Kerala High Court
M/S.Valluvanad Fertilizer Company vs * 1. The General Manager
Author: A.K.Jayasankaran Nambiar
Bench: A.K.Jayasankaran Nambiar
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR
TUESDAY, THE 27TH DAY OF JUNE 2017/6TH ASHADHA, 1939
WP(C).No. 30271 of 2011 (H)
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PETITIONER(S):
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M/S.VALLUVANAD FERTILIZER COMPANY,
VELIYAD, MANNANNUR, VANNIYAMKULAM,
OTTAPALAM, PALAKKAD REPRESENTED BY ITS
MANAGING PARTNER, K. KRISHNAKUMAR.
BY ADV. SRI.N.MURALEEDHARAN NAIR
RESPONDENT(S):
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* 1. THE GENERAL MANAGER,
DISTRICT LEVEL COMMITTEE ON SALES TAX EXEMPTION,
DISTRICT INDUSTRIES CENTRE, WAYANAD. (CORRECTED)
ADDRESS OF FIRST RESPONDENT IS CORRECTED AS
GENERAL MANAGER AND MEMBER SECRETARY,
DISTRICT LEVEL COMMITTEE ON SALES TAX EXEMPTION,
DISTRICT INDUSTRIES CENTRE, PALAKKAD - 678004)
* VIDE ORDER DATED 10.01.2012 IN IA.244/2012)
2. COMMERCIAL TAX OFFICER (AA),
COMMERCIAL TAXES, PALAKKAD - 678 001.
3. THE DEPUTY COMMISSIONER (APPEALS),
DEPARTMENT OF COMMERCIAL TAXES, ERNAKULAM - 682 015.
4. THE KERALA AGRICULTURAL INCOME
TAX AND SALES TAX APPELLATE TRIBUNAL,
ADDL. BENCH, PALAKKAD - 678 004.
R2-R4 BY GOVERNMENT PLEADER SMT.JASMIN M.M.
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD
ON 27-06-2017, THE COURT ON THE SAME DAY DELIVERED THE
FOLLOWING:
SKG
WP(C).No. 30271 of 2011 (H)
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APPENDIX
PETITIONER(S) EXHIBITS
EXHIBIT-P1- TRUE COPY OF THE SSI REGISTRATION CERTIFICATE
DATED 01/06/2000
EXHIBIT-P2- TRUE COPY OF THE ORDER PASSED BY THE IST
RESPONDENT DATED 03/10/2011
EXHIBIT-P3- TRUE COPY OF THE ASSESSMENT ORDER PASSED BY THE
2ND RESPONDENT FOR THE YEAR 2001-2002 DATED
23/03/2006 (KGST ACT)
EXHIBIT-P4- TRUE COPY OF THE ASSESSMENT ORDER PASSED BY THE
2ND RESPONDENT FOR THE YEAR 2001-2002
DATED 22/03/2006 (CST ACT)
EXHIBIT-P5- TRUE COPY OF THE APPELLATE ORDER PASSED BY THE
3RD RESPONDENT FOR THE YEAR 2001-2002 (KGST AND
CST ACTS) DATED 07/12/2006.
EXHIBIT-P6- TRUE COPY OF THE TRIBUNAL ORDER PASSED BY THE
4TH RESPONDENT FOR THE YEAR 2001 - 2002 (KGST
AND CST ACTS) DATED 13/11/2008.
EXHIBIT-P7- TRUE COPY OF THE RECTIFICATION PETITION FILED BY
THE PETITIONER BEFORE THE 4TH RESPONDENT FOR THE
YEAR 2001-2002 DATED 11/03/2011
EXHIBIT-P8- TRUE COPY OF THE ORDER OF RECTIFICATION PETITION
NO.1/2011 PASSED BY THE 4TH RESPONDENT DATED
29/06/2011
RESPONDENT(S)' EXHIBITS
----------------------- NIL
/TRUE COPY/
P.S. TO JUDGE
SKG
'C.R.'
A.K.JAYASANKARAN NAMBIAR, J.
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W.P.(C).NO.30271 OF 2011 (H)
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Dated this the 27th day of June, 2017
J U D G M E N T
The petitioner is a small scale industrial unit engaged in the activity of crushing bones into crushed bones [bone meal] and sale thereof. It was established in the year 2000, as a small scale industrial unit, and commenced commercial production on 28.3.2000. Immediately thereafter, the petitioner filed an application before the 1st respondent, claiming tax exemption in terms of Notification SRO.No.1729/93, as amended, which contemplated an exemption, for a period of seven years from the date of commencement of commercial production, in respect of tax payable by small scale industrial units under the Kerala General Sales Tax Act [hereinafter referred to as the "KGST Act"], inter alia, on the turnover of sale of goods manufactured and sold by them within the State. It would appear that, the application for exemption that was contemplated under the aforesaid SRO, was to be considered in two stages, first, by the General Manager, District Industries Centre, who would issue an exemption eligibility certificate, and then, by the Assessing Officer of W.P.(C).No.30271/2011 2 the Commercial Taxes Department, who would give effect to the said exemption in the assessment orders. In the instant case, by Ext.P2 order, the claim for exemption made by the petitioner was accepted by the General Manager, District Industries Centre, Palakkad, who held the petitioner eligible for tax exemption, to an extent of Rs.18,18,581/-. The exemption was granted for the period from 28.3.2000 to 27.3.2007, by Ext.P2 order dated 3.10.2001. Thereafter, the assessments of the petitioner under the KGST Act/CST Act came up for consideration before the Assessing authority, and, by Exts.P3 and P4 orders passed under the KGST Act and CST Act respectively, the Assessing Officer denied the petitioner the benefit of exemption that was granted in Ext.P2 order, by observing that this Court had, through the decision in M/s. Swapna Bone Meal Co. Pvt. Ltd. v. State of Kerala and Another - [(2004) 12 KTR 183 (Ker)], held that conversion of bones into crushed bones and bone meal would not amount to a process of manufacture for the purposes of Notification SRO.No.1729/1993, as amended. Aggrieved by Exts.P3 and P4 orders, the petitioner preferred appeals before the First Appellate Authority, but the said appeals came to be dismissed by Ext.P5 order. The petitioner therefore preferred Second appeals before the W.P.(C).No.30271/2011 3 Appellate Tribunal, but the Appellate Tribunal also, by Ext.P6 order, dismissed the appeals. Thereafter, although the petitioner preferred a rectification of mistake application, for correcting certain factual mistakes in the order of the Appellate Tribunal, the said application was also dismissed by the Appellate Tribunal. In the writ petition, the petitioner impugns Ext.P6 order of the Appellate Tribunal, as also Ext.P8 order of the Appellate Tribunal dismissing the rectification application.
2. A statement has been filed on behalf of the respondents, wherein, the stand taken is that, although the petitioner was granted an exemption by the General Manager, District Industries Centre, when the matter came before the Assessing Authority for giving effect to the exemption order of the General Manager, District Industries Centre, the Assessing authority found that, by the decision of this Court, referred above, the process carried on by the petitioner, at his unit, was one that did not amount to a manufacture for the purposes of attracting the exemption under the Notification in question. The Assessing Officer therefore denied the exemption, notwithstanding the issuance of Ext.P2 eligibility certificate to the petitioner. The findings W.P.(C).No.30271/2011 4 in the assessing orders, as also the appellate orders, are sought to be justified for the reasons contained therein.
3. I have heard Sri. N. Muraleedharan Nair, the learned counsel for the petitioner as also Smt. M.M. Jasmine, the learned Government Pleader for the respondents.
4. The learned counsel for the petitioner would place reliance on the decisions of the Supreme Court in Vadilal Chemicals Ltd. v. State of Andhra Pradesh and Others - [2005 (142) STC 76] as also Pondicherry State Cooperative Consumer Federation Ltd. v. Union Territory of Pondicherry - [(2007) 10 VST 630 [SC]] to contend that, once the appropriate authority under the Notification, had found the petitioner eligible for the exemption, then, in the absence of any order cancelling the order finding the petitioner eligible for the exemption, it was not open to the Assessing authorities, under the KGST Act or the CST Act, to go behind the order of exemption granted by the appropriate authority, and deny the exemption that the petitioner was found eligible to. It is further stated that, on account of the exemption granted through Ext.P2 W.P.(C).No.30271/2011 5 certificate, the petitioner did not collect tax at the time of sale of the goods during the relevant assessment year, and, hence, if the assessment orders are now upheld, it would cause severe financial hardship to the petitioner, in that, he would be forced to pay tax amounts, which he had not passed on to his customers.
5. On a consideration of the facts and circumstances of the case as also the submissions made across the bar, I find that, while it may be a fact that the petitioner did obtain an eligibility certificate from the appropriate authority under the Notification, finding in his favour on the issue of eligibility for the benefit of exemption under Notification SRO.No.1729/93, as amended, I note that, by the time the matter came up for consideration before the Assessing authority under the KGST Act/CST Act, a decision of this Court in M/s. Swapna Bone Meal Co. Pvt. Ltd. v. State of Kerala and Another - [(2004) 12 KTR 183 (Ker)], had declared that the process of conversion of bones into crushed bones and bone meal would not amount to a process of manufacture for the purposes of grant of exemption under the Notification SRO.No.1729/1993. This was, therefore, a case where the Assessing authority, when completing the assessment W.P.(C).No.30271/2011 6 against the petitioner for the relevant assessment year, had to reconcile between an order granting exemption, issued by the appropriate authority under the Notification, and the decision of this Court that declared the process carried on by the petitioner as one not amounting to manufacture. In my view, when the decision of this Court declared the law with regard to the activity not amounting to a process of manufacture, then, it followed, as a consequence, that the certificate of eligibility granted by the appropriate authority under the Notification, was one that was passed in excess of the jurisdiction conferred on the said authority. This is because, the authority had power, under the Notification, to grant exemption only in respect of turnover of sale of goods manufactured and sold by a small scale industrial unit in question. The declaration of law by this Court had the effect of rendering the decision of the appropriate authority, illegal, as beyond the jurisdiction conferred on him in terms of the Notification. For the said reason, I hold that the action of the Assessing authority, as also the Appellate authorities, under the KGST Act, denying the benefit of exemption to the petitioner, was legal and valid, and the said orders do not require any intervention by this Court in these proceedings under Article 226 of the Constitution of W.P.(C).No.30271/2011 7 India.
6. Before parting with this case, I must deal with the contention of the learned counsel for the petitioner based on the decisions of the Supreme Court referred above. I note that, although, at first blush, it appears that the said decisions squarely cover the issue in the writ petition, there are factual differences which serve to distinguish the said decisions from the facts in the instant case. Both the decisions in Vadilal Chemicals Ltd. v. State of Andhra Pradesh and Others - [2005 (142) STC 76] as also Pondicherry State Cooperative Consumer Federation Ltd. v. Union Territory of Pondicherry - [(2007) 10 VST 630 [SC]], dealt with a situation where the appropriate authority under the Notification, that considered the eligibility of the assessee for the benefit of the Notification, found in favour of the asessee, and issued the eligibility certificate holding the assessee entitled for the benefit of exemption. The Assessing authorities under the respective Sales Tax Legislations also initially granted the exemption, based on the eligibility certificate issued to the assessee. Thereafter, at the instance of the Sales Tax Department, the said assessments were sought to be reopened, on the W.P.(C).No.30271/2011 8 contention that the processes carried on by the assessee did not amount to a process of manufacture, for the purposes of granting the exemption. Under those circumstances, the Supreme Court held that it was not open to the Department to go behind the order finding the assessee eligible for the grant of exemption, and to take a contrary view, in the absence of any material to show otherwise. It also deserves mention, at this stage, that in the decisions of the Supreme Court referred above, it was only at the stage before the High Court that, for the first time, the processes carried on by the assessees were found to be processes not amounting to manufacture. The Supreme Court considered the said aspects, and held that, inasmuch as in the Vadilal Chemical's case [supra], the Supreme Court had already held that the process of repacking of a product amounted to a process of manufacture, there was no justification in denying a similar process of repacking that was involved in the Pondicherry State Cooperative Consumer Federation Ltd.'s case [supra] as a process not amounting to manufacture. In both the aforementioned cases, the Court was not confronted with a situation where the Assessing authority had to decide the case for grant of exemption when there were conflicting views, one by the appropriate authority W.P.(C).No.30271/2011 9 under the Notification, and the other by the jurisdictional High Court, on the issue of whether or not the processes carried on by the assessee amounted to a manufacture. In my view, the declaration of law by this Court, on the aspect of whether the process carried on by the assessee amounted to a manufacturing process, was one that the Assessing officer was bound to follow, even at the cost of disregarding the certificate issued by the appropriate authority holding the assessee eligible for the benefit of exemption, while denying the benefit of exemption to the assessee in the assessment orders passed under the KGST Act/CST Act. The appropriate authority under the Notification, having committed a jurisdictional error in granting a certificate of eligibility, in a case which did not involve a process of manufacture, the said certificate could not have been relied upon to grant an exemption to the petitioner in the instant case. While holding so, I draw support from a decision of a Division Bench of this Court in Southern Refineries Limited v. State of Kerala - [(2013) 62 VST 353 (Ker)], where, on a different aspect in connection with the same Notification, this Court found that when the authority issuing the certificate of eligibility, acted beyond its jurisdiction, then the certificate itself was to be treated as a 'nullity', and the Assessing W.P.(C).No.30271/2011 10 authority cannot be faulted for denying the exemption to the assessee.
Thus, I find that the orders impugned in the writ petition cannot be interfered with in these proceedings under Article 226 of the Constitution of India. The writ petition therefore fails, and is accordingly dismissed.
A.K.JAYASANKARAN NAMBIAR JUDGE prp/28/6/17