Legislative History of the Sales Tax Law in Kerala
The
history of Sales tax in India begins from 1938. During
the pre-independence days the Provinces in British
India were empowered under the
Government of India Act, 1935 to levy taxes
on the sale of goods and on the advertisements, as
per Entry 48 in list II of the VIIth Schedule of the
Act. At the same time the Princely State had sovereign
legislative powers to promulgate their own laws for
the levy of tax on the transaction of sale of goods.
The first Province in India to levy a tax on sale
of goods by exercising powers of the Government of
India Act 1935, was Central Provinces and Berar (renamed
Madhya Pradesh after Independence), which in 1938
levied a tax on the retail sale of motor spirit and
lubricants. This levy however was only a selective
Sales tax. The Province of Madras was the poineer
province in India in the matter of introducing a scheme
of General Sales tax. Madras introduced a General
Sales tax in 1939 on multipoint system. In 1941 Bengal
followed a single point system. In the same year
Punjab commenced General Sales tax on multi point
system. Shortly after this, almost all the Provinces
and some of the Princely States introduced Sales tax
in one form or other.
2. Though
the State of Kerala itself was formed only on 1-11-1956
by the integration of the Malabar District and the
Kasaragod Taluk of the South Kanara District of the
Madras State with the Travancore Cochin State (excepting
the areas transferred to the Madras State), which
itself was the result of an earlier integration of
the two princely state of Travancore and Cochin on
1-7-1949 Sales tax was introduced in the component
parts of the State on much earlier dates. In the
erstwhile Cochin State, Sales tax was introduced on
the first day of Chingam 1122 corresponding to the
17th day of August 1946 by the
Cochin Sales Tax Act (Act XV
of 1121). In the erstwhile Travancore State
the introduction of Sales tax was on 1-10-1124 M E
by the Travancore
General Sales Tax Act 1124 (Act XVIII of 1124).
So far as the erstwhile Malabar District and the Kasaragod
Taluk are concerned, the Madras General Sales tax
Act, 1939 (Act IX of 1939) the Madras
Sales of Motor Spirit Taxation Act, 1939 (Act VI of
1939) and the Madras Tobacco (Taxation of Sales
and Registration) Act, 1953 (Act IV of 1953 were in
force at the time of the integration on 1-11-1956.
Soon after the integration of Travancore and Cochin
states, a unified Act for the newly formed United
States of Travancore and Cochin as the new state was
then called was promulgated in 1950 under the title
"The United State of Travancore
and Cochin General Sales Tax Act 1125 (Act XI of 1125)".
This Act received the assent of His Highness the Raj
Pramukh on 5th January 1950 corresponding
to 21st Dhanu 1125 and as per Government
Notification No S R 1-353 A /49/RD dated 29-5-1950
the Act came into force on 30th May 1950.
The scheme of taxation was, in general, a multi point
one at the rate of there paisa for every Indian rupee
on the total turnover with additional tax at rates
ranging from 3 pies to 9 pies per rupee at specified
single points in respect of certain specified classes
of goods and exemption in respect of some others.
At the same time in respect of a few items of goods,
the scheme of taxation was single point one. The
assessable limit was fixed as net turnover of Rs.
10,000. The Travancore General Sales tax Act 1124
(Act XVIII of 1124) and the Cochin Sales tax Act 1121
(Act XV of 1121) were repealed by Act XI of 1125.
By the end of November 1950, the title of the Act
was altered as The Travancore Cochin General Sales
tax Act, 1125, by the Travancore
Cochin Adaptation of Laws Act (Act XXIX of 1950)
which was published in the Travancore Cochin Gazette
of 28-11-1950 with immediate effect. After the formation
of the Kerala State on 1-11-1956, the name of the
Travancore Cochin General Sales tax Act, 1125 (Act
XI of 1125) was changed as the General Sales tax Act
1125 (Act XI of 1125) and it was extended to the Malabar
area with effect from 1-10-1957 by the Travancore
Cochin General Sales tax (Amendment) Act 1957 (Act
12 of 1957). Till then, the pre integration Acts
mentioned above continued to be in force in the respective
areas. In respect of the financial year 1957, special
provisions were made in the Amendment Act for taking
into account the turnover under the Madras General
Sales tax Act 1939 also while completing the assessment
for that financial year. In 1963, the General Sales
tax Act 1125 was repealed and re-enacted by the Kerala
General Sales tax Act, 1963 (Act XV of 1963), which
now continues to be in force. The changes brought
about from time to time in the Sales tax law from
the introduction of Act XI of 1125 are discussed below.
3.
The first amendment to the Travancore
Cochin General Sales tax Act 1125 was by the
Act 28 of 1950, which introduced an additional tax
at 4 annas per rupee on the first sale of tobacco.
As a result of the Federal Financial Integration the
entire Customs,Revenue of the State was vested in
the Central Government and hence the State has to
face a serious set back in the Collection of Revenue.
This amendment was introduced to compensate for the
loss in customs duty on tobacco consequent on the
Federal Financial Integration.
4.
The next amendment of the Travancore Cochin General
Sales tax Act, 1125 was by Act 12 of 1951, consequent
on the passing of the Constitution on 26th
January 1950. This is an important landmark in the
history of Sales tax Laws in Kerala. Before passing
the Constitution by the parliament, each state or
province exercising either its sovereign legislative
powers or the powers under the Government of India
Act 1935, picked up one or more of the ingredients
of sale and acting on the principle of territorial
nexus enacted Sales tax Laws for their own States
or Provinces. Assam and Bengal made among other things
the actual existence of the goods in the Province
at the time of the contract of sale as the test of
taxability. In Bihar, the production or manufacture
of the goods in the province was made an additional
ground. A tax net of the widest range was laid in
Central Province and Berar where it was sufficient
if the goods were actually found in the Province at
any time after the contract of sale or purchase was
made. As regards Madras the existence of the goods
and production after the contract in respect of future
goods within the Province was adopted as the test
of taxability. Travancore Cochin states followed
the lines of Madras. This led to multiple taxation
in inter State trade or commerce resulting in cumulation
of burden falling ultimately on the consuming public.
This situation posed to the Constitution makers, the
problem of restricting the taxing power of the States
on sales or purchase involving inter State elements
and alleviating the tax burden of the consumer. At
the same time they were evidently anxious to maintain
the State power of imposing non discriminatory taxes
on goods imported from other States, while upholding
the economic unity of India by providing for the freedom
of inter state trade or commerce. In their attempt
to harmonise and achieve these goals they enacted
the Articles 286, 301 and 304. These articles read
as follows.
“286
(1) No law of a State shall impose, or authorise the
imposition of a tax on the sale or purchase of goods
where such sale or purchase takes place-
(a)
Outside the State or
(b)
In the course of the import of the goods, into or
export of the goods out of the territory of India
Explanation-
For the purpose of sub clause (a) a sale or purchase
shall be deemed to have taken place in the state in
which the goods have Actually been delivered as a
direct result of such sale or purchase for the purpose
of consumption in that state notwithstanding the act
that under the general law relating to sale of goods
the property in the goods has by reason of such sale
or purchase passed in another state.
(2)
Except in so far as Parliament may by law otherwise
provide no law of a State shall impose or authorise
the imposition of a tax on the sale or purchase of
any goods where such sale or purchase takes place
in the course of inter State trade or commerce.
Provided
that the President may by order direct that any tax
on the sale or purchase of goods which was being lawfully
levied by the Government of any State immediately
before the commencement of this Constitution shall
notwithstanding the imposition of such tax is contrary
to the provisions of this clause continue to be levied
until the thirty-first day of March 1951.
(3)
No law made by the Legislature of a State imposing
or authorising the imposition of a tax on the sale
or purchase of any such goods as have been declared
by parliament by law to be essential for the life
of the community shall have effect unless it has been
reserved for the consideration of the president and
has received his assent.
301.
Subject to the provisions of this Part, commerce and
intercourse throughout the territory or India shall
be free.
304.
Notwithstanding anything in Article 301 or Article
303 the Legislature of a State may by law –
(a)
Impose on goods imported from other States any tax
to which similar goods manufactured or produced in
that State are subject, so, however, as not to discriminate
between goods so imported and goods so manufactured
or produced; and
(b)
Impose such reasonable restrictions on the freedom
of trade, commerce or intercourse with or within that
State as may be required in the public interest.
Provided
that no bill or amendment for the purposes of clause
(b) shall be introduced or moved in the Legislature
of a State without the previous sanction of the President.
5.
The Constitution came into force on 26th
January 1950. But by the Sales tax Continuance Order
1950” the levy of tax ion inter State sales were allowed
to continue till 31st March 1951. The
Sales tax Continuance Order 1950 read as under;
“In
exercise of the powers conferred by the proviso to
clause (2) of Articles 286 of the Constitution of
India, the President is pleased to make the following
order;-
- (i)
This order may be called the Sales Tax continuance
Order 1950
(ii)
It shall come into force at once
2 Any
tax on the sale or purchase of goods which was being
lawfully levied by the Government of any State immediately
before the commencement of the Constitution of India,
shall until the thirty first, day of March 1951, continue
to be levied not withstanding that the imposition
of such tax is contrary to the provision of clause
(2) of Article 286 of the said Constitution.
6.
With the passing of the Constitution, some of the
States in India amended the definition of ‘sale’ in
their Acts, to bring it in the line with the provision
of Article 286. In Travancore Cochin as in Madras
State, a new section viz; section 26, which in effect
was only a reproduction of Article 286 was inserted
by the Travancore Cochin General Sales tax (Amendment)
Ordinance, 1951 which was then replaced by
the Act 12 of 1951. The statement of objects and
reasons for this section published in the Travancore
Cochin Gazette No 33-dated 14-8-1951 is reproduced
below.
“Article
286 of the Constitution of India lays down certain
restrictions on the imposition of tax on the sale
or purchase of goods. Accordingly no tax is leviable
on the sale or purchase of goods if the sale or purchase
takes place outside the State or in the course of
import into or export out of the territory of India.
But under the provisions of the Travancore Cochin
General Sales Tax Act, 1125 as they stand tax is leviable
on the sale or purchase of goods wherever the contract
of sale or purchase might have been made if the goods
are actually in the State at the time when the contract
was concluded. It was therefore necessary to amend
the Act in order it make its provisions conform to
the provisions of Article 286 of the Constitution.
Accordingly, a new section viz; Section 26, which
merely states the restrictions laid down in Article
286 was introduced in the Act by the Travancore Cochin
General Sales tax (Amendment) Ordinance, 1951. This
bill is intended to replace the above Ordinance by
an Act of the legislature.”
7.The
main change in 1952 was the enhancement of the Additional
tax on petrol from 9 pies to I anna 9 pies per rupee
by Act 13 of 1952. This change increased the Sales
tax revenue to a great extent.
8.
The next important change in the administration of
Sales tax Law was the commencement of levy of tax
on certain categories of inter State sales commonly
known as Explanation
Sales on the basis of the judicial pronouncement
by the Supreme Court of India in the case of The State
of Bombay and Another Vs. The United Motors (India)
Ltd; and Others” (1953 IV S T C 133). In that case
the Supreme Court held that the Explanation to Article
286 (1) of the Constitution provided by means of a
legal fiction that the State in which the goods sold
or purchased are actually delivered for consumption
there in is the State in which the sale or purchase
is to be considered to have taken place, notwithstanding
the fact that the property in such goods passed in
other State and that State had the power to tax the
sale or purchase. Relying on this interpretation
of Article 286 by the Supreme Court,a number of State
Governments commenced serving notices on dealers in
other States demanding Sales tax requiring appearance
with account books etc, in respect of such inter-State
transactions. The Government of India received a
large number of representations complaining against
the hardship caused by these notices. After consultation
with the State Governments the Government of India
convened the officials committee, which was appointed
by the "Conference of Finance Ministers"
to consider how the situation should be met. The
committee evolved an interim scheme for dealing with
the levy of tax etc., on inter State sales by the
State Governments. A press note embodying the scheme
was issued by the Central Government on 11-2-1954.
In pursuance of the said scheme the Government of
Travancore Cochin decided to levy tax on inter state
sales from 1-4-1953, the date immediately following
that on which the Supreme Court delivered its judgment,
and to forgo the levy prior to that date. A Press
Note explaining the position was issued by the State
Government on 5-2-1954. As per the press note, tax
was payable by non resident dealers selling goods
for delivery and consumption in Travancore Cochin
State from 1-4-1953.
9.
In 1955 by Act 18 0f 1955 in the light of experience
gained till then a number of major modifications were
made in the provisions of the Act which came in to
effect on 1-10-1955. The most important of them were:-
(1)
Making provisions for the appointment of an independent
Judicial Tribunal to hear appeals against orders of
the Appellate Asst. Commissioners and suo motu
orders of the Deputy Commissioner for revision before
the High Court against orders of the Appellate Tribunal
and from appeal before the high court against suo
motu orders of the Board of Revenue.
(2)
Empowering the officers of the Sales Tax Department
to seize account books and documents in certain circumstances;
(3)
Enlarging the list of items under the single point
system of taxation;
(4)
Exempting handloom cloth from levy of tax as a measure
of encouragement of the handloom industry; and
(5)
Introduction of an additional tax on fine and superfine
mill made textile to compensate for the loss due to
exemption of handloom cloth from tax.
10.
Another change brought about in 1955 was that petrol
and ‘motor spirit other than petrol’ were brought
under the single point scheme of taxation by Act 25
of 1955 at the rates of two annas and three pies and
nine pies respectively.
11.
During the year 1955, the State had to face a serious
situation regarding levy of tax on inter State sales
consequent on the historical decision of the Supreme
Court in Bengal Immunity Company Vs. State of Bihar
on 6th September 1955. Over ruling its
own earlier decision in State of Bombay and Another
Vs. The United Motors India (India Ltd.,) and Others’,
the Supreme Court in the case of Bengal Immunity Company
gave its authoritative interpretation on Article 286
of the Constitution and laid down that the States
had no power to tax on Inter State sales. This decision
created serious confusion and uncertainty regarding
the levy of tax during the period 1–4-1951 to 6-9-1955.
Several States including the Travancore Cochin states
had already collected tax from non-resident dealers
and steps for collection were in progress in respect
of several others. In this situation the Government
of India had to step in to set at rest the confusions
and uncertainties. This led to the promulgation of
the Sales tax Laws Validation Ordinance, 1956 by the
President on 30th January 1956 validating
the levy of tax on interstate sales or purchases between
1-4-1951 and 6-9-1955. This was later followed by
the Sales Tax Laws Validation Act, 1956 passed by
the Parliament and published with the Presidents assent
on 21st of March 1956.
12.
As regards amendment of the Act in 1956, the only
change was that Section 3 was amended making provisions
for provisional assessments with retrospective effect
from 30-5-1950 by Act 8 of 1956.
13.
On 1-11-1956, the Kerala State was formed and by the
Kerala Adaptation of Laws Order, 1956, the Travancore
Cochin and the Madras Acts were made applicable to
the respective parts of the State until unification
of the laws.
14.
The year 1957 marks an important epoch in the history
of sales tax in India in general. As discussed above,
following the decision of the Supreme Court in the
State of Bombay ands Another Vs. The United Motors
(India) Ltd. and Others, the states began levying
tax on inter State sales and we had the misfortune
of having conflicting decisions of the High Courts
regarding the scope of Article 286. In 1953, the
Government of India convened a Conference of Finance
Ministers to solve the difficulties caused by those
decisions and to consider the question of bringing
about a measure of uniformity in the sales tax Laws
of the various States. On 1st April 1953,
the Government of India also constituted the
Taxation Enquiry Commission headed by late Dr. John
Mathai. The report of the Commission was
published in 1955. One of the recommendations of
the Commission was to amend the Constitution empowering
the Central Government to levy tax on inter State
sales and purchases of goods other than newspapers.
Accordingly, the Constitution was amended by the Constitution
(Sixth Amendment) Act, 1956 deleting explanation to
clause (1) (a) of Article 286 and substituting the
existing clause (2) and (3) by new clauses which enabled
the Parliament to make laws to formulate principles
for determining when a sale of purchase of goods takes
place outside a State and in the course of import
of the goods into or export of the goods out of the
territory of India. A new entry viz. 92-A was also
introduced in the union List empowering the Central
Government to levy taxes on the sale or purchase of
goods other than news papers, where such sale or purchase
takes places in the course of inter state trade or
commerce. In pursuance of these changes in the Constitution,
the Government of India introduced a Bill in the Parliament
on 21st November 1956 which was passed
as the Central Sales tax Act 1956 (Act 74 of 1956).
This Act, except section 15 came into force on 5th
January 1957. The Central sales tax Act enabled the
State Governments to impose, on behalf of the Central
Government a tax on the sale or purchase of goods
in the course of inter state trade or commerce. The
levy of tax under the Central Sales tax Act 1956 commenced
from 1st July 1957.
15.
On 1-4-1957 the rates of tax were changed to the decimal
system of coinage by Act 4 of 1957.
16.
On 1-9-1957 the Kerala Surcharge on Taxes Act, 1957
(Act 11 of 1957) came into force. Under this Act,
a Surcharge on Sales tax came to be introduced at
the rate of 2 1/2 percent in case the turnover exceed
thirty thousand rupees.
17.
The year 1957 is also of great importance in the history
of Sales tax Laws in Kerala since the name of the
Travancore Cochin General Sales tax Act was changed
as General Sales tax Act, 1125 and it was extended
to the Malabar area including Kasaragod as stated
in para 2 above with effect from 1-10-1957 by Act
12 of 1957. The Madras Acts already in force in those
areas were also repealed by Act XII of 1957. The
Amendment Act also brought under the single point
scheme of taxation a large number of commodities by
the insertion for the first time, a schedule of 40
items of goods in the Act. This was a substantial
change in the scheme of taxation, which originally
was almost a multi point one. Section 26 was also
amended by Act 12 of 1957 by deleting the words “except
in so far as Parliament may by law other wise provide”
from sub section (1) (b) and deleting subsection
(2)
18.
From 14-12-1957 the Central Government began levying
an Additional Excise Duty on mill made textiles (other
than pure silk) sugar and tobacco and the State gave
up the tax on the sale or purchase of those commodities.
This was done by promulgation of Ordinance VIII of
1957 which was later replaced by Act 7 of 1958
19.
The exemption of mill made textiles, sugar and tobacco
from Sales tax effected by Act 7 of 1958 did not however
apply to the stock held by a dealer immediately before
14-12-1957. Doubts arose as to the manner of assessment
of such stocks. The intention was that they should
be liable to tax at the same rates and at the same
points, as they were liable immediately before 14-12-1957.
This position was made clear by the Ordinance I of
1958, which was replaced by Act 21 of 1958.
20.
Act 21 of 1958 also made considerable changes in the
levy of tax on luxury goods. The rates of Sales tax
on luxury goods varied from state to state, which
led to diversion of trade and evasion of tax. With
a view to overcome these difficulties, the National
Development Council agreed to a system of uniform
levy of sales tax on luxury goods. The Conference
of the Finance Ministers which considered the subject
further unanimously agreed that a uniform rate of
tax at 7 per cent on single point system be levied
on certain items of luxury goods in all States permitting
however, those States which were already levying a
higher rate to continue the same. Schedule 1 of the
Act was therefore amended suitably. It was enlarged
to 45 items by bringing in five more items under single
point tax.
21.
Another important step forward in the development
of sales tax law in 1958 was the enactment of Section
16 A by Act 21 of 1958 providing for the establishment
of Check Posts with a view to prevent evasion of tax
by regulating movement of goods within and across
the state borders. Check Posts were established under
this new provision with effect from 1-12-1958. The
introduction of Check Posts proved to be the most
effective method of prevention of evasion of tax.
22.
In the year 1958, by Act 22 of 1958, the rate of tax
on motor spirit other than petrol was raised to 20
nps from 8 np and timber was brought under single
point system of tax at 8 np at the last purchase point.
(The rate of tax on timber and 3 np for soft wood
with retrospective effect from 1-4-1058). Both these
changes were effected from 1-4-1958. By the same
Amendment Act, the items “Cocoanut” and “Copra” and
“Cashew and its Kernel” in Schedule 1 of the Principal
Act were amended as “Cocoanut including copra”, and
“Cashew-nut including its kernel”. Unfortunately
these changes subsequently gave rise to serious difficulties
as discussed in paragraph 31 below.
23.
In the course of six months, timber had to be again
brought under multi point levy as the single point
levy proved unsuccessful and this was done with effect
from 1-10-1958 by Ordinance 8 of 1958 which was replaced
by Act 40 of 1958.
24.
In 1959 the only change in law was that “Toddy” was
made taxable with effect from 1-4-1959 by Act 14 of
1959
25.
The changes in Sales tax Act in 1960 were the amendments
of section 5 (vii) with effect from 1-10-1957 by Ordinance
1 of 1960, which was replaced by Act 3 of 1960 and
of Schedule 1 by Act 11 of 1960. The amendment of
Section 5 (vii) was necessitated by the judgment of
the Kerala High Court in O P No 12 of 1959, that the
notification specifying the “last purchase in the
state by a dealer who is not exempt from taxation
under section 3” as the point liable to tax in respect
of some of the goods specified in the Schedule was
beyond the power conferred by section 5 (vii). Section
5 (vii) was therefore suitably amended with effect
from 1-10-1957 and all taxes levied, assessed and
collected and all proceedings taken, orders passed
and acts done in pursuance of the notifications under
section5 (vii) were validated. Act 11 of 1960 brought
under the single point scheme of taxation, a few more
items like bicycles paints and colours scents and
perfumes, lubricating oils and greases etc from 1-8-1960
by inserting items 46 to 49
26.
In the same year the rate of surcharge on sales tax
was raised to 5% from 2 1/2 % with effect from 1-4-1960
27.
In 1961, some major changes were made in the provisions
of the Act by Act 11 of 1961 and Act 40 of 1961.
By Act 11 of 1961 food grains which were exempt from
tax under license were made taxable under the single
point scheme, the point of levy being the first sale
in the state allowing however exemption on rice sold
through fair price Shops. Provision for payment of
tax at the compounded rates in respect of dealers
with turnover of not more than twenty five thousand
rupees was made for the first time as a measure of
relief to small dealers by Act 11 of 1961. The rate
of tax on foreign liquor was also enhanced to 40 percent
from 25 percent by the same Amendment Act. These
changes were brought into effect from 1-4-1961. Act
40 of 1961 which replaced Ordinance 7 of 1961 was
enacted to overcome the difficulties caused by the
judgment in O P No 987of 1960 of the Kerala High Court.
28.
In 1962, Section 26 of the Principal Act regarding
inter state sales was amended by Act 9 of 1962 with
retrospective effect from 1-4-1951. Section 26 of
the Principal Act prohibited the levy of tax on inter
State sales which took place after 31-3-1951, whereas
the sales tax Laws validation Act, 1956 validated
the levy of tax by states up to 6-9-1955. In certain
tax revision cases, the High Court of Kerala held
that the levy of tax from 1-4-1951 to 6-9-1955 was
illegal as section 26 as amended in 1957 prohibited
the levy after 31-3-1951. By Act 9 of 1962 the words
“31st day of March 1951” were replaced
by “6th day of September 1955” with retrospective
effect from 1-4-1951 with a view to validate the imposition
and collection of tax from 1-4-1951 to 6-9-1955.
This Amendment was also struck down as ultravires
by the High Court in Deputy commissioner, Eranakulam
Vs. The Cochin Coal Co., Ltd., - XIV, S T C 845
29.
Another important change in 1962 was the substitution
of Schedule 1 with effect from 1-4-1962 by a new Schedule
consisting of as many as 80 items by Act 13 of 1962,
on the recommendations of the High Level Sales tax
Committee. The single point scheme of taxation was
thereby widened to a very large extent.
30.
The Madras General Sales tax Act, 1939 ,the Madras
Sales of Motor Spirit Taxation Act, 1939 and the Madras
Tobacco (Taxation of Sales and Registration) Act,
1953 as in force in the erstwhile Malabar district
and Kasaragod Taluk were repealed by Act 12 of 1957.
The validity of acts done etc., by the Officers and
authorities appointed under the General Sales tax
Act 1125 in respect of matters under the repealed
Acts was questioned on the ground that such Officers
were not Officers appointed under the Repealed Acts.
Therefore, a new proviso was added to Section 27(2)
conferring upon such Officers, powers under the said
Repealed Acts, with retrospective effect from 1-10-1957
by Act 16 of 1962.
31.
The only amendment in 1963 was of section 1 by Act
10 of 1963 making specific provision with effect from
1-11-1957 for the realization and recovery of all
amounts collected purporting to be sales tax by any
person. This was the last amendment of Act XI of
1125, before its repeal by Act XV of 1963. But there
was one subsequent amendment after the repeal and
that was by Act 8 of 1964. The High Court of Kerala
by their decision in K A Karim vs. The Sales tax Appellate
Tribunal and others –XIV S T C 36 and Poulose Bros
vs. The State of Kerala –XIV S T C 40 held that
the entries “Coconut including Copra” and Cashew nut
including its kernel in the schedule 1 did not permit
levy of tax on copra and cashew kernel at the point
of purchase and assessments made imposing tax on copra
and cashew kernel at the purchase point were illegal.
In order to overcome this difficulty, Ordinance I
of 1964 was promulgated amending the said items in
the Schedule and validating all proceedings made and
orders passed. The Ordinance was replaced by Act
8 of 1964. However in K C Antony vs. Sales tax Officer,
Eranakulam – 1964 XV S T C 620 the High Court of Kerala
struck down both Ordinance I of 1964 and Act 8 of
1964 as ultra vires.
32.
As discussed above there had been several amendments
to Act XI of 1125 and some of them especially those
relating to establishment of Check Posts checking
of goods in transits, inspection of business places
etc., which were targets of attack by the business
community and the public. There was also persistent
demand for simplifying the sales tax system and the
law from the members of the Sales Tax Advisory Committee,
trade interests and Members of the Legislature. At
the same time the Sales tax Department was also pressing
the Government for series of amendments to the sales
tax Act for plugging loopholes of evasion or in the
alternative for the enactment of a new sales tax Law
immediately.The Government therefore constituted a
High Level Sales Tax Committee in November 1960
with Sri. P S Nataraja Pillai Ex-Finance Minister
as the Chairman. The committee took evidence
from the representatives of the Trade, Plantations
and Local Bodies, Members of the Legislature, Officers
etc and submitted its report on 29th March
1961. In addition to submitting the report, the Committee
was asked to draft a simplified Bill. The committee
after making a comparative study of the sales tax
Laws in the neighboring States, drafted a Bill and
forwarded it to Government on 10th March
1961. After a careful study of the report and the
Bill, the Government introduced the Bill in the Assembly
and after being passed, received the assent of the
Governor on 5-3-1963. The new Act, “The Kerala General
Sales tax Act, 1963 (Act 15 of 1963)” was published
in the Gazette dated 6-3-1063 and brought into force
with effect from 1-4-1963.
33.
The First Amendment of the new Act was in March 1963
by Act 21 of 1963. This Amendment Act raised the
General rate of Sales tax from 2 per cent to 3 percent
by amending clause (ii) of sub section (1) of Section
5 and sub section (4) of Section 5, and the rate of
tax of items 12 to 21 in Schedule I from 7 percent
to 10 percent by amending the First Schedule. An
additional item “50 A aviation turfine fuel” taxable
at the point of first sale in the state at 6 percent
was also introduced by Act 21 of 1963. As this Amendment
Act was given effect from 1-4-1963, actually,the Act
XV of 1963 came into force in the amended form.
