Kerala High Court
Cashew Maufacturers And Exporters ... vs State Of Kerala on 24 August, 2007
Author: Antony Dominic
Bench: Antony Dominic
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE ANTONY DOMINIC
THURSDAY, THE 22ND DAY OF MARCH 2012/2ND CHAITHRA 1934
WP(C).No. 3097 of 2012 (J)
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PETITIONER(S):
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1. CASHEW MAUFACTURERS AND EXPORTERS ASSOCIATION,
(REG.NO.Q 114/93)REGD.OFFICE:NETHAJI NAGAR-7
PANKAJASADANAM,KOLLAM-691002
REPRESENTED BY ITS SECRETARY SRI.B.GOPINATHAN.
2. B.GOPINATHAN,
NETHAJI NAGAR-7,PANKAJA SADANAM,KOLLAM-691002.
BY ADVS.SRI.ASWIN GOPAKUMAR
SRI.PRAVEEN.H.
SRI.ANWIN GOPAKUMAR
SMT.KALA G.NAMBIAR
SRI.R.ARUN
RESPONDENT(S):
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1. STATE OF KERALA
REPRESENTED BY ITS SECRETARY,DEPARTMENT OF TAXES
GOVERNMENT SECRETARIAT,THIRUVANANTHAPURAM
PIN-695001.
2. THE COMMISSIONER OF COMMERCIAL TAXES,
COMMERCIAL TAXES DEPARTMENT,PUBLIC OFFICE BUILDING
VIKAS BHAVAN.P.O,THIRUVANANTHAPURAM-695033.
BY SR GOVERNMENT PLEADER SMT.SOBHA ANNAMMA EAPPEN
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON
16/3/2012, THE COURT ON 22/3/2012 DELIVERED THE FOLLOWING:
WPC NO.3097/12
APPENDIX
PETITIONER'S EXHIBITS
EXT-P1 TRUE COPY OF THE SPOT PRICES FOR CASHEW RECORDED BY NATIONAL
COMMODITY EXCHANGE LTD FOR THE YEAR 2009
EXT-P2 TRUE COPY OF CIRCULAR NO.38/07 DATED 24.08.2007 ISSUED BY
2ND RESPONDENT.
EXT-P3 TRUE COPY OF CIRCULAR NO.28/11 03.12.2011 ISSUED BY THE 2ND
RESPONDENT.
EXT-P4 TRUE COPY OF THE OBJECTIONS DATED 28.12.201 OF CASHED EXPORT
PROMOTION COULCIL.
EXT-P5 TRUE COPY OF THE REPRESENTATION DATED 04.01.2012 SUBMITTED BY
PETITIONERS.
EXT-P6 TRUE COPY OF THE INVOICE DATED 30.12.2011 ISSUED BY CASHEW
DEVELOPMENT CORPORATION.
EXT-P7 TRUE COPY OF INVOICE DATED 02.01.2012 ISSUED BY CASHEW
DEVELOPMENT CORPORATION.
EXT-P8 TRUE COPY OF THE NOTICE DATED 8.2.2012 ISSUED BY THE
COMMERCIAL TAXES INSPECTOR, COMMERCIAL TAXES CHECK POST, AMARAVILA TO
M/S KUMAR CASHEW EXPORTS, KOLLAM.
EXT-P9 TRUE COPY OF THE OBJECTIONS DATED 8.2.012 FILED BY M/S KUMAR
CASHEW EXPORTS TO EXT.P8.
EXT-P10 TRUE COPY OF THE RELEASE ORDER DATED 8.2.12 ISSUED BY THE
COMMERCIAL TAXES INSPECTOR, COMMERCIAL TAXES CHECK POST, AMARAVILA.
EXT-P11 TRUE COPY OF THE DETENTION NOTICE DT 30.1.12 ISSUED IN THE
CASE OF M/S EMMANUEL CASHEW INDUSTRIES, KOTTARAKKARA.
EXT-P12 TRUE COPY OF THE RELEASE ORDER DATED 30.1.12 ISSUED IN THE
CASE OF M./S EMANUEL CASHEW INDUSTRIES, KOTTARAKKARA.
//True Copy//
PA to Judge
Rp
ANTONY DOMINIC, J.
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W.P.(C) NO. 3097 OF 2012
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Dated this the 22nd day of March, 2012
J U D G M E N T
First petitioner is an association of processors, manufacturers, traders and exporters of cashew nuts and cashew kernels, which is registered under the Travancore Cochin Literary, Scientific and Charitable Societies Registration Act, 1955. Second petitioner is a member of the first petitioner and is also engaged in the business of trade and exporting of cashew nuts.
2. Petitioners have filed this writ petition seeking to quash Exts.P2 and P3 circulars issued by the 2nd respondent fixing the floor rates for various grades of cashew nuts and cashew kernels on the basis that raw cashew nuts and cashew kernels are evasion prone commodities. On this basis, 2nd respondent has directed that the officials shall ensure that cashew consignments are not valued at lower value than what is shown in the circulars.
3. According to the petitioners, on the issuance of Exts.P2 and P3, the Cashew Export Promotion Council of India, an organisation sponsored by the Government of India, objected to the floor value fixed by filing Ext.P4 representation. Petitioners WPC.No.3097/12 :2 : themselves have also filed Ext.P5 representation objecting to the fixation of floor rates and it is complained that both these representations have not been considered by the 2nd respondent. It is contended that the 2nd respondent has no power, jurisdiction or authority under the KVAT Act to issue circulars in the nature of Exts.P2 and P3 and that on the strength of these circulars, consignments are intercepted and detained inspite of having valid and proper documents required under the KVAT Act. It is in these circumstances the writ petition is filed with the aforesaid prayers.
4. A statement has been filed on behalf of the 2nd respondent and according to the 2nd respondent, there is rampant undervaluation in the cashew business and therefore Ext.P2 circular was issued which was followed by the assessees and the officials till recently. It is stated that subsequently, it was noticed that the prices of various varieties of cashew nuts and cashew kernels have increased significantly and therefore an Expert Committee was constituted to study the issue and to suggest whether a revision on the floor rate was necessary. It is stated that the committee analysed the market intelligence and the rates of various grades of cashew kernels and based on the WPC.No.3097/12 :3 : recommendations made by the Committee, the rates fixed in Ext.P2 circular were revised and that it was accordingly that Ext.P3 circular was issued.
5. In para 4 of the statement, it is stated thus:-
"As per section 47(16A) of the Kerala Value Added Tax Act 2003, the Commissioner of Commercial Taxes is empowered to order collection of advance tax on evasion prone commodities. A floor value is fixed on these evasion prone commodities after conducting market study and is subjected to periodical revision and its constitutional validity has already been upheld by the Hon'ble High Court of Kerala in (15 KTR 161). The tax so paid is adjustable against output put tax and if not it can be refunded. The rate of local cashew nuts have been reduced to Rs.65/- vide circular No.28/2011, subsequently when it was brought to the notice that market rates were low. The price is so fixed to have uniform pattern throughout the state and to avoid arbitrary fixation of rates by field staff. So there is nothing unconstitutional about it and the price fixed are only floor rates and subjected to periodical revision."
6. The statement concludes by relying on Section 3(2) of the KVAT Act as enabling the 2nd respondent to issue the circulars impugned.
7. According to the petitioners, Exts.P2 and P3 circulars fixing the floor value for various grades of cashew nuts and cashew kernels are ultra vires the provisions of the Kerala Value WPC.No.3097/12 :4 : Added Tax Act and it is also contended that even if it is held that the circulars are intra vires the Act, the circulars are unconstitutional for violation of Article 14 of the Constitution of India.
8. I shall first examine the legality of the circulars. According to the 2nd respondent, the circular has been issued as empowered under Section 3(2) and Section 47 (16A) of the Act and these sections, being relevant, are extracted below for reference.
"3(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".
"47 (16A) Notwithstanding anything contained in this Act or the rules made there under, the Commissioner may where he deems it necessary to prevent any evasion of tax, direct that the tax in respect of the sale of any evasion prone commodities, as may specified by him, shall be paid before the date prescribed for its payment under this Act."WPC.No.3097/12 :5 :
9. Section 3(2)(c), as is evident from the words used by the Legislature, confers supervisory powers on the Commissioner and authorises him to issue orders, instructions and directions, which shall be binding on his subordinates. However, this Section does not specifically provide for collection of tax either in advance of sale or otherwise.
10. The constitutional validity of Section 47(16A) of the Act was upheld by this Court in Fantacy Sales Corporation v. Sales Tax Inspector (2007(2) KLT 174). This judgment was confirmed by a Division Bench of this Court in S.P.L. Ltd. v. Commercial Tax Inspector (2009(4) KLT S.N.25). Thus the validity of the section is no longer open to dispute and the petitioners are also not raising such a plea.
11. The contention raised by the petitioners was that the circulars are ultra vires Section 3(2) and 47(16A) of the Act. In fact, in respect of live chicken and timber, similar circulars were issued by the 2nd respondent and these circulars were challenged before this Court as ultra vires the Act. In Beeran Koya C v. Commissioner, Commercial Taxes, Tvm. And Others (2009 (4) KHC 431), repelling the contentions, a learned Judge of this WPC.No.3097/12 :6 : Court held thus:-
The above power coupled with the power under Section 3(2)(c), enables the Commissioner to issue appropriate orders, instructions and directions to the officers and persons as he deems fit, for the proper administration of the Act . This being the position, the fixation of the 'sale price' by the Commissioner, to have a uniform application in the course of the proceedings pursued by the officers under him, while calculating the estimated sale price for collecting the advance tax at the Check Post/Entry Point, is very much within the four walls of the law and cannot be assailed under any circumstances, especially when the dealers are provided with an alternative course to have actual assessment at the hands of the 'Assessing authority' and to secure a Certificate to cross the border as provided in Circular 53/06, validity of which Circular has been upheld by this Court in Fantacy Sales Corporation vs. Sales Tax Inspector [2007(2) KLT 174]. This is more so, when fixation of the sale price by the Commissioner is after a market study, as stated in paragraph No.5 of the counter affidavit and further that the dealers can very well claim the refund, if they sell the commodities for a lesser price and file necessary return. Even otherwise, the dealers need not wait till the sale of the commodities materialises, as the advance tax paid can very well be adjusted/set off against the output tax to be paid along with the filing of the return in respect of the transaction in the very same month. The alleged loss, hardships and apprehension projected to the contrary are quite wrong and unfounded.
12. This judgment was challenged in WA No.2412 of 2009 and by judgment dated 27th of January, 2010, the appeal was WPC.No.3097/12 :7 : dismissed by a Division Bench of this Court holding thus:-
"3. On going through the judgment under appeal, most of the legal questions raised by the appellant about the Commissioner's jurisdiction stand decided by the learned Single Judge and we do not find any ground to deviate from the said finding. Further, when the validity of the statutory provision is upheld by this Court, this necessarily means that advance tax could be collected in respect of goods notified as evasion prone goods by the Commissioner under Section 47 (16A) of the Act. If advance tax is to be collected, necessarily value has to be estimated because advance tax is payable before the sale of the commodity. If the Commissioner has left it open to the Departmental Officers to collect advance tax, in respect of a commodity at entry point, the same would have led to dispute and adjudication in regard to value of commodity for the purpose of collection of advance tax. Therefore for the purpose of uniformity and to avoid unnecessary controversy, the Commissioner has fixed the value of various varieties of imported timber for the purpose of collection of advance tax".
13. Therefore, vires of Section 47(16A) and the powers of the 2nd respondent to issue circulars in the nature of Exts.P2 and P3 have also been upheld by this court by virtue of the aforesaid judgments.
14. However, it needs to be clarified that the power under Section 47(16A) to fix floor value is to be invoked to prevent evasion of tax and the Commissioner can only direct that in respect of such evasion prone commodities, tax be paid before WPC.No.3097/12 :8 : the time prescribed for its payment. Therefore, Section 47(16A) is an overriding provision, which was added by the Kerala Finance Act, 2006 w.e.f. 01/04/2005 empowering Commissioner to direct payment of advance tax in respect of evasion prone commodities. Further, the floor value can also be relied on as a guideline to deal with cases of under valuation and to initiate proceedings against erring dealers on that basis. On the other hand, if there is any substance in the complaint of the petitioners that on the strength of the circulars, consignments of cashew are being detained for purposes other than collection of advance tax or proceedings in cases of under valuation, such action of the respondents will certainly be ultra vires and illegal.
15. Petitioners have a further case that Circular No.50/06 was issued by the 2nd respondent in exercise of his powers under Section 47(16A), for collection of advance tax on various commodities and that in respect of those commodities, floor price was not fixed. Therefore, according to them, fixing of floor price only for cashew nuts and cashew kernels is discriminatory. I am unable to accept this contention. First of all, this Court has already upheld the power of the 2nd respondent to fix floor value for WPC.No.3097/12 :9 : evasion prone commodities. Therefore, the fact that in respect of a particular commodity or group of commodities, floor value has not been fixed, is no ground to hold that the floor value fixed in respect of another commodity is unconstitutional. That apart, each commodity stand apart as a separate class and unless it is established that all the commodities form one class, the petitioners cannot sustain this argument. Further, there are other commodities, such as live chicken, timber etc., which are also identified as evasion prone items, in respect of which also floor value has been fixed.
16. It was then contended that no other state has fixed the floor value for cashew nuts or cashew kernels and therefore the fixation of floor value in Kerala State alone is discriminatory. It is trite that the validity of the law in a State cannot be tested by comparison with the law prevailing in another State. Therefore, the fact that the floor value for cashew nuts and cashew kernels have not been fixed in other States is no reason to attract the provisions of Article 14 of the Constitution of India.
17. It was then contended that floor value fixed is unrealistic and that even a Government of India sponsored WPC.No.3097/12 :10 : organization such as the Cashew Export Promotion Council of India had complained about the floor value fixed by filing Ext.P4 to the 2nd respondent. From the contents of Ext.P3 and the statement filed before this court, it is seen that the revision of floor value was on the basis of a study conducted by the committee of experts and this Court lacks any expertise to sit in judgment over the conclusions of these experts. It is true that the petitioners have produced as Exts.P6 and P7 invoices issued by Kerala Cashew Development Corporation Ltd., a Kerala Government Undertaking. Referring to the price indicated in Exts.P6 and P7, counsel contended that the floor value fixed in Ext.P3 is exorbitant. First of all, there is no material to conclude that the quality of the cashew mentioned in Exts.P6 and P7 is comparable with any one of the grades of the cashew mentioned in Ext.P3 and therefore in my view, Exts.P6 and P7 cannot be pressed into service. Further there is no material before this Court to hold that the floor value fixed is illegal for any reason. In such circumstance, if there are any circumstance calling for a review of the floor value fixed, it is upto the petitioners to pursue the matter before the 2nd respondent and the 2nd respondent shall WPC.No.3097/12 :11 : take appropriate action in the matter.
18. In the circumstances, the writ petition is disposed of holding that:-
(1) the case of the petitioners that Exts.P2 and P3 circulars are ultra vires the KVAT Act.
(2) I clarify that the circulars can be relied on only for the purpose of levy of advance tax as contemplated under Section 47 (16A) of the KVAT Act and in cases where undervaluation is detected, adopting floor value fixed as a guideline, proceedings under the KVAT Act can be initiated.
ANTONY DOMINIC, JUDGE Rp