IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMACHANDRA MENON THURSDAY, THE 28TH OCTOBER 2010 / 6TH KARTHIKA 1932 WP(C).No. 25445 of 2003(D) ------------------------------------- PETITIONER(S): ----------------------- GEORGE THOMAS, AGED 39 YEARS, S/O. M.J.THOMAS, PROPRIETOR, MALABAR CANNING, 36/896, M.G.RAOD, COCHIN 11. BY ADV. SRI.SHAJI P.CHALY RESPONDENT(S): ------------------------ 1. STATE OF KERALA, REP.BY THE SECRETARY TAXES, SECRETARIAT, THIRUVANANTHAPURAM. 2. THE DIRECTORATE OF INDUSTRIES AND COMMERCE, VIKAS BHAVAN, THIRUVANANTHAPURAM. 3. THE STATE LEVEL COMMITTEE FOR EXEMPTION OF SALES TAX, DIRECTORATE OF INDUSTRIES AND COMMERCE, VIKAS BHAVAN, THIRUVANANTHAPURAM, 4. THE DISTRICT LEVEL COMMITTEE, FOR SALES TAX EXEMPTION, DISTRICT INDUSTRIES CENTER, ERNAKULAM REP.BY ITS CHAIRMAN. 5. THE SALES TAX OFFICER, SECOND CIRCLE, SALES TAX OFFICE, PALARIVATTOM. 6. THE COMMISSIONER OF COMMERCIAL TAXES, THIRUVANANTHAPURAM. BY GOVERNMENT PLEADER SRI.K.P.PRADEEP THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 28/10/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P.(C) NO.25445/2003 APPENDIX PETITIONER'S EXHIBITS P1:- COPY OF THE APPLICATION SUBMITTED BY THE PETITIONER TO THE 4TH RESPONDENT DT.D 30.10.92. P2:- COPY OF THE ELIGIBILITY CERTIFICATE ISSUED BY THE 4TH RESPONDENT . P3:- COPY OF THE NOTIFICATION ISSUED BY THE IST RESPONDENT DT. 11.11.95. P4:- COPY OF THE APPEAL FILED BY THE PETITIONER BEFORE THE 3RD RESPONDENT DTD. 25.7.98. P5:- COPY OF THE JUDGMENT OF THE DIVISION BENCH OF HONOURABLE HIGH COURT IN W.A. NO.2123/00 DTD. 3.10.00. P6:- COPY OF THE JUDGMENT OF HONOURABLE HIGH COURT DTD. 15.1.02 IN OP. 1584/02. P7:- COPY OF THE ORDER PASSED BY THE 3RD RESPONDENT AGAINST THE PETITIONER DTD. 2.6.03. P8:- COPY OF THE ORDER PASSDED BY THE DEPUTY COMMISSIONER OF SALES TAX ERNAKULAM, DTD. 21.8.98. P9:- COPY OF THE ORDER PASSED BY THE 6TH RESPONDENT DTD. 14.8.02. P10:- COPY OF THE ORDER PASSED BY THE SALE TAX APPELLATE TRIBUNAL ADDITIONAL BENCH, ERNAKULAM DTD. 22.12.01. TRUE COPY P.A. TO JUDGE tss P.R. RAMACHANDRA MENON J. ~~~~~~~~~~~~~~~~~~~~~~~~~~ W.P (C) No. 25445 OF 2003 ~~~~~~~~~~~~~~~~~~~~~~~~~~~ Dated, this the 28th day of October, 2010 JUDGMENT The issue involved in this Writ Petition is, whether the petitioner is entitled to get exemption from the purview of sales tax, based on the relevant notifications issued by the Government in this regard and whether the rejection of the benefit, in respect of the value invested by the petitioner for purchasing the 'brand new vehicle', which was subsequently sold of in the year 1992, as ordered by the State Level Committee vide Ext. P7 is correct or not. 2. The petitioner is an SSI unit engaged in manufacturing and sale of fruit products. By virtue of the relevant notification (SRO No. 968 of 1980) issued by the Government, the petitioner is entitled to get exemption up to 90 % of value investment made on the fixed asset/machinery, delivery van etc. The petitioner preferred Ext. P1 application showing the exemption eligible to him as Rs. 9,00,941.48. After considering the facts and figures, the 4th respondent granted exemption of Rs. 4,99,618.60/- as borne by Ext. P2. The rejection of the amounts under the other heads was mainly in respect of the value of land, machinery etc. besides the value of newly W.P. (C) No. 25445 of 2003 2 purchased vehicle to an extent of Rs.1,15,143.28/-. The dispute involved in the present Writ Petition stands confined to the rejection in respect of the said vehicle alone. 3. Being aggrieved of the rejection of exemption in respect of the value of the vehicle vide Ext. P2, the petitioner preferred Ext. P4 appeal before the 3rd respondent, the State Level Committee. While the said proceedings were pending before the 3rd respondent, the 5th respondent passed an order invoking the power of rectification and passed the revised assessment order, followed by initiation of penalty proceedings in respect of assessment years 1991-'92 and 1992-'93. According to the petitioner, the said periods were eligible for exemption. The orders imposing penalty were subjected to challenge by filing appropriate proceedings before the Deputy Commissioner. During the pendency of the said proceedings, coercive steps were initiated against the petitioners, which were subjected to challenge by filing O.P. 24475 of 2000, wherein interference was declined, which made the petitioner to file W.A. 2123 of 2000. This appeal was disposed of, as borne by Ext. P5, observing that the issue could be resolved, once Ext. P4 pending consideration before the 3rd respondent was finalized and accordingly, the 3rd respondent was directed to finalise Ext.P4; simultaneously intercepting the coercive proceedings till such time. 4. Pursuant to Ext. P5, Ext. P4 was considered by the 3rd W.P. (C) No. 25445 of 2003 3 respondent and dismissed on the main grounds; however granting some paltry relief, providing exemption to an extent of Rs. 54,139/-. Pointing out that the said order was passed without giving an opportunity of hearing to the petitioner, O.P. 1584 of 2002 was filed before this Court, which was disposed of, directing the 3rd respondent to reconsider the matter, as borne by Ext. P6. Accordingly, the petitioner was heard and Ext. P7 order was passed, whereby the very stand already taken in respect of the claim for exemption with regard to the value of the vehicle was reiterated, dismissing Ext. P4 appeal, which forms subject matter of challenge in this Writ Petition. 5. The learned counsel for the petitioner submits that the reasoning given in Ext.P7 order passed by the 3rd respondent is quite wrong and unfounded. The only reason pointed out therein is that the 'brand new vehicle' purchased by the petitioner in the year 1989 was subsequently sold off in the year 1992 and as such, the petitioner is not entitled to get the benefit of exemption. The learned counsel, with reference to Ext. P3 norms issued by the Government in this regard submits that, clause 10 is very much categoric, which does not contemplate any such situation as now stated by the third respondent. The said clause reads as follows : 10. All brand new identifiable items of plant and machinery including tools, jigs, dies and moulds shall be eligible for tax exemption. All claims in this regard shall be supported by a W.P. (C) No. 25445 of 2003 4 certificate by the Chartered Accountant. In case if items where materials are bought and fabricated in house, the cost should be certified by the Chartered Accountant with regard to cost of materials and fabrication charges and by a Chartered Engineer with regard to the value of the fabricated plant and minimum of these shall be taken (Plant and machinery on hire purchase from NSIC shall be eligible for tax exemption on the basis of original value). No vehicles, other than delivery vehicles, items of office equipment and furniture, crates, pallets and consumable stores will be eligible for tax exemption. Second hand machinery items will not quality for tax exemption. The learned counsel submits that, the matter has been considered and finalized by the 3rd respondent quite in a casual and mechanical manner and contrary to the relevant provisions of the Scheme, which hence is sought to be set aside. 6. The learned Government Pleader appearing for the respondents submits with reference to the 'manual' that, the Scheme was proclaimed by the Government for providing exemption as a measure to boost up the industries. It is brought to the notice of this Court that SRO 968 issued in the year 1980 has undergone substantial changes in the passage of time. Pursuant to various orders issued at different points of time, SRO No. 1729 was issued in 1993, specifying the relevant norms in this regard; wherein the term fixed capital investment has been defined with clarity, as provided W.P. (C) No. 25445 of 2003 5 under Clause 11 (vii) stipulating that the investments (for the purpose as shown therein) for the industrial purpose are eligible for exemption. Placing reliance and emphasis on the words 'like, required for the industrial purpose', the learned Government Pleader submits that value of the vehicle which was admittedly sold off cannot be reckoned for the purpose of granting exemption, as the vehicle is no more available at the hands of the the petitioner, to be put to use for industrial purpose. It is also stated that, the above said notification (SRO 1729 of 2003) has undergone further changes, by virtue of SRO 588 of 1996 and also by virtue of Ext. P3 norms prescribed by the Government, incorporating Clause 10 as extracted herein before. 7. The questions to be considered are: whether the vehicle purchased by the petitioner in the year 1989 was a 'brand new vehicle' and the same comes within the purview of the notification for claiming the exemption; and if so, whether the sale of the said vehicle after few years would dis-entitle the person concerned for claiming the benefit of exemption (claimed by the petitioner for a period of 5 years from November, 1988 to November 1993) by virtue of the sale of the said vehicle in the year 1992 i.e., whether the petitioner could be denied the benefit in toto, in spite of the fact that the vehicle was put to industrial use, till it was sold. W.P. (C) No. 25445 of 2003 6 8. Going by the contents of the relevant notifications and Ext. P3, the vehicle ought to have been kept at the hands of the assessee, putting the same to industrial use, so as to have entertained the claim for exemption, which is admittedly investment-oriented. The extent of investment and extent of exemption offered in the concerned assessment years are given separately, taking only such reckonable extent as given in Ext. P2. The factual position that the vehicle (delivery van) was purchased by the petitioner for industrial purpose and the delivery van was made use of for the industrial purpose till it was sold are not the subject matter of any dispute. In Ext. P7, the only reason stated to reject the benefit is, the disposal of the vehicle in the financial year 1991-'92. Since the notification does not say that the entire investment should be 'intact' for the entire period of exemption and since the aspect whether the petitioner could have been given the benefit in respect of the period during which the vehicle was put to industrial use after the purchase in the year 1989, till the disposal in 1992, has not been considered by the appellate authority in Ext. P7. This Court finds that the matter requires to be dealt with more elaborately, with specific reference to the purport of the notification, its scope, object and extent of applicability. 9. In the said circumstances, Ext. P7 is set aside and the 3rd respondent is directed to reconsider the matter in the light of the above observations and the relevant provisions of the Scheme and pass W.P. (C) No. 25445 of 2003 7 appropriate orders in accordance with law, of course after giving an opportunity of hearing to the petitioner. This exercise shall be finalized, as expeditiously as possible, at any rate within 3 months, from the date of receipt of a copy of this judgment. This Court does not express anything on merits as to the eligibility of the petitioner or otherwise which is to be established before the 3rd respondent with reference to the actual facts and figures. The Writ Petition is disposed of as above. P. R. RAMACHANDRA MENON, JUDGE kmd