Deputy Commissioner of Sales Tax, (Law), Board of Revenue (Taxes) Vs. C.T. Kochouseph - Court Judgment

SooperKanoon Citationsooperkanoon.com/731968
SubjectSales Tax
CourtKerala High Court
Decided OnSep-04-2003
Case NumberT.R.C. Nos. 20, 24 and 26 of 1996 and 338 of 2000 and O.P. No. 25135 of 2002(P)
Judge G. Sivarajan and; J.M. James, JJ.
Reported in[2004]136STC545(Ker)
ActsKerala General Sales Tax Act, 1963 - Sections 5, 5A, 5A(1) and 10; Constitution of India - Articles 14, 133, 134A and 301
AppellantDeputy Commissioner of Sales Tax, (Law), Board of Revenue (Taxes)
RespondentC.T. Kochouseph
Appellant Advocate Raju Joseph, Special Government Pleader and; Chacko George and;
Respondent Advocate Raju Joseph, Special Government Pleader and; Chacko George,;
DispositionRevision allowed
Cases ReferredShanmuga Traders v. State of Tamil Nadu
Excerpt:
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sales tax - constitutional validity - sections 5, 5a, 5a (1) and 10 of kerala general sales tax act, 1963 and articles 14, 133, 134a and 301 of constitution of india - constitutional validity of section 5a (1) (c) challenged - validity of said section already upheld by present court after giving due consideration to contentions based on articles 14 and 301 - said decision upheld by apex court - judicial discipline demands that authoritative decision of apex court be followed - held, impugned act valid. - karnataka motor vehicles taxation act, 1957. exemption from tax; [m. ramachandran, k. padmanabhan nair & s.siri jagan, jj] kerala motor vehicles taxation act, 1976 held, exemption from tax in respect of vehicles under detention for non-payment of tax under section 11, can be claimed.....
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g. sivarajan, j.1. the scope and content of section 5a(1)(c) of the kerala general sales tax act, 1963 (hereinafter referred to as 'the act') arise for consideration in these cases. petitioner also incidentally challenges the constitutional validity of the said section.2. t.r.c. nos. 20, 24 and 26 of 1996 and t.r.c. no. 338 of 2000 are filed by the deputy commissioner of sales tax (law), board of revenue (taxes), ernakulam, under section 41 of the kerala general sales tax act, 1963 (for short 'the act') against the orders of the sales tax appellate tribunal, additional bench, ernakulam. the appeals which are the subject-matter of t.r.c. nos. 20, 24 and 26 of 1996 were disposed of by the tribunal by a common order dated may 30, 1995 and the appeal which is the subject-matter of t.r.c. no......
Judgment:

G. Sivarajan, J.

1. The scope and content of Section 5A(1)(c) of the Kerala General Sales Tax Act, 1963 (hereinafter referred to as 'the Act') arise for consideration in these cases. Petitioner also incidentally challenges the constitutional validity of the said section.

2. T.R.C. Nos. 20, 24 and 26 of 1996 and T.R.C. No. 338 of 2000 are filed by the Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam, under Section 41 of the Kerala General Sales Tax Act, 1963 (for short 'the Act') against the orders of the Sales Tax Appellate Tribunal, Additional Bench, Ernakulam. The appeals which are the subject-matter of T.R.C. Nos. 20, 24 and 26 of 1996 were disposed of by the Tribunal by a common order dated May 30, 1995 and the appeal which is the subject-matter of T.R.C. No. 338 of 2000 was disposed of by order dated June 19, 1999 in T.A. No. 1281 of 1998. O.P. No. 25135 of 2000 is filed by the respondent-assessee challenging the provisions of Section 5A(1)(c) of the Act. This writ petition even according to the petitioner is filed by way of an alternate plea in case the petitioner's contention regarding the scope of Section 5A(1)(c) is not accepted in the tax revision cases.

3. We will first consider the statutory revisions. As suggested by the petitioner in the O.P., only if the assessee's case is not accepted in the revisions the question of challenge to the provisions of Section 5A(1)(c) of the Act is to be considered.

4. Four tax revision cases are filed by the State. The assessee is the respondent. T.R.C. Nos. 20 and 24 of 1996 relate to the assessment year 1990-91 ; T.R.C. No. 26 of 1996 relates to the assessment year 1989-90 and T.R.C. No. 338 of 2000 relates to the assessment year 1992-93. Thus the assessment years are 1989-90, 1990-91 and 1992-93. Since a common question as to whether the turnover of voltage stabilisers purchased by the assessee from registered dealers, who are S.S.I. units exempted from payment of sales tax by notification issued under Section 10 of the Act, are liable to tax under Section 5A of the Act when they despatch the goods outside State either by way of stock transfer or for consignment sales. Since this is the common question involved in all the revisions they are disposed of by this common judgment. Of course in T.R.C. No. 338 of 2000 one more question regarding the validity of the invocation of Section 19 of the Act is involved. This will also depend on the decision on the main issue.

5. The respondent-assessee is a dealer in voltage stabilisers. He purchased voltage stabilisers from charitable institutions and S.S.I. units exempted from payment of sales tax under notifications issued under Section 10 of the Act. The assessee sold substantial portion of such purchases locally. The assessee had also despatched a portion of such purchases to outside State as stock transfer to branches supported by valid F form declarations and other evidences. In the assessment under the Act for all these years the assessee claimed exemption in respect of the entire turnover. It is stated that final assessment for the year 1987-88 was completed excluding the turnover of stock transfer from the taxable turnover. The Deputy Commissioner cancelled the said assessment order by invoking Section 35 of the Act and remanded the assessment to the assessing authority directing levy of purchase tax on goods despatched out of State. In appeal filed by the assessee the Appellate Tribunal set aside the order of the Deputy Commissioner by order dated March 28, 1994. The assessment has thus become final. For the assessment year 1988-89 the assessment was completed as per order dated February 22, 1992 without resorting to levy of purchase tax under Section 5A. The assessment was however reopened under Section 19 of the Act and assessed the turnover of goods purchased from tax exempted dealers and despatched out of State. In appeal filed by the assessee the Deputy Commissioner (Appeals), Ernakulam, allowed the appeal and deleted the turnover assessed under Section 5A holding that Section 5A has no application to the case. It is stated that the assessment for the year 1988-89 is now pending before the Tribunal. Similarly the assessment for the year 1989-90 was completed assessing the turnover of goods purchased from tax exempted dealers and despatched out of State for sale in neighbouring States to purchase tax under Section 5A. This was confirmed in appeal by the first appellate authority. However, the Sales Tax Appellate Tribunal by order dated May 30, 1995 set aside the orders of the two authorities on the levy of purchase tax under Section 5A. This is the subject-matter of T.R.C. No. 26 of 1996.

6. For the assessment year 1990-91, the assessing authority included the goods purchased from tax exempted dealers and despatched out of State for sale in neighbouring States in the taxable turnover and assessed to tax under Section 5A. In first appeal filed by the assessee the first appellate authority directed deletion of the said turnover holding that Section 5A has no application. The appeal filed by the State against the said order was dismissed by the Appellate Tribunal. T.R.C. Nos. 20 and 24 of 1996 arise from the said order. For the assessment year 1991-92 the assessing authority included the goods purchased from tax exempted dealers and despatched out of the State in the taxable turnover and assessed the said turnover under Section 5A. This was cancelled by the first appellate authority. However, the appeal filed by the State against the said order is pending before the Tribunal. For the assessment year 1992-93 the assessing authority completed the assessment without resorting to levy of purchase tax under Section 5A on goods purchased from tax exempted dealers and despatched out of the State for sale in the neighbouring States. However, this was set aside by the Deputy Commissioner, Ernakulam, in suo motu revision under Section 35 and directed the assessing authority to levy purchase tax under Section 5A on the said turnover. In appeal filed by the assessee the Tribunal set aside the order of the Deputy Commissioner. T.R.C. No. 338 of 2000 arises out of the said order.

7. It so happened that pursuant to the order of the Deputy Commissioner, the assessing authority passed revised assessment orders subjecting the said turnover to tax under Section 5A. In appeal filed by the assessee the Deputy Commissioner (Appeals), Ernakulam, cancelled the said order based on the decision of the Tribunal. The appeal filed by the department against the said order is pending before the Tribunal. The assessment for the year 1993-94 was also completed subjecting the goods purchased from tax exempted dealers and despatched to outside State for sale to tax under Section 5A. The appeal filed by the assessee against the said order was dismissed. The assessee's appeal against the said order is pending before the Tribunal. The assessment for the year 1994-95 was completed subjecting the turnover of goods purchased from tax exempted dealers and despatched out of the State to tax under Section 5A. The appeal filed by the assessee against the said order was dismissed. The second appeal filed before the Tribunal is now pending.

8. Thus for the three years in question the issue that arises for consideration is as to whether voltage stabilisers purchased by the assessee from charitable institutions and S.S.I. units which are exempted from payment of sales tax by notification issued under Section 10 of the Act and despatched out of the State either by way of stock transfer or for consignment sales is liable to be assessed under Section 5A of the Act. For all the three years the Tribunal has held that the provisions of Section 5A of the Act had no application to the present case. However, the department contends that voltage stabilisers during the assessment years 1987-88 to 1991-1992 fell within entry 68 of the First Schedule to the Act taxable at 15 per cent and that by virtue of Notifications S.R.O. No. 1171 of 1987 and S.R.O. No. 748 of 1989 the tax was reduced to 4 per cent. For the assessment years 1992-93 and 1993-94 the said item fell under entry 49 of the First Schedule to the Act liable to tax at the rate of 20 per cent and by virtue of S.R.O. No. 371 of 1992 the tax was reduced to 5 per cent. However, the Notification S.R.O. No. 371 of 1992 was superceded by S.R.O. No. 1728 of 1993 with effect from January 1, 1994 but the tax rate continued at 5 per cent. During the assessment year 1994-95 voltage stabilisers were included as item 5 in the Sixth Schedule taxable at all points (VAT) at 6 per cent. There is no dispute with regard to the point of levy or regarding the rate of tax as such in these revisions. The dispute, as already noted, is regarding the liability to tax under Section 5A. There is no dispute that the item voltage stabilisers at all the relevant times was a single point commodity taxable at the point of first sale in the State by a dealer liable to tax under Section 5 and by virtue of the notification voltage stabilisers are liable to tax only at the rate of 4 per cent up to March 31, 1992 and thereafter at 5 per cent. The case of the petitioner is that voltage stabiliser is an item liable to tax only at the point of first sale in the State and that since the first sale is effected by charitable institutions/small-scale industrial units, who were exempted from payment of sales tax by virtue of the exemption notification issued under Section 10 of the Act the subsequent sale of voltage stabilisers cannot be subjected to tax under the Act. It is also the case of the assessee that the local sales of voltage stabilisers so purchased by the assessee were not subjected to tax at the hands of the assessee during any of these years. It is also their case that the goods so purchased cannot be subjected to tax under Section 5A of the Act for the simple reason that they have despatched the same to outside State by way of stock transfer or for consignment sales.

9. The contention of the State is that the fact that the purchase turnover of voltage stabilisers has not been subjected to tax at the point of first sale by the charitable institutions or by the S.S.I units which are entitled to exemption from payment of tax by virtue of the notification issued under Section 10 of the Act is a circumstance which is contemplated under Section 5A of the Act.

10. Learned Government Pleader appearing for the revision-petitioner submits that the question involved in this case is squarely covered by the decision of a division Bench of this Court in Deputy Commissioner of Sales Tax (Law), Board or Revenue (Taxes), Ernakulam v. Supreme Boards [19981 111 STC 305. The Government Pleader submitted that the division Bench has considered the identical question with reference to the decisions of the Supreme Court and of this Court and had held that Section 5A is squarely attracted.

11. Sri Chacko George, learned counsel for the respondent-assessee, on the other hand, submits that all the decisions considered by the division Bench in Supreme Boards case [1998] 111 STC 305 did not consider the question with reference to the provisions of Articles 14 and 301 of the Constitution of India. The counsel also submits that the question involved in this case is covered by the decision of this Court in T.S. Govindarajulu Naidu v. State of Kerala [1979] 43 STC 233 as affirmed by the Supreme Court in State of Kerala v. T.S. Govindarajulu Naidu [1993] 90 STC 35 and a latter decision of the Supreme Court in Shanmuga Traders v. State of Tamil Nadu [1999] 114 STC 1. The counsel submitted that under the scheme of the Act when a particular commodity is taxable only at a single point and when under the notification issued under Section 10 exemption from payment of tax is granted to the dealer, who is liable to tax under the Act there is no question of taxing the same turnover again at the hands of the purchaser or at any subsequent sale. The counsel submits that the provisions of Section 5A of the Act were enacted only for the purpose of getting at the commodity which has escaped taxation at the point of first sale for the reason that the first sale was effected either by a person whose turnover is below the taxable limit or by agriculturists or unregistered dealers. The counsel further submitted that the policy behind the enactment of Section 5A is that a particular commodity must suffer tax at some point of time and in a case where the Government itself exempt a person from liability to tax at the point of levy there is no question of levying the tax on the purchaser or at a subsequent stage in which case the very purpose of the grant of exemption to the first seller is frustrated.

12. We have considered the rival submissions and have perused the judgment of the division Bench in Supreme Boards' case [1998] 111 STC 305 (Ker). We find that the division Bench had considered a case regarding levy of purchase tax under Section 5A of the Act in respect of single point commodity the sale of which was exempted by notification issued under Section 10 of the Act in favour of small-scale industrial units. We also note that the division Bench has considered all the decisions relied on by the counsel for the assessee except the decision of the Supreme Court in Shanmuga Traders' case [1999] 114 STC 1, and have come to the conclusion that the circumstance that small-scale industrial units were exempted from payment of sales tax in respect of their sale is a circumstance falling under Section 5A of the Act and consequently the levy of purchase tax under Section 5A in respect of the purchases effected by the assessee from the small-scale industrial units exempted from payment of sales tax and despatched to outside State by way of transfer or for consignment sales was in order. We are bound by the decision of the division Bench of this Court. Unless we doubt the correctness of the said decision we are bound to follow the said binding decision which is on all fours of the present revisions.

13. In these circumstances, we take up Writ Petition O.P. No. 25135 of 2000 for consideration. As already noted, the petitioner challenges the provisions of Section 5A(1)(c) of the Act. He seeks for a declaration that Section 5A(1)(c) of the Act insofar as it purports to levy purchase tax on goods liable only for single point levy of sales tax purchased from tax exempted dealers in the State and despatched to other States while excluding from similar levy, similar category of goods, purchased in similar circumstances but resold within the State without any yield of tax is violative of Articles 14 and 301 of the Constitution of India and therefore null and void. There is also a prayer for striking down Section 5A(1)(c) of the Act insofar as it relates to purchase of goods (liable only for single point levy of sales tax) from tax exempted dealers and despatched out of the State for sale in the transferee-States, as violative of Articles 14 and 301 of the Constitution of India by writ of certiorari.

14. The main ground taken by the petitioner is that in a case where a dealer, who has purchased single point taxable goods from tax exempted first point dealers in the State and despatched the said goods out of State while no similar tax is leviable on similar category of goods purchased in similar circumstances but resold subsequently within the State is an invidious distinction violative of the provisions of Article 14 of the Constitution of India. It is stated that since the object behind the enactment of Section 5A(1)(c) is to compensate escapement of tax on thwarted subsequent sale transactions inside the State, no rational distinction can be drawn between single point taxable goods purchased from tax exempted dealers and resold in the State, without any yield of tax and similar category of goods purchased in similar circumstances and despatched out of State. The contention is that insofar as Section 5A(1)(c) singles out the latter clause of transactions alone for levy of purchase tax the said provision is violative of Article 14 of the Constitution of India. It is also stated that single point taxable goods purchased from tax exempted dealers in the State and resold within the State are not brought to tax under Section 5 of the Act. It is also his contention that the levy of tax under Section 5A(1)(c) of the Act on single point taxable goods is not compensatory or regulatory in nature so as to justify the levy against the operation of Articles 14 and 301 of the Constitution.

15. A counter-affidavit is filed by the assessing authority who is the second respondent in the O.P. It is stated therein that the object of introducing Section 5A of the Act was 'a measure for checking evasion of sales', that Section 5A was challenged by Malabar Fruit Products Company [1972] 30 STC 537 (Ker) and several others before this Court on the ground of violation of Articles 14, 19(1)(f), 31, 301 and 304(b) of the Constitution, that the single Judge had rejected the contentions and had upheld the provision which is reported in [1972] 30 STC 537 (Malabar Fruit Products Company v. Sales Tax Officer) and that the said decision was upheld by the division Bench in Yusuf Shabeer v. State of Kerala [1973] 32 STC 359 (Ker). It is further stated that the Supreme Court in State of Tamil Nadu v. U.K. Kandaswami [1975] 36 STC 191 affirmed the decision of the division Bench and that the Supreme Court had specifically observed that the said provision is enacted to check evasion of tax. It is also stated that as per the scheme of the Act every article should suffer levy of tax at least at one point or other and that the only contingency in which no levy is possible is in regard to export sale where it is not taxed as a public policy. It is also stated that if the scheme of the Act is examined one can find that it is perfectly in consonance with the said principle. Referring to the provisions of Section 5(1) of the Act it is stated that the items dealt with by the assessee is coming under the First Schedule to the Act and taxable at the point of first sale in the State during the relevant period, that all the first sales are not taxable, that only a first sale effected by a dealer who is liable to tax under Section 5 is taxed and that in view of the exemption granted to the first sellers in the State the said sale is not liable to tax. It is further stated that several contingencies may arise wherein no such first sale by a dealer liable to pay tax under Section 5 is assessed and that such contingencies are met in Section 5A of the Act. It is stated that a sale of goods by a dealer who is exempted from payment of tax under Section 10 notification cannot be treated as a dealer liable to tax under Section 5. Goods sold within the State, goods taken outside the State by way of inter-State sale or otherwise, goods used for manufacture of other goods and goods used or disposed of in any manner other than by way of sale in the State are all subjected to tax and in that manner there is no discrimination between goods transferred out of the State and goods remaining in the State. It is stated that Article 301 of the Constitution has no application and that even assuming that Article 301 is attracted (not admitted) it is saved by Article 304(a) and that the position is further fortified by Rule 32(13) of the Kerala General Sales Tax Rules, 1963. The petitioner had filed a very detailed reply traversing the averments made in the counter-affidavit. Copies of sale bills issued by the S.S.I. units and charitable institutions are also produced.

16. We have heard the elaborate arguments of Shri Chacko George, learned counsel for the petitioner in the O.P., who is the respondent-assessee in the revisions and Sri Raju Joseph, learned Special Government Pleader (Taxes) appearing for the State. The submission of Sri Chacko George is that Section 5A of the Act is not attracted. He submitted that the item voltage stabilisers are taxable only at the point of first sale in the State, that the first sellers in the State are only the S.S.I. units or charitable institutions which manufactured the said item and that since the sale effected by the S.S.I. units/charitable institutions are exempted from payment of tax under the notification issued under Section 10 of the Act the said item is not liable to tax at the point of sale by the assessee nor can it be treated as a circumstance attracting the provisions of Section 5A. The counsel also submitted that the assessee had effected sale of voltage stabilisers purchased from tax exempted S.S.I. units/charitable institutions locally which were not subjected to tax either under Section 5 or under Section 5A of the Act. The counsel submitted that when there is no tax liability for the local sale of goods purchased from tax exempted S.S.I. units/charitable institutions in the State the levy of tax under Section 5A simply for the reason that such non-taxable goods are transported to outside the State as branch transfer or for consignment sales supported by 'F' form declaration is arbitrary and discriminatory. Counsel submitted that there is no question of evasion of tax which has to be plugged which is the object of Section 5A. Counsel also submitted that Section 5A(1)(c) if it is to be understood as enabling levy of tax under Section 5A the section would be violative of Articles 14 and 301 of the Constitution of India. Counsel further submitted that this Court and the Supreme Court had considered the validity of Section 5A of the Act only in the context of multi-point commodities and the contentions taken by the petitioner in the writ petition were never considered in the said decision. Counsel also relied on the decision of this Court in Govindarajulu Naidu's case [1979] 43 STC 233 as affirmed by the Supreme Court in State of Kerala v. T.S. Govindarajulu Naidu [1993] 90 STC 35 and also the decision of the Supreme Court in Shanmuga Traders' case [1999] 114 STC 1. The counsel submits that the Supreme Court had no occasion to consider the validity of the section with reference to single point levy and the provisions of Articles 14 and 301 of the Constitution and that at any rate the decision in Supreme Board's case [1998] 111 STC 305 (Ker) requires reconsideration in the light of the above.

17. The contention of the State as already noted that the validity of Section 5A of the Act has already been upheld by this Court and by the Supreme Court after considering all the possible contentions including the one based on Articles 14 and 301 of the Constitution and that it is not open to this Court to take a different view stating that the Supreme Court did not have occasion to consider the question in the light of the contention taken by the petitioner. The Government Pleader submitted that, if at all, only the Supreme Court can consider the correctness of the decision in Kandaswami's case [1975] 36 STC 191. The Government Pleader submitted that as at present the matter is covered by the decision of the Supreme Court in Kandaswami's case [1975] 36 STC 191 and the decision of this Court in Supreme Board's case [1998] 111 STC 305.

18. The validity of Section 5A was upheld by this Court in Malabar Fruit Products Co.'s case [1972] 30 STC 537 and affirmed by the Division Bench in Yusuf Shabeer's case [1973] 32 STC 359. The Supreme Court in Kandaswami's case [1975] 36 STC 191 had specifically approved the view taken by this Court in the above two decisions. The Supreme Court observed thus :

'In our opinion, the Kerala High Court has correctly construed Section 5A of the Kerala Act which is in pari materia with the impugned Section 7-A of the Madras Act. 'Goods, the sale or purchase of which is liable to tax under this Act' in Section 7-A(1) means 'taxable goods', that is, the kind of goods, the sale of which by a particular person or dealer may not be taxable in the hands of the seller but the purchase of the same by a dealer in the course of his business may subsequently become taxable. We have pointed out and it needs to be emphasised again that Section 7-A itself is a charging section. It creates a liability against a dealer on his purchase turnover with regard to goods, the sale or purchase of which though generally liable to tax under the Act have not, due to the circumstances of particular sales, suffered tax under Section 3, 4 or 5, and which after the purchase, have been dealt by him in any of the modes indicated in Clauses (a), (b) and (c) of Section 7-A(1).'

In the light of the authoritative decision of the Supreme Court upholding Section 5A of the Act judicial discipline demands that the said decision is followed. Even if the Supreme Court did not consider some other possible contentions in arriving at the decision, the High Court cannot bypass or ignore the binding decision of the Supreme Court on the ground that the Supreme Court did not consider some other available grounds.

19. As already noted the assessee is relying on the decisions of this Court in Govindarajulu Naidu's case [1979] 43 STC 233, as affirmed by the Supreme Court in State of Kerala v. T.S. Govindarajulu Naidu [1993] 90 STC 35 and the decision of the Supreme Court in Shanmuga Traders' case [1999] 114 STC 1. We find that the division Bench of this Court in Supreme Board's case [1998] 111 STC 305, had considered the decision in Govindarajulu Naidu's case [1979] 43 STC 233 (Ker) and [1993] 90 STC 35 (SC) in detail.

20. In Supreme Board's case [1998] 111 STC 305 (Ker) the assessee had purchased 'resin' from one newly set-up small-scale industrial unit entitled to exemption from payment of sales tax under the Notification S.R.O. No. 968 of 1980. The assessing authority as well as the first appellate authority took the view that the assessee is liable to pay purchase tax on the turnover under Section 5A of the Act as no tax was paid under Section 5 of the Act even though resin is a taxable commodity. However, the Tribunal held that Section 5A is not attracted as the dealer purchased resin from tax exempted S.S.I. units. The Tribunal was of the view that as resin is exempted from tax on the first sale point at the hands of the supplier, it qualified for exemption from tax both under Section 5 and under Section 5A and hence no purchase tax is payable on such transaction. The correctness of this decision was considered by the division Bench. The question posed was 'whether purchase tax under Section 5A can be levied from a person who purchased taxable goods from a dealer who is a newly set-up small-scale industrial unit eligible for exemption on the strength of the notification issued under Section 10 of the Act. The division Bench considered a number of decisions of this Court and of the Supreme Court including the decision in Govindarajulu Naidu's case [1993] 90 STC 35 (SC) and answered the question in the affirmative, i.e., purchase tax under Section 5A can be levied. We find that the division Bench largely relied on the decision of the Supreme Court in M.K. Kandaswami's case [1975] 36 STC 191 which approved the decision of this Court in Malabar Fruit Products Company's case [1972] 30 STC 537. The division Bench held that resin is a taxable item ; it is not totally exempted under the Act ; but because of the circumstance that the seller was a newly set up small-scale industrial unit qualifying for exemption under the notification, it was exempted on his hands ; but the purchase of the same by a dealer in the course of business is taxable if Clauses (a), (b) and (c) of Section 5A are satisfied.

21. The decision of the Supreme Court in Shanmuga Traders' case [1999] 114 STC 1 was one considered in the context of declared goods. The Government by statutory notification exempted the Tamil Nadu Electricity Board from sales tax. The Board issued circular holding that the purchasers of the declared goods from the Electricity Board would become liable for tax on their subsequent sales. The writ petition challenging the said circular was dismissed by the High Court but in appeal the Supreme Court held that the Act, having fixed the levy of tax, on first sale in the State incidence of tax cannot be shifted to subsequent sale.

22. Similarly, in Govindarajulu Naidu's case [1979] 43 STC 233 this Court held that the combined effect of provision imposing liability to tax and of one granting exemption from the said liability, is for all practical purposes, to hold that there is no liability to tax under the Act. That was a case of purchase of polished synthetic gems exempted from tax as per notification issued by Government under Section 10 of the Act. The assessee despatched them out of State, for sale in the transferee State. Purchase tax was levied under Section 5A on the ground that the sale in his favour, had not suffered tax. As already noted this decision was distinguished by the division Bench in Supreme Board's case [1998] 111 STC 305 (Ker) by observing that in the said case the commodity was fully exempted from payment of tax under the Act. It is only in those circumstances the court held that no purchase tax can be payable as exemption granted to the commodity is total but in Supreme Board's case [1998] 111 STC 305 (Ker) the commodity is not totally exempted ; only the sales turnover in the hands of newly set up industrial unit is exempted. The effect of the decision of the division Bench is that the purchase of the goods manufactured by a small-scale industrial unit which is exempted from tax under the Notification S.R.O. No. 968 of 1980 and its subsequent disposal either within the State or outside the State by the assessee attracts Section 5A provided the conditions specified in Clauses (a) to (c) are satisfied. In this view of the matter there is no discrimination between goods sold in the State or despatched to outside the State either by way of stock transfer or for consignment sales.

23. Though the counsel for the assessee submitted that neither this Court nor the Supreme Court had considered the circumstances that the commodity dealt with is a single point commodity taxable at the point of first sale and that the sale effected by the first seller was specifically exempted from tax under the notification issued under Section 10 of the Act, that the sale of such goods purchased from tax exempted S.S.I. units was not taxed when sold locally, that Section 5A tax is levied only when such goods are despatched to outside the State either by way of branch transfer or for consignment sale which attracts Articles 14 and 301 of the Constitution we cannot consider the validity of Section 5A of the Act independently when the Supreme Court has specifically upheld the validity of Section 5A of the Act in Kandaswami's case [1975] 36 STC 191 (SC).

24. Thus the only question which can be considered is as to whether the decision rendered by the division Bench in Supreme Board's case [1998] 111 STC 305 (Ker) requires reconsideration in the special circumstances pointed out by the counsel for the assessee and mentioned in the preceding paragraph. As already noted the division Bench had considered the decision of this Court in Govindarajulu Naidu's case [1979] 43 STC 233 as affirmed by the Supreme Court and distinguished the same with reference to the notifications concerned. Though there is some point in the contention of the counsel for the assessee that if the turnover of goods purchased from small-scale industrial units exempted from tax is not liable to tax under Section 5 of the Act where is the question of evasion of tax when such goods are despatched to outside the State either by way of branch transfer or for consignment sale, the decision of the division Bench of this Court would show that Section 5A of the Act would apply to both the situations. Further it would appear that the decision of the Supreme Court in Shanmuga Traders' case [1999] 114 STC 1 rendered in the context of declared goods would apply only to a case of total exemption and not a conditional exemption as in the case of notifications involved in these cases- This is so in the case of Govindarajulu Naidu's case [1993] 90 STC 35 (SC).

25. In these circumstances we do not find any reason to doubt the decision of the division Bench in Supreme Board's case [1998] 111 STC 305 (Ker). Since the said decision squarely applies to the facts of the revisions on hand following the said judgment we set aside the order of the Tribunal for the years in question and uphold the order of the assessing authority on the question of levy of tax under Section 5A of the Act on the disputed turnover. These revisions are accordingly allowed.

We also hold that Section 5A of the Act is constitutionally valid and intra vires and does not suffer from the vice of Articles 14 and 301 of the Constitution. The writ petition is accordingly dismissed.

20-10-2003 :

26. Immediately after pronouncement of the judgment Sri Chacko George, learned counsel appearing for the assessee made an oral request for a certificate for appeal to the Supreme Court against the judgment as provided under Article 134A of the Constitution. The counsel also wanted certain directions to be issued to the assessing authority in the judgment now pronounced. Since the judgment was delivered in a Bench in which one of the Judges (J.M. James, J.) was not sitting the case was adjourned to this date. The counsel for the assessee submits that since the legal issue is now decided against the assessee certain directions with regard to the following matters have to be issued to the assessing authority for consideration. (1) The assessing authority while completing the assessment had adopted the transfer value of the goods shown in the F forms accompanying the despatch of goods to outside the State instead of taking the actual purchase value of the goods obtained from both unregistered dealers and registered dealers in the State for levy of tax under Section 5A. According to the assessee the value to be taken for the purpose of assessment under Section 5A of the Act is the purchase value of the goods and not the transfer value shown in F forms which is only a notional value shown therein. (2) The assessee had purchased rubber both from registered dealers and from unregistered dealers ; the purchase turnover which can be subjected to tax under Section 5A of the Act is only the turnover which has not been brought to tax in the circumstances stated in the said section. According to the assessee this distinction has not been kept by the assessing authority while assessing the entire purchase turnover of goods despatched to outside the State by way of stock transfer/branch transfer.

27. This is opposed by the learned Special Government Pleader appearing for the State. The Special Government Pleader submitted that no such directions can be issued in revisions filed by the State against the orders of the Tribunal. He further submitted that the above two aspects were never put forward before the assessing authority in reply to the pre-assessment notice or while completing the assessments. It was also pointed out that these two aspects were never raised before the two appellate authorities also and therefore even otherwise such direction cannot be issued in these proceedings. The counsel for the assessee took us to the factual situation stated in paragraphs 8 and 9 of the writ petition O.P. No. 25135 of 2002 disposed of along with the revisions by this judgment and submitted that this Court has got ample power to issue the said directions so as not to exceed the quantum of relief already granted by the Tribunal.

28. We have considered the rival submissions. We find merit in the submission of the Special Government Pleader appearing for the State. The assessee did not have any such case either before the assessing authority or before the two appellate authorities. Further these aspects are not borne out from the records of these revisions. In these circumstances, we will not be justified in issuing the directions sought for by the learned counsel for the assessee. Hence no modification of the judgment is called for.

29. Now coming to the oral request for certificate for appeal to the Supreme Court in view of the submissions made by Sri Chacko George, learned counsel for the assessee that the decision of the Supreme Court in Kandaswami's case [1975] 36 STC 191 and the decisions of the Kerala High Court considered in the said decisions were rendered in the context of exigibility to tax under Section 5A of the KGST Act in respect of multi-point commodities and in the light of the decision of the Supreme Court in Shanmuga Traders v. State of Tamil Nadu [1999] 114 STC 1 relied on by the counsel we are of the view that these cases involve a substantial question of law of general importance which needs to be decided by the Supreme Court. We accordingly issue a certificate for appeal to the Supreme Court as contemplated under Article 133 read with Article 134A of the Constitution of India.

Order on C.M.P. No. 42535 of 2002 in O.P. No. 25135 of 2002 dismissed.