Disposed

M/S.Kannamthanam v. State of Kerala

Kerala HC12 Jul 2016WP(C)/5229/2015

Case brief

AI extract

What is this about?

The Kerala High Court disposed of a writ petition challenging a penalty notice under KVAT Act regarding M-sand. The court held separate assessment for M-sand was unsupported by law but directed the petitioner to file objections within 30 days for the authority to consider the matter considering correct books of accounts and settled judicial precedents.

What did the court decide?

Petitioner liberty to file objections within 30 days; respondent authority directed to consider them and pass appropriate orders after hearing.

M/S.Kannamthanam Vs State of Kerala — Income Tax | Kerala HC (2016)

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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 A.M.SHAFFIQUE

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TUESDAY, THE 12TH DAY OF JULY 2016/21ST ASHADHA, 1938

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WP(C).No. 5229 of 2015 (C)

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PETITIONER(S):

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M/S.KANNAMTHANAM & CO., MALAYAM P.O., THIRUVANANTHAPURAM, REPRESENTED BY ITS MANAGING PARTNER, K.J. THOMASKUTTY.

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BY ADVS.SRI.BECHU KURIAN THOMAS, SRI.PAUL JACOB (P), SRI.ENOCH DAVID SIMON JOEL, SRI.S.SREEDEV, SRI.RONY JOSE, SRI.GEORGE A.CHERIAN.

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RESPONDENT(S):

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1. STATE OF KERALA, REPRESENTED BY SECRETARY, TAXES, DEPARTMENT OF COMMERCIAL TAXES, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM-695 001.

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2. INTELLIGENCE INSPECTOR, SQUAD NO.VII, NEYYATTINKARA, THIRUVANANTHAPURAM-695 001.

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BY GOVT. PLEADER SRI.BOBBY JOHN.

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THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 12-07-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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rs.

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WP(C).No. 5229 of 2015 (C)

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APPENDIX

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PETITIONER'S EXHIBITS:-

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EXHIBIT P1- TRUE COPY OF THE ORDER DATED 30/06/2011 FOR THE ASSESSMENT YEAR 2011-12.

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EXHIBIT P1(A)- TRUE COPY OF THE ORDER DATED 31/05/2012 FOR THE ASSESSMENT YEAR 2012-13.

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EXHIBIT P1(B)- TRUE COPY OF THE ORDER DATED 31/05/2013 FOR THE ASSESSMENT YEAR 2013-14.

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EXHIBIT P2- TRUE COPY OF THE NOTICE NO.CR 66/13-14 DATED 22/12/2014 ISSUED BY 2ND RESPONDENT.

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EXHIBIT P3- TRUE COPY OF THE JUDGMENT IN 2011(4) KHC 876.

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EXHIBIT P3(A)- TRUE COPY OF THE JUDGMENT DATED 29/07/2011 IN OT.REV. NO.24/2009 OF THE HON'BLE HIGH COURT OF KERALA.

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EXHIBIT P4- TRUE COPY OF THE ORDER IN S.L.P. NO.32271/2011.

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EXHIBIT P5- TRUE COPY OF THE ORDER NO.C3/707/11/CT DATED 09/01/2012 ISSUED BY THE 2ND RESPONDENT.

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EXHIBIT P6- TRUE COPY OF THE ORDER DATED 25/06/2014 ISSUED BY THE COMMISSIONER OF COMMERCIAL TAXES.

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RESPONDENT'S EXHIBITS:- NIL.

//TRUE COPY//

P.S. TO JUDGE

rs.

A.M.SHAFFIQUE, J.

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------------------------------------ W.P.(C).No.5229 of 2015

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-----------------------------------

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Dated this the 12^th day of July, 2016

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J U D G M E N T

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The petitioner challenges Ext.P2 notice issued under Section 67 of the KVAT Act, 2003 proposing to impose penalty of ₹1,56,84,764/- being the double amount of tax allegedly sought to be evaded. The petitioner was asked to file objection or to compound the offence on paying the compounding fee. The petitioner challenges the aforesaid notice itself inter alia contending that it is without jurisdiction and the issue projected by the officer is well settled as per the judgment of a Division Bench of this Court in

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State of Kerala v. M/s.Poabs Granite Products Pvt. Ltd [2011 (4) KHC 876 (DB)] which has attained finality and judgment of a Single Bench in Mar Basil Granites and Metals v. Commercial Tax Officer [2015 (2) KLT 58] . It is stated that since the petitioner have been opted for compounding and the compounded tax has already been paid in terms of Exts.P1, P1(a) and P1(b), they cannot be mulcted with a further liability on the allegation that no particulars are given in respect of sale of M-sand. It is argued on the basis of judgments aforesaid that M-sand cannot be separately dealt with as a taxable commodity and when compounded tax is paid for the entire products, there is no question of making a separate assessment as far as M-sand is concerned.

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A perusal of Ext.P2 would show that the officer has formed

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W.P.(C).No.5229 of 2015

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an opinion that as far as the petitioner is concerned, M-sand is not a by-product of the crusher unit, whereas, the product is obtained from separate machine installed along with the crusher unit. It is also stated that in order to curtail such type of evasion, Government has allowed option to compound the Impactors used for the manufacture of M-sand separately, in addition to the primaries and secondaries used in the quarry w.e.f. 01.04.2014. It is also observed that the dealer opted compounding the VSI paying additional compounded tax for the production of M-sand with effect from the said period. Further it is observed that the dealer had misinterpreted the Proviso to Section 8(b) of the KVAT Act and claimed irregular exemption to the sale of M-sand in the returns filed as well as in the books of accounts with a malafide intention to evade tax due to the Government. It is also stated that books of accounts maintained by the dealer were not correct and complete.

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On the other hand the learned Government Pleader based on Ext.P4 submits that it is not a solitary case of separate assessment being made for M-sand. But it is a case where the petitioner's books of accounts were not properly kept and the same is treated to be not correct and complete. Under such circumstances, it is open for the officer to initiate proceedings under Section 67 of the KVAT Act, 2003. If the petitioner is maintaining proper and correct books of accounts, it shall be open for the

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W.P.(C).No.5229 of 2015

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petitioner to file appropriate objections, which shall be considered by the officer concerned in accordance with the procedure prescribed. In M/s.Poabs Granite Products Pvt. Ltd. (supra), Division Bench of this Court held that the benefit of compounding has to be given to the unit both in respect of the main product (granite metal) and in respect of by-product (M-sand). That was a case in which M-sand was a by-product and granite metal was the main product. In the case on hand, the officer proceeds on the basis that separate machinery is being installed for the purpose of M- sand. In Mar Basil Granites and Metals (supra), learned Single Judge of this Court after observing the scope and effect of Section 8 (b), by which question had arisen whether separate assessment for M-Sand or Manufactured sand is required, held at paragraph 11 as under :

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“11. It is apparent therefore, that the difference of opinion between the petitioners and the respondents is only with regard to what constitutes M-sand or Manufactured sand. It is not in dispute, however, that all the products namely, granite metal, crusher sand and manufactured sand, are obtained during the process of production of granite metal using mechanized crushing machines if that be so, then, as already noted above, so long a the M-sand or Manufactured sand is a product that is obtained in the process of production of granite metal using mechanised crushing machines, the mere fact that the dealer in question had installed, and used, another machine for the purpose of shaping the granite metal obtained from the secondary

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W.P.(C).No.5229 of 2015

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crushers, or for obtaining finer sized granite metal or sand, was of no consequence. In my view, the legislative scheme envisaged the payment of compounded tax by reckoning only certain specified machines, from among the various machines that were used in the production of granite metal, and the VSI/HSI machine was not one of them. Resultantly, the demands made on the petitioners in connection with a separate assessment of the M-sand or Manufactured sand obtained through the use of VSI/HSI machines, cannot be legally sustained. The notices and orders, impugned in these Writ Petitions, are consequently quashed.”

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In fact as far as the issue raised by the officer concerned with reference to the applicability of Section 8(b) is concerned, the law has been well settled as aforesaid. It is held that separate assessment of M-sand or Manufactured sand obtained by the use of VSI/HSI machines cannot be legally sustained. However, the point to be considered is whether the petitioner has produced the correct and complete books of accounts. As rightly pointed out by the learned counsel for the petitioner, the details of the incorrectness have not been specifically stated in the notice. If it is only with reference to an interpretation of Section 8(b), the issue apparently will be covered by the judgment in Mar Basil Granites and Metals (supra). But if there are other instances, it shall be open for the officer to consider the same and pass appropriate orders. In the light of the above observations, I am of the view that this writ petition can be disposed of as under :

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W.P.(C).No.5229 of 2015

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That the petitioner is at liberty to file appropriate objections to Ext.P2 notice within a period of 30 days from the date of receipt of a copy of this judgment, in which event, the respondent authority shall consider the same and pass appropriate orders, after hearing the petitioner, taking into consideration the law laid down by this Court in M/s.Poabs Granite Products Pvt. Ltd. (supra) as well as in Mar Basil Granites and Metals (supra).

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Sd/-

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A.M.SHAFFIQUE, JUDGE

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M/S.Kannamthanam v. State of Kerala

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M/S.Kannamthanam v. State of Kerala

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