IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM THURSDAY, THE 11TH JUNE 2009 / 21ST JYAISHTA 1931 ST.Rev..No. 268 of 2008() ------------------------- TA.27/2006 of STAT ADDL.BENCH, KOTTAYAM .................... PETITIONER: -------------------- M/S.EMPEES MODERN RICE MILLS CHAMBAKKULAM, ALLEPPEY DISTRICT. BY ADV. SRI.GEORGE KURUVILLA(ALAPPUZHA) RESPONDENT: --------------- STATE OF KERALA. BY G.P. SRI.MOHAMMED RAFIQ THIS SALES TAX REVISION HAVING COME UP FOR ADMISSION ON 11/06/2009, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: C.R. C.N.RAMACHANDRAN NAIR & C.K.ABDUL REHIM, JJ. .................................................................... S.T. Rev. No.268 of 2008 .................................................................... Dated this the 11th day of June, 2009. ORDER Ramachandran Nair, J. The question raised in the revision filed by the assessee is whether the Tribunal was justified in confirming disallowance of exemption claimed on the purchase tax payable under Section 5A of the KGST Act on paddy under SRO 1729/93. The petitioner started a rice mill in 1998 and being a new small scale industrial unit, petitioner is entitled to sales tax exemption on the rice and other products manufactured and sold under notification SRO 1729/93 for a period of seven years. Besides the exemption available to manufactured goods sold by the new small scale industrial units, such units are also granted exemption under the same notification in respect of tax payable on goods taxable at the point of last purchase in the State. Admittedly, petitioner is granted sales tax exemption on products namely, rice, bran 2 etc. The petitioner purchased paddy from unregistered dealers who are not liable to pay sales tax on their sales turnover of paddy by virtue of being agriculturists. Since goods purchased namely, paddy, is taxable under Entry 9 of the Second Schedule to the KGST Act and since the commodity has not suffered tax at the point of sale in the State, the Assessing Officer demanded purchase tax under Section 5A for the reason that paddy is consumed in the manufacture of rice. The petitioner's claim for exemption under SRO 1729/93 on the purchase turnover of paddy was rejected for the reason that paddy is not covered by the second limb of the notification which entitles a small scale industrial unit for exemption only on purchase turnover of goods which are taxable at the point of last purchase in the State. The petitioner carried the assessment in appeal unsuccessfully and hence this revision is filed against the Tribunal's order. We have heard counsel appearing for the petitioner and Government Pleader appearing for the respondent. 3 2. The first contention raised by counsel for the petitioner is that when Section 5A is applied in the hands of any dealer, such commodity becomes taxable at the point of last purchase in the State as it is consumed in the manufacture of the final product. However, Government Pleader submitted that goods taxable at the point of last purchase in the State as contained in the notification are only goods which are specifically made taxable at the point of last purchase in the First Schedule to the KGST Act. If petitioner's contention is accepted, then every commodity when assessed under Section 5A will become taxable at the point of last purchase and so much so, benefit of notification will be available. This is obviously not intended by the Government while issuing the notification because applying this logic, every commodity when purchased and consumed in manufacture by an SSI unit becomes taxable at the point of last purchase in the State and will be entitled to exemption. On the other hand, notification has to be read consistent with the other provisions of the Act. The charging 4 section namely, Section 5(1) says that sales tax in respect of commodities is payable at the point of sale or purchase and at the rates specified in the Schedules to the Act. Goods taxable at last purchase point are specifically mentioned in the First Schedule to the Act. Therefore, whenever the notification refers to goods taxable at last purchase point or first sale point, the goods so referred should be identified with the items mentioned in the Schedules to the Act. All cereals including paddy and rice are specifically covered by Entry 9 of the Second Schedule to the KGST Act which are taxable at the point of first sale in the State. Therefore, petitioner's contention that paddy assumes the character of goods taxable at last purchase point when it is assessed under Section 5A is untenable and we, therefore, reject the contention. Since the item is taxable at sale point, petitioner is liable to pay tax under Section 5A as no tax is borne on the commodity at sale point. Even though petitioner's claim for exemption under the Notification is rejected, it is seen that by virtue of operation of the 5 charging Section, the petitioner is entitled to rebate of tax paid on paddy against demand of tax on sale of rice. In other words, Explanation to Entry 9 of the Second Schedule to the Act which is extracted hereunder, specifically entitles a dealer in rice to get the rebate if he pays tax on the purchase of paddy. ------------------------------------------------------------------------------------- Sl.No. Description of goods Point of levy Rate of Tax-% ------------------------------------------------------------------------------------- 9. Cereals, that is to say paddy, At the point of first 1 rice, jower or milo, bajra, maize, sale in the State by a ragi, kodon, kutki and barli. dealer who is liable to tax under Section 5. Explanation:- Where a tax has been levied in respect of paddy, the tax leviable on rice produced out of such paddy shall be reduced by the amount of tax levied on such paddy. ------------------------------------------------------------------------------------- The rebate available apply not only to sales tax paid at first sale point, but the tax leviable under Section 5A on the very same dealer. So much so, sales tax payable on the sale of rice is reduced by the tax borne on the purchase turnover of paddy. In view of the provision for 6 rebate contained in the charging entry, the petitioner cannot have any grievance because the tax liability set off from the total amount of exemption certified will be only the net liability for sales tax payable on rice as reduced by the tax paid on paddy. We, therefore, dismiss the S.T. Revision case as devoid of any merit. C.N.RAMACHANDRAN NAIR Judge C.K.ABDUL REHIM Judge pms