M/S. Peekay Re-Rolling Mills (P) Ltd vs The Assistant Commissioner & Anr

FACTS The appellant is a company registered under the Companies Act, having its Registered Office at Kozhkkode. It is a registered dealer under the Kerala General Sales Tax Act, 1963 (for short 'the State Act'). It carried on the business of steel re-rolling mills at Nallalam, Kozhikode. The raw material used by the appellant in the production of bars and rods, is steel ingots, which the appellant either manufactures or purchases from other manufacturers from within or outside the State. Purchase of steel ingots effected by the appellant within the State are from manufacturing units, which are exempt from the payment of sales tax on the sale of such ingots by virtue of an exemption notification issued under Section 10 of the State Act.

For the Assessment Year 1994-95, appellant submitted a return of turnover and was assessed to tax declaring the taxable turnover at nil, by an order dated 15.1.1998 by the assessing officer. In respect of the assessment year 1995-96 also, the appellant's assessment was completed determining the taxable turnover at Rs. 21,85,550/- vide order dated 15.1.1998. While this was so, the appellant received a show cause notice dated 11.1.2000 for the assessment year 1994-95 and another notice dated 12.1.2000 on the same date for the assessment years 1996-97 to 1999-2000. In the first show cause notice relating to the assessment year 1994-95, the assessing officer stated that the appellant had purchased ingots from dealers within the State who were exempted from payment of tax and consumed the same in the manufacture of bars and rods during the year 1994-95. The notice further stated that the ingots purchased were goods liable to tax under the State Act and since the supply of such ingots did not suffer any tax at the time of sale due to the exemption notification under Section 10(1) of the State Act, purchase turnover of the ingots during the year and consumed in the manufacture by the appellant attracted liability to tax under Section 5A of the State Act. The notice alleged that the purchase turnover of the ingots had escaped assessment under Section 5A of the State Act and accordingly proposed to determine the turnover liable to tax and assess the same at 4%. It was stated that on the request of the appellant, a hearing would be given to the appellant before completing the assessment as proposed.

Notice relating to 1996-97 to 1999-2000 was worded differently. The said notice stated that the appellant had purchased ingots, scraps, mosrolls, etc. from units within the State claiming tax exemption and consumed the same in the manufacture of bars and rods during this period. It was further stated that since the goods had not suffered tax under Section 5A of the State Act, they were liable to pay purchase tax under Section 5A and called upon the appellant to remit tax with interest under Section 22 (3) within 10 days of the receipt of notice failing which an action would be taken to recover the tax.

[Emphasis supplied] The Court made it very clear that levy and collection are not synonymous and that collection of the tax is not a necessary facet of a 'levy'.

For the reasons stated above, these appeals are allowed. There will be no orders as to costs.