The High Court dismissed an appeal challenging an Authority for Clarification under the KVAT Act. Relying on a prior division bench decision which held the clarification valid, the court declined to re-examine the issue of whether sales to SEZ units qualify as exports.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE C.K.ABDUL REHIM
&
THE HONOURABLE MR. JUSTICE AMIT RAWAL
THURSDAY, THE 21ST DAY OF NOVEMBER 2019 / 30TH KARTHIKA, 1941
OT.Appeal.No.03 OF 2017
AGAINST THE ORDER/JUDGMENT IN C3/6639/2013 DATED 30-08-2013 OF COMMISSIONER OF COMMERCIAL TAXES, TRIVANDRUM
APPELLANT/S:
M/S.BNP INTERIORS XXI/443, SOUTH KALAMASSERY, OPPOSITE NEST, COCHIN UNIVERSITY PO, KOCHI-22, REPRESENTED BY ITS PROPRIETOR MR.PUNAMCHAND D. KULARIA.
BY ADV. SMT.K.LATHA
RESPONDENT/S:
COMMISSIONER, OFFICE OF THE COMMISSIONER, COMMERCIAL TAXES, KERALA, 9TH FLOOR, TAX TOWERS, KILLIPALAM, KARAMANA P.O, THIRUVANANTHAPURAM, PIN - 695 002.
OTHER PRESENT:
SR.GP-SRI. MOHAMMED RAFIQ
THIS OTHER TAX APPEAL HAVING COME UP FOR ADMISSION ON 21.11.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
C.K.ABDUL REHIM & AMIT RAWAL, JJ.
O.T.A No.03 of 2017
Dated this the 21st day of November, 2019
JUDGMENT
C.K.ABDUL REHIM, J
The above appeal is preferred in challenge against the proceedings of the 'Authority for Clarification', issued under Section 94 of the Kerala Value Added Tax Act 2003 ('KVAT Act' for short) dated 30.8.2013 (Order No.C3/6693/13 CT). The very same proceedings was subjected to challenge before this court and a Division Bench of this court in the decision in IND Rubber Trades vs. Authority for Clarification [(2018) 26 KTR 118 (Ker)] held that, the clarification is valid and sustainable. It was found that an overview of the provisions of the Special Economic Zone Act ('SEZ Act' for short) indicates that it is a special law enacted with specific object of providing an internationally competitive environment for exports and it contains provisions that are tailored to provide tax exemptions and other benefits to the units situated within the SEZ. The overriding effect given to the provisions in the SEZ Act is only
OT.Appeal.No.03 OF 2017 3
with a view to further the objects of the Act and cannot confer a status on the units in the SEZ other than what is contemplated for the purpose of their functioning under the Act. In that backdrop, this court considered whether the sale made from a unit in the Domestic Tariff Area (DTA) to a unit in the SEZ can be treated as an export for all purposes, including the purpose of the CST Act. The court expressed the view that, the words 'export' and 'import' have a different connotation under the SEZ Act, when compared with the definition of the same words under the Customs Act. It was found that, Section 7 of the SEZ Act deals with exemption from taxes, duties and cesses, which does not specifically grant an exemption from Customs Duties or CST or State VAT levies. The exemption from State VAT levies is separately contemplated under Section 50 of the SEZ Act. It is left to the discretion of the state legislatures. Therefore this court held that, while enacting the SEZ Act, the parliament did not intend to treat the supply from the DTA to a unit in the CEZ as an export for the purposes of CST Act or under Article 286 of the Constitution of India. It was found
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OT.Appeal.No.03 OF 2017
that, if the parliament had any such intention, it would not have been necessary to provide for an exemption from Taxes, levies and duties at the discretion of the state legislatures, for any sale of goods to a SEZ unit, which would have been qualified as an export sale for the purpose of the CST Act; and there would not have been any necessity for an exemption provision. It was noticed that, under the CST Act, Section 8(6) was introduced to provide an exemption from CST Act in cases where there is an inter-state sale effected to registered dealers, who are permitted to set up units in SEZs. Similarly, under the KVAT Act, there is a provision that grants exemption in respect of sale of goods to units in SEZ, under certain circumstances, which is provided under Section 6 (7)(b) of the KVAT Act. The above said provisions would suggest that, the legislative intention under the SEZ Act was to treat the sales to units in the SEZ as taxable sales, subject to specific exemptions that are provided either under the CST Act or under the KVAT Act. In the absence of any exemption provided under the SEZ Act, such sales effected from DTA to a unit in SEZ would not
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OT.Appeal.No.03 OF 2017
qualify to be export sales for the purpose of the CST Act as well as the local VAT Act. Therefore, it was held that sale by registered dealers to units within the SEZ would not qualify to be 'deemed exports' and instead their entitlement for statutory benefits are governed by provisions of Section 8 of the CST Act and Section 6 of the KVAT Act. Consequently, the clarification issued by the authority was held to be valid.
In view of the above cited decision of a Division Bench of this Court, the above appeal is liable to be dismissed. Accordingly, the above O.T Appeal is hereby dismissed.
We make it clear that, we have not dealt with any point relating to the liability/ refund of the tax amount for the period prior to the impugned notification.
Sd/-
C.K.ABDUL REHIM
JUDGE
Sd/-
sab
AMIT RAWAL JUDGE
2 issues framed by the court
Whether the appeal against the proceedings of the Authority for Clarification issued under Section 94 of the KVAT Act can be upheld in view of a prior division bench judgment holding the clarification
Whether the legislative framework of SEZ Act, CST Act, and KVAT Act treats sales from DTA to SEZ units as export sales.
Colour shows how this judgement treated each authority
IND Rubber Trades vs. Authority for ClarificationFollowed¶22
IND Rubber Trades vs. Authority for Clarification [(2018) 26 KTR 118 (Ker)]
3 provisions across 3 enactments
M/s.BNP Interiors
Commissioner, Commercial Taxes, Kerala
C.K. Abdul Rehim
Amit Rawal
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
