IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMAN & THE HONOURABLE MR. JUSTICE P.BHAVADASAN MONDAY, THE 13TH JULY 2009 / 22ND ASHADHA 1931 WA.No. 1470 of 2009() --------------------- (AGAINST THE JUDGMENT IN W.P.(C) NO.12030 OF 2006) APPELLANT(S): PETITIONER ------------------ M/S.UNITED SPIRITS LTD., UNIT PALAKKAD, K.PUDUAR, KANJIKODE, PALAKKAD -678 621, REPRESENTED BY ITS SENIOR MANAGER (P & A) MR.A.RAJENDRAN. BY ADV. SRI.RAJU K.MATHEWS RESPONDENT(S): --------------- 1. STATE OF KERALA REPRESENTED BY THE SECRETARY TO GOVERNMENT, TAXES (B) DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM. 2. THE ASST. COMMISSIONER OF SALES TAX (ASSESSMENT), COMMERCIAL TAXES, SPECIAL CIRCLE, PALAKKAD. 3. KERALA STATE BEVERAGES (MANUFACTURING AND MARKETING) CORPORATION LIMITED, SASTHA KRIPA, SASTHAMANGALAM, THIRUVANANTHAPURAM. BY GOVT. PLEADER SRI.K.P.PRADEEP. THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 13/07/2009, ALONG WITH W.A.NOS.1475 & 1479 OF 2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: P.R.RAMAN & P.BHAVADASAN, JJ. ------------------------------- W.A.Nos.1470, 1475 & 1479 of 2009 ------------------------------- Dated this the 13th July, 2009 J U D G M E N T Raman, J. Appellants, who are the petitioners in W.P.(C) Nos.12030/2006, 23966/06 and 24000/2006 respectively, are Distilleries engaged in the manufacture and sale of Indian made Foreign Liquor. The entire product manufactured by the petitioners and similarly situated persons are sold to Kerala State Beverages Corporation, and to none else. Thus, Beverages Corporation had a monopoly distribution right of Indian made Foreign Liquor. While sales tax at the rates prescribed in the First Schedule of KGST Act is paid on liquor at the point of sale by the Beverages Corporation, liability of the appellants is to pay turnover tax on their sales turnover. Besides sales tax, excise duty on liquor was also paid by the Beverages Corporation. For the assessment years 1998-99 onwards, turnover tax was demanded on the sale price inclusive of excise duty paid by the W.A Nos.1470, 1475 & 1479/2009 2 Beverages Corporation. In other words, the total sales consideration deemed to have received by the appellants is inclusive of the excise duty paid by the Beverages Corporation. This was contested by the appellants earlier before this Court and this Court held that no turnover tax is payable on the excise duty paid by the Beverages Corporation. However, on appeal by the State, the said judgment was modified by the Apex Court in State of Kerala v. Maharashtra Distilleries Ltd. and Others (2005 (141) STC 358) and ultimately the Apex Court held that appellants are not liable to pay turnover tax representing the excise duty component upto 4.1.1999. In the judgment, the Apex Court also took note of the amendment of the Foreign Liquor Rules with effect from 5.1.1999. Rule 13(9) of the said Rules provide for lifting and taking delivery of liquor by the Beverages Corporation from the warehouses of the appellants and other manufacturers only on payment of excise duty. Since the relief was confined to the period upto 4.1.1999, regarding the non-inclusion of excise duty element, there cannot be any dispute that after 5.1.1999, in view of the amendment made to the Rules and in view of the decision of the Apex Court, excise W.A Nos.1470, 1475 & 1479/2009 3 duty element has to be included in the turnover. It appears that garnishee proceedings were taken for recovery of the interest on turnover tax belatedly paid. It has been noticed by the learned Single Judge that though it is not clear from the orders and notices as impugned, it is clear that payments made by the appellants have been first adjusted towards interest as provided under Section 55C of the KGST Act and only the balance was adjusted towards the turnover tax. It is against these demand notices and garnishee proceedings that appellants have filed writ petitions for a declaration that they are not liable to pay interest; that the payments should not be adjusted towards interest first under Section 55C and for quashing the impugned demand notices and garnishee proceedings. 2. Though it was requested that the cases may be decided on merits on all issues, the learned Single Judge did not accept the said plea. It was noticed that except in one or two notices that the assessing officer has not referred to the Section under which interest is demanded from the appellants. Interest for default in payment of tax is payable under Sections 23(3), 23 W.A Nos.1470, 1475 & 1479/2009 4 (3A) and 23(3B) of the KGST Act. Sub-section (3A) was introduced to Section 23 by Act 14 of 1998 only with effect from 1.4.1998, by an amendment. Similarly, sub-section (3B) of Section 23 provides for levy of interest even during the period when collection of tax remained stayed by the Court. 3. In these circumstances, it was held by the learned Single Judge that the challenge against the validity of statutory provisions was mainly to maintain the writ petitions because remaining challenge in the writ petition was computation of interest which can only be contested before the statutory authority in appeal or revision, however, leaving freedom to the appellants to challenge the validity of any provision if so desired, after proper adjudication orders are issued determining interest liability in accordance with statutory provisions. The learned Single Judge did not enter any finding as to which is the relevant provision applicable in the matter of payment of interest, and necessarily, it is for the assessing authority to specify in the notice, the relevant provision under which the demand is raised. As the matter is now left to be decided by the assessing officer, it is unnecessary to pronounce on the merits of the contentions W.A Nos.1470, 1475 & 1479/2009 5 raised by the appellants. All that have been done by the learned Single Judge is only to leave the matter at the first instance to be decided by the assessing officer and reserved the right of the appellants including any challenge to be made in the provision before this Court. 4. Therefore, in so far as the relief moulded by the learned Single Judge is concerned, we do not think that any prejudice is caused to the petitioner and we do not find any merit in the contentions raised. In the result, we find no merit in the appeals. Accordingly, the appeals are dismissed. P.R.RAMAN, JUDGE P.BHAVADASAN , JUDGE. nj.