KEVI HARDWARE Vs. STATE OF KERALA
HIGH COURT OF KERALA
STATE OF KERALA
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(1.) IS the action of the respondent-assessing authority, in levying tax on the sale of 'dolomite' under Entry 42 instead of Entry 50 in the First Schedule of the Kerala General Sales Tax Act, 1963 legal and valid? this is the short question that arises for consideration in this case. A few facts may be noticed.
(2.) THE petitioners are registered as dealers under the kerala General Sales Tax Act. THE assessments for the years 1992-93,1993-94 and 1994-95 had been finalized. THE competent authority had levied tax on the sale of 'dolomite' at the rate of 2. 5% as prescribed under Entry 50. THE assessments were arbitrarily reopened. THE assessing authority proposed to levy sales tax under Entry 42 of the First Schedule. THE proposal was based on the decision of a Bench of this Court in M/s. Marbles India v. State of Kerala, (1996) 4 KTR 445. A copy of the notice issued to the petitioner No. 1 has been produced as ext. P2. Ultimately, the assessments were finalised for the years 1992-93,1993-94 and 1994-95 on the basis that the sales were covered under entry 42. THE tax was levied at the rate of 12. 5% for the years 1992-93 and 1993-94. For the year 1994-95, the rate of tax was fixed at 10%. Aggrieved by the order passed by the assessing authority, petitioner No. 1 had filed an appeal. It was, inter alia, pointed out that the sales had been effected to dealers in fertilizers. THE tax had been collected at the rate of 2. 5% only. THE decision of the Court in M/s. Marbles India had no relevance. THE appellate authority considered the matter. It noticed that "the assessing authority has no case that the appellant had used dolomite powder for the manufacture of mosaic tiles so as to attract the rate of tax applicable to mosaic chips and mosaic powder. " It had presumed that the powder sold by the appellant was used for manufacturing mosaic tiles for flooring purpose. This presumption was raised on the basis that the assessee was dealing in building materials. THE appellate authority further noticed that the assessee had produced "certain sale bills for verification which shows that sale of dolomite powder is mainly effected to a fertilizer dealer, namely, M/s. Organic fertilizers and the rate of tax charged is 2. 5% only". Thus, the appellate authority allowed the appeals in respect of the three assessment years and remanded the case to the assessing authority for fresh disposal.
The petitioners allege that the departmental authorities have taken the view that 'dolomite powder' is covered under Entry 42. It is proceeding on the basis of the decision in M/s. Marbles India case (supra ). This decision is clearly distinguishable. The action in reopening of the assessments and the consequential proceedings are illegal. Thus, the petitioners pray for a declaration that the sale of 'dolomite' is taxable only under Entry 50 at the rate of 2. 5% and not at any higher rate under Entry 42 of the schedule to the Act.
A counter affidavit has been filed on behalf of the respondents by the Assistant Commissioner (Law), Commercial Taxes, Ernakulam. According to the respondents, the petitioners are engaged in the sale of mosaic chips, whitewashing materials, cement, oxides and other flooring materials. The assessment in respect of petitioner No. 1 was completed for the assessment years 1992-93 to 1996-97 by treating "dolomite powder as a fertilizer vide Entry 50 (xi) taxable at the rate of 2. 5%. " Thereafter, the assessing authority had made an enquiry. In view of the decision rendered by this Court in M/s. Marbles India case (supra), it had come "to the conclusion that dolomite powder dealt with by the petitioner-firm is taxable at the rates specified for mosaic chips and powder vide Entry 42 of the First Schedule of the Kerala general Sales Tax Act and taxable at the rate of 12. 5% for the years 1992-93 and 1993-94. For the subsequent years, viz. , 1994-95 and 1995-96, the rate of tax is 10%". Accordingly, all the assessments were revised under S. 19 of the Act. Thereafter, the Appellate Assistant Commissioner had remanded the matter for fresh disposal. In pursuance to the order of remand, the assessing authority "conducted a factual enquiry". The assessees did not produce any evidence to prove that they sold dolomite powder as fertilizer. It was also found that the main business of the petitioners was sale of mosaic chips and flooring materials. Hence, "assessment was completed treating dolomite powder sold by petitioner No. 1 as materials used for flooring work which is taxable under Entry 42 of the First Schedule to the Kerala General sales Tax Act". In view of the decision of this Court in M/s. Marbles india case (supra), "emphasis is to be given to the use to which the material is put in order to determine the distinctive feature of an article and not to the common parlance in which the material is referred to". The assessments were made after giving adequate opportunity to the petitioners. When the petitioners had failed to pay amounts due to the Government, steps for recovery were initiated. The procedure is in accordance with law. On this basis, the respondents maintain that the Writ Petition deserves to be dismissed.
(3.) THE matter was posted before a Division Bench of this court. It noticed that there was a conflict of view in the two Division Bench judgments of this Court in M/s. Marbles India v. State of Kerala, (1996) 4 KTR 445 and Southern Veneers & Wood Works Ltd. v. State of Kerala, (1997) 5 KTR 437. Thus, the matter was referred to a Full Bench.
Learned counsel for the parties have been heard. On behalf of the petitioners, it has been contended by Mr. Abraham Mathew that the action of the respondents in reopening the assessments and levying tax under entry 42 is wholly illegal. 'dolomite' is clearly covered under Entry 50. Thus, it cannot be assessed as 'mosaic chips and powder' under Entry 42. On the other hand, Mr. Raju Joseph, Special Government Pleader for Taxes, contended that the view taken by the authorities is in conformity with law and the decision in m/s. Marbles India (supra ).;
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