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Judgment
C.N. Ramachandran Nair, J.—These revision petitions filed by the assessee as well as the Revenue are against common orders of the Sales Tax Appellate Tribunal upholding sales tax assessments on the assessee for the assessment years 2002-03 to 2004-05 but by granting partial relief to the assessee. The assessee is engaged in purchase of paper in bulk and manufacture of computer printing stationery for parties with perforation, colour printing of rows and logos of the parties and embedding carbon paper between two computer printing papers for use by the customers. The assessee availed of sales tax exemption for seven years on the ground that it was engaged in manufacture of computer printing paper and the assessee was permitted to enjoy sales tax exemption on the sale of same product, namely, computer printing papers made from paper rolls purchased by it along with other raw materials like carbon paper, colouring material, etc. However, after availing of sales tax exemption treating the very same computer printing paper as manufactured product for seven years, the assessee changed their stand and raised the contention that the item, namely, paper purchased is resold by them only as paper, and so much so the same being second sales does not attract any tax liability. The assessing officer disallowed second sale exemption claimed by the assessee on the ground that the computer printing paper sold by the assessee after printing colour rows and logos and embedding carbon paper is a product different from ordinary paper purchased by the assessee. The Tribunal confirmed the assessment disallowing second sale exemption claimed by the assessee but granted rebate of tax paid on paper purchased relying on the Explanation to entry 106 of the First Schedule to the Kerala General Sales Tax Act, 1963 (hereinafter referred to as "the Act", for short), which provides for rebate of tax paid on paper used in manufacture of note book against sales tax payable on sale of note book. While the assessee has filed revisions challenging the orders of the Tribunal confirming disallowance of second sale exemption, the Department has filed revisions challenging that part of the orders of the Tribunal granting rebate under the Explanation to entry 106 of the First Schedule to the Act on the ground that the said Explanation and entry have no application for sale of computer printing papers with carbon paper embedded between two computer printing papers. We have heard learned counsel for the assessee and learned Government Pleader for the Department.
Before considering the question whether the item sold is a product different from paper purchased by the assessee in bulk attracting tax at first sale point, we feel that the assessee should not be allowed to blow hot and cold in a matter like this. This is because the assessee for seven years after starting the industry contended that it is engaged in manufacture of computer printing paper, which is a product different from paper purchased by it, and it is entitled to sales tax exemption on sale of the product manufactured. This claim was allowed and the assessee enjoyed sales tax exemption for seven years on the sale of the products on the ground that the products sold are manufactured from the materials purchased. However, when the period of exemption is over, the assessee changed their stand and started contending that there is no manufacture involved and the item sold is one and the same though perforated and printed with colour rows and logos of the parties and embedded with carbon paper between two sheets for use by the customers. If the present stand of the assessee is accepted, then we have to conclude that the assessee defrauded the Revenue by availing of irregular and ineligible tax exemption for seven years. If we allow the assessee''s case we should first direct the assessee to deposit the entire tax exemption fraudulently availed of along with interest for the seven years during which period the assessee purchased paper from outside Kerala, manufactured computer printing paper and sold as first sales, which but for the exemption availed of by the assessee would be attracted full rate of tax in Kerala. Keeping this stand of the assessee in mind we now proceed to consider whether the activity of the assessee involves manufacture of a product different from the raw material used, namely, paper purchased by the assessee. The manufacturing process involved by the assessee as found by the final fact finding authority, i.e., the Tribunal, is as follows:
(1) The paper bought locally is cut into sizes.
(2) The paper is perforated to fit into computer printer.
(3) Printing of rows on colour, printing of rows and columns and other details such as name and address of the purchaser, logo and other format, etc., is made in it.
(4) The dealer has purchased ink,'' carbon paper stores and other consumables as raw materials.
(5) The products transferred on delivery notes are computer stationery forms and computer printing forms and invoices are raised.
The dealer has filed statement that they were involved in the manufacture of computer printer forms, pre-printed forms, blank forms, etc. They have also admitted that they were purchasing paper rolls, carbon paper, ink, packing materials, plates and paper cartons and manufacturing computer forms with installed computer stationery manufacturing and printing machine, collating M/C plate making and get ready the finished product as computer printer forms.
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The appellant purchase paper in bulk quantity from registered dealers within the State then cut into sizes, perforate, insert carbon paper in between papers, fold into packets and sell them as computer paper as per specific orders from buyers.
From the above, what is clear is that the item sold by the assessee is a value added product, namely, computer stationery, which has distinct and specific use and identity. It is admittedly commercially different from the paper purchased by the assessee, which is white paper, and in the first place white paper is cut into required sizes and then printing is done to provide continuous rows in colour ink on one side of entire paper, and thereafter the paper is perforated on either side with specific length for cutting. In between two computer printing papers, the assessee is embedding/planting a carbon paper for the customers to take computer printing in duplicate. Besides this, the finding of the Tribunal is that most of the supplies are against prior orders and large customers like railways demand printing of their logo on the computer paper. So much so, the product sold though is paper, is a commercially different product inasmuch as the identity of the paper is lost, and the product is a value added product. Even though learned counsel for the appellant has relied on the Single Bench judgment of this Court rendered by one of us (CNR(J)) in OP No. 37169 of 2002 dated October 13, 2005), what we notice is that in that case the extend of processing is not what is stated in the above case. Further the case decided is with reference to claim of exemption on manufactured product, whereas in this case the assessee got exemption for the very same product as manufactured product and thereafter they are changing their stand to continuously avoid payment of tax legitimately due on the sale of the product manufactured by the assessee. Even though the learned counsel has relied on the decision of the Supreme Court in Union of India (UOI) and Others Vs. J.G. Glass Industries Ltd. and Others, , what we notice from the said judgment is that the question considered is whether the printing of logo itself constitutes manufacturing activity. In this case, the entire process as stated above constitute manufacturing activity because in the whole process a commercially different article is produced by the assessee, which article is different from the original item. We, therefore, uphold the order of the Tribunal in rejecting the second sale exemption claimed by the assessee on the sale of computer printing paper manufactured by them from out of ordinary paper purchased in rolls. The sales tax revision cases filed by the assessee (S.T. Rev. Nos. 85, 86 and 94 of 2011) are accordingly dismissed.
We, now proceed to consider the revisions filed by the State wherein the Tribunal has granted rebate under Explanation to entry 106 of the First Schedule to the KGST Act, which is as follows:
From the above provision, it is clear beyond any doubt that rebate of tax on paper is available only on sale of note book and the assessee has no case that he is engaged in making any note book from the paper purchased and so much so, the Explanation has no application. We, therefore, allow the revision cases filed by the State (S.T. Rev. Nos. 88, 89 and 91 of 2011) by reversing the orders of the Tribunal and by upholding the orders in the suo motu revision passed by the Deputy Commissioner, and by confirming the assessment made at full rate of tax. Accordingly, S.T. Rev. Nos. 85, 86 and 94 of 2011 are dismissed and S.T. Rev. Nos. 88, 89 and 91 of 2011 are allowed as above.