Petitioner is not entitled to have benefit of 'presumptive tax' u/s 6(5), HC

Facts in Brief:

1. The petitioner firm is running a 'poultry farm' engaged in the sale of broiler chicken, having registration, both under the KGST and CST Acts. In the course of business, the petitioner used to bring the live chicken and such other goods from outside the State, to be sold within the State.

2. However, pursuant to the new enactment, i.e. KVAT Act, which was brought into force W.P.) No.25448 of 2006 with effect from 01.04.2005, the petitioner decided to have the benefit of reduced rate of tax applicable to the 'presumptive dealers', who were not importers or dealers liable to tax under Section 6(2) or dealers effecting first taxable sale of goods within the State and whose total turnover for an year was below Rs. 50 lakhs.

3. The petitioner cut down the taxable turnover, stopped import from outside the State, surrendered the CST registration and confined the business within the State, with a maximum turnover of less than Rs.50 lakhs, effecting the local purchase, which came to the first sale in the State. It was accordingly, that Ext.P1 application was submitted for registration under Section 6(5), giving the factual particulars and satisfied the tax at the reduced rate for the different quarters ending on 30.06.2005, 30.09.2005 and 31.12.2005, effecting the payments on 16.07.2005, 16.11.2005 and 15.02.2006 respectively.

4. While so, the petitioner was served with Ext.P2 notice dated 06.03.2006 issued by the first respondent, observing that, on verification of the application for registration as a W.P. ) No.25448 of 2006 'presumptive tax dealer', it was seen that the turnover of the dealer for the preceding year was Rs.84.87 lakhs and as such, the petitioner was not eligible for option for payment of presumptive tax; thus requiring the petitioner to file an application in Form I as a VAT dealer under Section 16 of the KVAT Act and to pay tax in terms of Section 6(1).

5. On receipt of Ext. P2, the petitioner submitted Ext.P3 reply pointing out that the tax payment was already effected under Section 6(5) and that, the amendment and incorporation of the new proviso , placing a bar with reference to the turnover of the preceding year, exceeding Rs.50 lakhs was brought about only on 28.08.2005, though with retrospective effect from 01.04.2005, which according to the petitioner was not applicable to the petitioner's case, who had already filed the application paying the tax in tune with the relevant provision, as it existed then.

6. It was further pointed out that the amendment was not applicable also in view of Sec.24 of the Act, placing a clear bar, stipulating that, where the rate of tax in respect of any goods has been enhanced as a result of amendments, such enhancement shall W.P. ) No.25448 of 2006 be applicable only from the date of such amendment. In respect of the closing stock of the taxable goods worth Rs.13.45 lakhs on 01.04.2005 (which included materials of import), it was pointed out that the petitioner had not purchased 'taxable goods', Inter- State, during the year 2004-05 and that the entire stock mentioned was in respect of 'Maize', a poultry feed which was feeding the petitioner's poultry and not for sale.

7. 'Maize' being not a taxable commodity, having been exempted as per Entry 12 of the First Schedule to the KVAT Act, the petitioner was not liable to be treated as an 'importer' as defined under Section 2(xxii), obviously since the term 'importer' means only a person who obtains or brings any taxable goods from outside.

8. After considering the said reply , the first respondent found that there was no merit in it and by virtue of the statutory prescription, as amended, the petitioner was liable to pay the tax, as prescribed under Section 6(1). In the said circumstance, Ext. P4 pre-assessment notice under Section 25 was issued to the petitioner on 22.08.2006 by Registered Post.

9. On service of notice, as observed by the first W.P. ) No.25448 of 2006 respondent, though two weeks' time was sought for on 11.09.2006 to comply with the requirement , the dealer had not responded further and accordingly, the assessment was finalised as per Ext.P6 order dated 29.09.2006, fixing the tax liability in respect of the year 2005-06, as proposed, followed by Ext.P7 demand.

10. The petitioner is challenging the above proceedings in this writ petition, also contending that the petitioner had preferred Ext.P5 reply dated 03.10.2006 in response to Ext.P4 notice, which was served to the first respondent before despatching Ext. P6 and hence the said reply ought to have been considered, in the light of the law declared by this Court in Ext.P8 judgment, reported in (1998) 6 KTR 466 (Ker.) [B.T. Mammoo vs. Assistant Commissioner (Assessment)].

On appeal HC held as under,

11. Despite the challenge as to the constitutional validity, the only Ground incorporated, other than Ground (k), dealt with already, is 'Ground (l)', contending that retrospective operation of the amendment to Section 6(5) is unreasonable and violative of Article 14. This Court finds it difficult to accept the said proposition. Retrospective operation of an amendment to a W.P. ) No.25448 of 2006 statutory provision is not alien in fiscal law . Reasonableness or unreasonableness has to be assessed with reference to the scope and object of legislation.

12. The very provision for having registered as a 'Presumptive Tax Dealer' with liability to satisfy the tax at the prescribed rate, was brought into the statute book only w.e.f. 01.04.2005 . The circumstance, under which such benefit has to be extended, was considered with more precision and necessary safeguards to meet the interest of the Revenue, were prescribed by way of amendment dated 28.08.2005, i.e. within four months; also reducing the existing rate of 1% to 0.5%, which was brought into effect from 01.04.2005. It is by virtue of the said amendment, that the petitioner has satisfied the 'Presumptive Tax' at the lesser rate of '0.5%' instead of '1%' as it originally existed. It is only by way of 'option' and not by virtue of any mandatory requirement, that the course provided under Section 6(5) is brought in and if the petitioner is not happy with the same, it is always open for the petitioner to proceed on the normal and regular track for satisfaction of the tax under Section 6(1), which alone has been W.P. ) No.25448 of 2006 done by the first respondent, passing Ext.P6 assessment order. But for the vague challenge as to the constitutional validity of the amended provision, the petitioner has not stated anything, in what way the provision is ultravires to the Constitution or in what manner the State has exceeded in exercising its law making power.

13. There is a case for the petitioner that Ext.P2 notice was issued to the petitioner only on 06.03.2006, as a result of which, the petitioner could not collect tax at the normal rates from the customers. This argument does not persuade this Court to draw an inference in favour of the petitioner in any manner. The liability to satisfy tax is not depending upon the right or chance of the dealer to have it passed on to the purchaser. Tax is payable at the instance of sale and only by virtue of the statutory prescription that the dealers have been permitted to pass on the liability to buyers; which in no case can be a 'pre- condition' to have mulcted with the tax liability.

14. Application for registration as a Presumptive Tax Dealer,was preferred by the petitioner in May, 2005, while W.P. ) No.25448 of 2006 the amendment to the statute was brought in August, 2005 with retrospective effect from 01.04.2005. There is a case for the petitioner that the application preferred by the petitioner for registration had already been accepted and the petitioner was permitted to satisfy the tax accordingly, as per the then existing statute and full payment has been effected already.

15. Particulars of the payment effected by the petitioner have been given in paragraph '2' of the writ petition and in Ex.P3 reply preferred by the petitioner, which has been extracted by the first respondent in Ext. P6 order impugned in the writ petition. This reads as follows:

16. Undisputedly, the rate of presumptive tax under Section 6(5) as per the original statute, as on 01.04.2005, was at the rate of '1%'. In respect of the quarter ending on 30.06.2005, the Turnover was Rs.17,10,658/-, for which the tax W.P. ) No.25448 of 2006 paid by the petitioner on 16.07.2005 was Rs.8553.29/-. In other words, the payment effected by the petitioner on 16.07.2005 i.e, before the amendment dated 28.08.2005, was only at the rate of '0.5%', which actually ought to have been at the rate of 1% amounting to Rs.17106.58/-.

17. In other words, it could be said that the tax paid by the petitioner under Section 6 (5) on the strength of Ext.P1 application, was not in full conformity with the statutory prescription and as such, the option exercised and satisfaction of the requirements could be said as incomplete.

18. There is another contention for the petitioner that some other additional Grounds are incorporated in Ext.P6 Assessment Order, which were not there in Ext.P4 pre- assessment notice and hence, the petitioner could not get an opportunity to explain the same. This does not appear to be palatable to this Court, primarily for the reason that, no proper reply was submitted by the petitioner before passing Ext. P6 order ( but for the admittedly belated reply of Ext.P5 dated 03.10.2006) and further since Ext.P6 order can be justified W.P. ) No.25448 of 2006 merely with reference to infringement of the 'second proviso' to Section 6(5), i.e. the admitted turnover of the petitioner for the previous year, as conceded in Column No.10 of Ext.P1 application having more than Rs.50 lakhs and hence it stands excluded by the statutory prescription itself. As such, no other ground is relevant or necessary to be looked into.

19. With regard to the contention of the petitioner that the first respondent ought to have referred to and considered Ext.P5 statement of objections, though preferred belatedly, as the same was served prior to despatch of Ext. P6 order, reliance is sought to be placed on the decision rendered by this Court (vide Ext.P8) in B.T. Mammu vs. Asst. Commissioner (Assessment) Sales Tax Office, Special Circle, Kannur [(1998) 6 KTR 466 (Ker.)]. The factual position in the said case is entirely different as discernible from the description given therein. It was the specific contention of the petitioner therein, that the statement of objection preferred by the petitioner was available in the records of the respondent. Availability of said statement of objection was conceded in the statement filed before the Court W.P. ) No.25448 of 2006 by the respondent.

20. It was in the said circumstance, that the impugned order was intercepted and the concerned authority was directed to pass fresh orders in the said case. Coming to the instant case, Ext.P4 notice was sent to the petitioner on 22.08.2006 by registered post and on receipt of the same, the petitioner submitted a letter on 11.09.2006, requesting two more weeks' time to comply with the notice, as specifically observed in Ext. P6 order. Despite the filing of the said letter, no reply was submitted, till the order was passed on 29.09.2006, which was immediately forwarded by registered post and served to the petitioner on 14.10.2006.

21. Admittedly, Ext.P5 statement of objection is dated 03.10.2006 and there is no case for the petitioner that it was forming part of the records before Ext.P6 order was passed or that the first respondent was aware of Ext.P5 statement of objection preferred by the petitioner at the time of despatch, unlike the factual position reflected from the decision reported in (1998) 6 KTR 466 (Ker.) (cited supra), which hence is not applicable to the case.

22. In the course of hearing, the learned Government W.P.) No.25448 of 2006 Pleader brought it to the notice of this Court, that a Division Bench of this Court has very recently held in petitioner's case itself (i.e. in Tropical Farms vs. State of Kerala [2012 (2) KLT 902], that buying one or two days' old chicks, rearing the same into full grown chicken and sale of the same does not entitle the poultry farm to get the benefit of 'presumptive tax' under Section 6(5), irrespective of whether there is manufacture or not in the rearing of chicks to chicken .

23. It has been held in the said decision, that irrespective of whether there is manufacture or not in the rearing of chicks to chicken, the petitioner's sale of broiler chicken as full grown birds for meat purpose, has to be and rightly treated as 'first taxable sale'. By virtue of the specific exclusion of 'first taxable sellers' from the scheme of payment of presumptive tax under 'clause (d)' of Sec.6(5), the lower authorities including the Tribunal have rightly rejected the claim of the petitioners.

24. It is to be noted that Section 6(5) (d) was very much there in existence, right from the beginning when the VAT Act was brought into force w.e.f. 01.04.2005,independent of any amendment subsequently W.P. ) No.25448 of 2006 brought about on 28.08.2005 (with retrospective effect from 01.04.2005). In other words, in view of the authoritative pronouncement of law by the Division Bench in the petitioner's own case, that the petitioner is not entitled to have the benefit of 'presumptive tax' under Section 6(5) (even by virtue of the unamended provision itself), this Court finds that the petitioner is not entitled to have any relief in this writ petition.

25. In the above facts and circumstances, the challenge raised by the petitioner with regard to the course and proceedings of the first respondent, leading to Ext.P6 order of assessment or as to the constitutional validity of the amended provision of Section 6(5) of the KVAT Act is not correct or sustainable, either on facts on in law .

26. The writ petition fails and it is dismissed.

Case Reference - Kerala High Court M/S.Tropical Farms vs The Assistant Commissioner.