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 3RD JULY 2008 / 12TH ASHADHA 1930 S.T.Rev..No. 163 of 2003 ---------------------------------------- ORDER DATED 31.5.2001 IN TA.294/1999 OF THE KERALA SALES TAX APPELLATE TRIBUNAL, ADDITIONAL.BENCH, KOTTAYAM .................... REVISION PETITIONER/APPELLANT/REVENUE ------------------------------------------------------------------ STATE OF KERALA, REPRESENTED BY DEPUTY COMMISSIONER (LAW) COMMERCIAL TAXES, ERNAKULAM. BY SR. GOVERNMENT PLEADER SRI.MUHAMMED RAFIQ RESPONDENT/RESPONDENT/ASSESSEE ----------------------------------------------------------- M/S. ARATI RUBBEWR PRODUCTS, KARIMKUNNAM. (AMENDED) M/S.ARATHI RUBBER PRODUCTS, KARIMKUNNAM, REPRESENTED BY M/S.ARATHY RUBBER PRODUCTS, KARIMKUNNAM, BUILDING NO.196A/VIII, KARIMKUNNAM GRAMA PANCHAYAT, (1/144) HEAD OFFICE, KARIMKUNNAM, THODUPUZHA TALUK, IDUKKI DT. (CAUSE TITLE AMENDED AS PER ORDER DATED 7.11.2007 IN I.A.NO.2681 OF 2007) BY ADV. SRI.KURIAN THOMAS & SRI.V.P.SUKUMAR THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 03/07/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: H.L.DATTU, C.J. & A.K.BASHEER, J. ------------------------------------------- S.T.Rev.No.163 of 2003 ------------------------------------------ Dated this the 3rd day of July, 2008 ORDER H.L.Dattu, C.J. Revenue has filed this revision petition being aggrieved by the orders passed by the Sales Tax Appellate Tribunal, Additional Bench, Kottayam in T.A.No.294 of 1999. 2. The Revenue has framed the following questions of law for our consideration and decision. They are as under: “a) Is not the Tribunal in error in holding that G.O.(MS) No.124/88/ID. dated 31.8.1988 is applicable to assessee industry which is started from 16.9.1985. Since the SRO is intended for new industries. b) Is it fair, proper and legal you except finding of the Tribunal when material facts or relevant facts are omitted to consider and irrelevant facts considered and relief granted without comprehending impact scope and effect of the notification.” 3. The assessee is an industry engaged in the manufacture of rubber products at Karimkunnam, Thodupuzha, which was established some time in the year 1985. It is borne on the files of the Sales Tax Officer, Thodupuzha. 4. In the returns filed for the assessment year 1996-97, the assessee had claimed the benefit of the notification issued by the State S.T.Rev.No.163 of 2003 2 Government in exercise of its powers under Section 10 of the Kerala General Sales Tax Act, 1963 ('the Act' for short) in No.G.O.(MS) 124/88/ID dated 31.8.1988. The claim of the assessee was rejected by the assessing authority on the ground that the assessee is not a new industry which has come into existence after 31.8.1988, and therefore, not entitled to claim the benefit of the exemption notification. 5. In the appeal filed, the Appellate Assistant Commissioner has allowed the appeal and has granted the claim of the assessee and has further directed the assessing authority to quantify the tax liability by granting the benefit of the notification which provides for levy of tax at the rate of 3%. 6. The Revenue had carried the matter in appeal before the Tribunal in T.A.No.294 of 1999. The Tribunal has rejected the Revenue's appeal by relying on the observations made by this Court in T.R.C.No.202 of 1998. 7. We have heard learned counsel appearing for the parties to the lis. 8. The one and the only question that arises for our consideration and decision is whether the notification issued by the State Government in No.G.O.(MS) 124/88/ID dated 31.8.1988, can be made S.T.Rev.No.163 of 2003 3 applicable to an industry which has come into existence much earlier to the issuance of the notification. In order to resolve this controversy the notification issued by the State Government requires to be extracted. It is as under: “GOVERNMENT OF KERALA Abstract Industries -setting up of rubber industries in Kerala concessions and reliefs-granting of- orders issued. ----------------------------------------------------------------------------------- INDUSTRIES (J) DEPARTMENT G.O.MS.124/88/ID Trivandrum, Dated 31-8-1988 ------------------------------------------------------------------------------------ ORDER The question of encouraging the rubber based industries in Kerala had been engaging the attention of Government for some time past and as rubber is an important raw material for industries, the State Government had been thinking to give further encouragement for setting up more rubber industries in the State. With this end in view, a meeting was held inviting all those concerned to discuss the ways and means of inducing more industries using rubber as raw-material inside the state. The consensus arrived at the meeting was that there was need for giving some concessions and relief to the new entrepreneurs for starting rubber industries. Government considered the various suggestions made by the rubber manufacturers and technical experts and have decided to extend the following concessions to promote rubber industries. 1). Rubber to be used for new industries in Kerala will be exempted from levy of purchase tax. 2). An additional capital subsidy of 5% will be given to new rubber industries to be set up in Kerala and this subsidy will be S.T.Rev.No.163 of 2003 4 in addition to the Central/State subsidy now available to the industries. 3). Sales tax on finished rubber goods produced from Factories in Kerala will be reduced to 3%.” 9. A reading of the notification would definitely indicate that the notification has been issued with an intention to give some concessions, incentives and benefits to the new entrepreneurs for starting rubber industries in the State of Kerala. Under the said notification, what is intended is to encourage new industries by granting exemption from levy of purchase tax, if rubber is used as raw material for manufacture of finished products. A capital subsidy of 5% is also given to new industries to be set up in Kerala and this subsidy will be in addition to the Central/State subsidy now available to the new industries. Lastly a reduced rate of tax of 3% is provided for sale of finished rubber goods produced from the factories in Kerala. 10. Sri.Kurian Thomas, learned counsel appearing for the assessee, at the time of hearing of this revision petition, would submit that clause 3 of the notification should be read in isolation and if it is read in that manner, though the petitioner industry has come into existence in the year 1985, is entitled to the benefit of the notification and the rate of tax that is payable by the petitioner industry on the sale of finished rubber S.T.Rev.No.163 of 2003 5 products is only at the rate of 3%. 11. This submission of the learned counsel, in our opinion, cannot be accepted. The exemption notification requires to be strictly construed. The language of the notification can be well understood if we read the mind of the framers of the notification. The framers of the notification had kept in view that they should invite new entrepreneurs to start rubber industries in the State of Kerala and those industries require to be given some incentives and concessions by way of sales tax exemption and subsidies, etc. The notification, in our opinion, cannot be read in isolation. All the conditions of the notification require to be taken as a whole while interpreting the notification. If it is done in that manner, it can safely be said that that the notification can be made applicable only to such of those new rubber industries which would come into existence after the date of the notification, i.e. 31.3.1988. 12. The Tribunal, while disposing of the Revenue's appeal relied upon the decision of this Court in T.R.C.No.202 of 1998. The facts situation in the said decision is totally different. In our view, the observations and directions issued in that decision will not come to the aid of the assessee, and in fact, the reliance placed by the Tribunal is misconceived. S.T.Rev.No.163 of 2003 6 13. In that view of the matter, the orders passed by the Tribunal cannot be sustained by us. Accordingly the revision petition filed by the Revenue requires to be allowed and it is accordingly allowed. The orders passed by the Tribunal is set aside. The questions of law framed by the Revenue is answered in favour of the Revenue and against the assessee. Ordered accordingly. (H.L.DATTU) CHIEF JUSTICE (A.K.BASHEER) JUDGE vns/dk