G. SIVARAJAN, J. –

Revenue is the revision-petitioner. The assessee, a small-scale industrial unit, engaged in the manufacture and sale of plastic film capacitors, is the respondent. The assessment year concerned is 1995-96. During the relevant assessment year, the respondent assessee was entitled to the benefit of tax exemption provided under Notification S.R.O. No. 1729/93. The assessee purchased certain electronic goods for use in the manufacture of plastic film capacitors by issuing declaration in form No. 18 provided under section 5(3) of the Kerala General Sales Tax Act, 1963. The assessee, in fact, used the electronic goods so purchased for manufacture of plastic film capacitors and the end-product, namely, plastic film capacitors were sold inside the State to various customers. However, the assessee did not collect any sales tax from the said customers since it was entitled to tax concession as per the eligibility certificate issued by the competent authority under the notification.

In the assessment year 1995-96, the assessing authority, while completing the assessment, sought to collect the differential rate of tax from the assessee by resorting to section 5(3)(ii) of the Act which was introduced with effect from July 29, 1993 on the ground that the assessee failed to make use of the electronic goods purchased by issuing form No. 18 declaration for the purpose for which the declaration was furnished. The assessee, inter alia, had challenged the said levy in appeal before the Additional Appellate Assistant Commissioner, A.I.T. and S.T., Thrissur. The appellate authority, relying on the decision in "Vattukalam Chemicals Industries v. State of Kerala" [2001] 124 STC 234 (Ker); 1997 KLJ Tax Cases 11, upheld the levy, but granted relief by directing the assessing authority to adjust the said tax against the amount of exemption provided under the eligibility certificate obtained by the assessee. Both the assessee and the department filed appeals before the Tribunal. The Tribunal observed that there is no provision in the K.G.S.T. Act empowering the assessing authority to assess the differential rate of tax in the facts and circumstances of the assessee's case. It accordingly directed the deletion of the differential rate of seven per cent assessed by the assessing authority and confirmed by the first appellate authority. Consequently, the State appeal on this issue was dismissed as infructuous.

The learned Government Pleader appearing for the revision-petitioner submits that small-scale industrial units are entitled to tax exemption under the Notification S.R.O. No. 1729/93. He also submits that the assessee had purchased electronic goods by issuing form No. 18 declaration and the plastic film capacitors were manufactured and sold by the assessee and since no tax was payable in respect of the sale of plastic film capacitors manufactured by the assessee, there is a violation of the provisions of section 5(3) particularly, the first proviso thereto and the declaration in form No. 18 furnished by it to the selling dealer. The Government Pleader further submits that the first appellate authority, in fact, had relied on the decision of this Court in "Vattukalam Chemicals Industries v. State of Kerala" [2001] 124 STC 234 (Ker); 1997 KLJ Tax Cases 11 which has since been reversed by the honourable Supreme Court in "State of Kerala v. Vattukalam Chemicals Industries" [2001] 124 STC 233; (2002) 10 KTR 69. He also submits that though the first proviso to section 5(3) initially provided that the provisions of the K.G.S.T. Act shall not apply where the sale of such finished product is not liable to tax either under the said Act or under the C.S.T. Act, the said provision was amended by the Kerala Finance Act, 1994 as per which the expressions "not liable to tax under this Act or under the C.S.T. Act" was changed to "where no tax is payable by the said industrial unit on such finished products either under this Act or under the