IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN THURSDAY, THE 28TH AUGUST, 2008 / 6TH BHADRA, 1930 ST.Rev..No. 318 of 2007 (TA.411/2004 of S.T.A.T., ADDL.BENCH-II, ERNAKULAM) .................... REVISION PETITIONER/RESPONDENT/APPELLANT: --------------------------------------------------------------- M/S.K.M.J.RICE MILL, KADAVOOR, MUVATTUPUZHA, REPRESENTED BY ITS MANAGING PARTNER, SRI.K.M.JOSHY. BY ADV. SRI.RAJU JOSEPH RESPONDENT/APPELLANT/RESPONDENT: ------------------------------------------------- STATE OF KERALA, REPRESENTED BY THE INSPECTING ASSISTANT COMMISSIONER, DEPARTMENT OF COMMERCIAL TAXES, MUVATTUPUZHA. BY SPL.GOVERNMENT PLEADER 9FOR TAXES) SRI.VINOD CHANDRAN. THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 28/08/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: C.N.RAMACHANDRAN NAIR & V.K.MOHANAN, JJ. --------------------------------------------- S.T.Rev.No. 318 of 2007 --------------------------------------------- Dated this the 28th day of August, 2008 J U D G M E N T Ramachandran Nair,J: This Sales Tax Revision is filed against the order of the Tribunal upholding the denial of sales tax exemption to the petitioner based on Notification S.R.O.No.295 of 1998. 2. We have heard counsel for the petitioner as well as the Government Pleader. 3. The petitioner, a rice mill was enjoying sales tax exemption as a new small scale industrial unit based on the notification S.R.O.No.1729/1993. Government vide S.R.O.No.295/1998 issued notification stating that if any S.S.I.unit enjoying sales tax exemption tries to evade payment of sales tax by failing to maintain proper books of accounts, sales tax exemption will be forfeited to such unit. The validity of the notification was upheld by this Court, vide judgment in M/s.Sahib Rubber Industries v. S.T.Rev. No. 318 of 2007 :-2-: State of Kerala and others [(2006) 14 KTR 184 (Ker)]. The petitioner's case is that since the petitioner was granted sales tax exemption under S.R.O.No.1729/1993, the said benefit cannot be denied to the petitioner, by reference to notification issued later namely, S.R.O.No.295/1998. This question was considered and stands decided by this Court in the judgment above referred. We do not find any ground to deviate from the view taken in the said judgment. Even though counsel for the petitioner contended that Notification S.R.O.No.295/98 amounts to retrospective withdrawal of exemption and according to certain decisions of the Supreme Court, exemption cannot be forfeited with retrospective effect, we do not find, the notification provides for any withdrawal of sales tax exemption retrospectively. On the other hand, the notification is only for disciplining industries enjoying sales tax exemption by requiring them to maintain proper books S.T.Rev. No. 318 of 2007 :-3-: of accounts, so that their entire purchase, production and sales are accounted. In fact, sales tax exemption itself is based on investment, sales turn over etc. Therefore, maintenance of correct and complete accounts is a necessary pre-condition for granting sales tax exemption in terms of the main notification SRO No.1729/93. The subsequent notification SRO No.295/98 only reconfirms these principles expressly and provides for withdrawal of exemption to any industry which along with exemption tries to evade payment of tax. In this case, the petitioner was subjected to penalty for attempting evasion of tax under Section 45A of the K.G.S.T.Act. Petitioner was found to have suppressed purchases made from outside State and consequently, was found to be not maintaining proper books of accounts which attracts SRO No.295/98. Petitioner was rightly held to be ineligible for sales tax exemption under Notification SRO No.295/98. S.T.Rev. No. 318 of 2007 :-4-: 4. We therefore do not find any ground to interfere with the order of the Tribunal. Accordingly, the Sales Tax Revision is dismissed. However, we feel, the petitioner can be granted one more opportunity to compound the offence and pay the compounding fee at twice the amount of tax sought to be evaded and retain exemption. The assessing officer is directed to permit the petitioner to enjoy the benefit subject to satisfying the conditions provided in the notification. C.N.RAMACHANDRAN NAIR, Judge V.K.MOHANAN, Judge MBS/ S.T.Rev. No. 318 of 2007 :-5-: C.N.RAMACHANDRAN NAIR & V.K.MOHANAN, JJ. -------------------------------------------- I.T.A.NO. 81 OF 2000 ------------------------------------ S.T.Rev. No. 318 of 2007 :-6-: J U D G M E N T DATED:17-6-2008 S.T.Rev. No. 318 of 2007 :-7-: