch as the levy of tax is on the taxable event of sale, it is incumbent upon the assessing authority to first determine whether the transfer in question attracts the tax under the KVAT Act. For this purpose, the assessing authority would have to analyse the nature of the transaction and come to a definite finding as to whether it constitutes a sale and only thereafter proceed to determine the tax liability in respect of the said transaction. Inasmuch as the said exercise has not been done by the 2 nd respondent in Ext P11 order. I quash Ext P11 order, as also Ext P12 demand notice, and direct the 2nd respondent to reconsider the matter and pass a fresh assessment order in respect of the petitioner for the assessment year 2012-13. The 2 nd respondent shall pass orders as directed, within a period of one month from the date of receipt of a copy of this judgment, after affording the petitioner an opportunity OTA No.9 of 2016 and batch cases 7 of being heard. It will be open to the petitioner to produce any material to substantiate his contention on merits before the 2nd respondent, at the time of hearing. The petitioner shall produce a copy of the writ petition together with a copy of this judgment before the 2 nd respondent for further action.
5. It is the case of Dealer that upon remand by this Court through judgment dated 01.10.2015 in W.P.(C) No.21946 of 2015, further steps in the matter were not taken and the tax demanded by including movement of milk products/goods from one unit to another was not levied or demanded. The Dealer since had the apprehension that this is a recurring issue in its business operators in Milma and its units in as much as milk products/goods considering their shelf life etc. are moved from one unit/godown to another unit/godown depending upon the business exigencies, decided to have clarification under Section 94 of VAT Act. The Dealer through Ext.A12 dated 08.02.2016 applied for clarification to the Commissioner of Commercial Taxes,Trivandrum.
6. The Commissioner of Commercial Taxes through Annexure-A13 dated 13.04.2016 has clarified on the applicability and levy of VAT to inter-unit transfer as follows:
OTA No.9 of 2016 and batch cases 8 "In the instant case, the dealer had voluntarily filed the application for taking out separate registrations for each place of business under Section 20(3) of the Kerala Value Added Tax Act, 2003. As such, general rules applicable under the Act will not be applicable to the instant case which is of a special nature. The said sub section provides that the Commissioner may treat each of such places of business as a separate unit for the purposes of levy, assessment and collection of tax. So, the general principle that one cannot transfer ownership to himself is not applicable in the instant case. Here, as per law, each unit acquires the character of a separate legal entity and as per the statute, for the purpose of levy, assessment and collection of tax, each unit is to be treated as a separate one, and the transfer among such units can only be treated as a sale and not as stock transfer. So, in view of the above said specific statutory provision and considering the fact that it became applicable only because of an application filed by the dealer, the applicant cannot turn around later and raise the claim that only a part of the said provision is applicable to them and not the whole provision that too according to their whims and fancies.
So, in view of the specific statutory provision that has become applicable only because of the voluntary application filed by the dealer, it is hereby clarified that the transfer of goods among different units of MRCMPU can only be treated as a sale, since each unit acquires the characteristic of a separate legal entity.
Hence the appeal under Section 63 of KVAT Act at the instance of the Dealer.
7. Adv.Latha K. argues that order dated 13.04.2016 is completely OTA No.9 of 2016 and batch cases 9 illegal and unsustainable both in law and fact. The Commissioner failed to appreciate the movement of goods from one unit of Milma to another unit of Milma but has gone by allocation of separate TIN number to each one of the dairy units of Milma. The dairy units may be having a separate TIN and the registration resulting in issuance of separate TIN is not the deciding factor when Milma is the principal dealer under whom all the units are working. The clarification, Annexure-A13 ignores the view expressed by this Court in judgment dated 1.9.2015 in Writ Petition No.21946 of 2015. She lays emphasis on the following sentence "in as much the levy of tax is on the taxable event of sale it is incumbent upon the assessing authority to first determine whether the transfer in question attracts the tax under the KVAT Act." For the said purpose, the Assessing Authority would have to analyse the nature of the transaction/transfer and come to a definite finding as to whether movement/transfer constitutes a sale and only thereafter proceed to determine the tax liability in respect of the said transaction. On the contrary, it is argued, Annexure-A13 has considered a separate registration obtained under Section 20(3) and constituting a rationale OTA No.9 of 2016 and batch cases 10 reason for levying and demanding tax on inter-unit transfer/movement effected by the dealer. She refers to and relies on the judgment of this Court in O.T.(Revision) No.40 of 2015 for the proposition that even if separate registration is obtained and the transfer of furniture effected in the said case between the units does not constitute a sale excisable to tax.
8. Senior G.P. Mr.Shamsudheen relies on the very basis resulting in clarification and contends that the Dealer has taken separate registration for each one of the units. Admittedly, the movement is from one unit to another unit, meaning thereby movement from one TIN registration to another TIN registration. Therefore the movement is rightly treated as a sale.
9. We have noted the submissions canvassed by the counsel appearing for the parties and perused the record.
10. At the outset it is to be noted that the description, composition and the convenience for which the arrangement now being placed i.e. having more than one TIN registration for the units of Milma is not in dispute. It is also not in dispute that the arrangement now being OTA No.9 of 2016 and batch cases 11 continued by the Dealer is the very same arrangement which was followed by its predecessor in interest. The department does not also dispute the nature of movement/transfer of milk products/goods inter se units and that consideration is not received for the transfer of milk products/goods from one unit to another. This Court in WP(C) No.21946 of 2015, by referring to the applicability of principles of law in matters of taxation succinctly has held that the levy of tax is on the taxable event of sale, it is incumbent upon the assessing authority to first determine whether the transfer in question attracts the tax under the KVAT Act. The clarification in Annexure A13 overlooks the general principle that one cannot transfer ownership to himself as not applicable and erroneously has determined the tax liability of the dealer by referring to the character of a separate legal entity and registration. We are unable to appreciate the said reasoning in Annexure-A13. Section 20(3) reads as follows:
"The Commissioner may, on application by the dealer, treat each of such places of business as a separate unit for the purposes of levy, assessment and collection of tax, and thereupon all the provisions of this Act regarding registration, filing of returns, assessment and collection of tax shall apply, as if each of such places of business were a separate unit except for considering the eligibility for payment of tax under OTA No.9 of 2016 and batch cases 12 sub section (5) of Section 6."
11. A plain reading of Section 20(3) does not enable one to accept that very separate registration granted on the application of a dealer, the dealer comes under obligation to pay tax even without reference to the incidence of sale or not. Section 20(3) is a facilitating option provided in KVAT Act in favour of a dealer. The sub section enables treating each unit as a business dealer for purposes of levy, assessment and collection of tax. The said fiction shall not be understood as enabling the revenue to collect tax, irrespective of the fact whether the incidence of tax has arisen or not. Further, levy, assessment, collection of tax are applicable to transfer of sale falling within the scope of KVAT. Therefore, by referring to the circumstances that each one of the units of Milma/dealer as the deciding factor for treating the movement of goods from one unit to another as excisable for KVAT is illegal and contrary to very sub section 20(3) relied by the revenue. Once the basis for issuing Ext.A3 is erased, what stares at the department is the finding recorded in Writ Petition (c) No.21946 of 2015. Whether the movement of goods is sale or not has to be considered on case to case basis and as and when the ingredients of sale OTA No.9 of 2016 and batch cases 13 are attracted under the Act, the Dealer is under obligation to pay the tax. For the above reasons, we are of the view that Ext.A13 is untenable in fact and law and accordingly set aside.
12. Writ Petition Nos.22273 of 2016 and 17873 of 2018 are filed questioning the assessment orders made pursuant to Annexure-A13 clarification dated 13.04.2016. Since Ext.A13 is set aside by this Court, the order of assessment with reference to treating any transfer from one unit to another as sale in respective assessment orders is also illegal and liable to be set aside. Accordingly the assessment orders impugned, made particularly, with reference to Ext.A13 are set aside.
13. In Writ Petition No.17873 of 2018, two more questions are raised:
a) to declare that the powers under erstwhile Entry 54 do not Exist post 15.09.2017 and therefore the provisions of Kerala Value Added Tax Act cannot be enforced after 15.09.2017 so long as the old Entry 54 has not been saved.
b) to declare that when provisions of Constitution are inconsistent with the provisions of a statute, the Constitutional provisions only will prevail and hence sub section (2) of Section 174 of Kerala Goods and Service Act 2017 to the extent to which they are in conflict with Constitution are bad in law.
OTA No.9 of 2016 and batch cases 14 It is made clear that the said issues are sub judice in a batch of cases. Hence we make it clear that the order we make in these writ petitions shall not be understood in any way as dealing with the other grounds pending decision in the batch. The said ground is not considered in this writ petition.
O.T.Revision is allowed.
Writ Petitions allowed as indicated above.
Sd/-
S.V.BHATTI JUDGE Sd/-
BASANT BALAJI JUDGE css/ OTA No.9 of 2016 and batch cases 15 APPENDIX OF WP(C) 17873/2018 PETITIONER EXHIBITS EXHIBIT P1 THE TRUE COPY OF PRE-ASSESSMENT NOTICE FOR THE YEAR 2013-2014 DATED 16-5-2018 ISSUED BY THE FIRST RESPONDENT TO THE PETITIONER EXHIBIT P2 TRUE COPY OF ORDER ISSUED BY THIS COURT IN SIMILAR WRIT PETITIONS AND PASSED INTERIM ORDERS IN WP(C)NO.13930/2018,DATED 13/04/2018 EXHIBIT P3 TRUE COPY OF ORDER VIDE ORDER NO.IA 1291/2016 IN OTA NO.9/2016 DT.15.06.2016 EXHIBIT P4 COPY OF CLARIFICATION ORDER U/S 94 OF THE KERALA VALUE ADDED TAZX C3/5444/16/CT/DT 13.04.2016 ISSUED BY THE COMMISSIONER OF COMMERCIAL TAXES,TRIVANDRUM.
OTA No.9 of 2016 and batch cases 16 APPENDIX OF WP(C) 22273/2016 PETITIONER EXHIBITS P1 THE TRUE COPY OF THE ASSESSMENT ORDER FOR THE YEAR 2010-2011 DATED 30.5.2016 ISSUED BY THE SECOND RESPONDENT TO THE PETITIONER U/S 25(1) OF THE KVAT ACT.
P1A THE TRUE COPY OF THE ASSESSMENT ORDER FOR THE YEAR 2011-2012 DATED 30.5.2016 ISSUED BY THE SECOND RESPONDENT TO THE PETITIONER U/S 25(1) OF THE KVAT ACT.
P1B THE TRUE COPY OF THE ASSESSMENT ORDER FOR THE YEAR 2012-2013 DATED 30.5.2016 ISSUED BY THE SECOND RESPONDENT TO THE PETITIONER U/S 25(1) OF THE KVAT ACT.
P1C THE TRUE COPY OF THE ASSESSMENT ORDER FOR THE YEAR 2013-2014 DATED 30.5.2016 ISSUED BY THE SECOND RESPONDENT TO THE PETITIONER U/S 25(1) OF THE KVAT ACT.
P2 THE TRUE COPY OF THE CLARIFICATION NO.
C3/5444/16/CT DATED 13.4.2016 ISSUED BY THE COMMERCIAL TAXES DEPARTMENT TO THE PETITIONER U/S 94 OF THE KVAT ACT.
P3 THE TRUE COPY OF THE INTERIM STAY ORDER IN IA NO.1291 OF 2016 IN OTA NO.9 OF 2016 DATED 15TH DAY OF JUNE 2016 ISSUED BY THIS HON'BLE HIGH COURT.
P4 THE TRUE COPY OF THE DEMAND NOTICE IN FORM NO.12 FOR THE YEAR 2010-2011 DATED 30.5.2016 ISSUED BY THE SECOND RESPONDENT TO THE PETITIONER U/S 25(1) OF THE KVAT ACT.
P4A THE TRUE COPY OF THE DEMAND NOTICE IN FORM NO.12 FOR THE YEAR 2011-2012 DATED 30.5.2016 ISSUED BY THE SECOND RESPONDENT TO THE PETITIONER U/S 25(1) OF THE KVAT ACT.
P4B THE TRUE COPY OF THE DEMAND NOTICE IN FORM NO.12 FOR THE YEAR 2012-2013 DATED 30.5.2016 ISSUED BY THE SECOND RESPONDENT TO THE PETITIONER U/S 25(1) OF THE KVAT ACT.
P4C THE TRUE COPY OF THE DEMAND NOTICE IN FORM NO.12 FOR THE YEAR 2013-2014 DATED 30.5.2016 ISSUED BY THE SECOND RESPONDENT TO THE PETITIONER U/S 25(1) OF THE KVAT ACT.
OTA No.9 of 2016 and batch cases 17