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 TUESDAY, THE 27TH MAY 2008 / 6TH JYAISHTA 1930 S.T.Rev..No. 174 of 2005 --------------------------------- ORDER DATED 11.12.2003 IN TA.13/2003 OF THE KERALA AGRICULTURAL INCOME TAX AND SALES TAX APPELLATE TRIBUNAL, ADDLITIONAL BENCH, PALAKKAD .................... REVISION PETITIOENR/RESPONDENT/REVENUE. ---------------------------------------------------------------------- STATE OF KERALA, REP. BY JOINT COMMISSIONER (LAW) COMMERCIAL TAXES, ERNAKULAM. BY SR.GOVERNMENT PLEADER MR.MUHAMMED RAFIQ RESPONDENT/APPELLANT/ASSESSEE. -------------------------------------------------------- M/S.PARRYS CONFECTIONERIES LTD, KANNADY, PALAKKAD. BY ADV. SRI.P.R.RAMACHANDRA MENON THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 27/05/2008, ALONG WITH ST REV.NO. 286 OF 2005 THE COURT ON THE SAME DAY PASSED THE FOLLOWING: H.L.DATTU, C.J. & T.R.RAMACHANDRAN NAIR, J. ------------------------------------------ S.T.Rev.No.174 of 2005 & S.T.Rev.No.286 of 2005 ------------------------------------------ Dated, this the 27th day of May, 2008 ORDER H.L.Dattu, C.J. These revision petitions pertain to the assessment years 1997-98 and 1998-99. 2. The revenue is before us in these tax revision cases being aggrieved by the common order passed by the Kerala Sales Tax Appellate Tribunal in T.A.Nos.13 of 2003 and 307 of 2003 dated 11th December, 2003. By the impugned order the Tribunal has accepted the stand of the assessee that what is sold by the assessee is tapioca product and therefore, exigible to tax under Entry 129 of the First Schedule to the Kerala General Sales Tax Act at the rate of 3%. 3. The Revenue has raised the following questions of law for our consideration and decision. They are as under: “1. Whether on the facts and in the circumstances of the case the tribunal is justified in finding that liquid glucose is a tapioca product. 2. Whether on the facts and in the circumstances of the case the tribunal is justified in deleting the levy of differential rate of tax as done by the assessing authority as per sec.5(3)(ii) of the KGST Act 1963.” 4. For the purpose of disposal of these revision petitions, facts in brief S.T.Rev.Nos.174 & 286 of 2005 2 may be noticed. They are as under: Petitioner is a dealer 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). It is a manufacturer of confectioneries. It had purchased liquid glucose from its sellers/manufacturers by issuing Form 18 declaration and while filing its annual returns had claimed concessional rate of tax under Section 5(3)(ii) of the KGST Act. After such purchase, the finished product is transferred substantially to its branch offices located outside the State by way of branch transfers/consignment sales. 5. The annual returns so filed by the assessee were doubted by the assessing authority. Therefore, the assessing authority had issued pre- assessment notice, inter alia, bringing to the notice of the assessee that the annual returns filed for the assessment years in question cannot be accepted by him and that the petitioner is not eligible and entitled to the concessional rate of tax at 3% and therefore, had directed the assessee to show cause why the differential rate of tax should not be assessed and demanded. For the reasons best known to the assessee, it did not choose to file any objections to the proposals made in the pre-assessment notice. 6. The assessing authority thereafter has completed the assessment and has confirmed the proposal made in the pre-assessment notice and accordingly had issued demand notice directing the petitioner to pay the differential rate of tax at 7% treating the branch transfers of liquid glucose as an S.T.Rev.Nos.174 & 286 of 2005 3 unclassified item liable to be taxed under Section 5(1) of the KGST Act. 7. The assessee being aggrieved by the demand so made by the assessing authority had preferred appeal before the first appellate authority. In the memorandum of appeal the stand of the assessee was that what is purchased by the assessee is a tapioca product and even without Form 18, the goods dealt by the assessee requires to be classified under Entry 129 of the First Schedule to the KGST Act and the rate of tax would only be at the rate of 3%. In aid of this assertion made in the memorandum of appeal, the assessee has produced a certificate issued by the manufacturer who had supplied liquid glucose to the petitioner, wherein it certified that the liquid glucose supplied to the petitioner is manufactured only from tapioca. Without commenting on the certificate so issued by the manufacturer and the supplier, the appellate authority had rejected the appeal filed by the assessee by its order dated 31.10.2002 and had confirmed the orders passed by the assessing authority. Correctness or otherwise of the said order was questioned by the assessee before the Tribunal in T.A.Nos.13 of 2003 and 307 of 2003. The Tribunal after detailed consideration of the expressions like tapioca products, etc. and placing reliance on certain observations made by the apex Court has come to the conclusion that the liquid glucose is nothing but a tapioca product and therefore, exigible to tax under Entry 129 of the First Schedule to the KGST Act and requires to be taxed only at the rate of 3%. Having come to the aforesaid conclusion has set aside that portion of the order S.T.Rev.Nos.174 & 286 of 2005 4 passed by the assessing authority wherein the assessee was asked to pay the differential rate of tax at 7%. 8. The legality or otherwise of the order passed by the Tribunal is questioned by the Revenue in these tax revision cases. 9. Since a common issue would arise in these tax revision cases, these revisions are clubbed, heard and disposed of by this common order. 10. Sri.Muhammed Rafiq, learned senior Government Pleader appearing for the Revenue would submit that liquid glucose can be manufactured not only from tapioca but also from sweet potatoes, beat roots etc. and if that is so, the Tribunal was not justified in coming to the conclusion that the liquid glucose purchased by the petitioner cannot be classified as an unclassified item and liable to be taxed under Section 5(1) of the KGST Act. 11. Sri.P.R.Ramachandra Menon, learned counsel appearing for the assessee ably justifies the orders passed by the Tribunal. 12. In our view, it may not be necessary for the purpose of disposal of these revision petitions to give a finding whether the liquid glucose is a tapioca product. The said question can be decided in appropriate proceedings. 13. In the instant case, though the assessee was served with the pre-assessment notice and since it had not filed any objection to the proposal made therein, the assessing authority has confirmed the proposal and had claimed the differential rate of tax treating the aforesaid item as an unclassified item liable to be taxed at the rate of 10% and since the assessee had paid only S.T.Rev.Nos.174 & 286 of 2005 5 3% had issued a demand notice directing the assessee to pay the difference of tax at 7%. 14. Before the appellate authority, along with the memorandum of appeal, the assessee had produced a certificate issued by the manufacturer who had supplied liquid glucose to the assessee by accepting the Form 18 issued by the assessee. In that certificate the manufacturer had clearly stated that the liquid glucose supplied/distributed to the assessee by accepting Form 18 declaration is manufactured out of tapioca only. It was not the case of the Revenue before the first appellate authority that the certificate that was issued by the manufacturer is either a false certificate or that the certificate was issued only to assist the assessee. Since the manufacturer himself states that the liquid glucose supplied to the petitioner is manufactured out of tapioca, in our opinion, in the absence of any contra evidence, the first appellate authority should have accepted that certificate and should have granted whatever reliefs that the assessee was entitled to. That has not been done in the instant case. 15. In our view, in view of the certificate issued by the manufacturer who had supplied the liquid glucose to the assessee, we have no hesitation to hold that the product so sold to the assessee is a product manufactured out of tapioca and therefore, it requires to be classified only under Entry 129 of the First Schedule to the KGST Act and if that is so, the rate of tax would be at 3% and there was no occasion for the assessing authority to demand differential rate of tax on the branch transfers effected by the assessee at the rate of 7%. S.T.Rev.Nos.174 & 286 of 2005 6 16. In view of the above, for the reasons other than stated by the Tribunal, we answer the first question of law raised by the Revenue for our consideration and decision in negative and in favour of the assessee. In view of the above, these revision petitions require to be rejected and they are accordingly rejected. We keep it open the issue whether the liquid glucose is a tapioca product or not for decision in appropriate proceedings. 17. In so far as the second question of law framed by the Revenue is concerned, in our opinion, the same need not be answered by us in this proceedings. Ordered accordingly. (H.L.DATTU) CHIEF JUSTICE (T.R.RAMACHANDRAN NAIR) JUDGE vns/dk