SALES TAX OFFICER Vs. RAGAM PLASTICS

JUDGEMENT

(1.) The respondents in the Original Petition are the appellants. The petitioners in the Original Petition are Small Scale Industrial Units set up after 1-4-1979. They are registered dealers engaged in the manufacture of plastic bags and covers and rigid PVC pipes and selling the same. The main raw material for the manufacture of plastic bags, covers etc. is the plastic granules which is taxable at 8% under Entry 145 of the First Schedule of the Sales tax Act. The assessees' units were entitled to the benefits of the Government Order S.R.O. 968/1980 under which all Small Scale Industrial Units set up after 1-4-1979 are entitled to exemption from payment of sales tax on the turnover of the sale of goods produced and sold by them for a period of five years from the date of commencement of sales of such goods by them subject to the limit prescribed therein of which we are not concerned. Therefore, the goods manufactured and sold by the assessees are exempt from payment of sales tax for a period of five years under the said Government Order. S.5(3) of the Sales tax Act gives certain other benefits to persons like the assessees. Under S.5(3) of the Act the Industrial raw materials and component parts sold to industrial units for use in the manufacture of finished products inside the State for sale shall be taxed at the rate of 2% only. But under the proviso to S.5(3) the concessional rate is not available where the sale of such finished products is not liable to tax either under the Kerala General Sales tax Act or under the Central Sales tax Act or when such finished products are exported out of the territory of India. Therefore, the short question arose for consideration in the Original Petition was whether new industrial units entitled to a limited exemption from sales tax as per the notification of the Government S.R.O. 968/1980 are excluded from the benefit of a lower rate of tax as provided for in sub-section(3) of S.5 of the Act on the ground that no tax is payable by such Small Scale Industrial Units because of the exemption.

(2.) The learned single Judge, after detailed examination of the case, held that the small scale industrial units which are entitled to the benefit of exemption are also entitled to the concessional rate of tax on the sale of industrial raw materials and component parts.

(3.) The assessees are entitled to purchase at concessional rate the industrial raw materials only on production of Form 18 and it is when the Form was denied to them they approached this Court. It is against the judgment in the Original Petition the Writ Appeal is filed by the respondents in the Original Petition - the revenue.