Judgment:
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE WEDNESDAY, THE26H DAY OF FEBRUARY20147TH PHALGUNA, 1935 OT.Rev.No. 81 of 2013 () ------------------------- AGAINST THE ORDER
IN TAVAT5632010 of KERALA VAT APPELLATE TRIBUNAL, ERNAKULAM DATED1406-2013. REVISION PETITIONER(S)/PETITIONER: ----------------------------------- B.MADHU KUMAR, PROPRIETOR, M/S.KINGSTON AUTOMOTIVES, KARAMKODE CHATHANNUR, KOLLAM DISTRICT. BY ADV. SRI.C.K.THANU PILLAI RESPONDENT(S): -------------- STATE OF KERALA R BY GOVERNMENT PLEADER BOBBY JOHN THIS OTHER TAX REVISION (VAT) HAVING BEEN FINALLY HEARD ON81.2014, ALONG WITH OTRV. 82/2013, OTRV. 83/2013, THE COURT ON2602-2014, PASSED THE FOLLOWING: Manjula Chellur, C.J.
& A.M. Shaffique, J.
=-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-=-= O.T.Rev. Nos. 81, 82 & 83 of 2013 =-=-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-= Dated this, the 26th day of February, 2014.
JUDGMENT
Shaffique, J.
The revision petitioner challenges the orders passed by the Kerala Value Added Tax Appellate Tribunal, Ernakulam, in T.A. Nos. 563/2010, 165/2011 & 166/2011. O.T.Revn. 82/2013 is with reference to assessment year 2006-2007, O.T. Revn. No. 81/2013 with reference to assessment year 2007-2008 and O.T.Revn. No. 83/13 is with reference to assessment orders for April, 2008.
2. The short issue involved in the revision petitions is whether metal bodies of trucks manufactured in the petitioner's establishment are exempted from payment of Kerala Value Added Tax by virtue of Entry 55 to the First Schedule of the Kerala Value Added Tax Act (hereinafter referred as KVAT Act) 3. According to the petitioner, he carries on the business of manufacture of metal bodies for trucks. The petitioner also has registration under the Kerala Khadi and Village Industries Board as a blacksmithy unit under the Rural Engineering and Bio-Technology Industry. He is also a dealer under the KVAT Act. As per Entry 55 of the first schedule, products notified by the Khadi and Village Industries Commission at the point of sale by the O.P.Rev. Nos. 81, 82 & 83 of 2013 -:
2. :- manufacturing unit, approved by the Kerala Khadi and Village Industries Board are exempted from payment of tax. The produce includes "products of black smithy other than furniture".
4. It is not in dispute that the petitioner's unit is approved by the Kerala Khadi and Village Industries Board (for short `the Board'). In order to attract the exemption clause, the first requirement is that the unit should be approved by the Board and secondly the product should be notified by the Khadi and Village Industries Commission, which is governed by the Central Act, viz. Khadi and Village Industries Commission Act.
5. The main contention urged by the petitioner is that in terms of Section 2(h) of the Khadi and Village Industries Commission Act, the term `village industry' is defined and therefore every produce of an industry, which is notified as a village industry fall within the exemption under Entry 55. The assessing officer as well as the appellate authorities came to a finding that the petitioner is not entitled for any such exemption.
6. The assessing authority found that the sale of tipper lorry bodies cannot be considered as a product of black smithy falling under Entry 55(12) of the First O.P.Rev. Nos. 81, 82 & 83 of 2013 -:
3. :- Schedule to the Act. It further found that Entry 67 of the list of goods notified by the Government as per SRO No. 82/2006 was taxable at 12.5%, which includes motor bodies built on chassis on motor vehicles and bodies built on motor vessels. In so far as the products sold by the petitioner are tipper lorry bodies, it falls under the category specified in S.R.O. No. 82/2006 and is taxable at 12.5%. The Tribunal, on an elaborate consideration of the entire issues involved in the above matter, formed an opinion that the work of producing tipper lorry bodies cannot be considered as products of blacksmithy. It is further found that when the nature of products specified at Entry 55 is considered, one cannot conclude that the intention of the legislature was to exempt the manufacture of tipper lorry body from the levy of tax. Hence, it was concluded that the petitioner is under obligation to pay tax at 12.5%. Having regard to the other contentions regarding the quantum, the Tribunal had limited the addition to Rs. 1 lakh instead of Rs. 2,05,500/-.
7. The petitioner had raised the following questions for consideration: "(i) Whether on the facts and in the circumstances of the case is the Tribunal justified in denying exemption to the turnover of goods produced O.P.Rev. Nos. 81, 82 & 83 of 2013 -:
4. :- and sold by the petitioner in view of the provisions of Entry 55 of the First Schedule to the Kerala Value Added Tax Act and the certificate and proceedings produced as shown at pages 14 to 17 of Annexure IV orders. (ii) Whether on the facts and in the circumstances of the case is the Tribunal justified in denying exemption from levy of tax on the products of petitioner by resorting dictionary meaning and decisions for the expression "black smith" when the term "village industry" is defined in Section 2(h) of the Khadi and Village Industries Commission Act, which includes use of power also by the industry and when the unit of the petitioner manufacturing metal bodies of motor vehicles was approved by the Kerala Khadi and Village Industries Board as unit of "black smithy". (iii) Whether on the facts and in the circumstances of the case is the Tribunal justified in denying exemption to the products of the unit of the petitioner by holding that the Kerala Khadi and Village Industries Board Act does not empower the Board to issue any certificate of approval when entry 55 of the `first `schedule to the Kerala Value Added Tax Act empower the Kerala Khadi and Village Industries Board to issue such certificate of approval to the unit. iv) Whether on the facts and in the circumstances of the case is the Tribunal justified in denying exemption to the products of the unit of the petitioner by relying on the entries in serial number 67(6) of the notification issued in SRO No. 82/2006 and by giving preference to the entry in the notification than to the entries in serial number 55 of the First Schedule to the Kerala Value Added Tax Act citing the Rules of Interpretation appended to the Act ignoring the provision contained in section 6(8) of the Act O.P.Rev. Nos. 81, 82 & 83 of 2013 -:
5. :- specifying that Rules of Interpretation applies only to the Schedules appended to the Act and thereby is the Tribunal committed error of law? (v) Whether on the facts and in the circumstances of the case is the Tribunal justified in upholding levy of interest especially in view of the decision of the Honourable Supreme Court in E.I.D. Parry Ltd. v. Assistant Commissioner, (2005)141 STC12" 8. The petitioner has produced a certificate of registration issued by the Kerala Khadi and Village Industries Board thereby indicating that the petitioner's business concern has been financed under the Rural Employment Generation Programme and the Khadi and Village Industries Commission/Board for the development of blacksmithy unit under the Rural Engineering and Bio-Technology Industry. It is further certified that the unit is a new unit financed under the REGP since 3.5.2006 and it is genuinely engaged in manufacturing the product/service as per the norms prescribed by the Khadi and Village Industries Commission in the name and style of M/s. Kingston Automotive. Further, it is stated that the unit is approved for a maximum production capacity of Rs.143.64 laks per annum and the certificate is valid from 3.5.2006 to 30.4.2009. Another document produced is the proceedings of the Board, which, inter O.P.Rev. Nos. 81, 82 & 83 of 2013 -:
6. :- alia, indicates that the Project Officer of the District Khadi and Village Industries Office has recommended the release of margin money assistance to the petitioner under the Special Employment Programme for an amount of Rs. 25 lakhs for setting up a body building (automobile) unit under the Rural Engineering and Bio-Technology Industry. The document further indicates sanction or release of an amount of Rs. 4 lakhs in favour of the petitioner for the aforesaid purpose as the first instalment.
9. On the basis of the aforesaid document, it is inter alia contended that the unit in question clearly comes under Item No. 12 of Entry 55 of the First Schedule to the KVAT Act as the products in question have been notified by the Khadi and Village Industries Commission and the unit has been approved by the Board.
10. In order to avail the exemption under Entry 55 of the First Schedule, the assessee has to satisfy two requirements. One of the requirement is that the product is to be notified by the Khadi and Village Industries Commission and the second is that the manufacturing unit is to be approved by the Kerala Khadi and Village Industries Board. The documents O.P.Rev. Nos. 81, 82 & 83 of 2013 -:
7. :- relied upon by the petitioner have been issued by the Kerala Khadi and Village Industries Board. They have accepted the assessee concern as a new unit financed under the REGP Scheme, which is genuinely engaged in manufacturing products/service as per the norms prescribed by the Khadi and Village Industries Commission.
11. The functions of the Board are specifically stated under Section 15 of the said Act and the functions of the Commission are specified under Section 15 of the Khadi Village Industries Commission Act, 1956. The functions of both authorities are specified under two different enactments. Therefore, one has to find out whether body building of vehicles, especially tipper lorries, is an activity notified by the Khadi and Village Industries Commission as a product under the Act. It is contended by the learned counsel for the petitioner that in the Khadi and Village Industries Commission Act, which is a Central Statute under which the Commission was established, Village Industries is defined under Section 2(h) as any industry located in a rural area which produces any goods specified in the Schedule to the said Act. According to the learned counsel for the petitioner, when blacksmithy is considered as a village O.P.Rev. Nos. 81, 82 & 83 of 2013 -:
8. :- industry in the said Act, although Khadi and Village Industries Commission has not issued any notification specifying individual products which village industry is producing, the meaning of the expression in Entry 55 that "products notified by the Khadi and Village Industries Commission" has to be gathered from Section 2(h) read with the Schedule to the Central Act, which plainly means the products of village industries specified in the Schedule to the Central Act. It is therefore contended that a purposeful interpretation has to be given to the Entry to support the assessee and if so, the assessee is entitled for the benefit of exemption.
10. In so far as it is an admitted fact that the Commission has not notified the above product as a product of blacksmithy, the only question to be considered is whether an interpretation as narrated by the counsel for the petitioner can be given to Entry 55. The provision is very clear and unambiguous, which does not call for any interpretation at all. As already indicated, when two conditions are to be satisfied by an assessee to claim benefit of exemption under Entry 55 of First Schedule, both conditions are required to be satisfied. When it is an admitted fact that the product is O.P.Rev. Nos. 81, 82 & 83 of 2013 -:
9. :- not notified by the Commission, there is no point in further interpreting the same in order to find out whether all the village industries under the Central Act come within the purview of Entry 55. Kerala Value Added Tax Act is a State Act and the Khadi and Village Industries Commission Act is a Central Act. The Commission has notified 26 village industries, which includes blacksmithy also. But, here is an instance where the assessee is carrying on the business of body building of tipper lorries, which is not similar to the ordinary blacksmithy, which is contemplated as village industry. Body building may include some blacksmithy work also. But it is a specialised job, which requires substantial investment and expertise. It is in that view of the matter that the legislature felt that unless the product is notified by the Commission, such product is not eligible for exemption though the nature of work may include blacksmithy as well. What is to be notified by the Commission under Entry 55 is that the product is a blacksmithy product.
11. In so far as the petitioner admits the fact that there is no such notification, we do not think that a different interpretation can be made applicable to the issue in hand. Accordingly, we do not find any merit in O.P.Rev. Nos. 81, 82 & 83 of 2013 -:
10. :- the questions of law raised by the petitioner. The same are answered against the assessee and the revisions are dismissed. Sd/- Manjula Chellur, Chief Justice. Sd/- A.M. Shaffique, Judge. Tds/ [True copy] P.S. to Judge.