M/S. PEEKA Y RE-ROLLING MILLS (P) LTD. versus THE ASSISTANT COMMISSIONER AND ANR.

Citation: [2007] 4 S.C.R. 185 · Decided: 20-03-2007 · Supreme Court of India · Bench: ASHOK BHAN · Disposal: Appeal(s) allowed

Cited by 2 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

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MIS. PEEKA Y RE-ROLLING MILLS (P) LTD. 
A 
v. 
THE ASSISTANT COMMISS!ONER AND ANR. 
MARCH 20, 2007 
[ASHOK BHAN AND DAL VEER BHANDARI, JJ.] 
B 
... 
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Kera/a General Sales Tax Act, 1963: Sections 5, 5A and 10. 
Sales tax-Single-stage tax-AYs 1995-96 to 1999-2000- Declared c 
goods-Levy on sale or purchase of goods-Exemption notification-Levy 
and collection-Distinction between-Assessee, a registered dealer under 
the State Act, carried on the business of steel re-rolling mills-The raw 
material used by the assessee in the production of bars and rods was steel 
ingots, which the assessee either manufactured or purchased from other 
manufacturers from within or outside the State- Purchase of steel ingots D 
effected by the assessee within the State were from manufacturing units, 
which were exempt from the payment of saies tax by virtue of an exemption 
... 
notification issued under Section JO of the State Act-For the AY 1994-95, 
the assessee was assessed to nil taxable turnover-For the AY 1995-96, the 
assessee was assessed to a certain taxable turnover-Subsequently, the 
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assessee received show cause notices for the AYs 1994-95 to 1999-2000 
wherein it was stated that the assessee had purchased ingots from dealers 
within the State who were exempted from payment of tax and the goods were 
liable to tax under the State Act-It was further stated in the show cause 
notices that since the supply of such ingots did not suffer any tax at the time 
). 
of sale due to the exemption notification, therefore, the assessee was liable F 
to pay purchase tax under Section 5A with interest under Section 22(3) of 
the State Act-The High Court rejected the assessee's contention that in view 
of the provisions of Article 286(3) of the Constitution of India read with 
Section 15 of the Central Sales Tax Act, it was impermissible to levy purchase 
tax under Section 5A of the State Act-Correctness of-Held: By virtue of 
Section I 5 of the Central Sales Act, declared goods once made liable to tax G 
cannot be made to suffer an additional tax liability-Exemption can only 
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operate when there has been a valid levy for, if there was no levy at all, there 
would be nothing to exempt-Exemption does negate a levy of tax altogether-
Despite an exemption, the liability to tax remains unaffected, only the 
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186 
SUPREME COURT REPORTS 
[2007] 4 S.C.R. 
A subsequent requirement of payment of tax to fulfill the liability is done away 
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with-Collection and levy are distinct and that collection is not an essential 
facet of levy-Thus, the liability to tax or taxability under Section 5 of the 
State Act remains unaffected by an exemption under Section JO of the State · 
Act-Hence, purchase tax cannot be levied on the assessee for the same 
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would violate the condition of single-stage tax under Section 15 of the 
Central Sales Tax Act-High Court judgment set aside-Central Sales Tax 
Act, 1957, S. 15-Constitution of India, 1950, Arts. 277 and 2'86(3). 
... 
The appellant was a registered dealer under the Kerala General Sales 
.... 
Tax Act, 1963 and it carried on the business of steel re-rolling mills. The 
c raw material used by the appellant in the production of bars and rods was 
steel ingots, which the appellant either manufactured or purchased from other 
manufacturers from within or outside the State. Purchase of steel ingots 
effected by the appellant within the State were from manufacturing units, 
which were exempt from the payment of sales tax by virtue of an exemption 
notification issued under Section 10 of the State Act. 
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For the assessment year 1994-9S, the appellant submitted a return of 
turnover and was assessed to tax declaring the taxable turnover at nil. For 
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the assessment year 199S-96 also, the appellant's assessment was completed 
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determining the taxable turnover at a certain amount. Subsequently, the 
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appellant received show cause notices for the AYs 1994-9S to 1999-2000 
wherein it was stated that the appellant had purchased ingots from dealers 
within the State who were exempted from payment of tax and the goods were 
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liable to tax under the State Act. It was further stated in the show cause 
notices that since the supply of such ingots did not suffer any tax at the time 
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of sale due to the exemption notification, therefore, the appellant was liable to 
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F pay purchase tax under Section SA with interest under Section 22(3) of the 
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State Act. 
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