The Travancore Rubber & Tea Co. Ltd. V. Asst. Commissioner (Assmt). Commercial Taxes Special Circle, Trivandrum and Deputy Commissioner of Commercial Taxes, Trivandrum and Commissioner of Sales Tax, Trivandrum and Deputy Tahsildar R.R., Trivandrum

WA/443/2007

AI Insights

The case involves The Travancore Rubber & Tea Co. Ltd., which appealed against the penalty imposed for not depositing sales tax collected on the sale of rubber trees during the assessment year 1996-97. Initially, the sale of rubber trees was not considered taxable, but subsequent rulings redefined rubber trees as timber, making their sale taxable. The appellant had collected tax from the purchasers but did not deposit it with the State, leading to penalty proceedings. The High Court of Kerala confirmed the penalty, stating that the appellant's actions constituted an incorrect return under Section 45A of the KGST Act, which allows for a penalty up to twice the amount of tax sought to be evaded.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 798997 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 18-02-2019
• Assessment Year: misc
• Other Referred Cases: M/s. Tropical Plantations Limited v. State of Kerala, Padinjarekara Estates Limited v. State of Kerala, Tropical Plantations Limited & Others Vs. State of Kerala
• Laws Referred To: KGST Act, KGST Rules
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: V K SHAMSUDHEEN
• Assessee Lawyers: JOSEPH MARKOSE; MITHUN MARKOS
• Keywords: Penalty; Rubber trees; Sales tax liability; Tax Collection; Incorrect return
• Section: 22; 46A; 18(3); 45A

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 18TH DAY OF FEBRUARY 2019 / 29TH MAGHA, 1940 WA.No. 443 of 2007 AGAINST THE ORDER/JUDGMENT IN WPC 18021/2003 of HIGH COURT OF KERALA DATED 05-10-2006 APPELLANT/S: THE TRAVANCORE RUBBER & TEA CO. LTD. PLANTATION HOUSE, PATTOM SIVARAMAKRISHNA AIYAR ROAD, PATTOM PALACE P.O.,, TRIVANDRUM - 695 004, REPRESENTED BY ITS, DIRECTOR, MR.S. RAMAKRISHNA SARMA. BY ADVS. SRI.JOSEPH MARKOSE (SR.) SRI.MITHUN MARKOS RESPONDENT/S: 1 ASST. COMMISSIONER (ASSMT). COMMERCIAL TAXES SPECIAL CIRCLE,, TRIVANDRUM. 2 DEPUTY COMMISSIONER OF COMMERCIAL TAXES TRIVANDRUM. 3 COMMISSIONER OF SALES TAX TRIVANDRUM. 4 DEPUTY TAHSILDAR R.R. TRIVANDRUM. BY ADV. GOVERNMENT PLEADER OTHER PRESENT: SRI V.K. SHAMSUDHEEN SR GP THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 18.02.2019, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: WA No.443/2007 2 J U D G M E N T Vinod Chandran, J The appeal arises from the judgment of the learned Single Judge which refused to interfere with the order of penalty which was only modified reducing the quantum to equal amount of tax. The issue arises in the assessment year 1996-97 and is with reference to the sales tax liability on sale of rubber trees. The issue had been engaging the attention of this Court and in a decision reported in 1997 (5) KTR 26 (KER) [M/s. Tropical Plantations Limited v. State of Kerala & Padinjarekara Estates Limited v. State of Kerala] it was finally held that sale of rubber trees would not attract sales tax since the felled trees cannot be brought under the definition of timber. 2. The State took the matter in appeal WA No.443/2007 3 and the Hon'ble Supreme Court remanded the matter for fresh consideration to the Sales Tax Appellate Tribunal (STAT). The STAT then, found that the rubber tree is used in manufacturing of furniture and held that it is timber. The order of the STAT is reported in 1999(7) KTR 459 The Tropical Plantations Limited & Others Vs. State of Kerala. This Court confirmed the order of the STAT by a decision reported in 2009 (26) VST 403 [ Tropical Plantations ltd. v. State of Kerala]. The issue is now said to be pending in appeal in Civil Appeal Number 11351/2009 and connected matters. 3. The penalty as imposed in the present case, however, does not revolve on the final decision of the Hon'ble Supreme Court at all. The subject assessment year is when this Court had held in favour of the assessee. Presumably because of the matter pending before this Court; the assessee WA No.443/2007 4 collected a deposit from the person with whom they entered into an agreement for purchase of rubber trees after felling them. This was to satisfy the liability to tax, if at all the issue was held against the assessee, in the pending cases. The deposit so accepted, is in purported collection of tax. The Assessing Officer thus found the return to be incorrect and directed the amounts so collected to be paid to the exchequer and also initiated penalty proceedings. 4. The assessee paid up the amounts determined as tax and contested the penalty proceedings. The lower authorities concurrently found the issue against the assessee and the learned Single Judge confirmed the ground for initiating penalty but however modified the penalty to equal amount of tax. 5. The learned Senior Counsel Joseph WA No.443/2007 5 Markose argues that if at all a penalty under Section 46A is imposed, it cannot exceed Rs.5000/-. There was absolutely no ground for alleging the return to be incorrect since at that point of time there was no tax payable. The deposits collected from the persons to whom the rubber trees were sold were only in lieu of the anticipated liability. If the liability arose the assessee would pay up the amounts and if not, the assessee would refund the deposited amounts to the purchaser. The learned Senior Counsel also points out the earlier orders passed by the department, specifically Ext.P4 wherein an application for refund was rejected on the contention that the assessee had not refunded the amounts to the persons from whom collection was made. 6. Sri.Shamsudheen, learned Senior Government Pleader however, submits on the basis of WA No.443/2007 6 the records that the agreement itself shows the collection of an ascertained amount in lieu of sales tax and income tax. Hence the amount collected was purportedly in lieu of tax and the assessee ought to have deposited it to the State. When the assessee had specifically collected the tax, the returns could not have been filed showing no tax on the sale effected since, there was definitely collection of tax. The assesse ought not to have created a device of deposit with itself. On collection of amounts as tax, the same should have been paid to the Government and refund claimed when there is a decision in favour of the assessees exonerating such liability. 7. We perfectly agree with the learned Single Judge insofar as the finding that the assessee is liable to be imposed with penalty. From the agreement; which we see from the records made WA No.443/2007 7 available by the learned Government Pleader across the Bar, the collection has been made in lieu of tax. When such collection was made necessarily it has to be paid over to the State. We quite understand that the issue itself was in a flux and it was not finally decided as to whether there is liability to tax or not. If at all the assessees were absolved of the tax liability the assessee could have refunded the amounts to the ascertained purchasers and then sought for a refund from the State. Or otherwise, as specifically provided under Section 46A(2) the purchasers of rubber trees who paid up the tax to the assessee could have approached the State producing the evidence of payment and sought for a refund. 8. Ext.P4 pointed out by the learned Senior Counsel according to us does not at all make the assessee's case better, since the assessee's WA No.443/2007 8 application itself was not properly filed. In fact the Senior Government Pleader points out that Ext.P4 speaks of only forfeiture and no application is seen to have been filed by the assessee. 9. In the above circumstances we find that the assessee having collected the tax the same has to be paid over to the State as per Section 22 of the KGST Act and Rule 18(3) of the KGST Rules. The same having not been done, penalty proceedings initiated against the assessee was perfectly in order. The assessee had also filed an incorrect return insofar as the tax collected having not been shown in the records. The proceedings hence was under Section 45A, where the penalty could extent to twice the amount of tax sought to be evaded. The assessee had not paid over the tax to the State despite collecting. The deposit in lieu of tax was a device employed to deprive the State of the tax; WA No.443/2007 9 when already collected by the seller. As was noticed earlier if at all the assessee was absolved from such liability there could have been a refund sought either by the assessee or by the person who suffered tax; producing evidence of refund having been made to the purchaser and in the latter case producing evidence of payment of tax having been effected. We do not think there could be any further modification on the quantum of the penalty. We hence affirm the order of the learned Single Judge and dismiss the appeal. There is no order as to costs. Sd/- K. Vinod Chandran, Judge Sd/- Ashok Menon, Judge jma "