IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE P.S.GOPINATHAN WEDNESDAY, THE 27TH JANUARY 2010 / 7TH MAGHA 1931 WA.No. 2412 of 2009() --------------------- AGAINST THE JUDGEMENT IN WPC.19930/2008 Dated 07/08/2009 .................... APPELLANT: -------------- M/S KMP TIMBERS & SAW MILLS, COLLEGE ROAD, MUVATTUPUZHA, REPRESENTED BY ITS PARTNER, K.P. SAIRAJ. BY ADV. SRI.BOBBY JOHN SRI.P.N.DAMODARAN NAMBOODIRI RESPONDENT(S): --------------- 1. THE COMMERCIAL TAX INSPECTOR, O/O THE INSPECTING ASST. COMMISSIONER, COMMERCIAL TAX CHECK POST, B-MANGESHWAR, KASARGOD. 2. THE COMMISSIONER OF COMMERCIAL TAXES, THIRUVANANTHAPURAM. BY G.P. SRI.K.P.PRADEEP THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 27/01/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C .N. RAMACHANDRAN NAIR & P.S. GOPINATHAN, JJ. -------------------------------------------- W. A. No. 2412 OF 2009 -------------------------------------------- Dated this the 27th day of January, 2010 JUDGMENT Ramachandran Nair, J. Writ Appeal is filed by a firm engaged in import and sale of timber in the State challenging the judgment of the learned single Judge disposing of a batch of cases upholding the validity of a circular issued by the Commissioner under Section 47(16A) of the Kerala Value Added Tax Act, 2003, hereinafter called the "Act", among other things, fixing the value of various varieties of imported timber for the purpose of payment of advance tax. It is seen from the judgment that around 25 parties contested the very same circular, along with the appellant, and Government Pleader informed us that to his knowledge, no other party has filed appeal against the judgment. We have heard counsel appearing for the appellant in the Writ Appeal and Government Pleader appearing for the respondents. 2. At the outset we notice that the constitutional validity of Section 47(16A) of the Act which authorises the Commissioner of 2 Commercial Taxes to identify evasion prone goods and order collection of advance tax in respect of the same is upheld by judgment of a Division Bench of this Court in the case of S.P.L. LTD. v. COMMERCIAL TAX INSPECTOR, (2009) 17 KTR 586 (Ker.). Since the validity of the section is already upheld by a Division Bench judgment, counsel for the appellant has limited his argument on the validity of the circular No. 28/2008 produced as Ext.P7 in the WPC about the value fixed for each variety of imported timber. Appellant's counsel has referred to the circular and contended that floor rate fixed for the purpose of collection of advance tax for the various varieties of timber is arbitrary and unreasonable and has no relation to the market value. We notice from Ext.P7 that floor rate is fixed for as many as nine varieties of imported timber, some of which,namely, teak, Pin coda , Beachwood/Ashwood, etc., are available in plenty in the market. For teak wood, the floor rate fixed is Rs. 1800/- per cft and for other varieties of timber, the price fixed ranges from Rs. 400 to Rs. 900/- per cft. In other words, except for teak wood, the average floor rate of price fixed for payment of advance tax is below Rs. 740/- per cft. While the appellant contends that the Commissioner has not collected 3 any data about the market value and fixed the floor rate for payment of advance tax in an arbitrary manner, the Government Pleader on the other hand submits that the market value disclosed is even below the wholesale price and appellant's challenge against the rate fixed is only with reference to the price shown in the invoice of appellant's suppliers. 3. On going through the judgment under appeal, most of the legal questions raised by the appellant about the Commissioner's jurisdiction stand decided by the learned single Judge and we do not find any ground to deviate from the said finding. Further, when the validity of the statutory provision is upheld by this Court, this necessarily means that advance tax could be collected in respect of goods notified as evasion prone goods by the Commissioner under Section 47(16A) of the Act. If advance tax is to be collected, necessarily value has to be estimated because advance tax is payable before the sale of the commodity. If the Commissioner has left it open to the Departmental Officers to collect advance tax, in respect of a commodity at entry point, the same would have led to dispute and adjudication in regard to value of commodity for the purpose of collection of advance tax. Therefore for the purpose of uniformity and 4 to avoid unnecessary controversy, the Commissioner has fixed the value of various varieties of imported timber for the purpose of collection of advance tax. Going by the retail price of hard wood, that is, timber used for construction purposes, we are unable to accept the contention of the appellant that value fixed is high. Further, advance tax is only a provisional deposit towards tax and nothing in the Act requires the appellant or any party to pay tax except on actual sale price. The value fixed under the Circular for payment of advance tax does not reflect the basis for actual liability. In fact, tax is payable only on actual sale price and the appellant is absolutely free to claim refund of advance tax paid, if it is in excess over tax liability. If there is allegation of under-invoicing, it is for the assessing officer to establish the same in adjudication proceedings. We do not find any grievance for the appellant because along with monthly return, the appellant is entitled to take credit of the entire remittances of advance tax and adjust the same against tax liability. As already stated, tax payable under the return is on the actual sale price and not based on the value fixed by the Commissioner for the purpose of collection of advance tax. Even though counsel raised a valid point that flat rate of price 5 fixed irrespective of the size of the wood, mainly its girth, is arbitrary, we are afraid if we direct the Commissioner to fix the value for the purpose of payment of advance tax based on girth or size, then higher value will be fixed for timber of large size that could be used for making broad size planks which have high value. It is common knowledge that timber brought from abroad are mostly from East Asian countries, namely, Malaysia, Myanmar, where they cut and supply large size and grown up timber from the forest which are invariably very big in size. Therefore we do not find any merit in this contention and even if we interfere with the value fixed by the Commissioner on this ground, the same may not lead to the advantage of the appellant. Strangely appellant has not canvassed for the position that they have sold any imported timber at below the floor rate fixed by the Commissioner. On the other hand, their only contention is that the price declared before customs authorities is much less than the floor rate fixed. We do not think this argument of the appellant can be accepted as the basis for challenging the validity of circular issued by the Commissioner fixing the price because it is for the customs authorities to examine whether invoice price or the declared price for 6 payment of duty is right. In fact the correct procedure to fix the price for timber for the purpose of collection of advance tax is to collect from the market the prevailing retail market price at a given time and reduce therefrom the dealer margins to fix the dealer's price which is the price at which advance tax could be collected. As we have already observed going by the current market price of varieties of imported timber for which the Commissioner has fixed floor rate price for the purpose of payment of advance tax, the price fixed cannot be said to be unreasonable or arbitrary, more so when the appellant has no case that sales are made at below the floor rate fixed by the Commissioner. We therefore do not find any merit in the appeal and the same is dismissed. (C.N.RAMACHANDRAN NAIR) Judge. (P.S. GOPINATHAN) Judge. kk