JACOB SIMON Vs. SALES TAX OFFICER

JUDGEMENT

(1.) PETITIONER is an assessee under the Kerala General Sales Tax Act, 1963. He is engaged in the manufacture of chemicals which is a small -scale industrial unit eligible for sales tax exemption as per the notification issued in this behalf. In the year 1994 -95 petitioner purchased raw materials worth Rs. 3,21,145 from M/s. Industrial Chemical Corporation, Eda, Cochin as against form 18 declarations claiming concessional rate of tax under section 5(3) of the Kerala General Sales Tax Act, 1963. The Sales Tax Officer, the respondent herein, however disallowed the claim of concessional rate of tax on the ground that no tax is paid by the petitioner on the finished products. Accordingly, a penalty of Rs. 44,960 was imposed on him under section 45A(f) of the KGST Act for the alleged violation of the provisions under section 5(3) of the KGST Act as per order dated February 12, 1999 as evidenced by exhibit P1. Besides imposition of penalty, by a separate order the differential rate of tax was also levied on the assessment side, as per exhibit P2 order dated February 11, 1999. Petitioner challenges exhibits P1 and P2 orders as passed without jurisdiction and contrary to the provisions of the Act.

(2.) IT is the contention of the petitioner that the end -product in the present case is an item not exigible to tax as per the Kerala General Sales Tax Act, 1963. By virtue of the exemption granted to the petitioner as a small -scale industrial unit and by virtue of the notification issued under section 10 there is no liability fastened on him to pay the tax. According to him, under section 5(3) of the KGST Act, when he purchased raw materials for the manufacture of end -products he is liable to pay duty on the materials only at concessional rate of tax by using form 18 declaration. There is no dispute that the end -product is exigible to tax under the Act.

(3.) IN the decision reported in Sales Tax Officer, Angamaly v. Ragam Plastics [1990] 77 STC 313, this court considered the question regarding the applicability of the proviso of section 5(3) of the Act in a similar case. It was held that the words "liable to tax" under section 5(3) mentioned along with the liability under the Central sales tax or liability for export sales would indicate that the proviso will apply to exclude section 5(3) only in the case of non -applicability of the Act, as in the case of liability under the Central Sales Tax Act or liability for export sale. The limited exemption given by a notification from payment of sales tax in respect of the turnover cannot be construed to be that there is "no liability" to tax under the Act. In Greenex Polymers v. State of Kerala [2003] 130 STC 184; [2003] 1 KLT SN case No. 8, another division Bench of this court held that the contention of the department that since there was an exemption notification there is no liability and hence on the application of the proviso the assessee will be disentitled to the concessional rate of tax thereby justifying the differential rate of tax, was negatived. It was held that under section 5(3)(ii) of the Act, the differential tax can be levied only when the raw materials purchased, availing the concessional rate were not used for the purpose for which the declaration was furnished. In the absence of any case that the raw materials were not used for the purpose for which the declaration was furnished, he will not be disentitled to claim the benefit of the concessional rate of tax under section 5(3) of the Act. Thus, both the points are covered by the above two decisions of this court. Accordingly, exhibits P1 and P2 are quashed.