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2016 (8) TMI 248 - KERALA HIGH COURT

2016 (8) TMI 248 - KERALA HIGH COURT - [2016] 93 VST 414 (Ker) - Constitutional validity of Rule 11B(2)(c) of the Central Sales Tax (Kerala) Rules, 1957 - Interest sale sale - Reading of this provision would show that a purchasing dealer claiming the benefit of Section 6 (2) shall, in respect of such claim, furnish to the assessing authority a photocopy of the consignee copy of the lorry receipt, railway receipt, bill of lading bearing endorsement made by such dealer or cash receipt in favour of .....

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3(3), the State Government may make rules for all or any of the purposes enumerated therein. The purposes enumerated in clause (c) thereof include rules for furnishing of any other information relating to the business of a dealer as may be necessary for the purposes of the Act. - According to us, such expansive power conferred on the rule making authority takes within its sweep, power to prescribe production of the documents that are mentioned in Rule 11B(2)(c) also for the purpose of avail .....

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ections 13(3) and 13(4) of the CST Act. Viewed in this manner, we are unable to sustain the judgment under appeal. - Decided in favor of revenue. - WA. No. 1033 of 2014, WP (C). 3843/2007 - Dated:- 16-6-2016 - Antony Dominic And Dama Seshadri Naidu, JJ. For the Petitioner : Smt. Sobhaannamma Eapen For the Respondent : Sri Jose Joseph JUDGMENT Antony Dominic, J. 1. This writ appeal is filed by the respondents in W.P (C).3843/07 who are aggrieved by the judgment dated 7.3.2014 rendered by the .....

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d Tax Act, 2003 and the CST Act. They filed the writ petition challenging Exts.P8 and P9 assessment orders passed under the KVAT Act and CST Act for the assessment year 2005-06 and Ext.P10 assessment order passed under the CST Act for the assessment year 2006-07. In the writ petition, they also prayed that Rule 11B(2)(c) of the CST Kerala Rules be declared invalid and ultra vires the CST Act and the Rules framed thereunder by the Central Government. 3. The writ petition was admitted only with re .....

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n of the documents prescribed in the 1st proviso to Section. Therefore, once the documents prescribed under the 1st proviso is submitted in respect of the subsequent sale, the provision will operate and the exemption provided under the provision will come into effect with its full scope and amplitude and the State has no authority to whittle down the effect of the exemption provided under the statute by framing any rules or otherwise. Therefore Rule 11B(2)(c) framed by the State Government, whic .....

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this appeal. 4. We heard learned Government Pleader for the appellants and the counsel appearing for the respondent assessee. 5. Before we examine the rival contentions with respect to the rule making power of the State Government, we shall survey the relevant statutory provisions contained in the CST Act. Chapter III of the CST Act contains section 6 providing for liability to tax on inter-State sales. This section, prior to its amendment by Taxation Amendment Act (Act 16 of 2007) with effect f .....

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nd from the date so notified: Provided that a dealer shall not be liable to pay tax under this Act on any sale of goods which, in accordance with the provisions of sub-section (3) of section 5 is a sale in the course of export of those goods out of the territory of India. (1A) A dealer shall be liable to pay tax under this Act on a sale of any goods effected by him in the course of inter-State trade or commerce notwithstanding that no tax would have been leviable whether on the seller or the pur .....

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d by a transfer of documents of title to such goods,- (a) to the Government, or (b) to a registered dealer other than the Government, if the goods are of the description referred to in sub-section (3) of section 8, shall be exempt from tax under this Act: Provided that no such subsequent sale shall be exempt from tax under this sub-section unless the dealer effecting the sale furnishes to the prescribed authority in the prescribed manner and within the prescribed time or within such further time .....

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tion (4) of section 8: Provided further that it shall not be necessary to furnish the declaration or the certificate referred to in clause (b) of the preceding proviso in respect of a subsequent sale of goods if,- (a) the sale or purchase of such goods is, under the sales tax law of the appropriate State exempt from tax generally or is subject to tax generally at a rate which is lower than four per cent. (whether called a tax or fee or by any other name): and (b) the dealer effecting such subseq .....

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such goods from one State to another or has been effected by a transfer of documents of title to such goods during their movement from one State to another, any subsequent sale during such movement effected by a transfer of documents of title to such goods to a registered dealer, if the goods are of the description referred to in sub- section (3) of section 8, shall be exempt from tax under this Act: Provided that no such subsequent sale shall be exempt from tax under this sub-section unless th .....

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se (b) of sub-section (4) of section 8: Provided further that it shall not be necessary to furnish the declaration referred to in clause (b) of the preceding proviso in respect of a subsequent sale of goods if,- (a) the sale or purchase of such goods is, under the sales tax law of the appropriate State exempt from tax generally or is subject to tax generally at a rate which is lower than three per cent or such reduced rate as may be notified by the Central Government, by notification in the Offi .....

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appoint, not being earlier than thirty days from the date of notification, be liable to pay tax under the Act on all sales of goods, other than electrical energy, effected by him in the course of inter-State trade or commerce during any year on and from the date so notified. As per sub-section (2), prior to its substitution by Act 16 of 2007, notwithstanding sub- section (1) or sub-section (1A), where a sale of goods in the course of inter-State trade or commerce has either occasioned movement .....

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mpt from tax under sub- section (2), unless the dealer effecting the sale furnishes to the prescribed authority in the prescribed manner and within the prescribed time or within such further time as that authority may, for sufficient cause, permit, a certificate duly filled and signed by the registered dealer from whom the goods were purchased containing the prescribed particulars in a prescribed form obtained from the prescribed authority. As a result of the amendment by Act 16 of 2007, the cha .....

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the Central Sales Tax (Registration and Turnover) Rules, 1957. Rule 12(4) of the said Rules provides that the certificate referred to in section 6(2) shall be in Form E-I or Form E-II, as the case may be. As per clause D(iv) of both E-I and E-II forms, the number and date of the Railway Receipt/Trip sheet of lorry/or any other document of other means of transport are required to be stated. 9. As we have already stated, section 13(3) of the CST Act provides that the State Government may make rul .....

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r or any other information relating to his business as may be necessary for the purposes of this Act;" 10. It would appear that while the statutory provisions stood thus, the Board of Revenue had issued circulars directing the assessing authorities to insist on production of documents of title to the goods like lorry receipt/railway receipt or bill of lading evidencing endorsement of such documents, from the assessment year 1991-92 onwards. Validity of these circulars was questioned before .....

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of its power under Section 13(4)(c) of the CST Act, sub clause (c) to Rule 11B (2) was inserted to the CST Kerala Rules as per SRO 848/99. Clause 11B(2)(c) reads thus: "(c) The purchasing registered dealer who claims to have made a second or subsequent sale by transfer of documents of title to the goods shall, in respect of such claim furnish to the assessing authority a photo copy of the consignee copy of the Lorry Receipt, Railway Receipt, Bill of lading bearing endorsement made by such .....

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d in the writ petition and which challenge was upheld by the learned Single Judge. 14. Law is settled that a subordinate legislation, such as the CST Kerala Rules, should be framed within the four corners of the rule making power conferred by the parent enactment, viz., the CST Act. If the rule so framed is in excess of the power conferred on the rule making authority, rule will be ultra vires the parent legislation and hence unconstitutional. It is because of this legal principle that the Gover .....

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m a registered dealer, a certificate duly filled and signed by the seller containing the prescribed particulars, in the prescribed form obtained from the prescribed authority shall be submitted. It is further pointed out that in cases to which clause (b) is attracted, a declaration referred to in section 8(4)(b) shall be submitted. It is pointed out that once these requirements are satisfied by a dealer, the benefit of section 6 cannot be denied. According to him, having regard to the language u .....

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, is tantamount to amending section 6(2) of the Act and hence, is in excess of the rule making power and that therefore, rule 11B(2)(c) is invalid. 15. Though this argument would, at the first blush, appear to be attractive, on a closer scrutiny of the statutory provisions, we are unable to accept it. First of all, Section 6 providing for exemption from levy of tax and prescribing the production of certificate a declaration, as the case may be, for availing of the exemption, did not deprive the .....

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