IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR FRIDAY, THE 23RD MAY 2008 / 2ND JYAISHTA 1930 OP.No. 10903 of 2001(W) ----------------------- PETITIONER: ------------ M/S. KARTHIKA PENCIL SLATS, DHARMADHAM, REPRESENTED BY PROPRIETRESS, PARAMBATH JALAJA, P.O. DHARMADAM, THALASSERY TALUK, KANNUR DIST. BY ADV. SRI.R.SURENDRAN SRI.K.LAKSHMINARAYANAN RESPONDENTS: ------------- 1. THE GENERAL MANAGER, DISTRICT INDUSTRIES CENTRE, KANNUR. 2. THE DEPUTY COMMISSIONER, COMMERCIAL TAXES, KANNUR. 3. STATE OF KERALA REPRESENTED BY SECRETARY TO GOVT., REVENUE DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM. BY GOVERNMENT PLEADER SRI. TEKCHAND THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 23/05/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: 2 ORDER ON CMP 17503 OF 2001 IN OP 10903 OF 2001 DISMISSED 23.5.2008 SD/-C.N.RAMACHANDRAN NAIR, JUDGE. APPENDIX PETITIONER'S EXHIBITS: EXT.P1 TRUE COPY OF THE ORDER NO. C2-1073/99/D DIS. DATED 2.6.1999 ISSUED BY THE FIRST RESPONDENT TO THE PETITIONER. EXT.P2 TRUE COPY OF THE ORDER NO. C2-7422/2000 DATED 15.3.2001 RESPONDENTS' EXHIBITS: NIL. TRUE COPY P.S. TO JUDGE. C.N. RAMACHANDRAN NAIR, J. -------------------------------------------- O.P. NO. 10903 OF 2001 -------------------------------------------- Dated this the 23rd day of May, 2008 JUDGMENT Petitioner was engaged in the manufature of pencil slats. The item was initially treated as manufactured product and sales tax exemption was granted for the period commencing from January, 1996 to December, 2002. However, the State Level Committee later took the view that pencil slat is only timber cut to specified sizes, which does not involve any manufacture and consequently exemption was withdrawn vide Ext.P2. It is this order that is under challenge in this O.P. 2. I have heard counsel appearing for the petitioner and Government Pleader appearing for the respondents. Petitioner has relied on the decision of this Court in RAMALINGAM NADAR AND SONS V. STATE OF KERALA (1993) 1 K.L.T. 822 and that of the Supreme Court in M.R.F. LTD., KOTTAYAM V. ASST. COMMISSIONER (ASSESSMENT) OF SALES TAX, (2006) 8 SCC 702. He further contended that his main grievance is against 2 retrospective withdrawal of sales tax exemption. I find force in this contention, because Section 22 of the Act authorises collection of tax by dealers who are liable to pay tax. Once sales tax exemption is granted, dealer is prevented from collecting sales tax. Therefore retrospective withdrawal of sales tax exemption originally granted is an arbitrary action leading to hardship to the dealer concerned. Following the judgment in the above two decision, and since petitioner was deprived of right to collect tax on account of exemption originally granted, O.P. is allowed vacating Ext.P2 to the extent of it's retrospective operation. However, since no manufacture is involved in the cutting of timber to sizes of pencil slats, Ext.P2 will stand confirmed with effect from the date of order dated 15.3.2001 onwards. In other words, petitioner will be entitled to exemption upto 15.3.2001 and thereafter tax can be collected from the petitioner. (C.N. RAMACHANDRAN NAIR) Judge kk 3