IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HON'BLE THE ACTING CHIEF JUSTICE MR.J.B.KOSHY & THE HONOURABLE MR. JUSTICE V.GIRI WEDNESDAY, THE 4TH FEBRUARY 2009 / 15TH MAGHA 1930 WA.No. 2174 of 2004() --------------------- {IN O.P.NO.2796/1999 OF THIS COURT} .................... APPELLANT(S): PETITIONER ---------------------------------------------- C.MOIDEEN PROP: CHEROOR GRANITE MANUFACTURERS VENGARA, MALAPPURAM DISTRICT. BY ADV. SRI.PREMJIT NAGENDRAN SRI.P.RAGHUNATH RESPONDENT(S): RESPONDENTS ----------------------------------------------------- 1. STATE OF KERALA, REP.BY THE CHIEF SECRETARY, THIRUVANANTHAPURAM. 2. THE GENERAL MANAGER, DISTRICT INDUSTRIES CENTRE, MALAPPURAM. 3. STATE LEVEL COMMITTEE FOR SALES TAX EXEMPTION, THIRUVANANTHAPURAM REP.BY THE COMMISSIONER OF COM.TAXES: (CHAIRMAN) 4. THE DEPUTY COMMISSIONER, (COMMERCIAL TAXES), MALAPPURAM. WA.No. 2174 of 2004 :: 2 :: 5. THE COMMERCIAL TAX OFFICER, TIRURANGADI. BY GOVERNMENT PLEADER SRI.MOHAMMED RAFIQ THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 04/02/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: J.B. KOSHY, Ag.C.J. & V.GIRI, J. ------------------------- W.A.No.2174 of 2004 ------------------------- Dated this the 4th day of February, 2009. JUDGMENT GIRI, J. The appellant, an assessee to Sales Tax and engaged in the manufacture of Jelly Metal from boulders, sought for exemption from payment of Sales Tax on the strength of S.R.O.No.968/80, which provided that Small Scale Industrial Units, subject to the conditions prescribed therein, will be exempted from payment of Sales Tax for a period of 5 years from the date of commencement of sale of such goods by the Units. The eligibility for claiming exemption from Sales Tax must be certified by the General Manager, District Industries Centre. 2. By Ext.P1 dated 16.1.1980, the 2nd respondent General Manager, District Industries Centre, Malappuram certified that the petitioner is eligible for Sales Tax exemption on Processed Rubble (Metal Jelly) for a period of 5 years from5.4.1985 to 4.4.1990, subject to the ceiling mentioned therein. According to the assessee, since the unit W.A.No.2174 of 2004 :: 2 :: was entitled to Sales Tax exemption, it had not collected any tax from its purchasers. 3. It is the petitioner's further case that assessment for the years 1985-86 to 1989-90 were completed by the assessing authority, after verifying the books of accounts of the assessee; that the assessments for the year 1985-86 and 1988-89 were completed on 8.1.1996 and for the year 1989- 90 was completed on 12.7.1996. 4. While so, the assessee was served with Ext.P2 order issued by the 1st respondent, under Section 35 of the Kerala General Sales Tax Act [for short 'the Act'], exercising suo motu powers of revision in relation to the assessment years 1985-86 to 1989-90. Ext.P2 order refers to the order of exemption granted in favour of the assessee, completion of assessment of 1985-86, 1988-89 and also refers to an order stated to have been passed by the State Level Committee for Sales Tax exemption, resolving to cancel the order of the General Manager, District Industries Centre, Malappuram, granting Sales Tax exemption to metal crushing units. It seems that consequential upon the said decision taken by the State Level Committee, the General Manager, District W.A.No.2174 of 2004 :: 3 :: Industries Centre, Malappuram, proceeded to pass an order on 9.3.1998 cancelling the exemption already granted in favour of the petitioner. On the said premise, the Deputy Commissioner, exercising powers under Section 35 of the Act, proceeded to set aside the orders of assessment for the years 1985-86 to 1989-90 and remanded the same for fresh consideration by the assessing authority. Ext.P2 was challenged before the learned single Judge in the writ petition. 5. The learned single Judge dismissed the writ petition, holding that Ext.P2 order was passed by the Deputy Commissioner on the basis of the cancellation of the order of exemption already granted in favour of the petitioner. That, since the order cancelling exemption has not been challenged in the writ petition, it is not open to the petitioner to challenge Ext.P2 order, which has only taken note of the cancellation of exemption. It is aggrieved thereby, that the present appeal has been filed. 6. We heard Sri.Premjith Nagendran, learned counsel for the appellant and Sri.Mohammed Rafiq, learned Government Pleader. W.A.No.2174 of 2004 :: 4 :: 7. Learned counsel for the appellant submitted that, what was challenged in the writ petition was Ext.P2 order passed by the Deputy Commissioner, purporting to exercise suo motu powers of revision under Section 35 of the Act. One of the principal grounds taken up in the writ petition and reiterated in the appeal was that Ext.P2 was not preceded by any notice nor was the assessee heard in this regard. Apart from this being violative of the principles of natural justice, it is contended that there is a clear bar under Section 35 of the Act itself restraining the Deputy Commissioner from passing an order in exercise of his suo moto revisional power, except after notice to the assessee. It is further contended that the cancellation of the exemption already granted in favour of the petitioner, is seen to have been made on a decision taken by the State Level Committee in 1997, almost 7 years after the period of exemption itself had expired. That, the assessee was not heard by the State Level Committee before it purported to take a decision against the interest of the assessee; that, going by the terms of S.R.O.No.968/80, under which the assessee had been granted exemption, the State Level Committee was not even W.A.No.2174 of 2004 :: 5 :: constituted as an appellate authority in relation to the proceedings of the General Manager, District Industries Centre, and therefore, the order stated to have been passed cancelling the exemption was per se void. 8. Learned Government Pleader, on the other hand, contended that the activity carried on by the petitioner could not have been treated as manufacture and therefore, the exemption granted was rightly interfered with by the State Level Committee. Ext.P2 only took note of the said fact and since the orders of assessment were prejudicial to the interest of the revenue, the Deputy Commissioner was competent to exercise powers under Section 35 of the Act. 9. The correctness of the proceedings of the State Level Committee cancelling the order of exemption issued in favour of the petitioner had been called in question by the assessee in the writ petition, though there is no specific prayer, for setting aside the said proceedings of the State Level Committee. But, we take note of the contention in the writ petition that the assessee was not given any notice by the State Level Committee before it proceeded to take the decision on 5.9.1997 to cancel the order passed by the W.A.No.2174 of 2004 :: 6 :: General Manager, District Industries Centre, Malappuram, granting sales tax exemption to metal crushing units. In fact, the said decision taken by the State Level Committee seems to have been a general one. But the assessee could be said to be aggrieved only when proceedings are passed by a competent authority, specifically withdrawing any order of exemption, which had been issued in his favour by an authority competent in that regard under the statutory notification. It seems that, according to the assessee, he did not have notice of the consequential proceedings stated to have been passed by the General Manager, on 9.3.1998 cancelling the sales tax exemption granted to the petitioner. 10. We do not think it necessary to finally pronounce on this aspect, inasmuch as that, the direct challenge in the writ petition is confined to Ext.P2 order passed by the Deputy Commissioner. One of the grounds on which the challenge was mounted against Ext.P2 was that, the same was not preceded by a notice to the petitioner and a hearing, in spite of the statute specifically providing for such notice. Absence of notice is not disputed by the respondents. Absence of notice is clear from Ext.P2 order also. If that be W.A.No.2174 of 2004 :: 7 :: so, the petitioner was entitled to succeed, qua Ext.P2 on the ground that it was passed without notice to him. 11. For all these reasons, we are of the view that the appellant is entitled to succeed, insofar as the challenge against Ext.P2 is concerned. Accordingly, the judgment under appeal is set aside. Ext.P2 order passed by the Deputy Commissioner is quashed. The appeal is allowed as above. There will be no order as to costs. Sd/- (J.B. KOSHY) ACTING CHIEF JUSTICE Sd/- (V.GIRI) JUDGE sk/ //true copy// P.S. to Judge