MALAYALA MANORAMA COMPANY LTD Vs. ASST COMMISSIONER KGST

JUDGEMENT

(1.) Malayala Manorama Company Limited, a Company engaged in the business of printing and publishing of daily newspaper and other publications, is a registered dealer under the Kerala General Sales Tax Act, 1963 (for short "KGST Act") and Central Sales Tax Act, 1956 (for short "CST Act"). The Company has established printing units at different places in and outside the State of Kerala. Printing of newspaper is carried on by sophisticated and expensive machinery and facilities employing large number of employees in the several industrial units at nine places in the State of Kerala.

(2.) Petitioner for the purpose of printing newspaper and other publications used to purchase printing ink, which is an essential industrial raw material. S.5(3) of the KGST Act provides for a reduced rate of tax at 3% payable by the dealer in respect of sale of raw materials when sold to any industrial unit for use in the production of finished products in the State for sale. According to sub-s.(3) of S.5, reduced rate of tax given to the selling dealer is subject to the condition of furnishing a declaration duly filled in and signed by the purchasing dealer in the prescribed Form 18 under the KGST Act. In accordance with the said sub-s.(3) petitioner furnished Form 18 to the selling dealer for the purchase of printing ink used in the production of newspapers and other publications. Petitioner Company purchased printing ink for Rs. 91,64,100 from M/s Quality Ink Manufacturing Company, Poovanthuruthu issuing Form 18 under S.5(3) of the KGST Act for the year 2000-01. Petitioner Company has also purchased printing ink for Rs. 1,00,03,050 from the very same Company by issuing Form 18 for the year 2001-02. During the year 2002-03 petitioner Company purchased printing ink for Rs. 84,69,603 from the same company by issuing Form 18. During the year 2003-04 also petitioner Company purchased printing ink for Rs. 87,79,103 from the same company by issuing Form 18.

(3.) Petitioner was however served with Exts. P1 and P2 notices dated 16/01/2006 and Ext. P3 notice dated 17/01/2006 by the first respondent stating that the petitioner had misused Form 18 by using the goods purchased for printing of newspaper and weeklies which involves no manufacturing process and if at all the same can be treated as manufacturing process. The proceeds sold are not taxable either under the KGST Act or CST Act. Further it was also stated that the newspaper does not satisfy the definition of "goods" under S.2(xii) of the KGST Act. Petitioner was therefore informed; that it has misused Form 18 and hence committed an offence punishable under S.45(A) of the KGST Act and therefore it was proposed to impose a penalty in all to the tune of Rs. 46,40,592 at double the amount of tax due on the purchase turnover. Petitioner was called upon to file objection to the notices within seven days of receipt of the notices.