IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE S.SIRI JAGAN WEDNESDAY, THE 23RD NOVEMBER 2011 / 2ND AGRAHAYANA 1933 WP(C).No. 31225 of 2011(C) --------------------------------------- PETITIONER: ------------------- M/S.N.V.CHETTIAR,S.M.STREET, CALICUT- 673 001, REPRESENTED BY IT'S MANAGING PARTNER MR.V.THYAGARAJAN. BY ADV. SMT.K.LATHA. RESPONDENTS: ------------------------ 1. THE STATE OF KERALA,REPRESENTED BY THE CHIEF SECRETARY TO THE GOVERNMENT OF KERALA, SECRETARIAT,THIRUVANANTHAPURAM-1. 2. SECRETARY(TAXES),GOVERNMENT OF KERALA, THIRUVANANTHAPURAM-1. 3. ASSISTANT COMMISSIONER SPECIAL CIRCLE-2, COMMERCIAL TAXES,ERANJIPALAM POST KOZHIKODE- 673 006. 4. INTELLIGENCE OFFICER,(IB),OFFICE OF THE DEPUTY COMMISSIONER(INT.) COMMERCIAL TAX DEPARTMENT,KOZHIKODE- 673 006. 5. DEPUTY TAHASILDHAR (RR), COLLECTORATE, CIVIL STATION,CALICUT- 673 020. R1 TO R5 BY GOVT. PLEADER SMT. SHOBA ANNAMMA EAPEN. THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 23/11/2011,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P.(C).NO.31225/2011-C: APPENDIX PETITIONER'S EXHIBITS:- EXHIBIT P1: THE TRUE COPY OF THE JUDGMENT OF THE HONOURABLE SUPREME COURT OF INDIA IN CIVIL APPEAL NO.7731/2011 (ARISING OUT OF S.L.P NO.7969/2008) IN ALUVA SUGAR AGENCY VS.STATE OF KERALA DATED 7TH SEPTEMBER 2011. EXHIBIT P2: THE TRUE COPY OF THE ASSESSMENT ORDER FOR THE YEAR 2008-09 DATED 31/8/2010 ISSUED BY THE THIRD RESPONDENT TO THE PETITIONER. EXHIBIT P3: THE TRUE COPY OF THE PENALTY ORDER NO.32110764164 FOR THE YEAR 2008-09 DATED 2/11/2010 ISSUED BY THE THIRD RESPONDENT TO THE PETITIONER. EXHIBIT P4: THE TRUE COPY OF THE ASSESSMENT ORDER FOR THE YEAR 2009-10 DATED 30/10/2010 ISSUED BY THE THIRD RESPONDENT TO THE PETITIONER. EXHIBIT P5: THE TRUE COPY OF THE PENALTY ORDER NO.IB.1.76 FOR THE YEAR 2008-09 DATED 12/7/2010 ISSUED BY THE FOURTH RESPONDENT TO THE PETITIONER EXHIBIT P6: THE TRUE COPY OF THE REVENUE RECOVERY DEMAND NOTICE AS PER SECTION 7 DATED 28/9/2010 ISSUED BY THE SALE TAX OFFICER RECOVERY , O/O.THE DEPUTY COMMISSIONER COMMERCIAL TAXES,KOZHIKODE FOR THE YEAR 2008-09 EXHIBIT P6(A):THE TRUE COPY OF THE REVENUE RECOVERY DEMAND NOTICE AS PER SECTION 7 DATED 11/1/2011 ISSUED BY THE INSPECTING ASST.COMMISSIONER,DEPARTMENT OF COMMERCIAL TAXES, KOZHIKODE FOR THE YEAR 2008-09. EXHIBIT P6(B):THE TRUE COPY OF THE REVENUE RECOVERY DEMAND NOTICE AS PER SECTION 7 DATED 10/8/2010 ISSUED BY THE SALE TAX OFFICER RECOVERY,O/O.THE DEPUTY COMMISSIONER, COMMERCIAL TAXES , KOZHIKODE, FOR THE YEAR 2009-10. EXHIBIT P6(C):THE TRUE COPY OF THE REVENUE RECOVERY DEMAND NOTICE AS PER SECTION 7 DATED 18/2/2011 ISSUED BY THE SALES TAX OFFICER , RECOVERY, O/O.THE DEPUTY COMMISSIONER COMMERCIAL TAXES , KOZHIKODE. FOR THE YEAR 2009-10. EXHIBIT P6(D):THE TRUE COPY OF THE DEMAND PRIOR TO THE ATTACHMENT OF LAND IN FORM 10 AND FORM NO.1 DAMAND NOTICE UNDER SECTION 7 ISSUED BY THE FIFTH RESPONDENT IN THE NAME OF PARTNER MR.DORAI SWAMI.V, S/O.N.V.CHETTIAR,BOTH DATED 24/8/2011 DEMANDING RS.65,05,018/-(SIXTY FIVE LAKHS FIVE THOUSAND EIGHTEEN ONLY) EXHIBIT P6(E):THE TRUE COY OF THE DEMAND PRIOR TO THE ATTACHMENT OF LAND IN FORM 10 AND FORM NO.1 DEMAND NOTICE UNDER SECTION 7 ISSUED BY THE FIFTH RESPONDENT IN THE NAME OF PARTNER MR.DORAI SWMI.V, S/O.N.V.CHETTIAR,BOTH DATED 24/8/2011 DEMANDING RS.76,98,961/-(RUPEES SEVENTY SIX LAKHS NINETY EIGHT THOUSAND AND SIXTY ONE ONLY) W.P.(C).NO.31225/2011-C: EXHIBIT P6(F): THE TRUE COPY OF THE DEMAND PRIOR TO THE ATTACHMENT OF LAND IN FORM 10 AND FORM NO.1 DEMAND NOTICE UNDER SECTION 7 ISSUED BY THE FIFTH RESPONDENT IN THE NAME OF PARTNER MR.DORAI SWAMI.V, S/O.N.V.CHETTIAR, BOTH DATED 24/8/2011 DEMANDING RS.1,13,73,815/-(RUPEES ONE CRORE THIRTEEN LAKHS SEVENTY THREE THOUSAND EIGHT HUNDRED AND FIFTEEN ONLY) EXHIBIT P6(G): THE TRUE COPY OF THE DEMAND PRIOR TO THE ATTACHMENT OF LAND IN FORM 10 AND FORM NO.1 DEMAND NOTICE UNDER SECTION 7 ISSUED BY THE FIFTH RESPONDENT IN THE NAME OF PARTNER MR.DORAI SWAMI.V, S/O.N.V.CHETTIAR,IN THE NAME OF PARTNER MR.RAJEEV,S/O.THYAGARAJAN AND IN THE NAME OF MR.THYAGARAJAN,S/O.N.V.CHETTIAR BOTH DATED 1/7/2011 DEMANDING RS.96,97,856/-(RUPEES NINETY SIX LAKHS NINETY SEVEN THOUSAND EIGHT HUNDRED AND FIFTY SIX ONLY) EXHIBIT P6(H): THE TRUE COPY OF THE DEMAND PRIOR TO THE ATTACHMENT OF LAND IN FORM 10 AND FORM NO.1 DEMAND NOTICE UNDER SECTION 7 ISSUED BY THE FIFTH RESPONDENT IN THE NAME OF PARTNER MR.DORAI SWAMI.V, S/O.N.V.CHETTIAR,IN THE NAME OF PARTNER MR.RAJEEV,S/O.THYAGARAJAN AND IN THE NAME OF MR.THYAGARAJAN,S/O.N.V.CHETTIAR BOTH DATED 1/7/2011 DEMANDING RS.79,08,422/-(RUPEES SEVENTY NINE LAKHS EIGHT THOUSAND FOUR HUNDRED AND TWENTY TWO ONLY) EXHIBIT P6(I): THE TRUE COPY OF THE DEMAND PRIOR TO THE ATTACHMENT OF LAND IN FORM 10 AND FORM NO.1 DEMAND NOTICE UNDER SECTION 7 ISSUED BY THE FIFTH RESPONDENT IN THE NAME OF PARTNER MR.DORAI SWAMI.V, S/O.N.V.CHETTIAR,IN THE NAME OF PARTNER MR.RAJEEV,S/O.THYAGARAJAN AND IN THE NAME OF MR.THYAGARAJAN,S/O.N.V.CHETTIAR BOTH DATED 1/7/2011 DEMANDING RS.1,28,17,635/-(RUPEES ONE CRORE TWNEY EIGHT LAKHS SEVENTEEN THOUSAND SIX HUNDERD AND THIRTY FIVE ONLY) EXHIBIT P7: THE TRUE COPY OF THE RELEVANT PORTION OF NOTIFICATION NO.SRO 82/2006 GOP NO.4/2006 TD DATED 21ST JANUARY 2006 CONTAINING THE ENTRY NO. EXHIBIT P8: THE TRUE COPY OF THE RELEVANT PORTION OF THIRD SCHEDULE TO THE KERALA VALUE ADDED TAX ACT 2003,CONTAINING THE ENTRY NO.38 (19) D. RESPONDENT'S EXHIBITS:- NIL. //TRUE COPY// P.A. TO JUDGE Prv. S. SIRI JAGAN, J. ------------------------------------------- W.P.(C) No.31225 of 2011 ---------------------------------------------- Dated this the 23rd day of November, 2011 JUDGMENT The petitioner is a registered dealer under the Kerala Value Added Tax Act. In the course of business, they deal in Margarine. According to the petitioner, Margarine is nothing but edible oil coming under Entry 38 of the Third Schedule to the Kerala Value Added Tax Act. The government has issued Ext.P7 notification dated 21.1.2006 under Section 6(1)(d) of the Kerala Value Added Tax Act in respect of goods taxable at the rate of 12.5% in which Margarine has also been included as item No.64(8). According to the petitioner, Margarine is an edible oil coming within the purview of Entry No.38 of Third Schedule and the Government is empowered to issue notification under Section 61(d) only in respect of goods, which are not covered by the Schedules to the Act. The petitioner further contends that the Supreme Court has in Ext.P1 decision held that the Margarine is an edible oil taxable only at 4%. But, in W.P.(C)No.31225/11 2 accordance with Ext.P7 notification issued under Section 6(1) (d), the petitioner has been assessed to Value Added Tax Act on Margarine at the rate of 12.5% by Exts.P4 and P5 assessment orders. Revenue recovery proceedings have also been initiated by Ext.P6 series of revenue recovery notices. In the above circumstances, the petitioner is challenging Entry 64 (8) of Ext.P7 notification, seeking the following reliefs: (i) To issue a Writ of Certiorari or any other appropriate Writ or Order to quash the Entry No. 64(8) in the Ext-P7 Notification. (ii) To issue a Writ of Mandamus or Direction or any other appropriate order declaring that the item Vanaspati based Margarine taxable @ 12.5% as per Entry No.64(8) in the notification SRO No.82 of 2006 is illegal and unconstitutional in the light of the decision of the Hon'ble Supreme Court of India as per the P1 judgment holding that Margarine should be taxed @ 4% as it is edible oil and also based on the specific entry edible oil is included in the 38 (19) (d) of the Third schedule to the KVAT Act being taxable only @ 4%. (iii) To issue a Declaration that Entry No.64 (8) in the notification SRO No.82 of 2006 is unauthorized, illegal and unconstitutional in the light of the decision of the Hon'ble Supreme Court of India as per the P1 judgment holding that Margarine should be taxed @4% as it is edible oil and also based on the specific entry edible oil is included in the 38(19) of the Third schedule to the KVAT Act being taxable only @ 4%. (iv) To issue a Writ of Certiorari or any other appropriate Writ or Order to quash the item Margarine from the Entry No.64 (8) in the Ext- P7 Notification as the said notification SRO W.P.(C)No.31225/11 3 82/2006 can include only those items which are not taxable under clause (a) or clause © under Section 6(1) of the KVAT Act 2003 where as the item Margarine being edible oil was already included under Entry 38 (19) d of the Third schedule to the KVAT Act. (v) To issue a Writ of Certiorari or any other appropriate order quashing the entire illegal P6 series of revenue recovery notices and the P2, P3, P4 and P5 assessment orders and penalty orders raising illegal demand of tax @ 12.5% on the item Margarine instead of the correct rate of 4% under the KVAT Act as held by the Hon'ble Supreme Court in the P1 Judgment. (vi) To issue a Writ of Mandamus or any other appropriate order or a Direction to the third respondent to keep all proceedings of levy and collection of tax on the petitioner by application of rate of tax on Margarine only @ 4% by considering the decision held by the Hon'ble Supreme Court in the P1 judgment. (vii) To issue a Writ of Mandamus or Direction or any other appropriate order directing the third and fourth respondent not to proceed further with the Ex-P6 series of recovery notices.” 2. The learned Government Pleader points out that Ext.P7 Government Order has been issued on 21.1.2006 and Ext.P1 judgment has been rendered by the Supreme Court only on 7.9.2011. It is further submitted that the petitioner has a right of appeal against the impugned assessment orders, in which the petitioner can raise the contention based on the Supreme Court decision also. The petitioner apprehends that W.P.(C)No.31225/11 4 in view of Ext.P7 notification, the appellate authority may not consider Ext.P1 judgment, which has been rendered in the context of the Kerala General Sales Tax Act, although the same deals with Margarine. 3. I have considered the rival contentions in detail. As rightly pointed out by the learned Government Pleader, Ext.P7 notification is dated 21.1.2006 and Ext.P1 judgment is dated 7.9.2011. Now that the Supreme Court has clarified that Margarine is an edible oil taxable at 4%, I am of opinion that the appellate authority is bound to construe the notification in accordance with the said pronouncement, meaning thereby the percentage of tax applicable to Margarine can only be in accordance with Entry No.38 of the Third schedule and if there is a conflict between the Third Schedule and a notification under Section 6(1)(d), the Schedule should prevail. But I am of opinion that the petitioner can raise that contention in the appeals to be filed against the assessment orders and the appellate authority is bound to take into account the Supreme Court decision and this finding. 4. In the above circumstances, this writ petition is W.P.(C)No.31225/11 5 disposed of with the following directions: The petitioner shall file appeals against the impugned orders in question before the appellate authority. The appellate authority shall consider the contentions of the petitioner in the light of Ext.P1 judgment and the findings in this judgment as above. In order to enable the petitioner to file appeals and seek interim orders, I direct that further proceedings pursuant to the revenue recovery proceedings shall be kept in abeyance for a period of two months from today. S. SIRI JAGAN, JUDGE acd W.P.(C)No.31225/11 6 W.P.(C)No.31225/11 7