TMI Blog2014 (9) TMI 370X X X X Extracts X X X X X X X X Extracts X X X X ..... s within the State. - the challenge raised by the petitioners, in respect of "entry No. 6" of Schedule II to SRO No. 1091/1999, to the extent the same confines the concession in the rate of tax only for the products manufactured by the small-scale industrial units within the State and having registration with the Directorate of Industries and Commerce of Kerala, stands repelled. - Decided against the assessee. Whether the product "soda maker" manufactured and marketed by the petitioners comes within "entry 116" attracting a tax liability at 12 per cent or whether it comes under the residuary clause under "entry 177", with a lesser tax of eight per cent - Held that:- It is true that the assessment in respect of the assessment years 2000-01, 2001-02 in the case of the petitioner was completed treating "soda maker" under "residuary entry 177", with the rate of tax payable at eight per cent. But later, it came to the notice of the Department that the actual rate of tax payable by the petitioner was 12 per cent as the item "soda maker" very much constituted an item scheduled under "entry 116" of the First Schedule, leading to exhibits P4/P4(a) notices issued by the fast track team, p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is, whether the concessional rate of tax confined to the products manufactured by the SSI units, registered in the State of Kerala alone, under entry 6 of Schedule II of SRO No. 1091 of 1999, is discriminatory and violative of articles 301, 302 and 304(a) of the Constitution of India. In W.P. (C) No. 35617 of 2009, besides the above legal question, another issue has also been raised, contending that, in the absence of any specific entry in the First Schedule to the Kerala General Sales Tax Act, to cover soda makers for rate purpose, the rate of tax can only be eight per cent, under the residuary entry . There is no dispute on the factual aspects. The petitioner in W.P. (C) No. 2914 of 2005, a company constituted under the relevant provisions of the Companies Act, is a registered dealer under the relevant taxation statutes in the State of Kerala as well as the State of Tamil Nadu. The said petitioner is manufacturing various items; such as pickles, jams, squashes, artificial soft drink concentrates, vinegar, etc., under the name and style Mr. Butlers and is a dealer of the said items. The products are manufactured in the factory situated at Coimbatore, in the State of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entry No. 116. The steps taken by the concerned respondent proposing fast track assessment under section 17D of the KGST Act in respect of the assessment years 2002-03 and 2003-04 made the petitioner to approach this court, challenging notices issued in this regard, seeking for necessary declaration. The respondent-State has filed a counter-affidavit in W.P. (C) No. 2914 of 2005, contending that, the claim put forward by the petitioner is totally wrong and misconceived and that the benefit provided as per exhibit P2 notification, in respect of the manufacturing units situated and registered in the State of Kerala, is based on reasonable classification. It is pointed out that, such concession is available only in respect of the small-scale industries in the State, that too in respect of such turnover so manufactured within the State, making use of the infrastructure available here. It is stated that such a stipulation has been brought about, for promoting industrial activities in the State, providing a congenial atmosphere for the growth of industry. It is also stated that, there is absolutely no discrimination, nor is there any violation of the constitutional provisions, in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Pleader also submits that the scope of the notification, i.e., SRO No. 1090/1999 has already been considered by a Division Bench of this court as per the decision reported in [2002] 126 STC 368 (Ker); [2002] 10 KTR 269 (P.P. Baby v. Additional Sales Tax Officer) in respect of rate of tax payable by the poultry farms situated in the State of Tamil Nadu and pursuing the sale in the State of Kerala, holding that, the benefit of concessional rate of tax given to the poultry farms in Kerala is a reasonable restriction. It is also stated that the writ petitioner in W.P. (C) No. 2914 of 2005 has already satisfied the tax liability availing of the benefit under the Amnesty Scheme and issue has become merely academic in the said case. With regard to the specific entries in the Schedule of the KGST Act in respect of the product soda maker involved in W.P. (C) No. 35617 of 2009, the learned Government Pleader submits that, the said item clearly comes within the purview of entry 116 and is not liable to be treated as under the residuary entry No. 177, with lesser tax at eight per cent. It is also pointed out that, the petitioners themselves have described the product as home sod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relating to trade and commerce in any of the Lists in the Seventh Schedule. (2) Nothing in clause (1) shall prevent Parliament from making any law giving, or authorising the giving of, any preference or making, or authorising the making of, any discrimination if it is declared by such law that it is necessary to do so for the purpose of dealing with a situation arising from scarcity of goods in any part of the territory of India. 304. Restrictions on trade, commerce and intercourse among States. Notwithstanding anything in article 301 or article 303, the Legislature of a State may by law (a) impose on goods imported from other States (or the Union territories) any tax to which similar goods manufactured or produced in that State are subject, so, however, as not to discriminate between goods so imported and goods so manufactured or produced; and (b) impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest: Provided that no Bill or amendment for the purposes of clause (b) shall be introduced or moved in the Legislature of a State without the previous sanction of the Pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aler had purchased the raw hides or skins in the State, he need not pay on the sale price of the tanned hides or skins and he can pay on the purchase price alone. If the dealer purchases raw hides and skins and transfers within the State, he will be liable to pay sales tax on the sale price of the tanned hides or skins. He also will have to pay more for tax, even though the hides and skins are tanned within the State, merely on account of his having imported the hides and skins from outside, and having therefore not paid any tax under sub-rule (1). The apex court observed that the mere circumstance of a tax having been paid on the sale of such hides or skins in their raw condition did not make the goods of different kind from the tanned hides or skins which had been imported from outside. At the time of sale of those hides or skins in the tanned state, there was no difference between them as goods and the hides or skins tanned outside the State as goods. According to the apex court, the similarity contemplated by article 304(a) is in the nature of the quality and kind of the goods, and not with respect to whether they were subject of a tax already paid or not. Observing that, the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... article 301 of the Constitution of India. The apex court observed that, as it manifests, article 304 of the Constitution is an exemption to article 301 of the Constitution and a need of taking resort to exception will arise only if the tax impugned is hit by articles 301 and 303 of the Constitution and otherwise not. There may be differentiations based on consideration of natural or business factors, which are more or less in force in different localities. The apex court observed that prevalence of differential rate of tax on sales of the same commodity cannot be regarded in isolation as determinative of the object to discriminate between one State and another. Where the general rate applicable to goods locally made and all those imported from other States is the same, nothing more normally and generally is to be shown by the State to dispel the argument of discrimination under article 304(a), even though the resultant tax amount on imported goods may be different. In Shree Mahavir Oil Mills v. State of Jammu and Kashmir reported in [1997] 104 STC 148 (SC), it was held that, though the States are free to encourage and promote the establishment and growth of industries within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of impediments which directly and immediately impede or hamper the freeflow of trade, commerce and intercourse fall within the prohibition imposed by article 301 and subject to the other provisions of the Constitution they may be regarded as void. (ii) It must be regarded as settled law that a tax may in certain cases directly and immediately restrict or hamper the flow of trade, but every imposition of tax does not do so. (iii) Article 301 does not merely protect inter-State trade or operate against inter-State barriers: all trade is protected whether it is intraState or inter-State by the prohibition imposed by article 301, and there is nothing in the language or the context for restricting the power of the Parliament which it otherwise possesses in the public interest to impose restrictions on the freedom of trade, commerce or intercourse, operative only as between one State and another as two entities. (iv) Exercise of the power to tax may normally be presumed to be in the public interest. (v) An Act which is merely enacted for the purpose of imposing tax which is to be collected and to be retained by the State does not amount to a law giving, or authorising the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Tax Act, in computing the turnover, excise duty is not liable to be included and by virtue of section 9(1) of the Central Sales Tax Act, Central sales tax has to be levied in the same manner as under the Madras Act, the excise duty will not be liable to be included in the turnover for the purposes of Central sales tax. Per Bachawat J., it was observed that: Neither intra-State sales tax nor inter-State sales tax operates directly or immediately on the free-flow of trade or the free movement or the transport of goods from one part of the country to another. None of the provisions of the Central Sales Tax Act, 1956, directly impedes the movement of goods or the free-flow of trade. Even assuming that the Central Sales Tax Act, 1956, is within the mischief of article 301, it is a law made by Parliament in the public interest and is saved by article 302. Per Hegde J., it was observed that: (i) Mere difference in rates is neither showing preference nor making discrimination but other things being equal, the difference in rates would result in showing preference to some States and making discrimination against others. Hence difference in rates is a prima facie proof of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der sub-section (1) (a) may extend to the whole State or to any specified area or areas therein, (b) may be subject to such restrictions and conditions as may be specified in the notification, (3) The Government may by notification in the Gazette, cancel or vary any notification issued under sub-section (1). Obviously, such power takes its origin from the constitutional provisions under Part XIII and it is in exercise of the said power, that the notification bearing SRO No. 1091/1999 has been issued by the State, which incorporates entry No. 6 to Schedule II, whereby it is provided that, the rate of tax applicable to the small-scale industries registered with the Director of Industries and Commerce in the State of Kerala will be confined to eight per cent. The general rate of tax, as applicable to any other manufacturer, whether situated outside the State or within the State, is of course at a higher rate, as provided under the First Schedule to the KGST Act. The exemption stands confined only to such industries, who are registered with the Director of Industries and Commerce in the State as aforesaid, and it is with the intent to achieve a definite purpose to promo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cover the same. The dealers contended that the soda makers were leviable to tax only at single point by classifying the same within entry 145 (plastics and articles made of plastic including plastic pipes). The said contention of the dealers was rejected by this court and referring to the actual facts and figures, it was held that soda maker was not an item, which could be classified under entry 145 and that the same could be reckoned only under the residuary entry , attracting tax at all points. From the year 1992 onwards, new entries were introduced in the First Schedule and under entry No. 104 , pressure cooker, cook and serve ware to keep food warm, casserole, water filters and similar home appliances not coming under any other entry in the First Schedule or in the Fifth Schedule, were included attracting the tax liability at 12% per cent, at the point of first sale in the State, by a dealer who is liable to pay tax under section 5. All other goods not coming under any entry in any other Schedule were grouped together at the residuary entry 156 (as then existed) attracting tax liability at eight per cent. The position almost remained the same during and after 1994 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding of the petitioner, that the items grouped under entry No. 116 are those, which are primarily connected with cooking in the kitchen and hence the term similar home appliances cannot take in soda maker is only wrong and misconceived. Under entry No. 104 as it existed in 1992-94 and thereafter till 2000, water filter was also one of the home appliances as included therein, attracting the tax liability at the prescribed rate, which in fact is in no way connected with cooking in kitchen, nor solely allocable for user in kitchen. In the year 2000 and afterwards, some other additional items were also included under the said entry. The petitioner-company themselves have described their product as home soda maker and hence it cannot but be a home appliance. This is more so, when, the home soda maker cannot have any application/utility other than the home use, as it is an alien product, so far as any commercial use is concerned. Applying the rule of harmonious interpretation and the principle of ejusdem generis , the term similar home appliances in entry No. 116 of the First Schedule to the KGST Act very much takes in a home soda maker as well and it is liable to be tre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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