ESCOTEL MOBILE COMMUNICATIONS LTD Vs. STATE OF KERALA

JUDGEMENT

(1.) A Mobile Company is the revision petitioner as well as the writ petitioner in these connected cases. During 1997-1998, the company approached the Government with an application to clarify the rate of tax on their product, viz. "mobile phone" or "cellular phone". The Secretary to Government, Taxes Department issued a communication to the petitioner on 7. 6. 1997 produced as Ext. P7 in the Writ Petition where under he has stated that,"cellular Telephone" will fall under the category of "walky Talkie, Wireless transmitters and receivers coming under Entry 5. 17 of Schedule VI to notification s. R. O. No. 1728 of 1993. The Secretary (Taxes), Board of Revenue also issued a letter to the petitioner on 14. 1. 1997 stating that the "cellular Phone" will fall under the same entry in the notification which is in line with Ext. P7 issued by the Secretary to Government. The petitioner's case is that based on these letters, the petitioner started remitting tax at 6% for "cellular Phone" (Mobile Phone) which was accepted by the assessing officer by completing the assessment for 1997-1998 at that rate. However, the Deputy commissioner of Commercial Taxes revised the assessment under S. 35 stating that tax payable for mobile phone/cellular phone at the relevant time is under Entry 120 which provides for tax at 12. 5% on "sound transmitting equipment including telephones, loud speakers, dicta phones, grama phones and similar apparatus for recording and reproducing sound and spare parts and accessories thereof. When the order issued by the Deputy commissioner under S. 35 was taken up in appeal before the Tribunal, the Tribunal confirmed the same holding that item falls under Entry 120 of the 1st Schedule of the k. G. S. T. Act. Before us, Senior Counsel Sri. P. K. R. Menon appearing for the petitioner contended that the petitioner sought for clarification on rate of tax and when the government clarified the rate, the departmental authorities are bound by the same. Special Government Pleader appearing for the respondents on the other hand contended that the letters issued by the Secretary, Board of Revenue and the Secretary to government (Taxes) are not statutory orders and therefore those orders cannot override the statutory provisions. We are of the view that irrespective of whether the product, viz. "cellular phone/mobile phone falls under Entry 120 of 1 st Schedule or not, the petitioner is entitled to succeed because the atleast Ext. P7 order issued by the Secretary to government will bind the Government, the assessing officer and the assessee. Mobile phone was a new type introduced in the market and there is nothing wrong in a dealer asking for a clarification on the rate of tax of the product. While the Board of Revenue is in charge of administration of the department, Secretary, Department of Taxes is the person representing the Government. S. 59a of the Act which gave power to the government to clarify on rate of tax on products was declared invalid by this Court and the same was confirmed by the Supreme Court. The said section was reintroduced in the Statute giving power to the Commissioner to clarify rate of tax which happened in the year 2000 after the decision of the Supreme Court. In fact all through the Government maintained that either it or the Commissioner had the authority to clarify on rate of tax on the products. S. 3 (1a) of the Act confers power of superintendence to the Board of revenue, over all officers and persons employed in the execution of the Act. Similarly sub-cl. c of S. 3 (1a) authorises the Board of Revenue to issue orders, instructions and directions to such officers and persons, as it may deem fit, for the proper administration of the Act. It is to be noted that S. 22 confers a right on registered dealers to collect tax on the goods sold by them. It goes without saying that unless the rate of tax on goods are known to the parties, they will not be able to collect the actual tax payable by them. In fact S. 22 (2) of the Act prohibits collection of tax in excess of the rate applicable. It is the conceded position that "cellular phone or mobile phone" is not an item specifically covered by any entry in the Schedule. Therefore the petitioner was perfectly justified in seeking advice from the statutory authorities to clarify on rate of tax. As advised vide Ext. P7, the petitioner paid rate of tax on the product by stating that item falls under Entry-5. 17 of S. R. O. No. 1728/93 which is the notification granting reduction in rate of tax on some products. In fact it is to be noted that under Entry 5. 5 of the same notification, reduced rate of tax of 6% is provided on electronic digital telephone instruments. It is seen from the application submitted by the petitioner that they sought clarification only because cellular phone/mobile phone is not covered by any specific entry in the notification above referred. The Secretary, Taxes Department specifically answered the question raised by the petitioner by stating that item falls under Walky Talkie, wireless transmitters and receivers under Entry 5. 17 of the notification. These entries in the notification were valid till S. R. O. No. 870/99 was issued on 28. 10. 1999. In view of the clarification issued by the Secretary to Government, we do not think the Assessing Officer or the Deputy commissioner can raise the contention that the clarification is not applicable. In the first place, the notification above referred itself was issued by the Government in exercise of the powers conferred under S. 10 (1) of the K. G. S. T. Act which authorises the government to grant exemption or reduction in rate of tax on goods. Therefore any clarification issued on an exemption-notification should be taken to have been issued in exercise of the powers conferred under S. 10 (1) of the Act. Of course, modification or amendment to the notification could be issued only through another notification to be published in the Gazette and not through letters. However, in this case, the Secretary to taxes Department only clarified that item is already covered by Entry 5. 17 of s. R. O. No. 1728/93. In our view, even if the item falls under Entry 120 of the 1st Schedule to the K. G. S. T. Act, the same does not bar the petitioner from claiming benefit under notification based on the clarification issued by the Secretary (Taxes) because the items referred to in Entries 5. 5 and 5. 17 of Schedule-6 of S. R. O. No. 1728/93 are items which would otherwise fall under Entry 120 of the 1st Schedule to the K. G. S. T. Act. Therefore the finding of the Deputy Commissioner and the Tribunal that cellular phone/mobile phone fundamentally fall under Entry 120 of the Ist Schedule to K. G. S. T. Act does not go against the petitioner claiming benefit of notification based on Ext. P7 clarification issued by the secretary to Government. Accordingly, we sustain the claim of the petitioner that the rate of tax applicable on the product is the rate provided under Entry 5. 17 of the Schedule-VI of S. R. O. No. 1728/1993 until it was amended. Consequently the Revision Petition is allowed reversing the orders of the Tribunal and that of the Deputy Commissioner and by restoring the original assessment. The Writ Petition is also allowed quashing the assessment at higher rate and with a direction to the Assessing Officer to revise the impugned assessments on the product at the rate provided in the notification.