Wp(C)/17120/2009 Of Ramachandran v. Agrl. Income Tax And Cto

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON FRIDAY, THE 29TH DAY OF JUNE 2012/8TH ASHADHA 1934 WP(C).No. 17120 of 2009 (H) --------------------------- PETITIONER(S): ----------------------------- RAMACHANDRAN.K.,KANCHANA BUTTON HOUSE, MANNARKAD. BY ADVS.SRI.N.MURALEEDHARAN NAIR SMT.K.HYMAVATHY RESPONDENT(S): ----------------------------- AGRICULTURAL INCOME TAX AND COMMERCIAL TAX OFFICER,MANNARKAD. BY GOVERNMENT PLEADER SRI.SHAIJ RAJ.T.K. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 29-06-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: sts WP(C)NO.17120/2009 APPENDIX PETITIONER'S EXHIBITS: P1COPY OF THE ANNUAL RETURN FOR THE YEAR 2005-06 DATED 26/04/2004 P2COPY OF THE NOTICE ISSUEDBY RESPONDENT DATED 20/5/2009 P3COPY OF THE OBJECTION FILED BY THE PETITIONER BEFORE THE RESPONDENT DATED 25/5/2009RESPONDENT DATED 25/5/2009 P4COPY OF THE ORDER PASSEDBY RESPONDENT DATED 30/5/2009 P5COPY OF THE NOTICE ISSUED BY RESPONDENT DATED 29/05/2009 P6COPY OF THE INVOICE NO.11197 DATED 2/5/2005 P7COPY OF THE DEMAND NOTICE ISSUED BY RESPONDENT DATED 30/05/2009 P8COPY OF THE PENALTY ORDER PASSED BY RESPONDENT FOR THE YEAR 2005-06 DATED 12/6/200906 DATED 12/6/2009 P9COPY OF THE DEMAND NOTICE ISSUED BY RESPONDENT DATED 16/06/2009 RESPONDENT'S EXHIBITS:NIL /TRUE COPY/ P.A.TO.JUDGE P.R.RAMACHANDRA MENON, J. - - - - - - - - - - - - - - - - - - - - - W.P.(c) No. 17120 OF 2009 - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 29[th] day of June , 2012 JUDGMENT Three interesting questions arise in this case. First question is,whether a dealer, who is having turn over less than the taxable limit,does require the permission of the departmental authorities to collecttax and to have it satisfied accordingly. The second point is, whetherthe persons like the petitioner, who otherwise satisfy the definition ofthe term 'importer' under Section 2(xxii) of the KVAT Act, doesrequire registration under the CST Act to be an 'importer' as definedthereunder. The third question is, whether penalty will be justified fornot taking CST registration, when the scope of registration isspecifically dealt with under Section 7 of the CST Act and if theassessee does come within the purview of such requirement to haveregistration. 2.The minimum extent of factual narration for the purpose of adjudication of this case is that, the petitioner is a registered dealer WPC.No.17120/09 under the KVAT Act and is having only 'Inter-State purchases' and not'Inter-State sales' ( conceded in paragraph 4 of the counter affidavit aswell). In respect of the assessment year 2005-06, the petitioner filedExt.P1 Annual Return revealing the factual position that, the petitionerwas having a turn over much below the taxable limit of Rs. 10 lakhs.The petitioner had collected tax of Rs.36,914/- from customers andpaid over to the respondent along with return, since the petitioner hadmade interstate purchase of goods for local sale, during the year.However, the petitioner was served with Ext.P2 notice by therespondent, calling for explanation as to how and why tax was beingcollected by him, without having any authority and observed that thepetitioner was not eligible for the “Input Tax Credit,” sought for. 3.On receipt of such notice, the petitioner preferred Ext.P3reply stating that, the petitioner very much satisfies the definition of theterm “importer” as defined under Section 2(xxii) and as such, wasliable to satisfy the tax. By virtue of this position, the petitioner wasliable to satisfy the tax and as it stands so, the petitioner is also eligiblefor the benefit of “Input Tax Credit”. This being the position, there WPC.No.17120/09 3.On receipt of such notice, the petitioner preferred Ext.P3reply stating that, the petitioner very much satisfies the definition of theterm “importer” as defined under Section 2(xxii) and as such, wasliable to satisfy the tax. By virtue of this position, the petitioner wasliable to satisfy the tax and as it stands so, the petitioner is also eligiblefor the benefit of “Input Tax Credit”. This being the position, there WPC.No.17120/09 was no need to have any permission as well, to collect the tax from theparties concerned and remitted before the authorities. 4.However, without any regard to the legal position andobjection raised by the petitioner, Ext.P4 order was passed by therespondent, rejecting the claim for Input Tax Credit, simultaneouslymulcting with the liability under different heads, including penalty andinterest, for the reason that the petitioner did not have any validregistration under the CST Act. 5.In the meanwhile, the petitioner was also served withExt.P5 notice proposing to impose penalty for admittedly havingeffected Inter-State purchase, without CST registration. The factualand legal position was sought to be explained by the petitioner, which,however, was not accepted and the respondent imposed penalty as per Ext.P8 order holding that, the petitioner was liable to take outregistration under the CST Act, which in turn, forms the subject matterof challenge in this writ petition, along with other grounds asmentioned herein before. 6.Learned Government Pleader appearing on behalf of the WPC.No.17120/09 respondent submits with reference to the counter affidavit that, theimpugned orders/proceedings are not assailable under anycircumstance, the same having been passed in tune with the relevantprovisions of law. During the course of hearing, learned GovernmentPleader submits that, the petitioner is pursuing business as definedunder Section 2(aa) of the CST Act and that the term “ dealer” isdefined under Section 2(b). Referring to the term 'business', it hasnecessary to be read into Section 7 of the CST Act, which speaks aboutthe registration and this being the position, the petitioner ought to havetaken registration under the CST Act for the purpose of such businessbeing a dealer, submits the learned Government Pleader. 7.In the course of hearing, it was brought to the notice of thisCourt that, the question whether a dealer, whose turn over is below the taxable limit, is liable to take permission for collecting tax had come upfor consideration before this Court and as per the decision in AbdulSathar M.G. v. State of Kerala ( 2012 (20) KRT 8 (Ker) , a DivisionBench of this Court answered the position against the revenue and infavour of the assessee. The learned Government Pleader fairly WPC.No.17120/09 concedes the position in this regard and as such, the first questionstands answered in favour of the petitioner. 8.With regard to the second point, the case of the petitioner is that, by virtue of the mandate under Section 6(1) of the KVAT Act,irrespective of the turn over, the petitioner/dealer is liable to pay taxbeing an “importer” as defined under the Act. Section 2(xxii) definesthe term “importer”, which reads as follows : S.2(xxii) “Importer means any person whoobtains or brings any taxable goods from anyplace outside the state or country whether as aresult of purchase or otherwise for the purpose ofbusiness.” Section 6(1) of the Act reads as follows : Sec.6 : Levy of tax on sale or purchase of goods:-(1) Every dealer whose total turnover for a year isnot less than ten lakhs rupees and every importer orcasual trader or agent of a non-resident dealer ordealer in jewellery of gold, silver and platinum groupmetals or silver articles or contractor or any StateGovernment, Central Government or Government ofany Union Territory or any department thereof or WPC.No.17120/09 S.2(xxii) “Importer means any person whoobtains or brings any taxable goods from anyplace outside the state or country whether as aresult of purchase or otherwise for the purpose ofbusiness.” Section 6(1) of the Act reads as follows : Sec.6 : Levy of tax on sale or purchase of goods:-(1) Every dealer whose total turnover for a year isnot less than ten lakhs rupees and every importer orcasual trader or agent of a non-resident dealer ordealer in jewellery of gold, silver and platinum groupmetals or silver articles or contractor or any StateGovernment, Central Government or Government ofany Union Territory or any department thereof or WPC.No.17120/09 any local authority or any autonomous body,whatever be his total turnover for the year, shall beliable to pay tax on his sales or purchases of goodsas provided in this Act. The liability to pay tax shallbe on the taxable turnover, - The above provision does not speak about any necessity to haveregistration for the purpose of payment of tax under Section 6(1) of theKVAT Act. This being the position, the observation made by the firstrespondent to the contrary in Ext.P4 does not appear to be correct orsustainable. 9.With regard to the sustainability of punishment imposedvide Ext.P8, for not having CST registration, the scope and extent ofregistration has to be looked into. Section 7 of the CST Act deals withregistration, Sub Sections (1) and (2) of which are relevant, as extracted below : Registration of dealers :- (1) Every dealerliable to pay tax under this Act, shall within suchtime as may be prescribed for the purpose, makean application for registration under this Act tosuch authority in the appropriate State as the Central Government may, by general or specialorder, specify and every such application shallcontain such particulars as may be prescribed. (2)Any dealer liable to pay tax underthe sales tax law of the appropriate Sate orwhere there is no such law in force in theappropriate State or any part thereof, any dealerhaving a place of business in that State or part,as the case may be, may, notwithstanding that heis not liable to pay tax under this Act, apply forregistration under this Act, to the authorityreferred to in sub-section (1), and every suchapplication shall contain such particulars asmay be prescribed. Explanation - For the purposes of this sub-section, a dealer shall be deemed to be liable topay tax under the sales tax law of theappropriate State notwithstanding that undersuch law a sale or purchase made by him isexempt from tax or a refund or rebate of tax isadmissible in respect thereof. 10.Sub Section1 of Section 7 does not come to the case in WPC.No.17120/09 hand, as the petitioner admittedly is not dealer who is liable to pay taxunder the CST Act, he having only Inter-State purchaseand notInter-State sales. What is stipulated inSub Section 2is that, a personnotwithstanding the fact that, he is not liable to pay tax under the CSTAct, is also eligible to apply and obtain registration under the CST Act,upon which, it may be open for him to effect the Inter-State purchasesatisfying the CST at a lesser rate, but for which, he will have to satisfythe CST at full/higher rate. It is also relevant note that the terminologyused in Sub Section 2 of Section 7 is “ may” and not “shall”. Thecourse provided in Sub Section 2 clearly speaks about the discretionvested with the dealer, giving him an option to have registration underthe CST Act, notwithstanding the fact that he is not liable to pay anytax under the CST Act. It is for the dealer to decide, whether he shouldapply for and obtain registration, to make use of the privileges that mayfollow by virtue of having such registration . If the dealer is notbothered of the same, the law does not compel such dealer to take outregistration under Sub Section 2. As such, Sub Section 2 of Section 7cannot be pressed into service by the respondent to hold that the WPC.No.17120/09 WPC.No.17120/09 petitioner is liable to take registration under Section 7. In short, bothsub sections 1 and 2 of Section 7 do not give an idea that petitioner/dealer is liable to take out registration under the CST Act. This is moreso, when there is no case for the respondent that the petitioner haseffected any Inter-State purchases, paying lesser rate of tax under theCST Act or that, the petitioner has effected any Inter-State sales. 11.In the above circumstances, this Court finds that theimpugned orders passed by the first respondent vide Ext.P4 and P8denying the benefit of Input Tax Credit to the petitioner and alsoimposing penalty do not have any factual or legal basis. The saidorders are set aside accordingly. It is declared that the petitioner isentitled to have the benefit of “Input Tax Credit”, in so far as hehappens to be an 'importer' as defined under Section 2(xxii) of theKVAT Act and there is absolutely nothing wrong for having collectedand remitted the tax, without having any registration under the CSTAct. The respondent is directed to finalise the proceedings afresh, withregard to the claim put forth by the petitioner, in the light of the aboveobservations and declaration. The proceedings as above shall be finalised, passing appropriate orders in accordance with law, at anyrate, within three months from the date of receipt of a copy of thisjudgment. Writ petition is allowed. No cost. P.R.RAMACHANDRA MENONJUDGE sv.