Kerala High Court
Commercial Tax Officer vs N.K.Prabhakara Naik on 26 August, 2021
"C.R."
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE S.V.BHATTI
&
THE HONOURABLE MR.JUSTICE VIJU ABRAHAM
THURSDAY, THE 26TH DAY OF AUGUST 2021 / 4TH BHADRA, 1943
WA NO. 241 OF 2016
AGAINST THE JUDGMENT IN WPC 1331/2014 OF HIGH COURT OF KERALA,
ERNAKULAM
APPELLANT/S:
1 ASSISTANT COMMISSIONER (ASSMNT)
COMMERCIAL TAXES, SPECIAL CIRCLE-I, SALES TAX COMPLEX,
COCHIN- 682 015.
2 STATE OF KERALA
REPRESENTED BY SECRETARY TO TAXES DEPARTMENT,
SECRETARIAT, THIRUVANANTHAPURAM - 695 001.
3 INSPECTING ASSISTANT COMMISSIONER
COMMERCIAL TAXES, COCHIN - 682 030.
BY SR.ADV GOVERNMENT PLEADER SHAMSUDHEEN V K
RESPONDENT/S:
1 M/S.GODREJ & BOYCE MFG.CO.LTD.
2ND FLOOR, ANGELS ARCADE, COCHIN UNIVERSITY P.O., SOUTH
KALAMASSERY, KOCHI - 682 022, ERNAKULAM DISTRICT,
REPRESENTED BY ITS BRANCH COMMERCIAL MANAGER, KOCHI -
A.S. MURTHY.
2 ADMINISTRATOR
UNION TERRITORY OF LAKSHADWEEP, W. ISLAND, COCHIN -682 003.
BY ADVS.SRI.TOMSON T.EMMANUEL
SRI.MANU.S, CGC, ADMINISTRATION OF THE UNION TERRITORY OF
LA
W.A. Nos. 241, 379, 1770 & 1891/2016
-2-
OTHER PRESENT:
SR GP SHAMSUDHEEN V. K.
THIS WRIT APPEAL HAVING COME UP FOR HEARING ON 26.08.2021, ALONG
WITH WA.379/2016, 1770/2016 AND CONNECTED CASES, THE COURT ON THE SAME
DAY DELIVERED THE FOLLOWING:
W.A. Nos. 241, 379, 1770 & 1891/2016
-3-
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE S.V.BHATTI
&
THE HONOURABLE MR.JUSTICE VIJU ABRAHAM
THURSDAY, THE 26TH DAY OF AUGUST 2021 / 4TH BHADRA, 1943
WA NO. 379 OF 2016
AGAINST THE JUDGMENT IN WPC 8022/2011 OF HIGH COURT OF KERALA,
ERNAKULAM
APPELLANT/S:
1 COMMERCIAL TAX OFFICER,
1ST CIRCLE, ERNAKULAM-682015
2 DEPUTY COMMISSIONER APPEALS
COMMERCIAL TAXES, ERNAKULAM, PIN-682015.
3 INSPECTING ASSISTANT COMMISSIONER
ERNAKULAM AT KAKKANAD-682030.
4 STATE OF KERALA
REPRESENTED BY SECRETARY TO GOVERNMENT, TAXES DEPARTMENT,
GOVERNMENT SECRETARIAT, THRIUVANANTHAPURAM, PIN-695 001.
BY SR. GOVERNMENT PLEADER SHAMSUDHEEN V K
RESPONDENT/S:
1 AL-MAHAMOOD
IS PRESS ROAD, ERNAKULAM, KOCHI. (REPRESENTED BY PROPRIETOR,
MAHAMOOD SUBAIR)
W.A. Nos. 241, 379, 1770 & 1891/2016
-4-
2 ADMINISTRATOR
UNION TERRITORY OF LAKSHADWEEP, WILLINGTON ISLAND, COCHIN-
682003.
SRI VIJAYAN K U
SRI.MANU.S, CGC, ADMINISTRATION OF THE UNION TERRITORY OF LA
THIS WRIT APPEAL HAVING COME UP FOR HEARING ON 26.08.2021, ALONG
WITH WA.241/2016 AND CONNECTED CASES, THE COURT ON THE SAME DAY
DELIVERED THE FOLLOWING:
W.A. Nos. 241, 379, 1770 & 1891/2016
-5-
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE S.V.BHATTI
&
THE HONOURABLE MR.JUSTICE VIJU ABRAHAM
THURSDAY, THE 26TH DAY OF AUGUST 2021 / 4TH BHADRA, 1943
WA NO. 1770 OF 2016
AGAINST THE JUDGMENT IN WPC 6286/2013 OF HIGH COURT OF KERALA,
ERNAKULAM
APPELLANT/S:
1 THE COMMERCIAL TAX OFFICER
3RD CIRCLE, ERNAKULAM, COCHIN 18.
2 THE STATE OF KERALA
REPRESENTED BY SECRETARY TO GOVERNMENT, TAXES DEPARTMENT,
GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM - 695 001.
BY SR. GOVERNMENT PLEADER SHAMSUDHEEN V K
RESPONDENT/S:
1 N.K.PRABHAKARA NAIK
SHREYAS HARDWARE, 40/7061, G.P.PRABHU ROAD, ERNAKULAM
2 ADMINISTRATOR
U T OF LAKSHADWEEP, W.ISLAND, COCHIN 3.
W.A. Nos. 241, 379, 1770 & 1891/2016
-6-
BY ADVS.
SRI.K.N.SREEKUMARAN
SRI.MANU.S, CGC, ADMINISTRATION OF THE UNION TERRITORY OF LA
SMT.V.P.SEENA DEVI
THIS WRIT APPEAL HAVING COME UP FOR HEARING ON 26.08.2021, ALONG
WITH WA.241/2016 AND CONNECTED CASES, THE COURT ON THE SAME DAY
DELIVERED THE FOLLOWING:
W.A. Nos. 241, 379, 1770 & 1891/2016
-7-
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE S.V.BHATTI
&
THE HONOURABLE MR.JUSTICE VIJU ABRAHAM
THURSDAY, THE 26TH DAY OF AUGUST 2021 / 4TH BHADRA, 1943
WA NO. 1891 OF 2016
AGAINST THE JUDGMENT IN WPC 12163/2016 OF HIGH COURT OF KERALA,
ERNAKULAM
APPELLANT/S:
1 COMMERCIAL TAX OFFICER,
3RD CIRCLE, ERNAKULAM, KOCHI-682 011.
2 THE STATE OF KERALA
REPRESENTED BY SECRETARY TO GOVERNMENT, TAXES DEPARTMENT,
GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM-695 001.
BY ADV GOVERNMENT PLEADER
RESPONDENT/S:
1 N.K.PRABHAKARA NAIK
SHREYAS HARDWARE, 40/7061, G.P.PRABHU ROAD, ERNAKULAM-682
011.
2 ADMINISTRATOR
U.T.OF LAKSHADWEEP, W.ISLAND, KOCHI-682 011.
W.A. Nos. 241, 379, 1770 & 1891/2016
-8-
BY ADVS.
SRI.K.N.SREEKUMARAN; ADV. ANIL KUMAR P J
SRI.MANU.S, CGC, ADMINISTRATION OF THE UNION TERRITORY OF LA
THIS WRIT APPEAL HAVING COME UP FOR HEARING ON 26.08.2021, ALONG
WITH WA.241/2016 AND CONNECTED CASES, THE COURT ON THE SAME DAY
DELIVERED THE FOLLOWING:
W.A. Nos. 241, 379, 1770 & 1891/2016
-9-
JUDGMENT
[WA Nos.241/2016, 379/2016, 1770/2016, 1891/2016]
S.V. Bhatti, J.
The instant four appeals are directed against the judgment
dated 04.11.2015 in W.P.(C) Nos.1331/2014, 8022/2011,
6286/2013 and 12163/2015. The respondents before the learned
Single Judge are the appellants (for short, 'the Revenue') and
the respondents herein/petitioners are dealers registered
under Kerala Value Added Tax Act, 2003 (for short, 'the Act').
The common question of law raised in these writ appeals
centres around proviso to Section 6(1) of the Act, read with Rule
12C of Kerala Value Added Tax Rules, 2005 (for short, 'the
Rules').
2. The circumstances set out in W.P.(C) No.1331/2014
are briefly adverted to and we are of the view that the
W.A. Nos. 241, 379, 1770 & 1891/2016
circumstances are similar or no fact in issue is separately stated
in other writ petitions, hence reference to the circumstances in
one writ petition would be sufficient for disposing of all the
appeals.
W.P.(C) No.1331/2014 [W.A. No.241/2016]
2.1 The petitioner is a registered dealer and an assessee
under the Act. The controversy arises from the return filed by
the dealer for the Assessment Year 2008-09. The petitioner,
inter alia, challenges Exts P7 and P7(a) orders made under
Section 25 of the Act. The petitioner prays for a declaration
that Rule 12C(1) of the Rules, is invalid, inoperative and
unenforceable to the extent it stipulates for filing shipping
documents or similar documents, to wit to claim concessional
rate of tax for the sales made in favour of the Administrator of
Lakshadweep Union Territory etc. The Assessing Officer,
through the orders impugned in the writ petition, rejected the
W.A. Nos. 241, 379, 1770 & 1891/2016
claim of dealer for concessional rate of levy and collection of
tax for the sales made in favour of Lakshadweep
Administration. The case of respondents is that the dealer, in
compliance with the requirement of Rule 12C, has furnished
Form No.42 however for want of proof of other requirements
prescribed in Rule 12C, namely, shipping bill or similar
document duly attested by the port authorities, the
concessional rate of tax applicable to sales made in favour of
Lakshadweep Administration has been rejected.
3. The case of Revenue is that for a dealer to avail
concessional rate of tax applicable under the Act, the dealer
must conform to the requirements of proviso to Section 6(1) of
the Act read with Rule 12C of the Rules. The concessional rate
could be accorded only, firstly, upon the sale of goods in favour
of one or the other named authority in the proviso to section 6
and further upon complying with all the requirements
W.A. Nos. 241, 379, 1770 & 1891/2016
prescribed in Rule 12C of the Rules.
4. Per contra, the argument of the dealer is that the
dealer is in a position to furnish a declaration in Form No.42
duly signed and sealed by the buyer, and the dealer is unable to,
either on account of the impossibility of performance or after
the sale is completed the affairs are beyond the reach of the
dealer, produce the shipping bill or similar documents duly
attested by the port authorities to establish that the sale, which
is subjected to concessional rate of tax, is finally utilised in the
area in which it is intended to be utilised. The proof of both the
conditions, i.e., submission of Form No.42 and also the shipping
bills or similar documents, are not mandatory prescriptions,
and in the absence of any one of them, denial of the
concessional rate of tariff claimed by the dealer is illegal. The
dealer avers that production of shipping bills or similar
documents is impossible of performance and the Rule must be
W.A. Nos. 241, 379, 1770 & 1891/2016
read in such a way that the concessional rate of tax accorded by
the proviso to Section 6(1) is extended to the dealer when the
sale was in favour of (i) the Administrator, Union Territory of
Lakshadweep, (ii) Laccadive Co-operative Marketing Federation,
Kozhikode, (iii) Lakshadweep Harbour Works, and (iv)
registered dealers certified by the Administrator, Union
Territory of Lakshadweep. For the said concessional rate of tax,
the submission of declaration in Form No.42 would suffice.
5. The further details/contentions on both sides are not
adverted to inasmuch as the judgment under appeal, in the
batch of cases, was considered by a Division Bench of this Court
in O.T.Rev. Nos.131 & 136/2019. Vide order dated 19.10.2020,
the Division Bench noted that "We hence do not subscribe to the
view expressed and the dictum laid down in Al Mahamood" i.e.
judgment under appeal in the present batch of cases. The
learned Judges while disposing of the O.T. Revisions were
W.A. Nos. 241, 379, 1770 & 1891/2016
examining the legal contention raised by the dealer on the
strength of dictum laid down in Al Mahamood, and, we
respectfully observe, that the Division Bench has rightly
considered the principle laid down in Al Mahamood v. Commercial
Tax Officer1 to the extent required to disposing of the O.T.Revs.
The reasons recorded by the Division Bench since are useful and
persuasive, we excerpt the operative portion hereunder:
"5. We are unable to agree with the said proposition even if the
sale is directly to the Lakshadweep Administration; which
herein is not the case. The sale invites the concessional rate as
per the proviso only if it is made to the Administrator, the
Marketing Federation, Harbour Works or registered dealers
certified by the Administrator, on conditions prescribed in Rule
12C. Rule 12C provides for Form No.42, a declaration from the
buyer and a copy of the shipping bill or similar document,
attested by the Port authorities to be produced. The
prescription made does not permit the different category of
purchasers to be treated differently; even if it is the
Administration itself. The intention as discernible from the
1 Judgment dated 04.11.2015 in W.P.(C) No.8022/2011
W.A. Nos. 241, 379, 1770 & 1891/2016
statutory provision as also the Rule is that a concession be
granted for the goods which will eventually be utilised in the
Islands. It is to ensure the utilisation that the shipping bill, or a
similar document is directed to be produced along with the
declaration as per Rule 12C. The prescription is also to ensure
that the goods purchased by availing the concessional rate are
then, not sold within the State of Kerala; thus defeating the
very purpose of the concession granted. We perfectly agree
that there need not be a suppressed sale assumed by the
Administration if the purchase is made directly by that
Administration. But that was a benefit which could have been
extended when the prescription is made, by the Executive
Government in the Rules, to effectuate the first proviso to
Section 6(1). The Rules having not prescribed such a benefit
insofar as the sales made directly to the Administration, we do
not think that there can be such a benefit conferred judicially.
We hence do not subscribe to the view expressed and the
dictum laid down in Al Mahamood."
5.1 The legal principle enunciated in Al Mahamood is
directly questioned by the Revenue in the batch of appeals and
we are required to take up the contention independently and
record our reasons.
W.A. Nos. 241, 379, 1770 & 1891/2016
5.2 Proviso to Section 6(1) of the Act and Rule 12C of the
Rules read thus:
"Section 6(1) of the Act
Provided that where the sale is to the Administrator, Union
Territory of Lakshadweep, Laccadive Co-operative Marketing
Federation, Kozhikode or the Lakshadweep Harbour Works and
registered dealers certified by the Administrator, Union
Territory of Lakshadweep, the tax payable under clause (d)
shall be at the rate of four per cent, subject to such conditions
as may be prescribed: (emphasis supplied)
Rule 12C of the Rules
12C. Procedure for claiming exemption or reduction in rates of
tax. - (1) Every dealer who makes any sale to the Administrator,
Union Territory of Lakshadweep, Laccadive Cooperative
marketing Federation, Kozhikode or the Lakshadweep Harbour
Works or any registered dealer certified by the Administrator,
Union Territory of Lakshadweep under the proviso to sub-
section (1) of section 6 shall obtain a declaration in Form No.42,
duly signed and sealed by the buyer along with the copy of the
shipping Bill, or similar document duly attested by the Port
Authorities and file a copy each of the same along with the
return filed under Rule 22. The originals shall be retained by
W.A. Nos. 241, 379, 1770 & 1891/2016
the dealer and shall be provided on demand by any authority
under the Act." (emphasis supplied)
The proviso deals with the concessional rate of tax payable by
the dealer under the Act for the sales made in favour of
Administrator, Union Territory of Lakshadweep, Laccadive Co-
operative Marketing Federation, Kozhikode or the Lakshadweep
Harbour Works and registered dealers certified by the
Administrator, Union Territory of Lakshadweep, the tax
payable shall be 4%, subject to conditions as may be prescribed.
The proviso, in terms, restricts the classes of buyers in whose
favour the sale at concessional rate of tax could be made and
concessional rate claimed. Apart from a few authorities/legal
entities, the other class relates to dealers certified by the
Administrator. In spite of complying with the statutory
requirement of sale in favour of specialized entity, such sale
automatically does not entail the concessional rate of tax. The
W.A. Nos. 241, 379, 1770 & 1891/2016
concessional rate of tax is applicable upon complying with the
requirements prescribed by Rule 12C. Rule 12C prescribes that
to avail concessional rate of tax, the sale firstly shall be in
favour of the identities referred to above, and secondly, that a
declaration in Form No.42 duly signed and sealed by the buyer
along with the copy of the shipping bill or similar document
duly attested by the port authorities are obtained and the
dealer files a copy of each of the documents along with return
filed under Rule 22. The Rule obligates the dealer firstly to
obtain a signed and sealed declaration in Form No.42 along with
the shipping bill or similar documents duly attested by the port
authorities. On obtaining the said documents, the proviso
enables the dealer to claim concessional rate of tax. The copies
of documents shall be filed by the dealer along with the return
under Rule 22 and originals are retained for verification if need
be.
W.A. Nos. 241, 379, 1770 & 1891/2016
6. The charging section, through a proviso, extends the
concessional rate, the language and the requirements for
claiming the eligibility are sufficiently clear. The first rule of
construction, i.e., the Golden Rule or literal construction, is that
the words of a Statute must prima facie be given their ordinary
meaning and that language of Section is read as it is. Let us
examine whether the golden rule of interpretation is applicable
to the case on hand or other tools of interpretation are needed
to resolve the controversy. The learned Judge has considered
the requirements prescribed in Rule 12C more by referring to
purposive interpretation of Rule 12C to give effect to proviso to
Section 6(1). We are persuaded that in the contract where the
liberal construction does not suffer from ambiguity,
inconsistency or uncertainty, resorting to purposive
interpretation of a Rule is to be avoided.
6.1 The Courts strongly lean against any construction
W.A. Nos. 241, 379, 1770 & 1891/2016
which tends to reduce a statutory requirement to futility. The
requirement in legislation or subordinate legislation must be
read/construed so as to make it effective, albeit such
construction is not possible because of vagueness of language,
the language is wholly interactable. The State legislature and
the delegatee are having jurisdiction to make law/rules in
regard to Value Added Tax. We refuse to sit as a super
legislature to weigh the wisdom of requirements in proviso to
Section 6(1) or Rule 12C. Courts normally refuse to examine the
wisdom of expression of legislature/executive in tax, categories
of taxes, rate of taxes, person who are brought under the tax
purview etc. As it is said, words are the framework of concept
or policy of Legislature/Government and the fact is that the
concept or policy could change more quickly than the words.
But, in our construction of Statute/Subordinate Legislation, we
are concerned with the expression of Section/Rule, as the case
W.A. Nos. 241, 379, 1770 & 1891/2016
may be. If the Government changes concept/policy, the
expression of requirement in words would also change. But
through our construction, it shall not appear that we change
the meaning of words framed on concept or policy of the
Government. The Legislature has a wide latitude in the matter
of choice of persons, things and applicable requirements for
extending concessional rate of tax. The
Legislature/Government is the best Judge of these matters. As
Courts, we construct the Statute/Rule and apply the facts in
issue.
6.2 The dealer had a choice whether to sell at the
regular/applicable rate or claim a concessional rate of tax. The
dealer chooses to sell the goods at concessional tariff and
collects tax as applicable to the sale, therefore, the dealer is
expected to comply with other requirements prescribed under
the Rule for claiming concessional rate of tax. The dealer
W.A. Nos. 241, 379, 1770 & 1891/2016
having sold the goods at concessional rate of tax, cannot be
heard to challenge the very prescription as impossible of
performance, ineffective in practice etc. The concessional rate
of tax, firstly, is attracted when the sale is effected in favour of
named identities, secondly, the obligation is fastened on the
dealer to secure documents in proof of shipment etc, from the
buyer for claiming concessional rate. Then alone, the
concessional rate of tax is applicable. In the process of
interpretation or application, relevant expression chosen by the
legislature or the executive ought not to be ignored or diluted.
The case of dealer if accepted, the same would result in
overlooking the clear expression of the rule making authority.
The claim of dealer for concessional rate without placing on
record all the requirements of Rule 12C is misconceived and
liable to be rejected. The rule making authority, both from the
wisdom and experience gained over years, has stipulated the
W.A. Nos. 241, 379, 1770 & 1891/2016
prescription to give concessional rate of tax to such
transactions which reach the Union Territory. The misuse of
concessional rate of tax cannot be overlooked while accepting a
purposive interpretation, hence the rule insists production of
shipping bill or similar document attested by the port
authorities. Firstly, we are in agreement with the view
expressed by the Division Bench in O.T.Revs. on Al Mahamood,
and secondly, for the reasons mentioned above, we are unable
to agree with the judgment under appeal. Consequently, the
judgment under appeal is liable to be set aside and is
accordingly set aside. The Writ Appeals stand allowed. The
above narrative could not conclude the consideration, for we
are dealing with obligation of a dealer and a buyer with respect
to concessional rate of tax under proviso to Section 6(1) of the
Act read with Rule 12C of the Rules.
6.3 We have taken note of Section 6(1) proviso which
W.A. Nos. 241, 379, 1770 & 1891/2016
deals with the concessional rate of tax and the requirements
prescribed by Rule 12C. In a case of sale and purchase covered
by Section 6(1) proviso, the buyer is purchasing the goods at a
concessional rate of tax, the buyer; whether it could be
Administrator, Union Territory of Lakshadweep, Laccadive Co-
operative Marketing Federation, Kozhikode or the Lakshadweep
Harbour Works and registered dealers certified by the
Administrator, Union Territory of Lakshadweep; having
purchased the goods at concessional rate of tax cannot be
allowed to wash off its hands by stating that it is impossible or
difficult to produce shipping bills or similar documents duly
attested by the port authorities evidencing shipment of the
consignment. These are matters of record and the evidence,
either in the form of shipping bills or similar documents duly
attested by the port authorities, ought to be made available by
the buyer to the seller/dealer.
W.A. Nos. 241, 379, 1770 & 1891/2016
6.4 Hence, for the said purpose we grant liberty to
dealers, in these cases, to represent to the Administrator, Union
Territory of Lakshadweep or the buyer under respective
invoices, by enclosing a copy of this judgment to furnish copies
of shipping bills or similar documents duly attested by port
authorities evidencing shipment of goods covered by respective
invoices, within four weeks from the date of receipt of a copy of
the judgment. Upon such request being received, the
Administrator, Union Territory of Lakshadweep, the
Administrator/buyer as the case may be, shall verify and
furnish the best of evidence available in this behalf of shipment
of goods to Lakshadweep within eight weeks from the date of
receipt of the request from the writ petitioners/dealers.
Thereafter, the dealer is given liberty to place the said proof
before the Assessing Officer. The Assessing Officer shall re-
assess and pass orders by adverting to the documents now
W.A. Nos. 241, 379, 1770 & 1891/2016
produced by the dealer in accordance with law. In cases where
the dealer has already furnished declaration in Form No.42 and
utilisation certificate by authority from Union Territory, the
same could be considered in terms of Rule 12C and re-
assessment orders are made.
W.A. Nos. 379, 1770 & 1891/2016
For the reasons recorded supra W.A. Nos.379, 1770 and
1891 of 2016 are allowed
Writ Appeals are allowed with the above directions.
Sd/-
S.V.BHATTI
JUDGE
Sd/-
VIJU ABRAHAM
JUDGE
jjj
