18 November 2004
Supreme Court
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STATE OF KERALA Vs ALEX GEORGE .

Bench: S.N. VARIAVA,DR. AR. LAKSHMANAN,S.H. KAPADIA
Case number: C.A. No.-000979-000986 / 1999
Diary number: 644 / 1999
Advocates: K. R. SASIPRABHU Vs K J JOHN AND CO


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CASE NO.: Appeal (civil)  979-986 of 1999

PETITIONER: State of Kerala

RESPONDENT: Alex George & Another etc.

DATE OF JUDGMENT: 18/11/2004

BENCH: S.N. VARIAVA, Dr. AR. LAKSHMANAN & S.H. KAPADIA

JUDGMENT: J U D G M E N T

WITH CIVIL APPEALS No.987-1000 OF 1999.

KAPADIA, J.

       This batch of civil appeals by special leave against  the judgment and order of the Kerala High Court dated  28.8.1998 raises the question as to the true scope and  operation of section 1(2) of the Kerala Finance Act, 18 of  1987 substituting schedule-I to the Kerala Plantations  Tax Act, 1960 w.e.f. 1.7.1987.                  Since the aforestated question arises in all the civil  appeals, the same are taken up together and disposed of  by this common judgment.

       Since the facts in this batch of civil appeals are  almost identical, we mention hereinbelow the facts of  Civil Appeal No.983 of 1999.

       E.K. Mathew & Brothers is a registered  partnership firm carrying inter alia the business of  planting tea in Alampally estate in Pasuppara in the State  of Kerala.  For the assessment year commencing from  1.4.1987, the firm was assessed under section 3 of the  Kerala Plantations Tax Act, 1960 (hereinafter for the  sake of brevity referred to as "the 1960 Act").  Under  assessment order dated 6.9.1988, the said firm was  assessed to tax @ Rs.130/- per hectare for the period  from 1.4.1987 to 30.6.1987 and at the revised rate of  Rs.350/- per hectare for the remaining nine months  period from 1.7.1987 to 31.3.1988.  The said assessment  was made pursuant to the substitution of schedule-I to the  said 1960 Act by the Kerala Finance Act, 18 of 1987  w.e.f. 1.7.1987.  By the said amendment, the tariff in  existence as on the first day of the financial year, viz.  1.4.1987 stood revised in the midst of the year w.e.f.  1.7.1987.  Consequently, in terms of the demand notice,  the assessee was asked to pay the tax at the rate of  Rs.130/- per hectare for the period 1.4.1987 to 30.6.1987  and at the rate of Rs.350/- per hectare for the period  1.7.1987 to 31.3.1988.   

       Aggrieved, by the assessment order dated

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6.9.1988, the said firm preferred an appeal before the  Sub-Collector, Devicolam, Idukki district.  By order  dated 20.6.1989, the Sub-Collector, as an Appellate  Authority, confirmed the assessment order dated  6.9.1988 and consequently dismissed the appeal.  

       Against the said order of dismissal, the said firm  moved an application under section 9A of the 1960 Act  requesting the Sub-Collector to refer the following  question of law to the District Judge: "Whether in the facts and circumstances of  the case, plantation tax at the revised rate of  Rs.350/- per hectare introduced by the  Kerala Finance Act, 18 of 1987 w.e.f.  1.7.1987 was leviable for any part of the  financial year 1987-88?"                  

       In the meantime, by judgment and order dated  21.10.1988, in O.P. No.3610 of 1988 entitled M.J.  Vijaya Padman v. The State of Kerala & another, the  learned Single Judge of the High Court of Kerala held  that the amended rates applied from the commencement  of the financial year 1987-88 as the object of the said Act  18 of 1987 was to give effect to the budget proposals for  that year.  Consequently, the applicability of the levy was  upheld and original petitions filed by the assessees stood  dismissed.

       Placing reliance on the above judgment of the  High Court, the Sub-Collector dismissed the application  for reference under section 9A filed by the said firm.                  At this stage, it may be mentioned that prior to  21.10.1988, there was conflict of opinion in the decisions  of the District Judges under section 9A.

       In the case of Udayagiri Rubber Co. Ltd. v. State  of Kerala, it was held, that, the plantation tax was  assessable under section 3 at the rate prevalent on the  first day of each financial year and that the same could  not be altered during the year.  

       Consequent upon this difference of opinion, the  assessees and the State, both being the aggrieved parties,  came before the Division Bench by filing writ appeals  and writ petitions respectively.

       By the impugned judgment dated 28.8.1998, the  Division Bench has held that the assessees were liable to  be taxed for the assessment year 1987-88 on the basis of  the rates specified in schedule-I as on 1.4.1987; that the  revision in tariff in the middle of the assessment year  would result in two assessments during the same year;  that the substitution of the schedule w.e.f. 1.7.1987  cannot affect the assessment for assessment year 1987- 88; that the liability to pay the tax got crystallized on Ist  April each year as mentioned in section 3(2); and  consequently, assessment as per the new schedule could  be made only from the assessment year 1988-89.  The  appellant-State then applied to this Court and obtained  special leave to appeal against the impugned judgment of  the High Court.  

       Mr. John Mathew, learned advocate for the  appellant herein submitted that revision in the rates under

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the new schedule w.e.f. 1.7.1987 would not result in two  assessments during the assessment year 1987-88; that the  demand in question was for the differential tax and  consequently, the question of two assessments during the  same assessment year did not arise.  He further  contended that the object of enacting the State Finance  Act, 18 of 1987 was to give effect to the budget  proposals for the financial year 1987-88; that the effect of  substituting schedule-I w.e.f. 1.7.1987 was to revise the  rates of plantation tax during the financial year 1987-88  and that object would stand defeated if the revised rates  were held to be applicable on and from financial year  1988-89.  Learned Advocate submitted, that, in the  circumstances the High Court had erred in holding that  the revised rates were applicable only from assessment  year 1988-89.

       Mr. Jayant Bhushan, learned senior advocate  appearing on behalf of the assessees, submitted that  under section 3(1) of the said 1960 Act, exigibility to tax  was with reference to the extent of the lands comprised in  the plantation as on the first day of each financial year;  that under section 3(2), the tax assessed is payable for  each financial year till the extent of the holding is  revised; that such revised tax is payable only from the  financial year immediately following the revision and  consequently, it was urged, that, the revised rates could  apply from the assessment year 1988-89.  It was urged  that the scheme of the said Act rules out two assessments  during the same year.  In this connection, it was pointed  out that the assessing authority has demanded the said tax  at the rate of Rs.130/- per hectare for the period 1.4.1987  to 30.6.1987 and at the rate of Rs.350/- per hectare for  the period 1.7.1987 to 31.3.1988 which indicated that the  assessees were assessed twice during the same year  which was not permissible under the said Act.  In the  circumstances, it was urged, that, no interference was  called for as there was no merit in the civil appeals.

       The basic point for determination is : whether in  the present case, the revised schedule introduced in the  1960 Act, by the Finance Act, 18 of 1987, results in two  assessments?

       To answer the aforestated question, we need to  examine the provisions of the said 1960 Act.  The said  Act is enacted to provide for the levy of an additional tax  on plantations in the State of Kerala.  Section 2(9)  defines the expression "valuation date", in relation to the  financial year for which an assessment is to be made to  mean the first day of April of that year.  Section 3(1) is  the charging section.  Under the said section, for every  financial year, there shall be charged in respect of lands  in the plantations, a tax at the rates specified in  schedule-I.  Under section 3(2), the tax assessed under  the Act shall be payable for every financial year till the  extent of plantation held by the assessee is revised.  That,  from the financial year, immediately following the  revision, the tax assessed on the basis of such revision,  shall be payable.  Under section 3(3), the assessing  authority may at any time, suo motu, revise the extent of  plantation held by an assessee after hearing him.  Under  section 4(2), every assessee who, on the first day of the  financial year holds two hectares or more of the lands in  the plantation shall furnish to the assessing authority a

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return before the first day of June of that year.  Under  section 5, the assessing authority is authorized to  determine the extent of plantation and the assessment of  plantation tax.  Section 6A deals with the cases of  plantations escaping assessment.   Section 8 deals with  the authority of the assessing authority to serve notice of  demand.  Section 9 provides for an appeal against the  order of assessment. Section 9A provides for reference to  the District Court. Sections 13 & 14 deal with recovery.  Schedule-I refers to the rates of tax.  Prior to 1.4.1987, it  read as under:

RATES OF PLANTATION TAX

1 Where the aggregate extent  of plantations held by a  person does not exceed four  hectares. Nil 2 Where the aggregate extent  of plantations held by a  person exceeds four  hectares but does not  exceed eight hectares. Seventy rupees per hectare on  the extent of plantations in  excess of four hectares. 3 Where the aggregate extent  of plantations held by a  person exceeds eight  hectares but does not  exceed twenty hectares. Ninety rupees per hectare on the  extent of plantations in excess of  four hectares. 4 Where the aggregate extent  of plantations held by a  person exceeds twenty  hectares. One hundred and thirty rupees  per hectare on the extent of  plantations in excess of four  hectares.

       In exercise of the powers conferred by section 27  of the 1960 Act, the Government of Kerala has framed  the Kerala Plantations (Additional Tax) Rules, 1960.   Rule 16 provides for various forms prescribed for the  purposes specified against them.  For the purpose of  deciding the present civil appeals, form-IA is relevant  and it reads as under:  "FORM IA

[Notice of assessment under section 5/3(3) of the Kerala  Plantation Tax Act, 1960 as amended by the Kerala  Plantations (Additional Tax) Amendment Act, 1967]

To

       \005\005\005\005

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       Whereas under the Kerala Plantation Tax Act,  1960 as amended by the Kerala Plantations (Additional  Tax) Amendment Act, 1967 (19 of 1967) which has  come into force on the Ist November, 1967, the rate of  Plantation Tax has been raised from Rs.8 per acre to  Rs.56 per hectare and the amount of tax fixed in the  assessment already made under section 5/3(3) of the  Kerala Plantations (Additional Tax) Act, 1960 and  communicated to you as per notice of demand \005\005 No.  \005 dated \005.. requires revision on the basis of the rate of  Plantation tax fixed under the said Act as amended with  effect from the financial year 1968-69 and whereas the  details available in this office show that you hold  Plantations to the extent shown below, it is hereby  informed that you are assessed to pay Plantation Tax  amounting to Rs..\005. under the said Act as amended by  Act 19 of 1967.                  Notice is hereby given that you may file  objections, if any on the above assessment to the  undersigned within fifteen days of receipt of this notice  failing which the assessment shown above will be made  absolute on the presumption that you have no objections  to the above assessment."

       Thus, the scheme of the Act read with rules framed  thereunder indicates that section 3(1) is the charging  section; that the subject of the charge is the extent of  plantation held by an assessee on the first day of each  financial year; that the tax is payable at the rates  prescribed in schedule-I to the Act; that the tax assessed  is payable for the financial year until the extent is  revised; that even in the event of such revision, the tax  assessed on the revised basis shall be payable only from  the financial year immediately following such revision.   This position is also made clear by form-IA quoted above  under which the revision was given effect to from the  next financial year 1968-69, though the rates stood  revised by Amending Act 19 of 1967, which came into  force on 1.11.1967 i.e. during the financial year 1967-68.   Lastly, under the Act, the basis of the charge is the extent  of the plantation (hereinafter referred to as "the  assessable extent").  

       We may now examine the Kerala Finance Act,  18 of 1987, which received the Governor’s assent on  20.8.1987.  The said Finance Act was passed to give  effect to financial proposals of the Government for  the financial year 1987-88.  It appears that the  presentation of the budget got delayed during the  relevant year and accordingly the date of  commencement, fixed under the said Act, was Ist day  of July, 1987.  By the said Finance Act, three distinct  and separate Acts were amended, namely : the Kerala  General Sales Tax Act, 15 of 1963; the Kerala  Plantations Tax Act, 17 of 1960; and the Kerala  Motor Vehicles Taxation Act, 19 of 1976.  In this  matter, we are concerned with the amendment to the  1960 Act.  By the Finance Act, a revised schedule of  rates was introduced in the said 1960 Act, which read  as under:

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RATES OF PLANTATION TAX 1 a

b Where the aggregate extent  of plantations (except  conconut and arecanut  plantations) held by a person  does not exceed two hectares.

Where the aggregate extent  of coconut or arecanut  plantations held by a person  does not exceed four  hectares.

Nil

Nil

2 Where the aggregate extent of  plantations (other than coconut  and arecanut) held by a person  exceeds two hectares but does  not exceed four hectares.

One hundred rupees per hectare on the  extent of plantations in excess of two  hectares.                            

3 Where the aggregate extent of  plantations held by a person  exceeds eight hectares. i)

ii) In the case of  plantations other  than coconut and  arecanut.

In the case of  coconut and  arecanut  plantations.

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One hundred  and fifty rupees  per hectare in  excess of two  hectares.

One hundred  and fifty rupees  per hectare in  excess of four  hectares. 4 Where the aggregate extent of  plantations held by a person  exceeds eight hectares but does  not exceed fifteen hectares. i)

ii) In the case of  plantations other  than coconut and  arecanut.

In the case of  coconut and  arecanut  plantations. Two hundred  rupees per  hectare in  excess of two  hectares.

Two hundred  rupees per  hectare in  excess of four  hectares.

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Where the aggregate extent of  plantations held by a person  exceeds fifteen hectares but does  not exceed twenty-five hectares.

i)

ii)

In the case of  plantations other  than coconut and  arecanut.

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In the case of  coconut and  arecanut  plantations.

Two hundred  and fifty rupees  per hectare in  excess of two  hectares.

Two hundred  and fifty rupees  per hectare in  excess of four  hectares. 6 Where the aggregate extent of  plantations held by a person  exceeds twenty-five hectares. i)

ii) In the case of  plantations other  than coconut and  arecanut.

In the case of  coconut and  arecanut  plantations. Three hundred  and fifty rupees  per hectare in  excess of two  hectares.

Three hundred  and fifty rupees  per hectare in  excess of four  hectares.

       In order to appreciate the contentions of the rival  parties, one must bear in mind the essential components  entering into the concept of a tax.

       In the case of M/s Govind Saran Ganga Saran v.  Commissioner of Sales Tax & others reported in [AIR  1985 SC 1041], this Court has held that the first  component in the concept of a tax is the character of  imposition, the second is a clear indication of the person  on whom the levy is imposed and who is obliged to pay  the tax, the third is the rate at which the tax is imposed  and the fourth is the value to which the rate is applied for  computing the tax liability.

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       In the case of M/s Goodyear India Ltd. v. State of  Haryana & another reported in [AIR 1990 SC 781], it  has been held that a taxable event is that which on its  occurrence creates the liability to tax, which liability does  not exist at later point of time.  Even though the taxable  event of a tax happens to be at a particular point of time,  the levy and collection of such tax may be postponed, for  administrative convenience, to a later date.  Thus, in the  context of the Central Excise Act, 1944, even though the  taxable event is the manufacture of an excisable article,  the duty is levied and collected at a later date for  administrative convenience.  Such later date is the date of  removal of goods from the factory.  As a corollary, the  charging section cannot be limited or circumscribed by  the machinery provisions of the Act.  The machinery  provisions cannot be interpreted so as to restrict the scope  of the charging section.  Liability to tax is distinct from  quantification by assessment.

       In the case of Kesoram Industries and Cotton  Mills Ltd. v. The Commissioner of, Wealth Tax  (Central), Calcutta reported in [AIR 1966 SC 1370], it  has been held that the chargeability is independent of the  passing of the Finance Act.

       In the light of our above discussion, we have to  examine the effect of the Finance Act, 18 of 1987 qua  section 3 of the 1960 Act.  The said Finance Act, 18 of  1987 was enacted to give effect to the budget proposals  for the financial year 1987-88.  To augment the revenues  of the State, schedule-I to the 1960 Act was sought to be  amended by revising the existing rate of plantation tax.   In the present case, we are concerned with the content of  the expression "revision".  Revision simpliciter in the  rate of tax is different from revision which alters the  tariff structure and the tariff categories.  Revision in the  rate of tax simpliciter does not affect the assessable  extent of the lands in the plantation.  This category of  revision in the rates does not come within the ambit of  section 3(2) of the 1960 Act and consequently, such  revisions do not require revision in the assessment of tax.   However, in the present case, the revision brought upon  by substitution of revised schedule not only effects  revision in the rates, it also revises the tariff categories as  well as the tariff structure and consequently, such a  revision would fall within the ambit of section 3(2) of the  1960 Act.  In the case of revision in the rates simpliciter,  the assessable extent of the holding remains constant  throughout the year, whereas in the case of revision in the  tax structure, the assessable extent of the holding  undergoes a change.  In this case, the revised schedule  increased the assessable extent of the holding.  In the  present case, the revised schedule altered the tariff  categories.  Therefore, the revision in question in this  case squarely came within the ambit of section 3(2) of  the 1960 Act and such a revision could be given effect to  only in the next immediate financial year 1988-89.  As  stated above, chargeability is independent of the passing  of the Finance Act.  Therefore, one has to read the  Finance Act in consonance with the provisions of the  charging section.  The function of the Finance Act  primarily is to prescribe the rate of tax and the manner of  calculation of tax; and it is not intended to incorporate  the entire procedural and substantive law relating to tax.   In the circumstances, we do not find merit in the

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contention advanced on behalf of the appellant-State that  the object of the Finance Act, 18 of 1987 was only to  revise the rates of plantation tax.

       We may reiterate that the State can always revise  the rates in the middle of the financial year provided the  assessable extent of the lands comprised in the plantation  as on Ist April of each year is not altered.

       In the case of The Karimtharuvi Tea Estate  Ltd. v. The State of Kerala reported in [AIR 1966 SC  1385], it has been held that by the imposition of a  different tariff in the course of the year, the incidence  of the tax liability may be altered by the Legislature,  but for effecting that alteration, the Legislature must  devise machinery for computing it and if the  Legislature has failed to do so, the Court cannot  resort to a fiction which is not prescribed by the  Legislature and seek to effectuate that alteration by  the devising machinery not found in the enactment.   

       For the aforestated reasons, we answer the  above question in favour of the assessees and against  the department.

       Before concluding, we may clarify, that, this  judgment is confined only to insertion of schedule-I  in the said 1960 Act by the Kerala Finance Act, 18 of  1987 and it will not apply to the amendments to other  enactments, namely, the Kerala General Sales Tax  Act, 1963 and the Kerala Motor Vehicles Taxation  Act, 1976.

       In the result, the appeals fail and are dismissed,  with no order as to costs.