Disposed

M/S. Venkateshwara v. the Commissioner of Commercial Taxes

Kerala HC20 Aug 2014WP(C)/6386/2014

Case brief

AI extract

What is this about?

The Court disposed of the writ petition declaring that intra-state transport of 'day old chicks' cannot be detained solely based on undervaluation using the Commissioner's prescribed floor-rate. The Court held that security deposit demands must be based on invoice rates, not floor rates, for such transactions.

What did the court decide?

The writ petition was disposed of with a declaration that intra-state transport of 'day old chicks' cannot be detained only on the question of undervaluation with reference to floor-rate fixed by the

M/S. Venkateshwara Vs the Commissioner of Commercial… — Writ and Judicial Review | Kerala HC (2014)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT:

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THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

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WEDNESDAY, THE 20TH DAY OF AUGUST 2014/29TH SRAVANA, 1936

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WP(C).No. 6386 of 2014 (W)

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PETITIONER:

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M/S. VENKATESHWARA HATCHERIES PRIVATE LIMITED., DOOR NO.1/26, KALLEKULAGARA P.O., DHONI ROAD, PALAKKAD, REPRESENTED BY ITS GENERAL MANAGER, MURTUZA ALI ISMAIL MAGDUM.

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BY ADVS.SRI.N.MURALEEDHARAN NAIR SRI.V.K.SHAMUSUDHEEN

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RESPONDENTS:

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1. THE COMMISSIONER OF COMMERCIAL TAXES, PUBLIC OFFICE BUILDING, VIKAS BHAVAN, THIRUVANANTHAPURAM - 695 001.

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2. THE STATE OF KERALA, REPRESENTED BY ITS SECRETARY TO TAXES DEPARTMENT, GOVERNMENT SECRETARIAT,

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THIRUVANANTHAPURAM - 695 001.

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3. COMMERCIAL TAX INSPECTOR, COMMERCIAL TAX CHECKPOST, KUNHIPALLY P.O., CHOMBALA,

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KOZHIKODE DISTRICT - 673 006.

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4. THE INTELLIGENCE INSPECTOR,MOBILE SQUAD NO.II, MAHE, OFFICE OF THE DEPUTY COMMISSIONER (INTELLIGENCE), DEPARTMENT OF COMMERCIAL TAXES, PALAKKAD - 678 001.

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R1 TO R4 BY SPL.GOVERNMENT PLEADER SRI.GEORGE MECHERY

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THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 20-08-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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sts

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WP(C).No. 6386 of 2014 (W)

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APPENDIX

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PETITIONER(S)' EXHIBITS

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EXHIBIT P1 : TRUE COPY OF THE CIRCULAR NO.50/2006 DATED 18.12.2006

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EXHIBIT P2 : TRUE COPY OF THE CIRCULAR NO.53/2006 DATED 22.12.2006

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EXHIBIT P3 : TRUE COPY OF THE ORDER NO.C2-15221/09/CT DATED 23.08.2013

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EXHIBIT P4 : TRUE COPY OF THE NOTICE NO.OR.269/13-14 UNDER SECTION 47(2) OF THE KERALA VALUE ADDED TAX ACT ISSUED BY 3RD RESPONDENT DATED 12.02.2014

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EXHIBIT P5 : TRUE COPY OF THE NOTICE NO.OR.417/13-14 UNDER SECTION 47(2) OF THE KERALA VALUE ADDED TAX ACT ISSUED TO 4TH RESPONDENT DATED 22.02.2014

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EXHIBIT P6 : TRUE COPY OF THE CIRCULAR NO.13/2013 DATED 26.07.2013

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EXHIBIT P7 : TRUE COPY OF THE RETURN FILED BY THE PETITIONER FOR THE MONTH OF JANUARY 2014

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EXHIBIT P8: TRUE COPY OF THE NOTICE NO.OR.23/12-13 DATED 12/05/2012

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EXHIBIT P9: TRUE COPY OF THE NOTICE NO.OR.50/14-15 DATED 14/05/2014

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EXHIBIT P10: TRUE COPY OF THE NOTICE NO.OR.13/14015 DATED 21/05/2014

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EXHIBIT P11: TRUE COPY OF THE NOTICE NO.OR.676/14-15 DATED 13/06/2014 EXHIBIT P12: TRUE COPY OF THE NOTICE NO.OR.03/14-15 DATED 20/06/2014 EXHIBIT P13: TRUE COPY OF THE NOTICE NO.OR.201/14-15 DATED 12/07/2014 EXHIBIT P14: TRUE COPY OF THE NOTICE ISK.I OR/14-15 DATED 15/07/2014

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RESPONDENT(S)' EXHIBITS:

NIL

/TRUE COPY/

P.A.TO.JUDGE

sts

K.VINOD CHANDRAN, J.

W.P.(C) No. 6386 of 2014 (W)

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Dated this the 20^th day of August, 2014

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JUDGMENT

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The petitioner was aggrieved with the detention of the intra-state transports made of “day old chicks” and demand of security deposit at the rates prescribed in Exts.P1 & P3 issued by the Commissioner, Commercial Taxes under Section 3 of

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the Kerala Value Added Tax Act, 2003 (for short, 'KVAT Act').

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2.The petitioner contends that the petitioner is

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engaged in the business of hatchery from where 'day old chicks' are transported for sale to farmers. The petitioner also is paying tax on the sale effected. However, on detention, the petitioner was directed to remit security deposit on the ground that there is undervaluation. According to the department Exts.P1 & P3 circulars prescribe the

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W.P.(C) No. 6386 of 2014 (W)

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floor-rate for chicken and 'day old chicks' and hence payment of advance tax is necessary for such transportation. The invoices having not disclosed the value at the floor-rate, made applicable by the Commissioner, undervaluation was alleged and security deposit was demanded on the estimation made as per the floor-rate specified by the Commissioner by circular.

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3.The learned Special Government Pleader (Taxes), contend that for evasion prone commodities, to plug tax evasion; floor-rate has been prescribed. The Commissioner is entitled to prescribe such floorrates as has been upheld in K.M.P Timbers & Saw Mills v. Commercial Inspector and another [(2012) 50 VST 195 (Ker)] . The learned Special Government Pleader also would contend that the sale by the petitioner's are to unregistered dealers whose resultant turnover would not be taxed for reason of

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W.P.(C) No. 6386 of 2014 (W)

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the same being lesser than the registerable turnover. This according to the State is an exercise in evasion which needs to be thwarted.

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4.Primarily, Exts.P1 and P3 circulars, prescribe rates

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for payment of advance tax, with respect to interstate transport (inter-state purchase), preventing any evasion of tax where the goods brought into the State are first sold within the State. The floor-rate fixed by the Commissioner definitely cannot decide the sale price which is to be taken for assessment purposes as has been held in U.K.Monu Timbers v. State of Kerala [2012 (3) KHC 111].

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5.One other aspect which has to be emphasised is that a detention of goods under Section 47 is for the purpose of adjudicating upon, any evasion attempted and to decide on the imposition of penalty. The demand of security deposit is also for

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W.P.(C) No. 6386 of 2014 (W)

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adjusting it towards the penalty imposed. What is attempted by the notices at Exts.P4 & P5 is to ferret out evasion, on the basis of the floor-rate fixed by the Commissioner, on the ground of undervaluation. This goes against the dictum laid down in U.K.Monu

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Timbers (supra) :

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“The circular is only for the purpose of collecting tax in advance and cannot be considered as an unassailable document of universal application with respect to the price at which the goods are to be sold”.

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6.The floor-rate prescribed in Ext.P1 is for live chicken and chicken meat. 'Day old chicks' are indicated in Ext.P3. The same would be applicable only for the import into the State especially since the prescription is for the purpose of Section 47(16A) of the KVAT Act. Sub-section 16A speaks of advance tax with respect to the anticipated sale. That takes in inter-state purchases made by the dealers within

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W.P.(C) No. 6386 of 2014 (W)

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the State intended for further sale. The transport is in pursuance of purchase and the sale is yet to take place. The intra-state transactions detained by Exts.P4 & P5 are in pursuance to a tax suffered sale

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and transport is an incidence of such sale; wherein there is no warrant for advance payment of tax.

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7.In such circumstance, this Court is not convinced that the detention made as per the notices impugned hereunder are proper, especially since the security deposit demanded is based on the circular prescribing the floor-rate. If defects are noticed, definitely transport could be detained and security deposit demanded only on the invoice rate and not on the floor-rate fixed by the Commissioner.

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8.In such circumstances, the writ petition is disposed of, declaring that the transport of 'day old chicks' cannot be detained only on the question of

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W.P.(C) No. 6386 of 2014 (W)

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undervaluation, with reference to the floor-rate fixed by the Commissioner, and even if detained for other defaults no security deposit can be demanded on the basis of such floor-rate fixed by the Commissioner. Such exercise would lead to arrogating, by the detaining officer; the powers of the assessing officer.

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The writ petition is disposed of, with the above declaration.

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Sd/K.VINOD CHANDRAN, JUDGE

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AMV/22/08/

M/S. Venkateshwara v. the Commissioner of Commercial Taxes

Case brief

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M/S. Venkateshwara v. the Commissioner of Commercial Taxes

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