Tax Law; Star Metals Vs. Authority for Clarification [Kerala High Court, 06-07-2011]

Value Added Tax Act, 2003 (Kerala) – Ss. 8(b), 62(1) & 94 –  Stone Crushing Units – Machines used for crushing the stone – Machine falls under item (iii) – liable to pay tax fully.

2011 (3) KLT SN 100 (C.No.100) : 2011 (3) KHC 286



Dated this the 6th day of July, 2011

O.T.A. No. 3 of 2011

Star Metals Vs. Authority for Clarification

For the Petitioner: C.K. Thanu Pillai, K.P. Joy; For Respondent : Mohammed Rafiq, Government Pleader


Ramachandran Nair, J.

This is an appeal filed under Section 62(1) of the Kerala Value Added Tax Act challenging the order issued by the authority for clarification under Section 94 of the Act.

2. We have heard learned counsel appearing for the appellant and learned Government Pleader appearing for the respondent.

3. The appellant applied for payment of tax at compounded rate in respect of the stone crushing unit installed and run by the appellant. Stone crushing units are entitled to remit tax at compounded rate based on the size (length and width) of the machine used for crushing the stone. The compounded rates provided for the machines of different sizes under Section 8(b) are the following:-

“(i) for each crushing machine of size not exceeding 30.48cm x 22.86cm = Rs.50,000/- p.a.

(ii) for the each crushing machine of size exceeding 30.48cm x 22.86cm but not exceeding 40.64cm and 25.40cm = Rs.1,60,000/- p.a.

(iii) for each crushing machine of size exceeding 40.64cm x 25.40cm = Rs.3,20,000/- p.a.

(iv) for each cone crusher Rs.7,50,000/- p.a.”

4. The appellant’s machine is admittedly of the length of 55cm and width of 22.5cm and the appellant paid tax at Rs.1,60,000/- p.a. However, the Intelligence Wing of the Department noticed that the appellant’s machine falls under item (iii) above and the appellant is therefore liable to pay tax at Rs.3,20,000/- p.a. as against Rs.1,60,000/- paid, which is only half the rate payable. Consequently, additional demand is raised for the tax, interest and penalty. It is in this context, the appellant applied for clarification, which led to the order impugned in this appeal.

Learned counsel for the appellant pointed out that in order to be covered by clause (iii) both the length and width of the machine should be more than the specifications mentioned therein. Admittedly, length of the machine is 55cm and therefore so far as length is concerned, appellant’s machine falls squarely within clause (iii). The contention raised by the learned counsel is that since the width of the appellant’s machine is only 22.5cm, which is less than the width of the machine referred to in clause (iii) i.e. 25.40cm, the appellant’s machine will not fall under clause (iii). What is clear from the dimensions of machines provided in the above classifications is that generally the width of machines are standard and the range of difference is very little. What is significant is the length of the machine, which is determinative of the volume and quantity of the stone chips produced by use of the machine. We, therefore notice that incidents of tax is directly related to the length of the machines, width remaining almost same for all the machines. While machines below 30.48cm of length attracts an annual tax of Rs.50,000/-, for machines with length of 30.48cm and up to 40.64cm the rate of tax is more than three times i.e. Rs.1,60,000/- p.a. So far as the 3rd category is concerned, if the length of the machine is above 40.64cm (in appellant’s case it is 55cm) the tax payable is Rs.3,20,000/- p.a. What is clear from the Scheme of Classification is that tax payable is directly proportionate to the volume and quantity of goods produced by the machines.

To achieve this objective the capacity of the machine has to be taken by multiplying the length with width. Therefore, in our view, the minor variation in the width of appellant’s machine does not take it outside clause (iii). Further as already stated, the determinative feature of the machine with standard width indicating the volume and quantity of production being length, the appellant’s machine is squarely covered by clause (iii). We, therefore uphold the clarification issued by the authority constituted for the said purpose.

Consequently, this appeal is dismissed.

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