FAIZAL C. M. Vs. STATE OF KERALA

JUDGEMENT

(1.) Petitioners in the connected Sales Tax Revisions were dealers in Coffee, engaged in purchase and sale of coffee beans during 1998-99. Before the introduction of finance bill 1998, coffee beans was taxable at the point of first purchase in the State. However, in the finance bill introduced for the financial year 1998-99, the point of levy of sales tax on coffee beans purchased within the State was proposed to be changed from the point of first purchase to the point of last purchase in the State. Along with the finance bill declaration was also issued by the Government under S.4 of Provisional Collection of Revenue Act, 1985. Consequent upon the declaration published along with the finance bill the provisions of the bill came into force from first April, 1998. Therefore, by virtue of the change in the incidence of tax from the point of first purchase to the point of last purchase, petitioners were not liable for payment of sales tax on first purchase of coffee beans within the State. According to the petitioners, tur over of first purchase of coffee was claimed exempt in the monthly returns filed for the months of April to July, 1998. The petitioners' case is that the coffee purchased by them within the State were sold to Hindustan Lever Ltd., against issue of Form No. 25 by which Hindustan Lever Ltd. declared themselves as purchasers of coffee from the petitioners within the State. Form No. 25 prescribed under R.32(14), issued by Hindustan Lever confirmed their purchase within the State and unless they sell the goods within the State again they will be liable to pay tax as last purchasers in the State. While the position remained so, the finance bill 1998 was passed by the Assembly and notified on 28/07/1998. However, proposal for amendment for changing the point of levy of tax on coffee beans was given up and the original provision that is tax on first purchase was retained. Consequently, petitioners became liable for payment of tax on first purchase of coffee within the State for the whole year. Even though the Finance Act was notified on 28/07/98, petitioners neither filed revised monthly returns declaring the first purchase turnover of coffee for three months, April to July, as taxable turnover nor remitted the tax along with such returns or even in the annual return filed in Form 8 for the year 1998-99. However, later at the request of the assessing officer, petitioners filed revised annual returns declaring the first purchase turnover of coffee as taxable turnover for the financial year and remitted the tax. In the regular assessment made for 1998-99, the assessing officer levied interest under S.23(3) of the Act. Even though first appeals filed against demand of interest were allowed, the Tribunal on Second Appeals restored the interest demand from the petitioners for belated payment of tax. It is again this order of the Tribunal the petitioners have filed these revision petitions.

(2.) We have heard counsel appearing for the petitioners and the Government Pleader appearing for respondents.

(3.) Counsel appearing for the petitioners, by referring to Annexures 2 to 3 produced along with these revisions, contended that Hindustan Lever, being the purchasers of the coffee from the petitioners, have remitted tax at the point of last purchase and consequent upon passing of the Finance Act, 1998, they are allowed to adjust the excess tax paid towards the other tax liability vide Annexure 3. Annexure 3 was stated to be issued after petitioners filed revised returns along with remittance of tax. According to the petitioners, interest payable under S.23(3) of the KGST Act is compensatory in nature and since the tax was paid on the same goods by the purchaser by virtue of the provisions of the Finance Bill and since adjustment of tax against other demand was permitted to them only after the remittance of tax by the petitioners, there was in fact no delay in payment of tax and so much so interest cannot be demanded. Counsel further pointed out that after passing of the Finance Act, 1998, the assessing officer did not make any provisional or regular assessment or demanded tax for the first four months of the finance year 1998-99 from the petitioners. In other words, petitioners contend that there was no default in payment of tax and consequently default interest is not payable under S.23(3) of the KGST Act. Government Pleader on the other hand contended that, by virtue of R.18(3) of the KGST Rules, petitioners were liable to pay interest along with revised returns which have been filed under R.18(2A) of the Rules. The respondent has sought for confirmation of the Tribunal's order based on R.18(3) of the KGST Rules.