IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO(S) 5348-5350 OF 2011 (Arising out of SLP (Civil) No(s) 16830-16832 of 2009)

DEEPA PANELS                                   Appellant(s)

                VERSUS

STATE OF KERALA                               Respondent(s)

O R D E R

1. Delay condoned.

2. Leave granted.

3. The  appellant  herein  is  an  assessee  manufacturing  

chemically treated rubberwood products.  The assessee filed  

its  annual  returns  claiming  exemption  from  payment  of  

purchase tax.  In that context, the issue that arose for  

consideration  is  whether  the  assessee  is  entitled  for  

exemption from payment of purchase tax.   

4. The contention of the appellant was that the appellant  

is eligible for exemption from payment of tax in respect of  

purchase of rubberwood from unregistered dealers.  For the  

assessment  year  1998-99,  1996-97,  the  assessing  authority  

completed the assessments and granted exemption even from  

payment  of  purchase  tax.   However,  after  the  aforesaid  

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assessment  orders  were  passed,  action  was  taken  for  re-

opening of the assessment for the aforesaid assessment years  

in question and a notice to that effect was issued to the  

assessee who in receipt of the aforesaid notice filed its  

reply contending, interalia, that in view of the exemption  

certificate  granted  by  the  General  Manager,  District  

Industries Centre, the assessee is entitled for exemption  

from  payment  of  purchase  tax.   The  assessing  authority  

considered the records including the objections taken by the  

assessee  and  thereafter  it  held  and  passed  an  order  of  

assessment that the assessee is not entitled from exemption  

of levy of purchase tax under Section 5A of the Karnataka  

General Sales Tax Act [for short “KGST Act”].

5. Aggrieved by the orders of the assessment passed for  

the assessment year 2001-2002 and orders of re-assessment  

passed by the assessing authority for the assessment years  

1998-99 and 1996-97, the assessee filed appeals before the  

Kerala Sales Tax Appellate Tribunal, Addl. Bench, Palakkad.  

The Tribunal by its orders dated 10.08.2004 and 06.08.2007  

rejected  the  appeals  filed  by  the  appellant  against  the  

order of re-assessment for the years 1996-97 and 1998-99 and  

also the order of assessment for the year 2001-2002.

6. Aggrieved  by  the  aforesaid  orders  passed  by  the  

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Tribunal, revision petition was filed before the Kerala High  

Court which was registered as Sales Tax Revision No. 6 of  

2008.  The High Court, after hearing the counsel appearing  

for the parties held that the article manufactured by the  

assessee is not covered by the Notification SRO No. 1729 of  

1993 and, therefore, the issue that arises for consideration  

according to the High Court was covered by the decision of  

this Court in the case of  State of Kerala Vs.  Vattukalam  

Chemicals Industries 2001(6) SCC 764.  In that view of the  

matter, it was held that the assessee was not entitled for  

exemption  from  payment  of  purchase  tax.   The  High  Court  

further held that the assessee at best could be entitled for  

exemption only on the goods manufactured and sold and no  

exemption could be granted from payment of purchase tax.  

The aforesaid findings which are recorded by the High Court  

are under challenge in these appeals in which we have heard  

learned counsel appearing for the parties.

7. Having considered the submission of the learned counsel  

appearing for the parties and also the decisions referred  

to, we are of the view that the facts of the case in hand  

are similar to the one which was decided by this Court in  

the  case  of  State  of  Kerala Vs.  Vattukalam  Chemicals  

Industries(supra).   Learned  counsel  appearing  for  the  

appellant, however, relied upon two decisions of this Court  

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being Pondicherry State Cooperative Consumer Federation Ltd.  

Vs.  Union  of  Pondicherry 2008(1)  SCC  206  and  Vadilal  

Chemicals Ltd. Vs. State of A.P. and others 2005(6) SCC 292.

8. Having considered the ratio laid down by the aforesaid  

decisions in the light of the Notifications relevant for the  

purpose of deciding this case and referred to by the learned  

counsel appearing for the parties, we are of the opinion  

that the two decisions which are relied upon by the learned  

counsel appearing for the appellant are distinguishable on  

facts.   In  the  aforesaid  two  decisions  relied  upon,  the  

exemption  certificates  which  were  issued  by  the  District  

Industries Department consisting of experts on the subject  

were sought to be interpreted by the assessing authority and  

thereby arriving at the conclusion for denial of the benefit  

of exemption to the assessee therein.

9. This Court also noted that there is a turn around by  

the  State  by  taking  two  contradictory  stands  at  two  

different points of time, which according to this Court,  

should not have been done, and in that view of the matter,  

the  aforesaid  two  decisions  were  rendered.   In  our  

considered opinion, the ratio of the aforesaid two decisions  

are distinguishable on facts but so far as the decision of  

this  Court  in  Vattukalam  Chemicals  Industries(supra)  is  

concerned, the facts are almost similar.  In that Judgment,  

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this Court has clearly held that the assessee therein is not  

entitled for exemption from payment of purchase tax as the  

article manufactured is not included in the Notification,  

namely, SRO No. 499/1990.  Learned counsel appearing for the  

appellant, however, sought to submit that SRO No. 499/1990  

which was considered in the aforesaid case i.e. Vattukalam  

Chemicals  Industries  case(supra)was  superseded  by  a  

subsequent Notification SRO No. 1729 of 1993.

10. We have perused and considered the said Notification  

very carefully but in the said Notification also, we find  

that no exemption was granted to the article manufactured by  

the appellant as well.  The ratio of the decision in the  

case  of  Vattukalam  Chemicals  Industries (supra)  was  laid  

down in the context of the Notification SRO No. 499/1990.  

There is no change in the ground situation in the subsequent  

Notification also and, therefore, we see no reason as to why  

the ratio of the decision in Vattukalam Chemicals Industries  

(supra)  would  not  be  applicable  to  the  facts  and  

circumstances of the present case.

11. We are also of the opinion that the assessee could be  

said to be entitled for exemption only on goods manufactured  

and sold but it cannot claim any exemption from payment of  

purchase tax.

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12. Having held thus, we find no merit in these appeals  

which are accordingly dismissed. No costs.

.......................J.  (DR. MUKUNDAKAM SHARMA)

.......................J.  (ANIL R. DAVE)

NEW DELHI JULY 12, 2011.

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