IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT :- THE HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE K.T.SANKARAN MONDAY, THE 7TH APRIL 2008 / 18TH CHAITHRA 1930 ST.Rev.No.457 of 2004 ---------------------------------- TA.21/2002 OF THE SALES TAX APPELLATE TRIBUNAL, THIRUVANANTHAPURAM (ORDER DATED 31-12-2003). .................... REVISION PETITIONER/APPELLANT:- --------------------------------------------------- M/S.ALLIANCE GRAIN PRODUCTS (P) LTD., PALATHARA, THATTAMALA, KOLLAM, REPRESENTED BY ITS MANAGER, SRI.AMEENUDDIN. BY ADV. SRI.BECHU KURIAN THOMAS SRI.PAUL JACOB (P) RESPONDENT/RESPONDENT:- ------------------------------------------ STATE OF KERALA. BY GOVERNMENT PLEADER SRI.VINOD CHANDRAN. BY SRI.RAJU JOSEPH, SPL.GOVT.PLEADER(TAX) THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 07/04/2008, ALONG WITH STRV NO. 461 OF 2004 AND CONNECTED CASES, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: H.L.DATTU, C.J. & K.T.SANKARAN, J. ----------------------------------------------------------- S.T.Rev.Nos.457/2004, 459/2004, 460/2004, 461/2004, 462/2004, 149/2005, 276/2005, 279/2005, 280/2005, 285/2005, 290/2005, 304/2005, 307/2005, 308/2005, 318/2005, 322/2005, 397/2005 & 404/2005. --------------------------------------------------------------------------------------- Dated, this the 7th day of April, 2008 ORDER H.L.Dattu, C.J. Since the assessee is common and since the issues involved in all these revision petitions are identical, these revision petitions are clubbed, heard and disposed of by this common order. (2). The assessee is a small scale industrial unit having its processing unit at Palathara in Kollam District. The assessee's processing unit purchase raw wheat, either from the Food Corporation of India or from agriculturists or from registered dealers, and process the same into marketable products such as wheat, Atta, Sooji etc. The wheat products thereafter are sold to the Public Distribution System (“ PDS” for short) and other registered dealers. The PDS is maintained and run by the Civil Supplies Department of Government of Kerala. (3). The assessee is also a dealer registered under the provisions of the Kerala General Sales Tax Act and Central Sales Tax Act. (4). In these revision petitions, we are concerned with the orders of assessment passed by the assessing authority for the assessment years 1991-1992, 1992-1993, 1995-1996, 1996-1997 and provisional assessment orders for the months of April 1998 to December 1998 and for the months of April 1999 to September, 1999. STRV No,.457/04 & con.cases -2- (5). Though several legal issues are raised in the revision petitions, at the time of hearing, the assessee's learned counsel Sri.Bechu Kurian Thomas confines his submissions only to two issues. They are: i). Whether wheat impurities are liable to be taxed ? ii). Whether the amounts paid to the Taluk Supply Office under the PDS are liable to be deducted from the total tax due on sale of wheat products? (6). Before the assessing authority, the assessee had claimed exemption of tax on the sale of wheat impurities on the ground that they are either wheat or wheat products. The assessing authority had not accepted the claim of the assessee on this count. Therefore, had issued a proposition notice, inter alia, bringing to the notice of the assessee, that, his claim for exemption of sales turnover of wheat impurities cannot be accepted. The assessee had filed his objection to the said proposal made and the assessee was of the opinion that wheat impurities are nothing but form of wheat and therefore, they are exempt in view of the exemption order passed by the General Manager, District Industries Centre, Kollam for several years. In the alternative, it was contended that it is form of wheat and the assessee being a second seller is also entitled for exemption under the Act itself. The assessing authority while confirming the proposal made, in his order has observed as under: “Wheat impurities are the resultant byproduct of the STRV No,.457/04 & con.cases -3- manufacturing process. It is neither wheat nor wheat products for which exemption is allowable under the SSI exemption order ME (I) 16767/92/STE dt.2-10-94 of the General Manager, DIC, Kollam. Hence the proposal to levy tax @ 6% is confirmed.” (7). Aggrieved by this finding of the assessing authority, the assessee had questioned the same before the first appellate authority in STA.Nos.103 to 109/1999 and 421/1999. The first appellate authority by his order dated 29-10-2001 has rejected the assessee's appeal and in that has stated as under: “ I have carefully examined the contentions and also perused the relevant records. The assessing authority has rightly allowed the Sales tax exemption on the basis of the exemption certificate issued by the Industries department. Hence the contention in this regard is not sustainable. No evidences have been produced in support of the appellant's contention in respect of the total payment of ST paid/due on wheat put to manufacture. Hence the contention in this regard is also not sustainable.” (8). It is less said the better about the orders passed by the appellate authority. The appellate authority in his order has not even adverted to the claim made by the assessee before rejecting the statutory appeal filed by the assessee. In our opinion, the order passed by the first appellate authority is a non-speaking order. STRV No,.457/04 & con.cases -4- (9). Aggrieved by the order passed by the first appellate authority, the assessee had filed second appeal before the Sales Tax Appellate Tribunal. In the appeal, it was once again contended by the assessee that wheat impurities are one form of wheat product. Therefore, they are exempt either under the orders passed by the General Manager, District Industries Centre or since the assessee being a second seller is exempt from payment of tax under the Act itself. (10). The Tribunal has brushed aside the whole claim of the assessee. While rejecting the claim, the Tribunal relies upon the decision of the Full Bench of the Tribunal in the case of M/s.Sabari Roller Flour Mills (P) Ltd. Vs. State of Kerala. That was a case where the Full Bench of the Tribunal was considering the case of sale of bran flakes and refractions and wheat products and not wheat impurities as such. In fact, in the aforesaid decision, the Tribunal was not called upon to answer the issue, whether the sale of wheat impurities are exigible to tax or exempt from payment of tax in view of the fact that they are forms of wheat, as contended by the assessee. (11). In these tax revision cases, the assessee calls in question the findings and conclusions reached by the Tribunal in regard to the claim of the assessee made before the assessing authority seeking exemption from payment of tax on the sale of wheat impurities. (12). The other issue that is raised in these revision petitions is whether the amounts paid to the Taluk Supply Office under the PDS are liable to be deducted from the the total tax due on sale of wheat product. STRV No,.457/04 & con.cases -5- (13). It is the case of the assessee before the authorities under the Act, as well as before the Tribunal, that the assessee and persons similarly placed like the assessee were directed to supply/effect sales of wheat and wheat products to the PDS, which is managed and controlled by the Civil Supplies Department. It was their further case that the price was fixed by the Civil Supplies Department and the price was inclusive of the tax payable under the Act. (14). Relying upon the orders passed by the Government of Kerala dated 21-4-1994 and 25-4-1994, the assessee had contended before the assessing authority as well as before the Tribunal, that, the tax collected by him was paid to the Food & Civil Supplies Department as administrative surcharge and therefore necessary deduction requires to be given to the assessee while quantifying the tax payable by him. (15). Sri. Bechu Kurian Thomas, learned counsel appearing for the assessee, by placing heavy reliance on Ext.P5 (3) order passed by the Secretary to the Government Food & Civil Supplies Department would submit, that, since the assessee had collected tax on the sale of wheat product, by virtue of clause 2 of the Ext.P5 (3) order he had paid it over to the Food and Civil Supplies Department as administrative surcharge and therefore that amount requires to be deducted from the tax payable by him. In order to appreciate the stand of the assessee, it may be useful to extract what has been said in the order passed by the Secretary, Food & Civil Supplies Department dated 25-4-1994. STRV No,.457/04 & con.cases -6- “ Important notes: - i. The ST on wheat product indicated above (ie.Rs.22.02 - Rs.16.08 = Rs.5.94) will be paid to the S.T.Dept. irrespective of whether ST is payable by the Mill or not, as it represents ST collected by the Mill. 2. If for some reason, the above amount is not actually paid to the ST Dept, it will be paid to the Food & CS Department as Administrative Surcharge. (16). Keeping clause 2 in view, the learned counsel for the assessee would submit that, since the assessee had collected the tax on the sale of wheat products to the PDS, and since they had not paid the same to the sales tax department, in view of clause 2, he had paid the same to the Food and Civil Supplies Department as administrative surcharges and therefore that amount requires to be deducted from the tax payable by the assessee. (17). In our opinion, the Tribunal is not only a fact finding authority but also empowered to decide question of law. These are all factual disputes which requires to be sorted out by the Tribunal at the first instance. The claim of the assessee before the Tribunal was that wheat impurities are form of wheat and, therefore, they are exempt from payment of tax under the Act itself. Assuming that wheat impurities are wheat products then also they are entitled for exemption by virtue of the orders passed by the General Manager, District Industries Centre. This aspect of the matter ought to have been taken note of by the Tribunal before rejecting the claim of the STRV No,.457/04 & con.cases -7- assessee. In the order passed by the Tribunal, there is not even a mention as to whether wheat impurities are form of wheat or a by-product of wheat. If it is a form of wheat, then also petitioner is entitled for exemption. If it is a by-product then under the orders of exemption he will be entitled for certain reliefs. Without examining these aspects of the matter, the Tribunal, in our opinion, could not have mechanically rejected the claim of the assessee. In that view of the matter, issue No.1 requires to be remitted back to the Tribunal for fresh consideration after hearing the petitioner or his representative. (18). In so far as the second issue is concerned, there is no finding as such by the Tribunal. The Tribunal, in our opinion, was expected to look into the orders passed by the State Government dated 21-4-1994 and 25-4-1994 wherein there is a clear mention that if for any reason a mill had collected sales tax and if it had not paid to the sales tax department then it can pay the amount to the Food and Civil Supplies Department. According to the assessee, he has paid whatever sales tax collected by him to the Civil Supplies Department and that amount requires to be deducted from the quantum of tax liability. This aspect of the matter is also not looked into by the Tribunal. (19). Therefore, we allow the revision petitions in part and remand to the Tribunal for fresh disposal of the aforesaid two issues in accordance with law after affording an opportunity of being heard to the assessee. Liberty is reserved to the assessee to produce the orders passed by the State Government dated 21-4-1994 and 25-4-1994, which are STRV No,.457/04 & con.cases -8- produced before us at the time of hearing. Liberty is also reserved to the petitioner to produce the samples of wheat impurities before the Tribunal in support of its claim. The observations made by us, in the course of the order, are only for the purpose of disposal of these revisions petitions. We make it clear, while considering the aforesaid two issues, the Tribunal would decide the same in accordance with law. (20). Consequently all pending interlocutory applications are closed. Ordered accordingly. (H.L.DATTU) CHIEF JUSTICE (K.T.SANKARAN) JUDGE MS/