IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE K.VINOD CHANDRAN WEDNESDAY, THE 16TH NOVEMBER 2011 / 25TH KARTHIKA 1933 ST.Rev..No. 85 of 2011() ------------------------ AGAINST ORDER DATED 14/02/2011 IN TA.89/2010 of S.T.A.TRIBUNAL,ADDL.BENCH,PALAKKAD .................... REVISION PETITIONER/APPELLANT IN THE APPEAL --------------------------------------------------------------- M/S.ESSEN PRINT FORMS (P) LTD., P.O.KHANNANAGAR, CHALAKUDY, KORATTY, THRISSUR-680308. BY ADV. SRI.K.J.ABRAHAM RESPONDENT(S): RESPONDENT ------------------------- STATE OF KERALA REPRESENTED BY THE CHIEF SECRETARY, SECRETARIAT, THIRUVANANTHAPURAM-695001. MR.BOBBY JOHN, GOVERNMENT PLEADER THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 16/11/2011, ALONG WITH STRV NOS.86, 88, 89, 91 & 94 OF 2011 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: STRV NO.85/2011 APPENDIX PETITIONER'S EXHIBITS ANNEXURE-I : COPY OF ASSESSMENT ORDER NO.25153709/02-03 DATED 25/11/2006 PASSED BY THE COMMERCIAL TAX OFFICER-I, CHALAKKUDY. ANNEXURE-II : COPY OF ORDER IN R1-4450/10 DATED 20/11/2010 PASSED BY THE DEPUTY COMMISSIONER, DEPARTMENT OF COMMERCIAL TAXES, THRISSUR. ANNEXURE-III : COPY OF COMMON ORDERS DATED 14/02/2011 PASSED BY THE TRIBUNAL IN T.A.NO.89/2010. ANNEXURE-IV : COPY OF ORDERS IN T.A.NOS.527, 528, 529/2002 & 530/2002 AND 758/2003 PASSED BY THE SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, PALAKKAD. //TRUE COPY// PA TO JUDGE. jg C.R. C.N.RAMACHANDRAN NAIR & K.VINOD CHANDRAN, JJ. .................................................................... S.T.Rev.Nos.85, 86, 88, 89, 91 & 94 of 2011 .................................................................... Dated this the 16th day of November, 2011. J U D G M E N T Ramachandran Nair, J. These Revision Petitions filed by the assessee as well as the revenue are against common orders of the Sales Tax Appellate Tribunal upholding sales tax assessments on the assessee for the assessment years 2002-03 to 2004-05 but by granting partial relief to the assessee. The assessee is engaged in purchase of paper in bulk and manufacture of computer printing stationery for parties with perforation, colour printing of rows & logos of the parties and embedding carbon paper between two computer printing papers for use by the customers. The assessee availed sales tax exemption for 7 years on the ground that it was engaged in manufacture of computer printing paper and the assessee was permitted to enjoy sales tax exemption on the sale of same product, S.T.Rev.Nos.85, 86, 88, 89, 91 & 94 of 2011 2 namely computer printing papers made from paper rolls purchased by it along with other raw materials like carbon paper, colouring material etc. However, after availing sales tax exemption treating the very same computer printing paper as manufactured product for 7 years, the assessee changed their stand and raised the contention that the item namely paper purchased is resold by them only as paper, and so much so the same being second sales does not attract any tax liability. The Assessing Officer disallowed 2nd sale exemption claimed by the assessee on the ground that the computer printing paper sold by the assessee after printing colour rows and logos and embedding carbon paper is a product different from ordinary paper purchased by the assessee. The Tribunal confirmed the assessment disallowing 2nd sale exemption claimed by the assessee but granted rebate of tax paid on paper purchased relying on the Explanation to Entry 106 of the First Schedule to the Kerala General Sales Tax Act (hereinafter referred to as the Act for short), which provides for rebate of tax paid on paper used in manufacture of note S.T.Rev.Nos.85, 86, 88, 89, 91 & 94 of 2011 3 book against sales tax payable on sale of note book. While the assessee has filed revisions challenging the orders of the Tribunal confirming disallowance of 2nd sale exemption, the Department has filed Revisions challenging that part of the orders of the Tribunal granting rebate under Explanation to Entry 106 of the First Schedule to the Act on the ground that the said explanation and entry have no application for sale of computer printing papers with carbon paper embedded between two computer printing papers. 2. We have heard learned counsel for the assessee and learned Government Pleader for the Department. 3. Before considering the question whether the item sold is a product different from paper purchased by the assessee in bulk attracting tax at first sale point, we feel the assessee should not be allowed to blow hot and cold in a matter like this. This is because the assessee for 7 years after starting the industry contended that it is engaged in manufacture of computer printing paper, which is a product different from paper purchased by it, and it is entitled to sales S.T.Rev.Nos.85, 86, 88, 89, 91 & 94 of 2011 4 tax exemption on sale of the product manufactured. This claim was allowed and the assessee enjoyed sales tax exemption for 7 years on the sale of the products on the ground that products sold are manufactured from the materials purchased. However, when the period of exemption is over, the assessee changed their stand and started contending that there is no manufacture involved and the item sold is one and the same though perforated and printed with colour rows & logos of the parties and embedded with carbon paper between two sheets for use by the customers. If the present stand of the assessee is accepted, then we have to conclude that the assessee defrauded the revenue by availing irregular and ineligible tax exemption for 7 years. If we allow assessee's case we should first direct the assessee to deposit the entire tax exemption fraudulently availed along with interest for the 7 years during which period the assessee purchased paper from outside Kerala, manufactured computer printing paper and sold as first sales, which but for the exemption availed by the assessee would be attracted full rate S.T.Rev.Nos.85, 86, 88, 89, 91 & 94 of 2011 5 of tax in Kerala. Keeping this stand of the assessee in mind we now proceed to consider whether the activity of the assessee involves manufacture of a product different from the raw material used, namely, paper purchased by the assessee. The manufacturing process involved by the assessee as found by the final fact finding authority, i.e. the Tribunal, is as follows. “(1) The paper bought locally is cut into sizes. (2) The paper is perforated to fit into computer printer. (3) Printing of rows on colour, printing of rows and columns and other details such as name and address of the purchaser, Logo and other format etc. is made in it. (4) The dealer has purchased ink, Carbon Paper stores and other consumables as raw materials. (5) The product transferred on Delivery Notes are computer stationery forms and computer printing forms and invoices are raised. 7. The dealer has filed statement that they were involved in the manufacture of computer printer forms, pre-printed forms, Blank Forms etc. They have also admitted that they were purchasing paper rolls, admitted that they were purchasing paper rolls, carbon paper, ink, packing materials, plates and paper cartons and manufacturing computer forms with installed computer stationery manufacturing and printing machine, collating M/C Plate making and get ready the finished product is computer printer Forms. S.T.Rev.Nos.85, 86, 88, 89, 91 & 94 of 2011 6 --------- --------- The appellant purchase paper in Bulk quantity from registered dealers within the state then cut into sizes, perforate, insert carbon paper in between papers, fold into packets and sell them as computer paper as per specific orders from buyers.” From the above, what is clear is that the item sold by the assessee is a value added product, namely computer stationery, which has distinct and specific use and identity. It is admittedly commercially different from the paper purchased by the assessee, which is white paper, and in the first place white paper is cut into required sizes and then printing is done to provide continuous rows in colour ink on one side of entire paper, and thereafter the paper is perforated on either side with specific length for cutting. In between two computer printing papers, the assessee is embedding/planting a carbon paper for the customers to take computer printing in duplicate. Besides this, the finding of the Tribunal is that most of the supplies are against prior orders and large customers like Railways demand printing of their logo on the computer paper. So much so, the product sold though is S.T.Rev.Nos.85, 86, 88, 89, 91 & 94 of 2011 7 paper, is a commercially different product in as much as the identity of the paper is lost, and the product is a value added product. Even though learned counsel for the appellant has relied on the Single Bench judgment of this Court rendered by one of us (CNR(J)) in OP No.37169 of 2002 dated 13/10/2005, what we notice is that in that case the extend of processing is not what is stated in the above case. Further the case decided is with reference to claim of exemption on manufactured product, whereas in this case the assessee got exemption for the very same product as manufactured product and thereafter they are changing their stand to continuously avoid payment of tax legitimately due on the sale of the product manufactured by the assessee. Even though learned counsel has relied on the decision of the Supreme Court in Union of India and Others v. JG Glass Industries Ltd., reported in 114 STC 387, what we notice from the said judgment is that the question considered is whether the printing of logo itself constitutes manufacturing activity. In this case, the entire process as stated above constitute manufacturing activity S.T.Rev.Nos.85, 86, 88, 89, 91 & 94 of 2011 8 because in the whole process a commercially different article is produced by the assessee, which article is different from the original item. We, therefore, uphold the order of the Tribunal in rejecting the second sale exemption claimed by the assessee on the sale of computer printing paper manufactured by them from out of ordinary paper purchased in rolls. The Sales Tax Revision cases filed by the assessee (S.T.Rev.Nos.85, 86 & 94 of 2011) are accordingly dismissed. 4. We, now proceed to consider the revisions filed by the State wherein the Tribunal has granted rebate under explanation to Entry 106 of the First Schedule to the KGST Act, which is as follows:- Sl.No. Description of Goods Point of levy Rate of tax (%) 106 (i) Paper At the point of first sale in the State by a dealer who is liable to tax under section 5 8 (ii) Newsprint, cardboard paper products, note books and printed materials including greeting cards. -do- 8 Explanation:- Where tax is levied on note books, the tax if any paid on the purchase of paper out of which such note book is manufactured shall be deducted. From the above provision, it is clear beyond any doubt that S.T.Rev.Nos.85, 86, 88, 89, 91 & 94 of 2011 9 rebate of tax on paper is available only on sale of note book and the assessee has no case that he is engaged in making any note book from the paper purchased and so much so, the explanation has no application. We, therefore, allow the revision cases filed by the State (S.T.Rev.Nos.88, 89 & 91 of 2011) by reversing the orders of the Tribunal and by upholding the orders in the suo motu revision passed by the Deputy Commissioner, and by confirming the assessment made at full rate of tax. Accordingly, S.T.Rev.Nos.85, 86 & 94 of 2011 are dismissed and S.T.Rev.Nos.88, 89 & 91 of 2011 are allowed as above. (C.N.RAMACHANDRAN NAIR, JUDGE) (K.VINOD CHANDRAN, JUDGE) jg