IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HON'BLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MRS. JUSTICE M.C.HARI RANI FRIDAY, THE 23RD MAY 2008 / 2ND JYAISHTA 1930 ST.Rev.No.410 of 2005 ------------------------------------- (T.A.No.516 of 2002 OF SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH-II, ERNAKULAM (ORDER DATED 25-2-2005) .................... REVISION PETITIONER:APPELLANT: --------------------------------------------------- M/S. ABAN MARKETING & EXPORTS (P) LTD., 6TH FLOOR, PENTA TOWERS, KALOOR, COCHIN-17, REPRESENTED BY ITS ADMINISTRATIVE OFFICER, SHRI.THOMAS WALES. BY ADV. SRI.C.K.KARUNAKARAN SRI.C.E.UNNIKRISHNAN RESPONDENT:RESPONDENT: ----------------------------------------- STATE OF KERALA. BY SENIOR GOVERNMENT PLEADER SRI.MUHAMMED RAFIQ. THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 23/05/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: H.L.DATTU, C.J. & M.C. HARI RANI, J. -------------------------------------------------------- S.T.Rev.No.410 of 2005 ------------------------------------------------------- Dated, this the 23rd day of May, 2008 O R D E R H.L.Dattu, C.J. This revision petition is filed by the assessee, being aggrieved by the orders passed by the Sales Tax Appellate Tribunal in T.A.No.516/2002 dated 25-2-2005. (2). The assessee has framed two questions of law for our consideration and decision. They are as under: 1). Whether on the facts and circumstances of the case the Tribunal is right in holding that the tea purchased by the Revision petitioner from the auction center is liable to be taxed under Section 5 (2) of the KGST Act , 1963, when section 5 (2) expressly excludes tea sold in auction in the state, from the purview of the aforesaid provision? 2). Whether on the facts and circumstances of the case was the Appellate Tribunal Tribunal correct, after having concurred with the finding of the Ist Appellate Authority that the Tea purchased from M/s.Ratan Plantations Ltd and M/s.Tyford Tea Ltd are liable to be exempted from the purview of section 5 (2), in directing the Assessing Authority to verify the documents again, though for a limited purpose? STRV.No.410/2005 -2- (3). At the time of hearing of the revision petition, the learned counsel appearing for the assessee would submit that he would not press for an answer so far as the second question is concerned. That only means that what requires to be answered by us is only the first question of law raised by the assessee for our consideration and decision. (4). The assessee is a dealer registered under the provisions of the Kerala General Sales Tax Act (“Act” for short). It is engaged in the packing and marketing of tea. It effects purchase of tea, both in public auction held in the State as well as from the brand name holders. The tea purchased by the assessee through the auction centre at Cochin also suffers tax. The tea so purchased is sold within the State as well as outside the State. Apart from other issues, the assessee had contended before the assessing authority that the goods 'Tea' is included in the First Schedule to the Act, which deals with goods in respect of which single point tax is leviable under sub-section (1) or sub-section (2) of Section 5 of the Act and since the commodity has already suffered single point tax, the assessee is not liable to pay tax under the Act. After rejecting the contention, the assessing authority has proceeded to complete the assessment and has levied tax under Section 5(2) of the Act on the ground that the assessee is a manufacturer of tea and is selling the tea manufactured under Brand name. STRV.No.410/2005 -3- (5). Being aggrieved by the levy of tax, the assessee had filed appeal before the first appellate authority. The first appellate authority has allowed the assessee's appeal in part and had directed the assessing authority to make certain verifications for grant of exemption from the purview of Section 5 (2) of the Act with regard to the purchases made by the assessee from Ratan Plantations and Tyford Tea Ltd., who are registered dealers under KGST Act. (6). Aggrieved by the remand order so passed by the first appellate authority, the assessee has preferred appeal in T.A.No.516/2002 before the Tribunal. The Revenue being aggrieved by the order passed by the first appellate authority granting exemption to the assessee has also filed appeal in T.A.No.71/2003 before the Tribunal. The Tribunal by its common order in T.A.No.516/2002 and T.A.No.71/2003 dated 25.2.2005 has specifically not answered the issue raised by the assessee in T.A.No.516/2002. (7). The assessee being aggrieved by the order passed by the Tribunal in not answering the specific issue raised, has approached this Court in this tax revision case. The learned counsel for the assessee would submit that the assessing authority on misinterpretation of provision of Section 5 (2) of the Act has levied tax on the tea sold by the assessee which STRV.No.410/2005 -4- was purchased from the auction centre. Therefore the levy of tax is contrary to the provisions of the Act and it is further submitted that though this specific plea was raised before the Tribunal, the same is not answered. (8) In order to answer the contention of the learned counsel for the assessee, it is necessary to notice the questions of law framed by the Tribunal for its consideration and decision. They are:- a). Whether the assessee company is liable to tax under Section 5 (2) of the KGST Act on the sale of tea purchased from M/s.Ratan Plantations and M/s.Tyford Tea Ltd? b). Whether the assessee company is eligible for exemption on the sales turnover of tea purchased from Cochin Auction Centre? (9). In so far as the first question is concerned, the Tribunal has answered it. In so far as the second question framed, it has failed to answer the question. That is how the assessee is before us in this tax revision case. (10). Section 41 of the Act provides for revision by this Court. The powers of revision can be exercised by this Court only under two circumstances, i.e. if the Tribunal has failed to decide the question of law or has erroneously decided the question of law. STRV.No.410/2005 -5- (11). In the instant case, as we have already stated, the Tribunal, though had framed a question of law for consideration and decision, has failed to decide that question of law. Therefore, in exercise of our powers under Section 41 of the Act, we need to answer the second question of law framed by the Tribunal. (12). The facts are not in dispute. The assessee purchases tea in the auctions held in the State and after such purchases effects sales within and outside the State. The question now for our consideration is whether the tea sold by the assessee which was purchased from auction centres is liable to be taxed under Section 5 (2) of the Act ? To answer the querry, which we have raised, the provisions of the Act requires to be noticed. Therefore, we extract Section 5 (2) of the Act as it existed during the relevant assessment year. Sec.5 (2). Notwithstanding anything contained in this Act in respect of goods, other than tea sold in auction in the State, which are sold under the trade mark or brand name, the sale by the brand name holder or the trade mark holder within the State shall be the first sale for the purposes of this Act. (13). Section 5(2) is an independent charging provision in respect of the matters covered by the said sub-section. Sub Section 2 of STRV.No.410/2005 -6- Section 5 of the Act starts with a non obstante clause. A non obstante clause is a legislative device which is usually employed to give overriding effect to certain provisions over some contrary provisions that may be found either in the same enactment or some other enactment, that is to say to avoid the operation and effect of all contrary provisions. By enacting Section 5(2) of the Act, what the legislature intends to achieve is to levy tax in respect of goods which are sold under the trade mark or brand name by the trademark holder or brandname holder within the State shall be the first sale for the purpose of the Act. Alternatively, it can be said, Section 5 (2) is an exception to the normal rule under Section 5 (1) in regard to the point of levy and that it is only in respect of the manufactured goods other than tea sold by brandname holders and trade mark holders under a brand or trademark, sub-section (3) is attracted. In order to attract sub-section (2) of Section 5, three conditions are to be satisfied. They are, sale of manufactured goods other than tea; sale of said goods is under a trade mark/brand name and; the sale is by the brand name holder or trade mark holder within the State. What is exempted from the purview of the levy is the sale of tea sold in auction in the State. Section 5(2) creates a legal fiction regarding the point of taxation in the case of branded goods sold by the trade mark holder or brand name holder. Nothing in the Section STRV.No.410/2005 -7- can affect the sale of tea purchased from the auction centre, as the said sale has been expressly excluded from the legal fiction. The tea sold in auction in the State has been treated on a separate footing from any other product sold under trade mark or brand name in the State. Thus, any tax on tea sold in auction can only be subject to the provisions of Section 5(1) of K.G.S.T Act. Therefore, we hold that the tea sold by the assessee which is purchased from the auction centre is not liable to be taxed under Section 5 (2) of the Act, if it is not sold under trade mark or brand name. Accordingly, we answer the first question of law framed by the assessee in favour of the assessee and against the Revenue. Accordingly, we dispose of the revision petition. Ordered accordingly. (H.L.DATTU) CHIEF JUSTICE (M.C.HARI RANI) JUDGE MS/dk.