IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMACHANDRA MENON FRIDAY, THE 29TH OCTOBER 2010 / 7TH KARTHIKA 1932 WP(C).No. 20172 of 2006(B) --------------------------------- PETITIONER(S): ------------------- M/S. MARHOOM REFINERIES (P) LTD., MUVATTUPUZHA, REPRESENTED BY RAZAK A.P. DIRECTOR. BY ADVS. DR.K.B.MUHAMED KUTTY, SENIOR ADVOCATE SRI.K.M.FIROZ RESPONDENT(S): -------------------- 1. THE INTELLIGENCE OFFICER (IB) COMMERCIAL TAXES, KANNUR. 2. THE COMMISSIONER OF COMMERCIAL TAXES, PUBLIC BUILDING, MUSEUM JUNCTION, THIRUVANANTHAPURAM-695 033. 3. THE DEPUTY COMMISSIONER, COMMERCIAL TAXES, MATTANCHERRY. R1 TO R3 BY GOVT.PLEADER SRI.K.P.PRADEEP THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 29/10/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: svs/ WP(C).No. 20172/2006(B) APPENDIX PETITIONER'S EXHIBITS: P1: COPY OF THE PENALTY ORDER DATED 25/11/1998 PASSED BY THE FIRST RESPONDENT FOR THE YEAR 1995-'96. P2: COPY OF THE PENALTY ORDER DATED 25/11/1998 PASSED BY THE FIRST RESPPONDENT FOR THE YEAR 1996-97. P3: COPY OF THE PENALTY ORDER DATED 25/11/1998 PASSED BY THE FIRST RESPPONDENT FOR THE YEAR 1997-98. P4: COPY OF THE FIRST REVISION ORDER DATED 04/02/2000 FOR THE YEAR 1995-'96. P5: COPY OF THE FIRST REVISION ORDER DATED 07/02/2000 FOR THE YEAR 1996-'97. P6: COPY OF THE FIRST REVISION ORDER DATED 07/02/2000 FOR THE YEAR 1997-'98. P7: COPY OF THE SECOND REVISION ORDER DATED 28/03/2006 PASSED BY THE SECOND RESPONDENT FOR THE YEAR 1995-'96 P8: COPY OF THE SECOND REVISION ORDER DATED 28/03/2006 PASSED BY THE SECOND RESPONDENT FOR THE YEAR 1996-'97 P9: COPY OF THE SECOND REVISION ORDER DATED 28/03/2006 PASSED BY THE SECOND RESPONDENT FOR THE YEAR 1997-'98 P10: COPY OF THE ELIGIBILITY CERTIFICATE DATED 12/03/1997 ISSUED BY THE GENENRAL MANAGER, DISTRICT INDUSTRIES CENTRE P11: COPY OF THE ELIGIBILITY CERTIFICATE DATED 06/11/1998 ISSUED BY THE GENENRAL MANAGER, DISTRICT INDUSTRIES CENTRE RESPONDENT'S EXHIBITS NIL /TRUE COPY/ P.A. TO JUDGE svs/ P.R. RAMACHANDRA MENON, J. .............................................................................. W.P.(C) No. 20172 OF 2006 ......................................................................... Dated this the 29th October, 2010 J U D G M E N T The issue involved in this Writ Petition is whether the course pursued by the Intelligence Officer or the first revisional authority, denying the benefit provided under SRO.1729/93 to the petitioner in respect of the items which were brought from outside the State on the strength of F-Form and admittedly manufacturing the end products sold in the State of Kerala, is correct or not. 2. The factual matrix reveals that the petitioner Company, who is a registered dealer under the KGST Act is engaged in the manufacture and sale of refined edible oils and other allied items as shown in Ext.P11. It is the case of the petitioner that the petitioner used to purchase the raw material/commodity from elsewhere outside the State and the same is refined in the units situated within the State of Kerala and sold in the State. In respect of the assessment years 1995-96 to 1997-98, the petitioner brought such commodities as 'Commission Agent' and the same was converted as the 'end product' and sold within W.P.(C) No. 20172 OF 2006 2 the State. The material was brought against 'F' Forms and the petitioner claimed exemption by virtue of the stipulation under SRO. 1729 OF 1993. Pursuant to the steps taken by the concerned respondents alleging evasion of tax, penalty was imposed on the petitioner under Section 45A of the KGST Act, as borne by Exts. P1 to P3, holding that the petitioner was not entitled to bring goods against 'F' Forms and was not eligible for claiming exemption under such circumstances. Being aggrieved of the orders imposing penalty, the petitioner preferred statutory revisions before the third respondent which culminated in Exts.P5 and P6 orders, wherein interference was declined. Aggrieved of such situation, further revisions were preferred before the second respondent leading to Exts.P7 to P9 orders, wherein also interference was declined and hence they are under challenge in this Writ Petition. 3. The learned Counsel for the petitioner submits that the basic issue sought to be projected by the petitioner has been dealt with by the respondents in a quite casual manner, without actually examining the parameters prescribed in the SRO, so as W.P.(C) No. 20172 OF 2006 3 to provide the benefit of exemption. The fact that the petitioner was engaged in the manufacturing operation is no more a matter of dispute, submits the learned Counsel. Referring to the contents of Exts. P1 to P3 orders passed by the first respondent, the learned Counsel submits that the various items procured by the petitioner from outside the State on the strength of 'F' Form have already been converted into different products and this being the position, the respondents are not justified in denying the benefit of exemption. Nowhere in the relevant Statute, is there a provision imposing a ban with regard to procurement of materials against 'F' Form or as to the right regarding exemption in respect of such goods procured against 'F' Forms, submits the learned Counsel. Reliance is placed on the definition of the term 'dealer' under Section 2 (viii) of the K.G.S.T. Act with specific reference to sub -clause © referring to 'commission agent', asserting that the term 'dealer' also includes 'commission agent' and this being the position, the version of the respondents that the item procured by the petitioner as a 'commission agent' and sold after manufacturing process is not W.P.(C) No. 20172 OF 2006 4 liable to be exempted, is not correct or sustainable. Similar reference and reliance was also placed on the terms 'taxable turnover' as well as 'turnover', as defined in the Act, which also make reference to the term 'dealer '. In the said circumstances, the observation made by the first and second revisional authorities in Exts.P4 to P6 and P7 to P9 orders upholding Exts. P1 to P3 orders and confirming imposition of penalty is stated as liable to be intercepted; more so for the reason that there is no 'mens rea' on the part of the petitioner in this regard. 4. No counter affidavit has been filed with regard to the facts and figures from the part of the respondents . 5. The learned Sr. Government Pleader sought to justify the proceedings with reference to the materials available on record. Referring to the contents of the impugned orders, it is pointed out that the entire extent of the item procured by the petitioner as 'commission agent' were not actually used for the manufacturing operation and that by virtue of the admitted status of the petitioner as 'commission agent' of the principal situated outside the state, a portion of the said item had been W.P.(C) No. 20172 OF 2006 5 subjected to sale directly and hence, the 'turnover' in respect of such portion is not liable to be included or reckoned for the purpose of granting exemption under SRO 1729/93. The learned Sr. Government Pleader also submits that the very purpose of proclamation of the SRO is to promote the industrial sectors in Kerala and not to promote the activities of the 'commission agents'; that by virtue of the action that was being pursued by the petitioner, undue benefit has been obtained by way of evasion of tax claiming exemption under SRO and that the ultimate beneficiaries are the petitioner as well as the principal situated outside the State, which has necessarily to be curtailed. This being the position, the orders passed by the original authorities as well as revisional authorities (ie. Exts.P4 to P6 and P7 to P9) do not call for any interference, submits the learned Sr. Government Pleader. 6. The learned Counsel for the petitioner submits, on the other hand, that the manufacturing exercise being pursued by the petitioner is no more liable to be disputed by the respondents . It is also pointed out by the learned counsel that W.P.(C) No. 20172 OF 2006 6 there is already an observation made by the first respondent in Exts. P1 t o P3 that the goods procured by the petitioner against 'F' Forms have already been converted and sold within the State and as such, the apprehension expressed from the part of the respondents does not hold any water at all. 7. After hearing both the sides this Court finds that the matter requires some more clarity with regard to the actual facts; more so when no counter affidavit has been filed with regard to the factual details. Eventhough there is an observation in Exts. P1 to P3 that the goods procured by the petitioner against 'F' Forms have been utilised for the purpose of manufacturing process, it remains a matter to be considered by the concerned authorities with reference to the actual facts and figures, to ascertain the 'actual extent of exemption' obtainable to the petitioner. 8. In the above circumstances, the second respondent is directed to re-consider the matter by passing a speaking order, after giving an opportunity of hearing to the petitioner, in accordance with law. The petitioner will be at liberty to raise all W.P.(C) No. 20172 OF 2006 7 contentions, both legal as well as factual, in support of the case before the said respondent. The proceedings in this regard shall be finalised as expeditiously as possible, at any rate, within a period of three months from the date of receipt of a copy of the judgment. So as to facilitate further steps, Exts.P7 to P9 passed by the second respondent will stand set aside. It is made clear that, if any recovery proceedings are being pursued against the petitioner under the Revenue Recovery Act, the same shall be kept in abeyance till such time. The Writ Petition is disposed of. P.R. RAMACHANDRA MENON, JUDGE. lk