State of Kerala vs Smt. Thressiammaskariah

C.N. Ramachandran Nair, J.—The common question raised in the two revisions filed by the State against the common order of the Tribunal in the case of the same assessee for the two assessment years 1994-95 and 1995-96 is whether the Tribunal was justified in cancelling assessment u/s 5A on the purchase turnover of timber from agriculturists by the respondent-assessee for use in manufacture of furniture for sale in the State. Even though assessment was sustained in first appeal, the Tribunal held that timber is an item coming under the Fifth Schedule to the Kerala General Sales Tax Act, 1963 taxable at two points and therefore, assessment u/s 5A is not possible. The Tribunal further held that when the item falls under Fifth Schedule, it cannot be assessed under residuary entry of the First Schedule for the purpose of levy of tax u/s 5A. The Government Pleader contended that Section 5A applies even in respect of commodities falling under the Fifth Schedule which are taxable at two points of sale. The facts are not in dispute inasmuch as purchases are from agriculturists who have turnover below the non-taxable limit and who are not liable to pay tax at sale point of timber sold by them to the respondent-assessee. Since the commodity purchased, namely, timber is taxable and the purchase is in the circumstance under which no tax is payable by the seller, the respondent is liable to pay tax u/s 5A as respondent admittedly used item in the manufacture of furniture for sale in the State.

The next question to be considered is whether Section 5A applies in respect of commodities falling under the Fifth Schedule to the Kerala General Sales Tax Act, 1963. We do not find any restriction u/s 5A limiting liability to any goods or any class of goods or to goods falling under any of the Schedules to the Act. Section 5A is a charging section by itself and if conditions stated therein are satisfied, it would apply to commodity falling under any of the Schedules to the Act. Therefore, Section 5A applies to commodities falling under the Fifth Schedule also. However, during the relevant years the tax payable in respect of a commodity under the Fifth Schedule when sold by a dealer to a registered dealer, whether it be for resale or for consumption or use, is only at the rate provided under column (4) which in this case is six per cent for 1994-95 and 10 per cent for 1995-96, Later by an amendment of 1997 even sale to a registered dealer other than for resale was brought to tax under column (8). Therefore, in respondent-assessee''s case even though timber purchased is used in manufacture and were not sold, liability u/s 5A should be limited to the tax payable under column (4) of the Fifth Schedule. We, therefore, allow the revision cases by reversing the order of the Tribunal but with direction to the officer to refix the liability at the rate applicable during the relevant years under column (4) of the Fifth Schedule to the Kerala General Sales Tax Act, 1963 as stated above.