IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE A.K.BASHEER THURSDAY, THE 24TH JULY 2008 / 2ND SRAVANA 1930 S.T.Rev..No. 111 of 2006 --------- ------------------------- ORDER DATED 18.8.2005 IN TA.136/2005 OF THE KERALA SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, KOZHIKODE .................... REVISION PETITIONER/APPELLANT/APPELLANT: --------------------------------------------------------------------- ARUN SREENIVASAN, KAIRALI POLYMERS, KOKKALLOOR, BALUSSERY, KOZHIKODE. BY ADV. SRI.R.K.MURALEEDHARAN RESPONDENT/RESPONDENT: ------------------------------------------- STATE OF KERALA, REPRESENTED BY CHIEF SECRETARY, SECRETARIAT, THIRUVANANTHAPURAM. BY SPECIAL GOVERNMENT PLEADER SRI.VINOD CHANDRAN THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 24/07/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: H.L.DATTU, C.J. & A.K.BASHEER, J. ------------------------------------------- S.T.Rev.No.111 of 2006 ------------------------------------------ Dated, this the 24th day of July, 2008 ORDER H.L.Dattu, C.J. In this tax revision case, we are concerned with the assessment year 1999-2000. 2. Petitioner is a Small Scale Industrial Unit. It is engaged in the manufacture of polythene bags out of polythene sheets. It effects sale of polythene bags and polythene sheets to some of its customers. 3. In the returns filed before the assessing authority, the assessee had conceded a total turnover of Rs.54,76,395/- and taxable turnover of Rs.54,76,395/-. The assessing authority had called for the books of accounts. After verification of the books of accounts, the assessing authority had noticed that the assessee is not maintaining separate accounts for the sale of polythene bags and polythene sheets. 4. In view of the above omission in the books of accounts maintained by the dealer, the assessing authority had issued a pre- assessment notice estimating 50% as the polythene bags and 50% towards polythene sheets. The assessee after receipt of the pre-assessment notice had filed his reply and in that had taken up a contention that since the polythene sheets are used for the purpose of packing materials by his customers, the assessee is entitled to the reduced rate of tax under the S.T.Rev.No.111 of 2006 2 notification issued by the State Government. The assessing authority, after considering the objections filed by the assessee, has rejected the returns filed by the assessee and has proceeded to pass a best judgment assessment. In that has levied reduced rate of tax on the sale of polythene bags, but has refused to concede to the request of the assessee to treat polythene sheets as packing materials for the purpose of reduced rate of tax. To arrive at the aforesaid conclusion, the assessing authority has relied upon the decision of this Court in the case of Sri.M.P.Augustine, Archana Plastics Industries, Angamaly v. State of Kerala [(2001) 9 KTR 110]. 5. The order passed by the assessing authority was confirmed by the first appellate authority as well as by the Tribunal. That is how the assessee is before us in this tax revision case. 6. The assessee has raised the following questions of law for our consideration and decision. They are as under: “a) Whether the assessee, who is manufacturing polythene sheets and bags used as packing materials entitled to reduction of tax at the rate of 4% as per entry 102 of first schedule. S.T.Rev.No.111 of 2006 3 b) Whether the decision reported in 9 KTR 110 (M/s.Archana Plastics) is liable to be distinguished for the omission in considering various legal and other factual aspects. c) Is the Tribunal justified in not considering the issue regarding levying of compounding fee for non payment of entire fee for Renewal of registration.” 7. Sri.R.K.Muralidharan, learned counsel appearing for the assessee, would contend before us that what is sold by the assessee is packing materials and, therefore, the assessee is entitled for reduced rate of tax by virtue of the notification issued by the State Government in S.R.O. No.1095/99. Learned counsel also brings to our notice a decision of this Court in the case of Southern Gas Ltd. v. State of Kerala [(2005) 139 STC 504], wherein this Court has said that since 'medical oxygen' and 'nitrous oxide' are used only in the hospitals for patients, the said commodity requires to be taxed only under 'medicine' and not under 'liquefied gases'. In our opinion, the aforesaid decision of the Division Bench of this Court would in no way assist the petitioner. 8. In the present case, the assessee is a dealer in polythene S.T.Rev.No.111 of 2006 4 bags and polythene sheets. In the books of accounts maintained by the dealer, since there was no separate accounts maintained for the sale of polythene bags and polythene sheets, the assessing authority has bifurcated the said total and taxable turnover into 50% each and has granted reduced rate of tax only on the polythene bags and not on the polythene sheets. 9. In the case of Archana Plastics Industries, A Division Bench of this Court has stated as under: “We are of the view that polythene sheets as such are not entitled for reduction. In 1994 notification, polythene tubings are also included. This also shows that polythene sheets are not entitled to reduction. The fact that polythene tubings are included shows that government wanted to give reduction for that item, but it is given effect from 1st April, 1994 and it was not given any retrospective operation.” 10. We have also perused the notification issued by the State Government in S.R.O. No.1095/99. In the said notification, the State Government while granting reduced rate of tax on various items, has also included polythene bags and not polythene sheets. It is now the well settled legal principle that exemption notification requires to be strictly S.T.Rev.No.111 of 2006 5 construed. If it is construed in that fashion, what is not included by the framers of the notification, this Court in exercise of its revisional powers cannot be including that product into the notification for the purpose of granting reduced rate of tax. In that view of the matter, we cannot find fault with the orders passed by the assessing authority and confirmed by the first appellate authority as well as by the Tribunal. 11. Therefore, while rejecting this revision petition, we answer the questions of law raised by the assessee against the assessee and in favour of the Revenue. 12. Consequently, I.A.No.1473 of 2008 also stand closed. Ordered accordingly. (H.L.DATTU) CHIEF JUSTICE (A.K.BASHEER) JUDGE vns/dk