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Judgment
Justice Antony Dominic
WP(C) No. 10532/06 has been filed seeking to quash Ext. P5 to the extent gurjan has been included at item No. 91(1)(i) and to quash Ext. P6, the order passed u/s 47(6) of the KVAT Act levying penalty on the petitioner. Briefly stated, the case of the petitioner is that he is engaged in the manufacture and sale of veneers. For manufacturing purpose, petitioner imports soft wood from different countries including Myanmar. In so far as this case is concerned, Ext. P1 is the commercial invoice by which the petitioner purchased Gurjan logs from Myanmar. The logs were delivered at the Port of Tuticorin for onward transmission to the petitioner''s place of business at Perumbavoor. Ext. P2 is the delivery note in Form No. 15 of the KVAT Rules. En route, at the Meenakshipuram check post, the goods were detained demanding payment of Rs. 53,750/- as entry tax, which was paid. Thereafter, Ext. P3 notice u/s 47(2) was issued demanding security deposit on the ground that the timber in question is a hard wood and therefore is liable to pay tax @12.5% instead of 4%. This proceedings finally culminated in Ext. P6 order u/s 47(6) by which rejecting the contentions of the petitioner that his liability is only to pay tax @4% payable for soft wood, it was held that, tax payable is @ 12.5%. On that basis, penalty of Rs. 1,07,500/- was levied on the petitioner. In this order, reliance has been placed on Ext. P5, a notification issued by the Commissioner for Commercial Taxes in exercise of his powers u/s 6(1)(d) of the KVAT Act notifying the list of goods taxable @12.5%. In that notification, as item No. 91(1)(i), gurgan/gurjan also has been included. Since penalty has been levied on the petitioner in view of Ext. P5 notification, petitioner is seeking to challenge Ext. P5 also. This is the background in which WP(C) No. 10532/06 has been filed.
In so far as WP(C) No. 18081/08 is concerned, petitioner herein is also a manufacturer of veneers. He is aggrieved by Ext. P2 assessment order passed for the year 2005-06 levying tax @ 12.5% on the sale of gurjan. This again has been done on the basis of SRO 82/06 referred to as Ext. P5 herein above and circular No. 12/2006 issued on the basis of the SRO.
The contention raised by the learned counsel for the petitioners is that SRO 82/06 on the basis of which the circular referred to above has been issued is illegal and without jurisdiction. Therefore, according to him, the levy of penalty as per Ext. P6 in WP(C) No. 10532/06 and the completion of assessment as per Ext. P2 in WP(C) No. 18081/08 is illegal.
Respondents have filed a counter affidavit in WP(C) No. 10532/06. In the counter affidavit filed, there is no serious contest that the timber in question is gurjan, which is also known as gurgan. However, they say that on the basis of the study reports obtained from the Kerala Forest Research Institute, the timber has been identified as a hardwood and therefore is taxable @12.5% as ordered in the SRO referred to above.
Having considered the rival submissions, I am inclined to think that the petitioners are entitled to succeed. The timber in question has been described as gurjan, gurgan and kalpine. The fact that gurjan is also known as kalpine is substantiated by the petitioners by referring to the INDIAN WOODS, their identification, properties and uses by K.A. Chowdhury and S.S. Ghosh, Volume I. In this book, it is stated that the timber belongs to the genus Dipterocarpus, which includes about 80 species and that 13 species grow in the Indian Zone (Andamans, Burma, Ceylon, India and Pakistan). It is also described as a wood oil tree of Malabar and that in Malayalam it is known as kakka, kalapayini, kalpine, kalpayan and vellaini. Therefore, as far as the identity of timber is concerned, there cannot be much controversy.
Then the only question is whether it was within the jurisdiction of the Commissioner to have exercised his power u/s 6(1)(d) to issue the SRO classifying gurjan as a hard wood and levy tax @12.5%. Section 6 provides for levy of tax on sale or purchase of goods. Section 6(a) provides that in the case of goods specified in the Second and Third Schedules, tax shall be levied at the rates specified therein and at all points of sale of such goods within the State. Section 6(c) provides for levy of tax on transfer of the right to use any goods. Section 6(d) provides that in the case of goods not falling under Clauses (a) or (c), the rate of tax shall be 12.5% at all points of sale of such goods within the State. It is also provided that the Government may notify a list of goods taxable at the rate of 12.5%. SRO itself states that it has been issued u/s 6(1)(d). In the IIIrd schedule to the Act, item No. 144 was "soft wood (given as Annexure 1)". Annexure 1 contained a list of 48 species of soft wood and item No. 3 reads as Karanjali/Kalpine and the botanical name has been given as Dipterocarpus indicus. Item No. 144 of the Schedule and the Annexure remained in the IIIrd schedule until it was omitted by Act 22 of 2006 w.e.f. 1/7/2006. Therefore, until the item was removed from the IIIrd schedule, gurjan which is also known as kalpine was identified as a soft wood, and that the rate of tax applicable was 4%.
It was when the position remained as above, SRO 82/2006 was issued by the Commissioner in exercise of his powers u/s 6(1)(d) of the Act and it was published as GO(P) No. 4/06/TD dated 21st of January, 2006. Circular No. 12/06, which is Ext. P3 in WP(C) No. 18081/08 is also dated 9/3/2006. So long as gurjan/kalpine which was identified as a soft wood remained in the Annexure to the IIIrd Schedule to the Act, Commissioner could not have exercised his power u/s 6(1)(d) and issued the SRO referred to above or the circular referred to above. The fact that the Kerala Forest Research Institute submitted a study report also does not alter the situation. Therefore, till 1/7/2006, when alone gurjan was removed from the IIIrd schedule, the Commissioner had no jurisdiction to invoke his power u/s 6(1)(d) to issue the SRO or the circular referred to above. For that reason itself, the notification and the circular, which are Ext. P5 in WP(C) No. 10532/2006 and Ext. P3 in WP(C) No. 18081/08 are illegal and deserves to be quashed. Consequently, these writ petitions are to be allowed. Ext. P5, SRO No 82/2006 to the extent gurgan has been included at item No. 91(1)(i) and Ext. P6 order issued u/s 47(6) challenged in WP(C) No. 10532/06 are quashed. Exts. P2 and P3, the assessment order for the year 2005-06 and circular No. 12/06 challenged in WP(C) No. 18081/08 are also quashed.
Writ petitions are allowed as above. Petitioners will be entitled to consequential benefits. No costs.