IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR FRIDAY, THE 21ST NOVEMBER 2008 / 30TH KARTHIKA 1930 WP(C).No. 3172 of 2006(C) ------------------------- PETITIONER(S): --------------- M/S.C.K.VELAPPAN & CO, KUNJITHANNY, IDUKKI DISTRICT, REPRESENTED BY ITS AMANAGING PARTNER C.K.CHELLAPPAN. BY ADV. SRI.E.P.GOVINDAN RESPONDENT(S): --------------- 1. THE COMMERCIAL TAX OFFICER, ADIMALI, IDUKKI DISTRICT. 2. THE STATE OF KERALA, REPRESENTED BY SECRETARY, TAXES DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM. BY G.P. SRI. TEKCHAND THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 21/11/2008, ALONG WITH WPC NO. 3155/2006 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: 2 APPENDIX (WPC 3172 OF 2006) PETITIONER'S EXHIBITS: EXT.P1 TRUE COPY OF THE NOTICE DATED 29.12.2005 ISSUED BY THE FIRST RESPONDENT TO THE PETITIONERS. RESPONDENTS' EXHIBITS: NIL TRUE COPY P.S. TO JUDGE. C.N. RAMACHANDRAN NAIR, J. -------------------------------------------- W.P.C. NO. 3172 & 3155 OF 2006 -------------------------------------------- Dated this the 21st day of November, 2008 JUDGMENT Both the connected cases are filed by the dealers in pepper who challenged Section 59(4) of the KGST Act which provides for payment of tax on closing stock of pepper held as on 31.3.2005. I have heard counsel appearing for the petitioners and the Government Pleader. 2. According to counsel for the petitioners, commodity, namely, pepper, was taxable at the point of last purchase under the KGST Act. Under the scheme of levy of tax under the KGST Act, tax is payable only when the commodity attains the quality of last purchase which happens when the goods are exported, or taken out of the State or otherwise consumed in manufacture. The petitioners' case is that nothing of this sort has happened, and as goods have not acquired the quality of last purchase, tax cannot be levied by introducing a provision under the statute. I am unable to uphold this contention because scheme of levy of sales tax on commodity was changed to VAT regime by introduction of Kerala Value Added Tax Act, 2003 2 with effect from 1.4.2005. The scheme under KVAT Act provides for grant of input tax credit for goods purchased in Kerala, when goods are resold in the State, or consumed in manufacture of other goods. Since pepper is taxable commodity under the VAT Act, quantity held as opening stock as on 1.4.2005 necessarily will have to be subject to levy of tax or otherwise parties would not be able to get input tax credit on the quantity of goods consumed in the manufacture of other products. The only grievance I feel for the petitioner is payment of tax in advance for the commodity held as closing stock as on 31.3.2005 which the petitioners can set-off when the goods are sold in the State or consumed in manufacture by claiming input tax credit. Even though counsel for the petitioners submitted that petitioners have paid tax under the KVAT Act on the entire goods, which is opening stock as on 1.4.2005, I do not think the same should be considered by considering constitutionality of Section 59(4) of the KGST Act. Since I do not find any infirmity in Section 59(4), the prayer of the petitioners for declaring the provision unconstitutional is rejected. However, it is for the assessing officer to consider levy of penalty for non-payment of tax 3 on the closing stock with reference to subsequent transactions of goods by the petitioner, payment of tax, etc. and take a reasonable view with reference to statutory provisions. WPCs. are dismissed, but with the above observations. (C.N. RAMACHANDRAN NAIR) Judge kk 4