IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT:- THE HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR MONDAY, THE 26TH MAY 2008 / 5TH JYAISHTA 1930 S.T.Rev.No.216 of 2004 ---------------------------------------------- (AGAINST THE ORDER IN T.A.NO77 OF 1996 DATED 30TH JULY, 2001 OF THE KERALA SALES TAX APPELLATE TRIBUNAL, ADDL.BENCH-I, ERNAKULAM - ASSESSMENT YEAR 1990-91) ---------------- REVISION PETITIONER/APPELLANT/ASSESSEE:- --------------------------------------------------------------------- SYNTHITE INDUSTRIAL CHEMICALS LTD., SYNTHITE VALLEY, KADAYIRUPPU, KOLENCHERRY-682311, PH: 2760285/2761181/27611184. BY ADV. SMT.S.K.DEVI SRI.SANTHOSH P.ABRAHAM RESPONDENT/RESPONDENT/REVENUE:- ----------------------------------------------------------- STATE OF KERALA, REPRESENTED BY ITS FINANCE SECRETARY, SECRETARIAT, TRIVANDRUM. BY SENIOR GOVERNMENT PLEADER SRI.MUHAMMED RAFIQ. THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 27/05/2008, THE COURT ON 26/05/2008 PASSED THE FOLLOWING:- H.L.DATTU, C.J. & T.R.RAMACHANDRAN NAIR, J. ------------------------------------------ S.T.Rev.No.216 of 2004 ------------------------------------------ Dated, this the 26th day of May, 2008 ORDER H.L.Dattu, C.J. This revision petition is filed by an assessee registered both under the provisions of the Kerala General Sales Tax Act, 1963 ('KGST Act for short) and the Central Sales Tax Act, 1956 ('CST Act' for short), being aggrieved by the orders passed by the Kerala Sales Tax Appellate Tribunal, Additional Bench-I, Ernakulam in T.A.No.77 of 1996 dated 30th July, 2001. By the impugned order the Tribunal has concurred with the view expressed by the assessing authority. 2. The assessment year in question is 1990-91. Petitioner is manufacturing and selling spice oil, oleoresins essential oils, etc. He effects both intra and interstate sales. He had filed his annual returns for the assessment year 1990-91 and in that had conceded a particular turnover as taxable turnover. The assessing authority has rejected the returns so filed by the assessee and thereafter has proceeded to complete the best judgment assessment. In that the assessing authority has levied tax under the provisions of the KGST Act on the sale of REP licence, has treated the sale of waste spice as sale of spice and exigible to levy under 8%, and lastly has denied the exemption from payment of turnover tax since the petitioner had failed to comply with the conditions prescribed in SRO No.717/88. Aggrieved by these findings and conclusions reached by the assessing authority, the assessee had unsuccessfully filed appeal before the first appellate authority as well as before the Tribunal. S.T.Rev.No.216 of 2004 2 3. The assessee being aggrieved by the aforesaid orders is before us in this revision petition filed under Section 41 of the KGST Act. 4. The assessee has framed three questions of law for our consideration and decision. They are as under: “(i) Whether the Tribunal is right in holding that premium received on the transfer of REP licence are goods eventhough the Apex Court doubts the decision in the case of H.Auraj vs. Govt. of Tamil Nadu (61 STC 165) on the basis of which the decision reported in 102 STC 106 was rendered. (ii) Whether the Tribunal is right in holding that waste is liable to be taxed at 8% against the conceded rate of 5% treating the same as spices and spice powder eventhough the same is used as fuel without any properties of spice. (iii) Whether the Tribunal is right in holding that the petitioner is liable to turnover tax under sec.5(2A) as Pepper and ginger eventhough they are paying the purchase tax being the last purchaser in the state and all the dealers except the dealer at the point of purchase preceding the last purchase point are exempted from the turnover tax as per SRO. 717/88.” 5. In so far as the first question of law framed by the assessee, in our opinion, the same is no more res integra in view of the decision of the apex Court in the case of M/s.Yasha Overseas & others v. Commissioner of Sales Tax & others (Civil Appeal No.2155 of 2000 and connected appeals disposed of on 6th May, 2008). In the aforesaid decision, the apex Court at paragraphs 27, 28 and 30 has observed as under: S.T.Rev.No.216 of 2004 3 “27. Thus on a detailed examination, we are unable to see how the decision in Sunrise can be said to alter the position in regard to the sale of REP licenses as held by the earlier decision in Vikas. It is noted above that the Constitution Bench in Sunrise firmly and expressly declined to go into the question whether REP licenses (or DEPB which replaced REP licenses) were 'goods'. It is indeed true that the Constitution Bench in Sunrise did not approve the decision in Vikas insofar as it gave their free marketability as an additional reason to hold that REP licences were not actionable claim but 'goods' properly so called. The Constitution Bench held that the assumption that actionable claims were not transferable for value was quite unfounded and the conclusion drawn on that basis was quite wrong. In paragraphs 39 and 40 of the decision, the Sunrise decision gave illustrations of a number of actionable claims which are transferable. 28. But to our mind that does not in any way change the position insofar as REP licenses are concerned. While examining the three-Judge Bench decision in Vikas earlier in this judgment it is seen that the Court first came to hold that REP licence/exim scrip fell within the definition of goods quite independently. The court found and held that REP licenses had their own value; they were freely bought and sold in the market for their intrinsic value and for that reason alone those were goods. (See paragraph 29 of the decision in Vikas that is reproduced above). It was only after coming to the conclusion that the Court proceeded to examine the matter in light of the observations made in Anraj relating to lottery tickets and that too because the Karnataka and Madras High Courts had heavily relied upon the Anraj decision for holding that the sale of REP licences was exigible to sales tax. On a careful reading of the decision in Vikas it is apparent that it S.T.Rev.No.216 of 2004 4 was the intrinsic value of REP licence that brought it within the definition of goods. xxx xxx 30. This takes us to the next question, whether what is said in Vikas in regard to REP licences would also apply in the case of DEPB. On behalf of the appellants it is strongly contended that DEPB has materially different features and hence, the decision in Vikas will have no application to it. Mr.A.K.Jain, learned counsel appearing for the appellants in Civil Appeal No.4075/2007 especially made elaborate arguments to bring out the points of distinction between REP licence and DEPB. But before proceeding to examine what is DEPB and how far it is different from REP licence it will be useful to take a look at the provisions of law under which the present cases arise and to establish their similarity with the statutory provisions that came up for consideration in Vikas and Sunrise. As noted above, the present appeals arise under the Delhi Sales Tax Act, 1975, the Kerala General Sales Tax Act, 1963 and the Bombay Sales Tax Act, 1959.” 6. In view of the dicta laid down by the apex Court in M/s.Yasha Overseas case, the first question of law framed by the assessee requires to be answered against the assessee and in favour of the Revenue. 7. In so far as the second question of law framed by the assessee is concerned, Mr.Santhosh P.Abraham, learned counsel appearing for the petitioner would submit that what is sold by the assessee is waste spice and therefore, requires to be treated as an unclassified item and liable to be taxed only at the rate of 5%. However, the assessing authority has completed the assessment treating waste spice as a scheduled commodity and has levied tax S.T.Rev.No.216 of 2004 5 at the rate of 8%. 8. The assessing authority while rejecting the request of the assessee for treating the waste spice as an uncalssified item, in his assessment order has observed as under: “The assessee have contended that waste and waste powder sales cannot be treated as spice sales. This is being used as fuel for boilers. If this is one and the same then the sales is not changeable as tax has been assessed. This contention is not correct. The item is retaining the quantities of spices and is used as spices. Almost all the items are liable to tax at first sale point as the purchases are from outside the State.” 9. While concurring with the view expressed by the assessing authority, the Tribunal in its well considered order has observed as under: “Rate of tax applicable on the sales turnover of waste powder of spices is the next question for consideration. According to the assessee the said commodity was sold as waste and therefore the rate of tax leviable is only 5%. But the assessing authority levied tax at 8% finding that the commodity retained its qualities of spices and was also being used as spices. In this connection we may point out that the assessee did not adduce any evidence before us to upset the concurrent factual finding of the authorities below that the disputed commodity contained the qualities of spices and was also being used as spices.” 10. The levy under the KGST Act on spices is on first sale point. It is not in dispute nor it can be disputed by the assessee that he had effected the S.T.Rev.No.216 of 2004 6 purchase of waste spice from outside the State and thereafter has sold waste spice within the State. The sale so made by the assessee requires to be taxed on the first sale point. The assessee's contention is that though it is liable to be taxed on the first sale point the same requires to be treated as an unclassified item since the waste spice is used as a fuel for boilers and not sold as spice as such. Except making a bald assertion, the assessee had not adduced any evidence either before the assessing authority or before the Tribunal that waste spice as such was sold by him to a dealer who would use the waste spice as a fuel for boilers. In fact the finding of the authorities under the Act as well as by the last fact finding authority, namely the Tribunal, is that waste spice was sold by the assessee as spice alone. If that is so, the sale of waste spice cannot be treated and levy on the said sale cannot be taxed as an unclassified item, but requires to be taxed as sale of spice and the levy can only be at the rate of 8% as provided under the Schedule to the Act. Therefore, in our opinion, the contention canvassed by the learned counsel for the assessee has no merit and therefore it requires to be rejected. Accordingly, the second question of law framed by the assessee requires to be answered against the assessee and in favour of the Revenue. 11. Lastly, the learned counsel appearing for the assessee contends that the levy of turnover tax under Section 5(2A) of the KGST Act by the assessing authority is not only illegal, irregular and contrary to the notification issued by the State Government in No.SRO 717/88. In aid of his submission, learned counsel relies upon the observations made by this Court in the case of M/s.P.I.Varghese & Sons v. State of Kerala (2002) 10 KTR 157 (Ker.) S.T.Rev.No.216 of 2004 7 12. Per contra, Sri.Muhammed Rafiq, learned Senior Government Pleader, appearing for the Revenue invites our attention to the observations made by a Division Bench of this Court in the case of M/s.P.K.Uthippu v. State (T.R.C.No.500 of 2001 decided on 2nd of July, 2007). 13. In the aforesaid decision, the Divison Bench of this Court has taken the view that in order to claim the benefit of SRO 717/88, the assessee requires to produce either the declaration forms as envisaged in the notification SRO 717/88 or produce such other evidence as is required under the notification to demonstrate that his seller has paid the turnover tax under Section 5(2A) of the KGST Act to claim the benefit of the notification SRO 717/88. The observation made by the Division Bench of this Court is as under: “In the instant case also, the assessee has not produced any declaration form as provided in the notification; nor has he produced any evidence as required under the notification. In the absence of the appropriate declaration form or any evidence in lieu of the same, in our opinion, the Tribunal was justified in rejecting the request of the assessee for exemption from payment of turnover tax under Section 5(2A) of the Act. In that view of the matter, the question of law raised by the assessee in the memorandum of Tax Revision Cases requires to be answered in the negative and against the assessee and in favour of the Revenue.” 14. In view of what has been held by the Division Bench of this Court, in our opinion, the submission of Mr.Santhosh P.Abraham, learned counsel appearing for the assessee cannot be accepted by us. Therefore, this question of law framed by the assessee also requires to be answered against S.T.Rev.No.216 of 2004 8 the assessee and in favour of the Revenue. 15. In view of the aforesaid discussion, all the questions of law framed by the assessee require to be answered against the assessee and in favour of the Revenue. Accordingly, we reject the revision petition. Ordered accordingly. (H.L.DATTU) CHIEF JUSTICE (T.R.RAMACHANDRAN NAIR) JUDGE vns/dk