IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE K.M.JOSEPH MONDAY, THE 25TH AUGUST 2008 / 3RD BHADRA 1930 WP(C).No. 18265 of 2007(Y) -------------------------- PETITIONER: ------------------ M/S.EMCEES TRADERS, ERAKKATHIL BUILDINGS KOTTAYAM 686 010 REPRESENTED BY ITS MANAGING PARTNER MANI JACOB. BY ADV. SRI.M.J.THOMAS RESPONDENTS: ---------------------- 1. STATE OF KERALA, REPRESENTED BY SECRETARY TO GOVERNMENT FINANCE DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM. 2. THE COMMISSIONER OF COMMERCIAL TAXES, OFFICE OF THE COMMISSIONER OF COMMERCIAL TAXES, THIRUVANANTHAPURAM. 3. THE SALES TAX OFFICER, OFFICE OF THE SALES TAX OFFICER, KOTTAYAM. 4. DY.COMMISSIONER, COMMERCIAL TAX OFFICE, KOTTAYAM. BY GOVT. PLEADER SRI. C.K. GOVINDAN. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 25/08/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WPC. 18265/2007. APPENDIX PETITIONER'S EXTS: EXT. P1 : TRUE COPY OF THE PART III RESOURCE MOBILIZATION ITEM NO.48. EXT. P2 : TRUE COPY OF THE CIRCULAR NO.54/2006 DATED 30.12.2006 ISSUED BY THE 2ND RESPONDENT. EXT. P3 : TRUE COPY OF THE LETTER ISSUED BY THE 2ND RESPONDENT DATED 29.1.2007. EXT. P4 : TRUE COPY OF THE JUDGMENT DATED 9.6.2005 PASSED BY THIS HON'BLE COURT IN W.P.(C) 7574 OF 2005. EXT. P5 : TRUE COPY OF THE SAID CIRCULAR NO.15/2007 DATED 30.3.2007 ISSUED BY THE 2ND RESPONDENT. EXT.P6 : TRUE COPY OF THE CIRCULAR LETTER NO.C1-22921/07/CT DATED 4.6.2007 ISSUED BY THE 2ND RESPONDENT. EXT. P7 : TRUE COPY OF THE PRESS RELEASE PUBLISHED BY THE NEW INDIAN EXPRESS DAILY DATED 5.5.2007. EXT. P8 : TRUE COPY OF THE PRESS RELEASE PUBLISHED BY THE DEEPIKA DAILY DATED 9.5.2007. EXT. P9 : TRUE COPY OF THE CIRCULAR DATED 25.1.2007 ISSUED BY THE 2ND RESPONDENT. EXT. P10 : TRUE COPY OF THE CIRCULAR DATED 24.8.2007 ISSUED BY THE 2ND RESPONDENT. EXT. P11 : TRUE COPY OF THE CIRCULAR NO.46/07 DATED 31.10.2007. EXT. P12 : TRUE COPY OF THE CIRCULAR NO.40/2007 DATED 15.9.2007. K.M.JOSEPH, J. - - - - - - - - - - - - - - - - - - - - - - - - - WP.(C) No.18265 of 2007 - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 25th day of August, 2008 JUDGMENT Petitioner challenges Ext.P6 and seeks a direction to instruct M/s. Glaxo Smith Kline Consumer Health Care Limited, Kochi to continue the system they followed in the months of April, May and June, 2007 till date in pursuance of Ext.P5 Circular. 2. Briefly put the case of the petitioner is as follows: Petitioner is the Managing Partner of M/s. Emcees Traders, which is a distributor of Glaxo Smith Kline Consumer Health Care Limited. He is allotted with TIN number under the VAT. He has also registration under CST. The State Government in the budget proposal for 2007-2008 have proposed to offer a facility to first sellers in the State dealing in commodities under the Packaged Commodities Orders to compound tax at MRP. In case of goods suffering tax at first sale point at MRP, subsequent sales will be exempted from tax. Pursuant to the same, the second respondent issued Ext.P5 Circular. Based on the same Glaxo Smith Kline Consumer Health Care Limited, Kochi, for which the petitioner is a distributor for Kottayam started supply of goods under 8HH invoices collecting tax at MRP under the compounding system. Petitioner also made WPC. 18265/2007. 2 all preparations under the system. However Ext.P6 Circular issued by the Commissioner. Ext.P6 reads as follows: “The proposal to introduce compounding on the basis of MRP for packed commodities did not work out this year. Since the major companies have not come forward to make use of this scheme, it has been decided to withdraw the scheme as a whole. It has also been decided that dealers who had opted for the scheme must be given as liberal a scheme as possible to withdraw. In the circumstance the subsequent sellers who purchased goods under cover of Form 8 HH under the scheme are permitted to sell the goods without remitting tax. Since the compounding option has not been accepted yet, 8HH issuance has to be dispensed forthwith and they should also operate as regular VAT dealer. This may be conveyed to each of them separately.” 3. A counter affidavit has been filed, wherein it is stated as follows: “It is hereby submitted that the petitioner is a dealer registered under KVAT Act 2003 on the rolls of 3rd respondent bearing TIN 320506 01774. The petitioner is not as first seller in the State of Kerala and is no entitled to get the benefit of payment of tax at compounded rate under Section 88 proposed in the Budget Proposal for the year 2007-2008 and WPC. 18265/2007. 3 which was subsequently revoked retrospective from 1.4.2007 itself through the Finance Act 2007. Hence the Section 88 proposal for envisaging a statutory provision for compounding is not at all in force. It is the prerogative of legislature to bring to the net of taxation of a particular commodity or turnover or person. In the instant case there was a proposal to tax packaged commodities at M.R.P. Rate. This was reconsidered in the light of the decision of the Hon'ble Supreme Court of India in State of Rajasthan and another v. Rajasthan Chemists Association reported in 147 STC 542 wherein the Hon'ble Court held that tax on M.R.P rate cannot be assessed if the total consideration paid and received is less than M.R.P rate.” 4. Petitioner has filed a reply affidavit. I heard learned counsel for the petitioner and the learned Government Pleader. 5. Ext.P5 is a Circular issued apparently on the basis of the Budget proposal. It is inter alia provided that only first sellers offering all the MRP marked goods in respect of which they are first sellers will be eligible to exercise option. Going by the averment in the writ petition it is clear that the petitioner is not the first seller. There is no denial of the allegation that he is not the first seller. It is also stated that it is a Budget proposal and it is the prerogative of the legislature to bring on taxation. It is true that the petitioner has opted. But the option has not been accepted WPC. 18265/2007. 4 apparently on the basis of Ext.P6. Admittedly petitioner is not the first seller. Petitioner cannot claim benefit on the basis of Ext.P5. There is no merit in the writ petition. It is dismissed. (K.M. JOSEPH, JUDGE) sb