Kerala High Court
Pushpagiri Medical College Hospital vs Commercial Tax Inspector on 10 June, 2009
Bench: C.N.Ramachandran Nair, C.K.Abdul Rehim
IN THE HIGH COURT OF KERALA AT ERNAKULAM
WA.No. 1175 of 2009()
1. PUSHPAGIRI MEDICAL COLLEGE HOSPITAL,
... Petitioner
Vs
1. COMMERCIAL TAX INSPECTOR, COMMERCIAL
... Respondent
2. COMMERCIAL TAX OFFICER,TIRUVALLAM.
3. COMMISSIONER OOF COMMERCIAL TAXES,
4. STATE OF KERALA REPRESENTED BY THE
For Petitioner :SRI.ARIKKAT VIJAYAN MENON
For Respondent : No Appearance
The Hon'ble MR. Justice C.N.RAMACHANDRAN NAIR
The Hon'ble MR. Justice C.K.ABDUL REHIM
Dated :10/06/2009
O R D E R
C.R.
C.N.RAMACHANDRAN NAIR &
C.K.ABDUL REHIM, JJ.
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Writ Appeal No.1175 of 2009
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Dated this the 10th day of June, 2009.
JUDGMENT
Ramachandran Nair, J.
Appeal is filed against judgment of the learned Single Judge upholding the validity of Circular No.51/06 dated 19.12.2006 issued by the Commissioner of Commercial Taxes whereby any person other than a registered dealer under the Kerala Value Added Tax Act bringing goods from outside State above the value of Rs.5,000/- is required to issue a certificate of ownership in Form 16 to accompany the goods. Even though batch cases were disposed of by common judgment, it is seen that only one of the parties have chosen to file appeal against judgment of the learned Single Judge. It is conceded that the requirement of a counter signature in the certificate of ownership required under the original notification was later dispensed with through modification of the Circular. In other words, after the modification, any person other than a registered dealer under the 2 KVAT Act bringing goods from outside Kerala for own use has to bring it under cover of a certificate of ownership in Form 16 which needs to be signed only by him. We have heard counsel appearing for the appellant and the Special Government Pleader appearing for the respondent.
2. The first question to be considered is whether the Commissioner has authority to issue the impugned Circular in exercise of powers under Section 3(2) of the KVAT Act. For easy reference we extract the said Section hereunder:
"S.3. Commercial Tax Authorities:- (1) ........
(2) The Commissioner shall have superintendence over all officers and persons employed in the execution of this Act and the Commissioner may,--
(a) call for returns from such officers and persons;
(b) make and issue general rules and prescribe forms for regulating the practice and proceedings of such officers and persons;
(c) issue such orders, instructions and directions to such officers and persons as it may deem fit, for the proper administration of this Act."
Clauses (b) and (c) of Section 3(2) make it clear that the Commissioner 3 can issue general orders and prescribe forms for regulating the practice and proceedings of authorities under the Act and he can also issue general instructions and directions for the proper administration of the Act. The purpose of issuing Circular as stated in the Circular itself is as follows:
"It is brought to notice that a substantial volume of goods is being transported into the State by persons other than registered dealers on the pretext of 'own use' and such goods are subsequently re-sold in the State. This leads to loss of revenue to the State Exchequer. While protecting the right of persons to bring in goods for genuine personal use, misuse of the facility has to be curbed forthwith."
From the above it is clear that it came to the notice of the Commissioner that goods in trade quantity are brought to the State by people under the pretext "for own use", but are sold thereby evading tax and since the importers of such goods from outside State happen to be unregistered dealers, there is no way to recover tax. The Circular recognises the right of any person in Kerala to bring goods from outside State, for whatever value, for his own use, which does not involve any tax liability in Kerala. However, under the guise of bringing goods for one's own use, nobody should be allowed to bring 4 goods from outside Kerala for sale in the State without payment of tax. The Act authorises levy of tax on the sale of goods in the State and if any person does it in a clandestine manner, it is for the Commissioner to stop it. Obviously the purpose of the Circular as stated above is to ensure that goods are never brought in bogus names for sale in the State. When a certificate of ownership is issued by the importer of the goods to the State, he can be proceeded against if there is sale and evasion of tax in respect of such goods. The Commissioner of Commercial Taxes is vested with powers under Section 47(16A) of the KVAT Act to identify evasion-prone goods and to collect advance tax at the Boarder Check Post on arrival of the goods. In fact, the Commissioner has issued contemporary Circular along with the impugned Circular identifying ten items as tax evasion-prone goods authorising collection of advance tax before sale of such goods. The validity of that Circular, though challenged in this court, was upheld by Division Bench of this court. It is clear from Section 47(16A) that the Legislature expects the Commissioner of Commercial Taxes to take effective steps to prevent evasion of tax. The power of the 5 Commissioner under Section 3(2)(c), therefore, should be read with other statutory powers conferred on him which as stated above includes the authority to issue Circulars to prevent evasion of tax. What is sought to be achieved by the impugned Circular is exactly the same i.e. prevention of tax evasion in respect of goods brought from outside the State. We are, therefore, in agreement with the finding of the learned Single Judge that the Circular issued by the Commissioner under Section 3(2)(c) is well within his powers.
3. Even though counsel for the appellant pointed out that Form 16 certificate of ownership is prescribed under Rule 58(18) which does not provide for it's issue where the transport is pursuant to sale, we do not think the argument is tenable because the Commissioner has adopted Form 16 prescribed under Rule 58(18) as the right form required to be issued for transport of goods above the value of Rs.5,000/- from outside the State. In other words, he has only adopted the form while issuing Circular under Rule 3(2) of the KVAT Act. Therefore, Rule 58(18) has no application for use of Form 16 based on the impugned Circular issued by the Commissioner. In other words, 6 Form 16 can also be used by any person in terms of Rule 58(18) which has no relation to the impugned Circular issued by the Commissioner. Therefore, this objection is also turned down. The Writ Appeal, therefore, is dismissed.
4. Counsel for the appellant submitted that penalty was levied on the appellant in respect of a consignment brought without being accompanied by certificate of ownership. According to the appellant, they have approached the officer for Form 16 with counter signature which was required at the time of transport in terms of the Circular, but the Assessing Officer did not accede to the request. Violation of the Circular is one thing and penalty for evasion of tax is another. If appellant has not attempted evasion of tax in as much as they prove that the consignment of goods brought is for own use and they have set up the same in the hospital, then obviously no tax-linked penalty could be levied on the appellant as they have not attempted evasion of tax. Of course infraction of law is an independent offence and therefore, even for violation of the conditions of Circular for transport also, penalty may be levied. However, in this case the appellant claims to have 7 requested for issue of a certificate from the Assessing Officer and appellant has in fact in the Writ Petition filed in this court stated it. There was also bonafide challenge against the Circular which stands concluded only by this judgment. Therefore, the appellant is free to raise all these contentions while challenging the penalty order so that bonafide omission does not lead to penalty on the appellant.
C.N.RAMACHANDRAN NAIR Judge C.K.ABDUL REHIM Judge pms