State Of Kerala & Ors vs M/S Kurian Abraham Pvt. Ltd. & Anr

M/s Kurian Abraham Pvt. Ltd.-assessee is engaged in the business of buying rubber, processing the same and selling the processed rubber. Assessee purchases field latex (raw-material) in Kerala, but, since its processing factories are in Tamil Nadu, it transports field latex to Tamil Nadu for processing into centrifuged latex and returns it back into Kerala. Thereafter, the centrifuged rubber is sold by the assessee either locally in Kerala or inter-State.

3. For the assessment year 1997-98, with respect to centrifuged latex sold locally, the assessee furnished Form No. 25, declaration from the concerned buyers, and claimed exemption from payment of tax on the purchase Turnover of field latex (raw-rubber). With respect to inter-State sale of centrifuged latex, the assessee paid the tax under the 1963 Act on the purchase of field latex and claimed exemption in respect of Central Sales Tax ("CST") under Notification SRO 1731/93 read with SRO 215/97. The returns filed by the assessee were accepted by the AO vide Order dated 14.5.2001 under the 1963 Act and vide assessment order dated 31.5.2001 under the 1956 Act. Similar returns were filed by the assessee for 1998-99 onwards.

4. At this stage, it may be stated that returns filed by the assessee were accepted by the Department on the basis of Circular No. 16/98 dated 28.5.1998 (for short "the said circular") issued by the Board of Revenue under Section 3(1A)(c). Under the said Circular, field and centrifuged latex were treated as one and the same commodity in view of Entry 110 of the First Schedule to the 1963 Act.

7. Be that as it may, in view of the judgment of the High Court in Padinjarekara case (supra) notices were issued by the Department under Section 19 of the 1963 Act proposing to reopen KGST and CST completed assessments for 1997-98 on the ground that purchase turnover of field latex and sales turnover of centrifuged latex had escaped assessments. Accordingly, the Department proposed to assess the entire purchase turnover of field latex in the hands of the assessee under Entry 110(a)(i) on the ground that the centrifuged latex obtained by processing field latex is a different commodity and, accordingly, the assessee was the last purchaser of field latex within Kerala. Similarly, with regard to inter-State sales of centrifuged latex, the Department alleged that the benefit of exemption taken by the assessee under the above two exemption Notifications was not admissible on the ground that the field latex purchased in Kerala and the centrifuged latex sold inter-State were two different commodities and, accordingly, the KGST paid by the assessee on the field latex was not sufficient to claim exemption for CST on the sale of centrifuged latex. The Department also reopened the assessments on the ground that the assessee had taken the field latex out of Kerala to its factory in Tamil Nadu and had brought it back as centrifuged latex and, therefore, the assessee was liable to sales tax on the sales turnover of centrifuged latex under Entry 110(a)(ii) on the ground that the assessee had sold centrifuged latex brought from outside the State of Kerala. In other words, the assessee was sought to be reassessed both for purchase turnover of field latex and for sales turnover of centrifuged latex, both under the 1963 Act and under the 1956 Act. At this stage, it may be noted that, till today the said Circular No. 16/98 issued by the Board of Revenue has remained in force. It has not been withdrawn till today.

At the point of sale within the State by a dealer, a dealer who is liable to tax under Section 5.

7. As per notification SRO 1003/91 exemption was granted, inter alia, in respect of the tax payable by Small Scale Industrial Units on the purchase of rubber for use in the manufacture of rubber goods subject to the condition that tax is levied on the products manufactured out of such rubber. Here again, since during 1991-92 the entry relating to rubber, namely entry 161, takes within its ambit field latex and centrifuged latex, no new commodity emerges in the conversion of field latex into centrifuged latex. Such Industrial units will not therefore be eligible for exemption under SRO 1003/91 and SRO 1727/93 in respect of the purchase of field latex for conversion on centrifuged latex."

Tax if any, collected shall be paid over to Government and tax if any, already paid shall not be refunded. This notification shall be deemed to have been in force during the period from 10th October, 2001 to 31st March, 2004."

23. For the aforestated reasons, we find no infirmity in the impugned judgment of the High Court and, accordingly, the State's civil appeals stand dismissed with no order as to costs.