CHETHANA PHARMASEUTICALS Vs. ASST COMMISIONER

JUDGEMENT

(1.) The petitioner in this batch of cases are small scale industrial units engaged in the manufacture of small-scale industrial units is one of the petitioners in O.P.No. 29507 of 1999, and therefore those small scale industrial units who have not filed Writ Petitions are represented by the said association. The small scale industrial units with turnover below Rs. 50 lakhs in a year are granted concessional rate of tax at four per cent on the sale of their products. This was brought into effect by notification SRO 429 of 1995 effective from 1.4.1995. By this notification, the Government have brought about an amendment to the general notification granting exemption at concessional rate, etc., to various categories of goods, dealers, etc. The amendment was brought about to SRO 1728/93 by SRO429/95 with effect from 1.4.1995 by addition to schedule IV to the man notification, which is as follows: SCHEDULE IV Persons or units , rate of tax on whole sales or purchase of goods, is reduced under sub-clause(3) of clause I SI. Description Description Reduced Condition No. of person/unit. Of goods & rate of tax. transactions 8Small Scale industrial Sale of goods manufac- unit whose total turn-tured by them within the 4%NIL over does not exceed State Rs.50 lakhs. Later the Government further amended the above notification where under the concessional rate of four percent was made applicable on the fist rupees fifty lakhs of turnover during the first year where the turnover of the SSI unit exceeds Rs. 50 lakhs so that the higher rate was made applicable in that year only on the turnover above Rs.50 lakhs. This amendment was brought about by introducing an explanation to entry 8 of the IVth Schedule as given below vide SRO 585 of 1996. The introduction of explanation was with retrospective effect from 1.4.1995 by Notification No.585 of 1996 dated 29.7.1996. The explanation so introduced is as follows: Explanation: Where the turnover of the unit exceeds the limit of Rs. 50 lakhs, during the first year in which the turnover crosses the limit, the higher rate will be applied only on the turnover above 50 lakhs. This explanation shall be deemed to have come into force with effect from 1.4.1995 With the introduction of the above explanation, the small scale industrial units in Kerala with a turnover of rupees fifty lakhs and above can avail the concessional rate of four percent on the first rupees fifty lakhs turnover in the first year in which the turnover exceeded rupees fifty lakhs, and they need pay tax at the higher rate on the turnover above Rs. 50 lakhs. But for the later years they will have to pay tax at the normal rate on the entire lakhs. On the other hand, if the turnover remained below rupees fifty lakhs in any year the SSI units were liable petitioners claim is that they should get the concessional rate of 4 per cent on the first rupees fifty lakhs turnover in all the years, and the same should not be limited to the first year in which the turnover exceeds rupees fifty lakhs. They are therefore objecting to the explanation above referred to the extent of limiting the benefit only to the first year, which was introduced by SRO 585/96 with retrospective from 1.4.1995.

(2.) I have heard counsel for the petitioners and also special Government Pleader for the petitioners and also Special Government Pleader for the State. The prayer in the Original Petitions is for a direction to the respondents to grant concessional rate of tax at four per cent on the sale of products by the SSI units on the first rupees fifty lakhs of turnover of every year. In other words, the validity of the notification SRO 585/96 to the extent of limiting the facility of concessional rate of 4% to first rupees fifity lakhs only during the first year in which the turnover exceeds rupees fifity lakhs is questioned by the petitioner.

(3.) The main argument in support of the said contention is that the petitioners are not able to predict or foresee their turnover for a year and unless the rate of tax is known to them in advance they will not be able to collect appropriate tax as provided under Section 22(1) of the KGST Act. The effect of the notification as amended is that after the first year of turnover crossing rupees fifty lakhs a SSI unit will have to estimate in advance their possible turnover in a year and if it is below rupees fifty lakhs they have to collect tax at four per cent. On the other hand, if the turnover is above rupees fifty lakhs, they will have to pay tax at the rate applicable to the product on the entire turnover. However, according to the petitioners, if the concessional rate at 4% is available on the first rupees fifty lakhs turnover every year then they can collect tax at the appropriate rate without any risk of under collection or excess collection. If their prayer is allowed then they can collect tax at 4% on the first rupees fifty lakhs of turnover every year and for the turnover above rupees fifty lakhs at the higher rate applicable to the goods. This of course is a practical suggestion, but the question is whether this so-called practical difficulty experienced by the petitioners is sufficient to invalidate the notification. The petitioners further contended that they are always collecting tax on the basis of estimation of turnover in a year and if it is below rupees fifty lakhs they have to collect tax at four per cent. On the other hand, if the turnover is above rupees fifty lakhs, they will have to pay tax at the rate applicable to the product on the entire turnover, However, according to the petitioners, if the concessional rate at 4% is available on the first rupees fifty lakhs turnover every year then they can collect tax at the appropriate rate without any risk of under collection or excess collection. If their prayer is allowed then they can collect tax at 4% on the first rupees fifty lakhs of turnover every year and for the turnover above rupees fifity lakhs at the higher rate applicable to the goods. This is of course is a practical suggestion, but the question is whether this so-called practical difficulty experienced by the petitioners further contended that they are always collection tax on the basis of estimation of turnover, for example, if they estimate the turnover below rupees fifty lakhs and start collecting tax at the concessional rate of 4% available under the notification, but towards the end of the year, if the turnover goes above rupees fifty lakhs. Then they will be compelled to pay tax at the higher rate on the entire turnover even though they have collected tax only at 4%. On the other hand, if the turnover does not go above rupees fifty lakhs, but they start collecting tax at the higher rate, on the basis of estimation of turnover above rupees fifty lakhs , then they will be liable for penalty and forfeiture for excess collection. The last of the contentions raised by the petitioners is that even though the turnover is below rupees fifty lakhs there is a contingency on the part of the assessing officer under the Sales Tax Act to reject the accounts and estimate the turnover above rupees fifty lakhs, and then assess the entire turnover at the higher rate. Thereby taking away the concessional rate of 4 per cent available to the petitioners.