GIRI OIL MILLS Vs. STATE OF KERALA

JUDGEMENT

(1.) THIS is an appeal by the petitioner against the judgment dated October 20, 1989 in O.P. No. 3047 of 1989 -K (Giri Oil Mills v. State of Kerala). The petitioner relying upon S.R.O. No. 968/80, the notification issued under section 10 of the Kerala General Sales Tax Act, 1963 filed the original petition questioning exhibit P2 dated March 21, 1989 issued by the General Manager, District Industries Centre, Palghat, and it prayed for quashing exhibit P3 notice dated March 18, 1989 issued by the Assistant Commissioner (Assmt.), Sales Tax Special Circle, Palghat.

(2.) THE facts leading to the controversy are as follows. The Giri Oil Mills, the petitioner, was established newly on December 14, 1985, and it was granted tax concession for the five year period from December 14, 1985 to December 14, 1990 as per the provisions of S.R.O. No. 968/80 which was issued in G.O. Ms. No. 74/80/TD dated September 29, 1980. It is the claim of the petitioner that it invested nearly Rs. 6,77,000 initially and as per exhibit P1 he was granted tax concession or exemption for an amount of Rs. 5,10,163, which represents 90 per cent of the total fixed capital investment. The petitioner claims that it additionally invested Rs. 7,81,344 between August, 1988 and December, 1988 and hence it again approached the General Manager, District Industries Centre for a certificate. Then the petitioner was granted exhibit P2 granting sales tax exemption for Rs. 6,82,492 for the period commencing from December 13, 1988 to December 14, 1990. The petitioner claims that this concession of Rs. 6,82,492 granted under exhibit P2 should also be spread over the entire period from December, 1985 to December, 1990. It further claims that it submitted returns for the years, 1987 -88, 1988 -89, and the petitioner was surprised to receive exhibit P3 notice without granting it the exemption, and without giving credit for the exemption to which it is entitled. It is also stated that the second respondent threatened to impose a penalty of Rs. 10 lakhs for the assessment years 1987 -88 and 1988 -89 for its failure to pay tax. The petitioner contends that it has not violated section 45A(1)(d) of the Kerala General Sales Tax Act, and there is no justification for levying the penalty. It also claims that it is not liable to pay the tax because of the exemption granted to it. In the original petition the prayers are as follows :

(3.) AGGRIEVED by the same, the present appeal is filed. In this appeal, Shri N. N. Venkitachalam contends that under G.O. Ms. No. 74/80/TD dated September 29, 1980 and the language of S.R.O. No. 968/80, there is no scope or power for prescribing in which years the exemption is to be enjoyed. The exemption is one which can be spread over throughout the five years. The notification does not lay down that the tax concession or exemption can be granted only after the additional investment is made. He contends that if the investment is made in the five year period, the total exemption should be spread over the five years. He contends that the notification does not contemplate exemption being enjoyed only subsequent to the investment. It is not open to the General Manager, District Industries Centre, to specify the period during which the tax concession or exemption should be granted. He contends that this being a taxation statute, a liberal interpretation should be given to the notification in favour of the assessee. He further contends that the notification only contemplates a period of five years from the date of commencement of sale of such goods by the unit and there is absolutely no reference to either the assessment year, calender year or financial year. Shri Venkitachalam also contends that the petitioner is entitled to tax exemption for 90 per cent of the capital investment for each year and a liberal interpretation of the notification clearly indicates that for each year the petitioner could avail the tax concession to the limit prescribed in the certificate issued by the General Manager, District Industries Centre. On behalf of the revenue, Shri N. N. Divakaran Pillai, Government Pleader, contends that what is claimed by the petitioner is a "tax exemption" given under the notification and hence the notification has to be construed strictly. A liberal interpretation cannot be given. The contentions of the petitioner's counsel are contrary to the wording and limitations contained in the notification. If Shri Venkitachalam's interpretation of the notification is to be accepted, the language of the second proviso in the notification will become otiose and meaningless. He also contends that under the scheme of the notification investment should precede the availment of the tax exemption. Unless he makes the investment, he cannot claim the tax exemption. In the present case, the tax exemption granted under exhibit P1 has been utilised and enjoyed by the petitioner in the first two years. The additional investment was made only from August, 1988 to December, 1988. Hence he can avail the tax exemption indicated in exhibit P1 only after December, 1988. For the years 1988 -89 and 1987 -88, he is bound to pay the sales tax. Shri Pillai further contends that "the year" referred to in the notification has necessarily to be construed as the financial year because section 2(xxx) defines the "year" as the financial year. The words used in the notification have the same meaning and connotation as the words used in the main Act, under which the notification is issued. The points that arise for consideration in this writ appeal are :