IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM MONDAY, THE 22ND NOVEMBER 2010 / 1ST AGRAHAYANA 1932 WP(C).No. 34879 of 2010(H) ----------------------------------------- PETITIONER(S): ------------------------- SIGN WAVE, ROOM NO.1, IST FLOOR, PARAMARA SHOPPING COMPLEX, PARAMARA ROAD, ERNAKULAM, COCHIN - 18, REPRESENTED BY ITS PARTNER SRI.M.S. MATHEW. BY ADV. SRI.R.MURALEEDHARAN (AROOR) RESPONDENT(S): ---------------------------- 1. THE COMMERCIAL TAX OFFICER, KVAT FIRST CIRCLE, DEPARTMENT OF COMMERCIAL TAXES, ERNAKULAM. 2. THE DEPUTY COMMISSIONER (APPEALS), COMMERCIAL TAXES, ERNAKULAM. 3. THE INSPECTING ASSISTANT COMMISSIONER, DEPARTMENT OF COMMERCIAL TAXES, ERNAKULAM. R1 TO R3 BY SR. GOVERNMENT PLEADER SRI.C.K.GOVINDAN THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 22/11/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: Kss C.K.ABDUL REHIM, J. ------------------------------------------- W.P.(C).No.34879 of 2010 ------------------------------------------- Dated this the 22nd day of November, 2010 J U D G M E N T ---------------------- Against Ext.P2 order of assessment passed by the 1st respondent, the petitioner had preferred Ext.P2 statutory appeal and Ext.P4 interlocutory application seeking stay. The 2nd respondent had issued an interim order on the stay petition as evidenced from Ext.P7 granting conditional stay insisting upon the petitioner to remit 40% of the total amount due and on furnishing Security Bond for the balance amount. 2. According to the petitioner, they are engaged in the business of printing of different materials on plastic coated or laminated sheets of Poly Vinyl Chloride (PVC), or flex sheets, commonly used for advertisement purposes. According to the petitioner, they are collecting tax at 4% on the turnover of sales of printed materials, in accordance with the clarification issued by the Commissioner of Commercial Taxes, under Ext.P1. On a perusal of Ext.P1 order issued under Section 94 of the Kerala Value Added Tax Act, 2003 (KVAT Act) it is revealed that the Commissioner had arrived at a conclusion that the goods in question will become printed material only W.P.(C).34879/10-H -2- after execution of the required printing and it is taxable as per Section 6(1)(e) of the KVAT Act, 2003 on the rate applicable to the goods. It is observed that the flex in question will lose its identity in commercial parlance and it will become a printed material. It is further noticed that since the printing is made on the basis of specific orders it will become another product which is not commercially valuable as far as the third party is concerned. Since the end result is a commercially distinct product the process is considered as manufacturing. Accordingly it is found that the printed material is taxable as a distinct product and that the printer is eligible for input tax credit. 3. It is contended that while issuing Ext.P7 order the 2nd respondent had failed to consider the order issued by the Commissioner of Commercial Taxes under Section 94 of the KVAT Act. The 2nd respondent had proceeded on the basis that the transaction in question is a works contract leviable with tax at the rate of 12.5%. Therefore it is argued that the order issued by the 2nd respondent is without consideration of the relevant issue and without proper advertence to the grounds raised in the appeal. 4. In view of Ext.P1 order issued by the Commissioner under Section 94 of the Act, I am of the view that the appellate W.P.(C).34879/10-H -3- authority ought to have considered the legal position while granting the interim order. It is evident that the contentions based on Ext.P1 has not been adverted to and that the insistence for payment of a part of the amount is made without taking note of Ext.P1. Therefore I am of the view that the matter requires re-consideration at the hands of the 2nd respondent. 5. Accordingly the writ petition is disposed of quashing Ext.P7. Matter is remitted back to the 2nd respondent. The 2nd respondent is directed either to pass fresh orders on the stay petition or to dispose of the appeal itself, after affording an opportunity of hearing to the petitioner, at the earliest possible, at any rate within a period of six weeks from the date of receipt of a copy of this judgment. 6. Till such time orders are issued by the 2nd respondent recovery of amounts covered under Ext.P6 revenue recovery notice shall be kept in abeyance. C.K.ABDUL REHIM, JUDGE. okb