CHAKKIATH ENGINEERING WORKS Vs. SALES TAX OFFICER

JUDGEMENT

(1.) Petitioner is challenging Ext. P1 assessment order and Ext. P11 notice proposing penalty both issued under the Kerala Tax on Entry of Goods into Local Areas Act, 1994, hereinafter called the "Act". The facts leading to the impugned order of assessment and notice are as follows: Pursuant to Ext. P2 agreement with a foreign party petitioner assembled ten chassis supplied by the foreign party in Semi Knocked Down Condition (SKD) and built bus body in Kerala and exported the buses to the same party. The terms agreed between the petitioner and the foreign party as evident from Ext. P2, on which respondents also have no controversy are the following. (1) The foreign party will ship the chassis of vehicle in Semi Knocked Down condition to India which will be cleared by the petitioner from customs on which no customs duty is payable as the goods are for export after body building. (2) The petitioner at his workshop in Kerala assembles the chassis, tests the same and then constructs bus body on it. (3) The bus after completion is exported by the petitioner to the foreign party at the destination instructed by the foreign party. (4) For services rendered of the above nature, for 10 vehicles the petitioner was paid under Ext. P7 purchase order issued by the foreign party a total US $ 39,000; which is at the rate of $900 per vehicle for unloading of chassis, assembling, testing and for delivery and at the rate of $3000 per vehicle for body building. When the first respondent proposed to levy entry tax on the value of chassis imported by the petitioner, the petitioner raised objections stating that there is no purchase of vehicle chassis by the petitioner and in any case the import of vehicle chassis in SKD condition was neither "used", "sold" nor consumed in Kerala and therefore entry tax is not attracted. However, the first respondent overruled the objections and completed assessment vide Ext. P1. Besides the assessment and demand of entry tax on the value of chassis imported, the first respondent has proposed penalty for evasion of entry tax under S.15(1) of the Act vide Ext. P11. Both Exts.P1 and P11 are under challenge in this WPC. I have heard counsel for the petitioner and Sri. Raju Joseph Special Government Pleader for the respondents.

(2.) In the normal course, this Court should have left the challenge against the assessment to be decided in statutory appeal and penalty proposed to be adjudicated by the Officer and left for decision again in appeal by the statutory authority. However, counsel for the petitioner contended that the jurisdiction of the first respondent to make assessment under the Act particularly after the authoritative pronouncement by this Court in the decision reported in FR. William Fernandez v. State of Kerala, 1998 (1) KLT 256 , itself is under challenge and so much so this is one of the situations approved by the Supreme Court in the decision in Whirlpool Corporation's case, 1998 (8) SCC 1 warranting interference by the High Court under Art.226 overlooking the statutory remedies. Apart from this, I feel this is a fit case where this Court should interfere because if the petitioner is directed to pursue the statutory remedies against the killer dose of tax and penalty and wait for the result for continued business the same will destroy the petitioner's business as no foreign party is willing to wait for protracted litigation in India to be over to continue the business. Above all I feel the impugned proceedings are an antithesis of the liberalised policies of the Government to promote international trade and commerce. Therefore, I am constrained to decide the case on merits and counsel appearing on both sides were heard on all aspects of the case.

(3.) Counsel for the petitioner raised the following contentions to substantiate that impugned proceedings are not sustainable: (1) Chassis of motor vehicle imported in Semi Knocked Down condition as a kit for assembling does not attract entry tax under Entry 22 of the Schedule to the Act, as the entry covers only fully built or assembled "chassis of motor vehicle" and not unassembled parts. (2) No entry tax is payable in respect of imported motor vehicle by virtue of the Division Bench decision of this Court in 1998 (1) KLT 256. (3) Since the chassis imported in SKD condition is not for "consumption, use or sale within any local area" no tax is attracted under S.3(1) of the Act.