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2010 DIGILAW 922 (KER)

State of Kerala v. Poabs Granites Pvt. Ltd.

2010-11-25

J.CHELAMESWAR, P.R.RAMACHANDRA MENON

body2010
JUDGMENT : P.R. Ramachandra Menon, J. The questions of law sought to be answered in this revision filed under Section 41 of the KGST Act are as given below: (A) Whether the Appellate Tribunal is right in law in treating M-sand sold by the assessee in par with granite metals to extend the benefit of compounding method assessment to the assessee under Section 7(1)(b) of the KGST Act? (B) Has not the Appellate Tribunal misconstrued, rather over-read the scope of Section 7(1)(b) in the matter of extending compounding facility to the assessee in respect of its sale of M-sand and granite metals? (C) Is not on a true construction of the relevant provisions "M-sand" a distinct commodity falling under Entry 128 of the First Schedule from "granite metals" an item falling under Entry 70 and that granite metals alone is covered by Section 7(1)(b) of the Act for the option for compounding? 2. This revision has been preferred at the instance of the Government, being aggrieved of the order passed by the Appellate Tribunal, in favour of the assessee, giving the benefit of compounding to both the 'main product' (granite metal) as well as to the 'by-product' (M-sand) after turning down the contention raised from the part of the Revenue, that the assessee could have compounded the tax only in respect of the 'main product' and not the 'by-product'. 3. The issue pertains to the assessment year 2003-04. The assessment was completed by the assessing authority, granting the benefit of compounding sought for from the part of the assessee, only in respect of granite metals (entry No. 70 as given in the schedule), while the by-product i.e. M-sand was reckoned as the residual entry and thereby the benefit of compounding was rejected to the same, fixing and demanding a higher rate of tax. Being aggrieved of the said assessment order, the assessee preferred statutory appeal before the appellate authority, wherein interference was declined, which led to the proceedings before the Appellate Tribunal at the instance of the assessee. 4. Being aggrieved of the said assessment order, the assessee preferred statutory appeal before the appellate authority, wherein interference was declined, which led to the proceedings before the Appellate Tribunal at the instance of the assessee. 4. The grievance of the Revenue/revision petitioner is that, the Tribunal, without considering the actual facts and circumstances, passed 'Annexure C' order dated 30th November, 2006, deciding the issue in favour of the assessee; thus granting benefit of compounding in respect of both the 'main product' as well as to the 'by-product', which hence is sought to be interfered by this Court, referring to the questions of law raised. 5. Heard the learned Government Pleader appearing for the revision petitioner and the learned counsel appearing on behalf of the respondent. 6. The learned Government Pleader appearing for the State/revision petitioner submits that, the verdict passed by the Tribunal is quite contrary to the provisions under Section 7(1)(b) of the KGST Act, which reads as follows: 7. Payment of tax at compounded rates.— xxxx xxxx xxxx 1(b) any mechanised crushing unit producing granite metals may, at its option, instead of paying tax in accordance with the provisions of that sub-section, pay tax at the following rates, namely:- (i) for each crushing mechine of size not exceeding 30.48 cmx 22.86 cm [Rs.30,000] per annum (ii) for each crushing machine of size exceeding 30.48 cm x 22.86 cm but not exceeding 40.64 cm x 22.86 cm [Rs.90,000] per annum (iii) for each crushing machine of size exceeding 40.64cm. x 2.2.86 cm. [Rs. 1,80,000] per annum [Explanation.— Primary crushe, shall also be reckoned for the purpose of computation of the quantum of compounded tax] The learned Government Pleader submits that, the item specifically mentioned under Section 7(1 )(b) for providing the benefit of compounding is 'Granite metal' and there is no reference to 'M-sand' and this being the position, the assessment order passed by the assessing authority and confirmed by the appellate authority are within the four walls of the law, which ought not to have been set aside by the Tribunal. In this context, it is necessary to look into the different situations contemplated under Section 7, so as to understand and appreciate the scheme and provisions providing the benefit of compounding. Section 7(1)(a) reads as follows: 7. Payment of tax at compounded rates.— (1) Notwithstanding anything contained in sub-section (1) of Section 5. In this context, it is necessary to look into the different situations contemplated under Section 7, so as to understand and appreciate the scheme and provisions providing the benefit of compounding. Section 7(1)(a) reads as follows: 7. Payment of tax at compounded rates.— (1) Notwithstanding anything contained in sub-section (1) of Section 5. (a) any dealer in gold or silver ornaments or wares, may, at his option instead of paying tax in accordance with the provisions of that sub-section, pay tax at [two hundred percent] of the tax payable by him as conceded in the return or accounts for the immediate preceding year [or the tax paid for the immediate preceding year whichever is higher] Explanation.— For the purpose of this clause "fax payable as conceded in the return or account for the immediate preceding year" means tax payable on the sales turnover under sub-section (1) of Section 5 and the tax payable on the purchase turnover under Section 5A: Provided that where during the preceding year, the dealer had not transacted business for any period the tax payable for the whole year shall be calculated proportionately on the basis of the tax payable for the period during which such dealer had transacted business: Provided also that where such a dealer acquires any running business or a branch of a business with respect to gold, silver ornaments or wares during the year,the amount of compounding tax payable in respect of such business shall be calculated in accordance with the provisions of this clause as if it were an independent business, taking into account the turnover conceded in the return or accounts thereof for the previous year with respect to that business [or on the quantum of compounded tax fixed for the previous year in accordance with clause (a)]: [Provided also that there a dealer paying tax in accordance with the provisions of this sub-section opens a new branch during a year, such branch shall be treated as if it were an independent place of business and the provisions of this sub-section shall apply to it accordingly] Going by the entire contents of Section 7, it is obvious that, the said provision has been incorporated in the statute book as an alternative measure for realization of the tax, instead of undergoing the ordeal with reference to the charging provision under Section 5. It is also pertinent to note that, such benefit of compounding is not open to all sectors, but the same stands confined to 'two' different situations/units, as taken care of by Sections 7(1)(a) and 7(1)(b). While Section 7(1)(a) deals with the dealers of gold/silver ornaments or wares, Section 7(1)(b) deals with mechanised 'crushing units' producing Granite metals. This clearly shows that, the benefits contemplated under Section 7(1)(b) is with reference to the 'unit' and not otherwise. The assessing authority has no case that, the assessee is not running a mechanized crushing unit producing granite metals and in fact has granted compounding benefit, however confining it to the 'main product' 'Granite metal' alone; while the M-sand (by-product) is sought to be reckoned under the residual entry, imposing higher rate of tax; which has been rightly interfered by the Tribunal. 8. In the above circumstances, we find that, the finding of the Tribunal 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 the by-product (M-sand) is perfectly right and we do not find any question of law to be answered in favour of the petitioner. The Revision Petition is dismissed accordingly, as devoid of any merit. It is made clear that the question whether the term 'Granite metal', entry No.70 of the first schedule, will include 'M-sand' or whether 'M-sand' has to be classified under entry Nos. 128 or 177 is not considered herein.