IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN WEDNESDAY, THE 21ST OCTOBER 2009 / 29TH ASWINA 1931 WA.No. 2332 of 2009() --------------------- AGAINST THE JUDGEMENT/ORDER IN WPC.20005/2009 Dated 17/08/2009 .................... APPELLANT(S): PETITIONER: ------------------------- M/S.BHARATH AGENCIES, C/O.LOTUS PHARMACEUTICALS, 28/810, MOLY'S MEDI HOUSE, K.P.VELLON ROAD, KADAVANTHARA, ERNAKULAM REPRESENTED BY ITS MANAGING PARTNER, BABU THOMAS, S/O.K.I.THOMAS, KANICHAI HOUSE, ARAKKAKADAVU ROAD, PADIVATTOM, KOCHI-26. BY ADV. SRI.M.V.BOSE SRI.VINOD MADHAVAN SMT.NISHA BOSE RESPONDENT(S): --------------- 1. THE STATE OF KERALA, REPRESENTED BY ITS SECRETARY TO FINANCE DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM. 2. THE COMMERCIAL TAX OFFICER, KVAT CIRCLE-III, ERNAKULAM. BY G.P. SRI. MOHAMMED RAFFIQ THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 21/10/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C .N. RAMACHANDRAN NAIR & V.K. MOHANAN, JJ. -------------------------------------------- W. A. No. 2332 OF 2009 -------------------------------------------- Dated this the 21st day of October, 2009 JUDGMENT Ramachandran Nair, J. Appeal is filed against the judgment of the learned single Judge declining to interfere with Ext.P2 notice issued by the assessing officer demanding differential tax at 2% and additional sales tax at 15% thereon on the estimated sales turnover of medicine purchased in Kerala which has suffered tax at 6%. We have heard counsel appearing for the appellant and Government Pleader appearing for the respondent. 2. In the normal course we should not interfere with the impugned judgment in Writ Appeal because the learned single Judge has only directed the Officer to consider appellant's objections and pass orders thereon. However, we find that the impugned notice Ext.P2 issued is without jurisdiction and is against the scheme of the Act, which does not authorise recovery of differential tax payable by the seller from the purchaser. 3. Medicine was taxable under the First Schedule to the KGST 2 Act at the point of first sale at the rate of 8% until 31.3.2004. However, a proposal was made in the Finance Bill, 2004 proposing to shift medicine from the First Schedule to the Fifth Schedule, for taxing the same at two points, i.e., at the rate of 6% on first sale and at 2% on last sale. However, when the Finance Act was passed the proposal contained in the Finance Bill was given up. We do not know how there is major shift in the policy of the Government, because tax at the last point of sale on retailers would ensure payment of tax on the entire commodity sold in the State. In any case, when the proposal in the Finance Bill was given up, no alternate arrangement was made for recovery of differential tax of 2% or adjustment of tax paid by dealers in terms of the original proposal contained in the Finance Bill because under the provisions of the Provisional Collection of Revenue Act, 1985, dealers are bound to collect and remit tax in terms of the provisions of the bill if the provisions are notified under the said Act. In other words, following the Finance Bill 2004, the appellant was bound to remit tax at 2% on last sale if the provisions in the Bill were notified by the Government under the Provisional Collection of 3 Revenue Act. However, it is seen that Ext.P1 assessment is completed by Fast Track Team consisting of four officers, who conveniently forgot their duties to examine as to what was the actual practice by the suppliers to the appellant and the reason why appellant has not collected tax in terms of the Finance Bill. In any case, assessing team was oblivious of the statutory provisions existing, proposed and later withdrawn while they passed the order because if they had considered the provisions of the Finance Bill, the matter would have been considered in detail. We do not think the assessing officer can modify the assessments completed by the Fast Track Team. For this simple reason, we allow the Writ Appeal by vacating Ext.P2. However, we leave freedom to the Fast Track Team to consider whether there was notification published under the Provisional Collection of Revenue Act implementing the financial proposals contained in the Finance Bill 2004 and if so suppliers would have charged only 6% as against 8% payable though the proposal contained in the Finance Bill was later given up. If provisions of the Finance Bill were implemented then there is at least a violation on the part of the appellant inasmuch as if 4 the suppliers had collected only 6% tax, appellant was bound to collect 2% and remit the same at the point of last sale. All these details will be available in the monthly returns by the Suppliers from whom appellant purchased and in the monthly returns filed by the appellant. Appeal is allowed vacating Ext.P2, but leaving freedom to the Fast Track Team to initiate proceedings in accordance with law after conducting proper enquiry. If suppliers had charged tax at 8% on the supplies to the appellant, ignoring the proposal contained in the Finance Bill, then of course the appellant is entitled to exemption of second sale and there is no need to consider violation if any by the appellant in not remitting tax at the last sale point. (C.N.RAMACHANDRAN NAIR) Judge. (V.K. MOHANAN) Judge. kk 5