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TMI Blog2007 (3) TMI 356X X X X Extracts X X X X X X X X Extracts X X X X ..... cause notices issued to the appellant. Civil Appeal No. 4406 is arising out of judgment dated July 7, 2006 of the Kerala High Court in Sales Tax Revision No. 9 of 2006 by which the division Bench dismissed the revision relying upon the judgment of the division Bench in Writ Appeal No. 434 of 2000 of the same High Court. We propose to dispose of these appeals by a common order, as the point involved in all these appeals is the same. Facts are taken from Civil Appeal No. 2653 of 2006. FACTS: The appellant is a company registered under the Companies Act, 1956 having its registered office at Kozhikode. 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 notificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nging the two show cause notices issued to him. Learned single Judge dismissed the writ petitions in limine by observing that the case involved disputed questions of fact which could not be decided in a writ petition under article 226 of the Constitution and relegated the petitioner to avail of the remedies provided under the State Act. It was held that the writ petition was not the appropriate remedy and the appellant was accordingly directed to avail of the remedies provided under the State Act. Learned single Judge directed the appellant to file objections to the notices before the assessing officer who shall consider the same while framing the assessment. Assessing authority was directed to complete the assessment in accordance with law after affording due opportunity to the appellant. Aggrieved by the above order of the learned single Judge, the appellant preferred two separate writ appeals. The division Bench dismissed the writ appeals by a common order and held that the learned single Judge was in error in directing the appellant to avail the remedies provided under the State Act. The division Bench, however, rejected the main contention of the appellant that in view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er as the State Government had already notified that the tax would be at the point of first sale and the rate of tax would be four per cent. That the High Court erred in assuming that the word "levied" in section 15(a) of the Central Act is used in the sense of imposed and collection. According to him, the word levy could cover both imposition and non-collection of tax imposed will not cease to be a levy of tax. It was further contended that the High Court erred in distinguishing the judgment of this court in Shanmuga Traders. v. State of Tamil Nadu [1998] 5 SCC 349 See [1999] 114 STC 1 (SC). and that of the Constitution Bench judgment in Bhawani Cotton Mills Ltd. v. State of Punjab [1967] 3 SCR 577 See [1967] 20 STC 290 (SC). According to him, the reliance placed by the High Court in Town Municipal Committee, Amravati v. Ramchandra Vasudeo Chimote [1964] 6 SCR 947 is unwarranted as in the said case this court was interpreting the expression "con- tinued to be levied" and "to be applied to the same purposes" in article 277 of the Constitution of India. A strong reliance was placed by him on the decisions of this court in Assistant Collector of Central Excise, Calcutta Division v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or Second Schedule, at the rates and only at the points specified against such goods in the said Schedules; (ii) to (iv) . . ." Second Schedule of section 5 of the State Act, as it stood at the relevant time, reads as under: "SECOND SCHEDULE Declared goods in respect of which a single point tax only is leviable under sub-section (1) or sub-section (2) of section 5 Sl. No. Description of goods Point of levy Rate of tax per cent (1) (2) (3) (4) 1. Oil seeds as defined in section 14 of the Central Sales Tax Act, 1956 (Central Act 74 of 1956), other than groundnut, coconut and copra At the point of first sale in the State by a dealer who is liable to tax under section 5 4 2. (i) Coal including coke in all its forms but excluding charcoal -do- 4 (ii) Iron and steel that is to say Section 5A of the State Act, as it stood at the relevant time, reads as under: -do- 4 ... ... ... ... "5A. Levy of purchase tax. - (1) Every dealer who, in the course of his business, purchases from a registered dealer or from any other person any goods, the sale or purchase of which is liable to tax under this Act, in circumstances in which no tax is payable under sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Second Schedules, the tax could be at the rates and points specified against such goods in the said Schedules which in the present case is at the point of first sale in the State by a dealer. The liability to tax and the rate of tax under section 5 is prescribed at four per cent. As far as this section is concerned, the conditions specified under section 15 of the Central Act are prima facie complied with. Further, under section 10 of the State Act the State Government granted certain exemptions by way of S.R.O. No. 1729/93, within the purview of which the goods in the present case fall. The controversy in the instant case arises when a tax is sought to be levied under section 5A of the State Act on the same goods that are taxable under section 5, but exempted. The essential question that we are required to adjudicate upon is whether the tax sought to be levied under section 5A on these goods, would amount to tax at a second stage and therefore violate section 15 of the Central Act. It is clear that by virtue of section 15 of the Central Act, declared goods once made liable to tax cannot be made to suffer an additional tax liability. In the present case, the goods have already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out and it needs to be emphasised again that section 7A itself is a charging section. It creates a liability against a dealer on his purchase turnover with regard to goods, the sale or purchase of which though generally liable to tax under the Act has not, due to the circumstances of particular sales, suffered tax . . . " (emphasis supplied). The court also analysed the section and indicated the conditions necessary for the applicability of the section and reaffirmed its validity. It has been contended that since these conditions are fulfilled, the levy under section 5A of the State Act is valid. However, while these observations are relevant for the understanding of the section and its validity, this case has no real bearing on the present one since it never involved a question of tax on declared goods under section 14 of the Central Act and the conditions laid down in this regard, specifically that of a single point levy. Satisfying the conditions laid down in Kandaswami's case [1975] 4 SCC 745 See [1975] 36 STC 191 (SC). therefore does not validate the present levy, which is on declared goods under section 14 of the Central Act. The impugned judgment of the division Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either that point of first sale or any subsequent sale in the State. Para 13 The Second Schedule of the State Act specifies the single point; it is 'the point of first sale in the State'. The first sale in the State was the sale by the said Board to the appellants/petitioners. That sale was exempt from tax by reason of the notification dated December 1, 1982 aforementioned. The iron and steel sold by the said Board to the appellants/petitioners was, therefore, not liable to tax either at the point of first sale or any subsequent sale in the State. Para 14 There is no warrant for the emphasis that would appear to have been placed by the Madras High Court on the phrase 'taxable sale'. The State Act does not fix the single point of the levy at the first taxable sale; it fixes it at 'the point of first sale'. The impugned circular cannot validly shift the point of levy from the first sale to a subsequent sale and it is, therefore, bad in law. [Emphasis supplied] The division Bench however in the present impugned judgment distinguished the Shanmuga's case [1998] 5 SCC 349 by observing: "We find that the observations made by the Supreme Court in S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that the decision taken by the division Bench in the impugned judgment is in conformity with the minority decision in the Bhawani Cotton Mills case [1967] 3 SCR 577 See [1967] 20 STC 290 (SC).. In his dissenting judgment, Sikri J. observed as follows: ". . . . In my opinion the Punjab Act does in effect comply with the requirements of section 15 of the Central Sales Tax Act because it is possible to find out the stage at which purchase tax becomes leviable on goods mentioned in Schedule C. This stage is the first purchase by a dealer, which is not exempted from taxation or which is not deductible from the taxable turnover of a dealer under section 5(2) of the Punjab Act . . ." However, the majority decision took a different, much stricter view of the matter, which is the law of the land today. The majority in Bhawani Cotton Mills case [1967] 3 SCR 577 See [1967] 20 STC 290 (SC). as of the opinion that the Act in question did not identify the specific stage for the levy on declared goods and that it was possible for the goods to be taxed at more than one stage, which was contrary to the condition in the Central Act. The court observed as follows: "Pausing here for a minute, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In our opinion, exemption can only operate when there has been a valid levy, for if there was no levy at all, there would be nothing to exempt. In this regard two cases decided by this court are relevant. The first is the Pine Chemicals case [1992] 2 SCC 683 See [1992] 85 STC 432 (SC)., which involved questions of sales tax and exemption under the Jammu and Kashmir General Sales Tax Act, 1962. While examining certain exemption orders made by the Government, the court observed as follows: "Under section 4(1) of the Jammu and Kashmir General Sales Tax Act the goods are taxable only once, that is, it could be taxed only at one point of sale. We have already held that the Government Orders 159 and 414 are exemption orders and exempt the sale by the appellants of their manufactured products. The exemption would not arise unless the goods are taxable at the point of their sale. Thus the effect of exempting their sale is that the said goods manufactured by them could not be taxed at the second or subsequent sales also as that would offend section 4(1) which provides for single point levy. In cases where there are no exemption orders and the State fixed the second or subsequent sale as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emains unaffected, only the subsequent requirement of payment of tax to fulfil the liability is done away with. DISTINCTION BETWEEN LEVY AND COLLECTION: The second aspect of the argument is that an absence of collection means an absence of levy or liability. This question has already been examined in certain earlier cases, and this court has consistently maintained a distinction between levy and collection. In National Tobacco case [1972] 2 SCC 560, this court was faced with certain questions relating to the refund of excise duty on the manufacture of cigarettes. In this context, the court examined the scope of the term "levy" and made the following observations: "The term 'levy' appears to us to be wider in its import than the term 'assessment'. It may include both 'imposition' of a tax as well as assessment. The term 'imposition' is generally used for the levy of a tax or duty by legislative provisions indicating the subject-matter of the tax and the rates at which it has to be taxed. The term 'assessment', on the other hand, is generally used in this country for the actual procedure adopted in fixing the liability to pay a tax on accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y is not there at the time when the goods are manufactured or produced in India, it cannot be levied at the stage of removal of the said goods. The idea of collection at the stage of removal is devised for the sake of convenience. It is not as if the levy is at the stage of removal; it is only the collection that is done at the stage of removal. Admittedly, the special excise duty is an independent duty of excise separate and distinct from the duties of excise levied by the Central Excises and Salt Act, 1944. This levy came into effect only on and from March 1, 1978 which means that the goods produced prior to that date were not subject to such levy. If that is so, the levy cannot attach nor can it be realised because such goods are removed on or after March 1, 1978. The provisions of the Central Excise Act and the Rules, in our opinion, do not say otherwise. . . . . . . The levy is and remains upon the manufacture or production alone. Only the collection part of it is shifted to the stage of removal. Once this is so, the fact that the provisions of the Central Excise Act are applied in the matter of levy and collection of special excise duty cannot and does not mean that wherever ..... X X X X Extracts X X X X X X X X Extracts X X X X
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