IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE K.SURENDRA MOHAN FRIDAY, THE 13TH MARCH 2009 / 22ND PHALGUNA 1930 ST.Rev..No. 46 of 2008() ------------------------ TA.137/2007 of S.T.A.TRIBUNAL,ADDL.BENCH,PALAKKAD .................... PETITIONER/ASSESSEE --------------------------------------- M/S. GAYATHRI MODERN RICE MILL VADAVANNUR, KOLLENGODE, PALAKKAD DT. REP. BY ITS MANAGING PARTNER SHRI. K.S.PARASURAM. BY ADV. SRI.T.M.SREEDHARAN SRI.V.P.NARAYANAN RESPONDENT(S): REVENUE ---------------------- STATE OF KERALA, REPRESENTED BY THE CHIEF SECRETARY TO GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM. BY G.P. SRI.V.K.SHAMSUDEEN THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 13/03/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.R. C.N.RAMACHANDRAN NAIR & K.SURENDRA MOHAN, JJ. .................................................................... S.T. Revn. No.46 of 2008 .................................................................... Dated this the 13th day of March, 2009. ORDER Ramachandran Nair, J. The question raised is whether petitioner is entitled to sales tax exemption on purchase turnover of paddy which is converted into rice and exported. Paddy and rice are declared items which are taxable under Entry 9 of the Second Schedule to the KGST Act at 1% on the sales turnover. Explanation to the said entry provides for rebate of tax on paddy from out of tax payable on the sales turnover of rice. The petitioner purchased paddy from unregistered dealers, converted into rice, partly sold locally and partly exported out of India. For the local sale of rice, the Assessing Officer granted rebate of tax paid on purchase of paddy in the tax payable on the sales turnover of rice. However, so far as export turnover is concerned, as petitioner was not liable to pay tax on export turnover, no rebate was granted on the tax paid on the purchase of paddy. The case of the petitioner is that they 2 are not liable to pay purchase tax on paddy as paddy is also taxable at sale point. The authorities below including the Tribunal, rejected the claim and hence this revision. We have heard counsel appearing for the petitioner and Government Pleader appearing for the respondent. 2. Counsel relied on sub-clause (c) and (ca) of Section 15 of the CST Act which provides restrictions and conditions in regard to levy of tax on purchase and sale of declared goods within the State. The relevant entries are the following: "S.15. Restrictions and conditions in regard to tax on sale or purchase of declared goods within a State:- Every sales tax law of a State shall, in so far as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions namely:- .......... (c) where a tax has been levied under that law in respect of the sale or purchase inside the State of any paddy referred to in sub-clause (i) of clause (i) of Section 14, the tax leviable on rice procured out of such paddy shall be reduced by the amount of tax levied on such paddy; (ca) where a tax on sale or purchase of paddy referred to in sub-clause (i) of clause (i) of Section 14 is leviable under that law and the rice procured out of such 3 paddy is exported out of India, then, for the purposes of sub-section (3) of Section 5, the paddy and rice shall be treated as a single commodity." All what is stated in sub-clauses (c) and (ca) above is that for the purpose of considering exemption on export sales under Section 5(3), paddy and rice will be treated as one and the same commodity. In fact, paddy and rice are commercially different and are different commodities and the fiction is introduced in sub-clauses (c) and (ca) of Section 15 to enable exporters to claim exemption on purchase of paddy for conversion into rice and for export. In other words, any exporter purchasing paddy against prior order for export will be entitled to exemption on the purchase tax payable on such paddy provided the paddy so purchased is converted into rice and exported to foreign buyers in terms of prior order of export. In other words, all the conditions of Section 5(3) of the CST Act have to be complied with for availing exemption on the purchase turnover of paddy. Though the case of the petitioner is that paddy is purchased after obtaining orders for export, there is nothing to indicate in the orders that petitioner has made any such claim. Even though Government Pleader submitted 4 that petitioner would have claimed exemption on purchase by issuing Form 18A, counsel for the petitioner rightly pointed out that Rule 28A which provides for issuance of Form 18A has no application when the purchases are from unregistered dealers. We, therefore, feel that even without the requirement of issuing Form 18A, the petitioner is entitled to claim exemption from payment of purchase tax under Section 5A, if petitioner establishes with evidence that specific purchases are for complying with order for export. In other words, in order to claim the benefit, the petitioner has to necessarily produce export orders for export of specific quantities of rice and prove before the Assessing Officer as to which are the purchases that are made for complying with orders of export. If the purchase of paddy is related to any specific consignment of rice with reference to prior orders for export, then petitioner will be entitled to exemption on purchase turnover provided the purchases are made for complying with order for export. We also make it clear that there need not be one to one correspondence between every export order and every purchase. In other words, for complying with single order of export, the petitioner will be entitle to make 5 different purchases and all what is required to prove exemption is to correlate between purchases, production and shipment to comply with orders for export. We declare the position of law as above and remand the matter to the Assessing officer after setting aside the order of the Tribunal to give an opportunity to the petitioner to establish his case. C.N.RAMACHANDRAN NAIR Judge K.SURENDRA MOHAN Judge pms