Allowed

P.M.Sankaran v. State of Kerala

Kerala HC24 Nov 2022OT.Rev/37/2020

Case brief

AI extract

What is this about?

Kerala High Court revised an AttributeErrorPTT tribunal order in a VAT dispute. The court held that specific food items like laddu and halva attract Entry 8 of Schedule III, not the residuary Entry 7, regardless of branding. The tribunal order setting a higher tax rate was quashed.

What did the court decide?

The order under revision was set aside as the tribunal wrongly applied Entry 7 instead of Entry 8.

P.M.Sankaran Vs State of Kerala — Cheque Dishonour | Kerala HC (2022)

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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 S.V.BHATTI

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THE HONOURABLE MR.JUSTICE BASANT BALAJI

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THURSDAY, THE 24^TH DAY OF NOVEMBER 2022 / 3RD AGRAHAYANA, 1944

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OT.REV NO. 37 OF 2020

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AGAINST THE ORDER IN TAVAT 105/2019 OF KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, ERNAKULAM

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REVISION PETITIONER:

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P.M.SANKARAN PROPRIETOR, FRESH PRODUCTS, 5/39, AMBALAKADAVU, CHERANELLORE, KOCHI-682 034.

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BY ADVS. K.N.SREEKUMARAN SRI.P.J.ANILKUMAR (A-1768) SRI.N.SANTHOSHKUMAR

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RESPONDENTS:

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

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BY ADV GOVERNMENT PLEADER, GP M.M JASMIN

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THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR ADMISSION ON 24.11.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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OT.REV NO. 37 OF 2020

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O R D E R

S.V. Bhatti, J.

We have heard Mr K.N. Sreekumaran learned counsel for

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the revision petitioner and learned Government Pleader Smt.

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M.M Jasmin.

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The petitioner/dealer registered under Kerala Value Added Tax Act, 2003 (for short, ‘the Act’) challenges the order of the Tribunal dated 14.01.2020 in TA (VAT) No.105/2019 of the Kerala Value Added Tax Appellate Tribunal, Ernakulam. The revision petitioner raised the following questions of law:

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“i) Whether the Appellate Tribunal is justified in law in dismissing the appeal on the ground that the food items like halva, mixture, laddu and jilebi sold by the petitioner would fall under Entry 11 of SRO 82/2006 notified under sec. 6(1)(d) of the KVAT Act in disregard of the definite and specific entry 8 of Schedule III of the KVAT Act which was inserted by the Kerala Finance Act 2014?

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ii) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in not distinguishing the ratio of the decision of this Hon'ble

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OT.REV NO. 37 OF 2020

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Court in O.T. (Rev) 120/2014 in Hon'ble High Court of Kerala in M/s. Perfect Agencies Vs. State of Kerala where the residuary entry 66 of 82/06 specifically contained the disputed item mosquito repellents unlike "entry 11 of SRO 82/06 which do not include the items like halva, mixture, laddu and jilebi?

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iii) Whether the Appellate Tribunal is justified in interpreting the amended entry 8 of Schedule III ignoring the Legislative intention in inserting the above entry by the Finance Act 2014 as discernible from the Budget speech of the Hon'ble Finance Minister for unifying the rate of tax of the foods products items like halva, mixture, laddu and jilebi without branded/unbranded classification?

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iv) Whether the Appellate tribunal is justified in not applying the rate of tax on the sale of items like halva, mixture, laddu and jilebi under the amended entry 8 as against entry 7 relating to bakery products sold under brand name in accordance with the settled Rules of Interpretation that the construction favourable to the assessee has to be adopted assuming that there is some ambiguity?”

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3. The petitioner admittedly is in the business of

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manufacturing food preparations/items like mixture, jilebi,

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laddu, murukku, achappam, pakkavada, and unniyappam in the

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traditional Kerala style and marketing the said products under

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the brand name or monogram as “Fresh Products”. In the revision, the disputes related to the applicable rate of tax on the

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OT.REV NO. 37 OF 2020

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turnover from the sale of products referred to above are 5% or

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14.5%. There is no dispute on the food preparations manufactured and sold by the petitioner. The petitioner filed the returns for the year 2014-15 by returning the total taxable turnover as Rs.5,33,71,912/- and paid tax at 5% under Entry 8 of Schedule III. The Assessing Authority completed the assessment by le vying tax at 14.5% under Entry 11 as applicable under notification dated 21.01.2006 read with Kerala Finance Act (Act 29 of 2013).

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4. The case of the dealer is that prior to 01.04.2015, the common, comprehensive Entry dealing with bakery products provided for payment of tax at 5% for all the bakery products such as sweets, confectionery, and other food products other than or except the products sold under the brand name registered under Trade Marks Act, 1999. Through Kerala Finance Act, 2014 (Act 29 of 2014), Entry 8 has been incorporated

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in Schedule III. For the subject return period, tax is payab le at 5% but not by referring to Entry 7 of Schedule III. The Tribunal and the Statutory Authorities do not accept the argument of the dealer. Hence the revision.

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We are not proposing to examine the reasoning and whether such reasoning is available in the facts and circumstances of the case. In a sequential manner, we would like to appreciate which one of the two Entries, viz. Entry 7 or 8

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is attracted to the taxable turnover shown by the petitioner. To appreciate the controversy in a very limited compass, the relevant Entries are excerpted hereunder:

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Bakery products, sweets, confectionaries, and other food products other than those sold under brand name registered under the Trade Marks Act, 1999.

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xxxx

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Bakery products like cakes, halwa, mixture, laddu and jelebi

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*****

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Mr Sreekumaran argues that applying Entry 7 to the

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products manufactured and sold by the petitioner is ex -facie illegal and beyond the scope and object of respective Entries. Entry 7 is not attracted and whether for return period, the petitioner had registered under the Trade Marks Act or not is irrelevant and immaterial. There is a direct Entry applicable to the products sold by the petitioner. By excluding an applicable direct entry in Entry 8, the orders under revision through illegal reasoning firstly treated the food preparations of the petitioner as directly coming under Entry 7, and if it is sold as an unbranded product, according to the Department, 5% would be attracted; sold as a branded product 14.5% is attracted. The logic and reasoning are completely illegal. To convince the Court of the applicable Entry, the counsel for the petitioner has taken us through Entry 7 and 8 of Schedule III and Entry 11 under 14.5%.

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Government Pleader M.M Jasmin oppo ses the prayer

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by reading the findings recorded by the Tribunal. She argues that there is no dispute that the petitioner had, at the relevant period, for the return period, caused the turnover under a brand name on a registered trade mark. The produc ts prepared and sold by the petitioner are once accepted as bakery products. Entry 7 is attracted. It is no doubt true that Entry 8 is in existence with ef fect from 01.06.2015, a nd that is not attracted to the case on hand.

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7.1 Entry 7 excerpted above deals with bakery products, viz. sweets, confectionery, and other food products. Once the products sold by the dealer fall within Entry 7 of Schedule III, the orders under revision do not warrant the interference of this Court. She prays to dismiss the revision.

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We have taken note of the rival contentions. The principles of interpretations of Entries in a tax statute are no more res-integra. The counsel for the petitioner submits that up

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to 01.04.2015, the deale r doing business in food preparations such as mixture, jilebi, laddu, etc., for facing severe hardships in marketing food products due to the higher rate of tax. The Government, by accepting the representation and feeling the need to provide tax applicable to the product dealt with by the petitioner, incorporated Entry 8 and introduced products that can be claimed as bakery products attracting a 5% Value Added Tax. Therefore, what is to be seen is whether the food preparations manufactured by the petitioner would attract Entry 7 or 8 of Schedule III of the Act. We have excerpted Entry 7 above, and a bare perusal of Entry 7 discloses that there are two facets covered by Entry 7; one, sold as non-brand products, another under a brand name. To apply Entry 7, the essential requirement is that the products for which turnover is returned should be bakery, sweets, confectionary, and other food products. The same products sold under the brand name 5% are not attracted.

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The legislature, in its wisdom through Entry 8, provided for 5% for the food preparations referred to above. The crucial test for determination is whether the turnover of the petitioner would fall under Entry 7 or Entry 8. In our considered view at the relevant point in time, the legislature got in practical to provide for bakery products such as sweets, confectionery, etc., only when it comes under Entry 7, the further requirement whether it is branded or not arises. Under Entry 8, the products covered are cakes, halva, mixture, laddu, jilebi, etc. Here the applicable tax rate is not dependent on whether these products are sold as branded products.

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The petitioner admittedly does business in food preparations such as mixture, jilebi, laddu, murukku, achappam, pakkavada, and unniyappam and marketing them. When a direct entry is available and attracts to the case on hand through an interpretative mechanism, bringing the petitioner’s

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OT.REV NO. 37 OF 2020

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turnover under Entry 7 is illegal and untenable. To sum up, the products sold by the petitioner do not per se come under Entry

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Entry 8 provided a different tax rate for the products mentioned therein.

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With the above reasons, we are satisfied that the order under revision suffers from patent illegality and irregularity and thus warrants interference of this Court. The orders under revision are set aside, and the revision is allowed. No order as

to costs.

Sd/-

S.V.BHATTI

JUDGE

Sd/-

BASANT BALAJI

JUDGE

OT.REV NO. 37 OF 2020

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APPENDIX OF OT.REV 37/2020

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PETITIONER ANNEXURES

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ANNEXURE A TRUE COPY OF THE MEMORANDUM DATED 20.2.2012 SUBMITTED BEFORE THE HON'BLE FINANCE MINISTER BY THE PETITIONER AS PRESIDENT OF THE ASSOCIATION OF BAKERS IN KERALA. ANNEXURE B TRUE COPY OF PARA 362 OF THE BUDGET SPEECH OF THE HON'BLE MINISTER FOR FINANCE FOR 2014-15. ANNEXURE C TRUE EXTRACT OF THE AMENDMENT IN CLAUSE 10(17) (C) (1)(II) OF THE FINANCE ACT, 2014. ANNEXURE D TRUE COPY OF THE ORDER NO.32071529035/2014-15 DATED 11.11.2015 ISSUED BY THE COMMERCIAL TAX OFFICER, 1ST CIRCLE, ERNAKULAM. ANNEXURE E TRUE COPY OF THE ORDER DATED 26.6.2018 IN KVATA 8/2016 ISSUED BY THE DEPUTY COMMISSIONER (APPEALS), ERNAKULAM. ANNEXURE F TRUE COPY OF THE APPEAL MEMORANDUM IN FORM 31 FILED BEFORE THE HON'BLE TRIBUNAL, ERNAKULAM ON 15.2.2019. ANNEXURE G CERTIFIED COPY OF THE ORDER DATED 14.1.2020 IN TA(VAT) 105/2019 OF THE KVAT TRIBUNAL, ERNAKULAM.

P.M.Sankaran v. State of Kerala

Case brief

What is this about?

What did the court decide?

P.M.Sankaran v. State of Kerala

Case brief

What is this about?

What did the court decide?

What the court decided

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