2003 (9) TMI 745 - HC - VAT and Sales Tax

Summary

Issues:
- Challenge to denial of sales tax exemption on products
- Challenge to cancellation of registration due to non-payment of tax

Analysis:
1. Challenge to Denial of Sales Tax Exemption:
The petitioner, a private limited company engaged in the production of crushed bones, bone meal, and tallow, challenged the denial of sales tax exemption on its products. The petitioner started commercial production in 1997 and applied for sales tax exemption in 1998. The dispute primarily revolved around whether crushed bones and bone meal qualified for sales tax exemption under Notification S.R.O. No. 1729 of 1993. The petitioner claimed exemption on crushed bones, but the authorities focused on bone meal based on previous court decisions. The court analyzed the manufacturing process, including crushing bones, producing crushed bones for sale to another industry, and selling bone meal as a by-product. The court referred to the definition of "manufacture" under the notification, emphasizing the exclusion of mere conversion of goods from one form to another. Ultimately, the court held that the petitioner was not entitled to sales tax exemption on crushed bones or bone meal as the processes involved did not qualify as manufacturing under the notification.

2. Challenge to Cancellation of Registration:
The second issue involved challenging the proceedings for cancellation of registration due to non-payment of taxes despite the denial of sales tax exemption. The assessing officer proposed cancellation under section 14(7) of the Kerala General Sales Tax Act, 1963. The court directed the assessing officer to suspend the cancellation proceedings for two months, during which the petitioner was required to file complete returns, remit taxes with interest, and comply with statutory provisions. The officer could grant installment facilities with security, but failure to comply would lead to recovery actions, including cancellation of registration or other coercive measures available under the law.

In conclusion, the court dismissed the challenge to the denial of sales tax exemption and provided a temporary reprieve regarding the cancellation of registration, subject to the petitioner meeting tax payment obligations within the specified timeframe.