1995 (6) TMI 187 - HC - VAT and Sales Tax

Summary

Issues:
1. Retraction from opting for payment of tax under section 7(14) of the Kerala General Sales Tax Act, 1963.
2. Validity of initiating revenue recovery proceedings after retraction from compounding scheme.
3. Assessee's ability to back out from the agreed tax payment under section 7(14).
4. Requirement of a prescribed form for paying tax under section 7(14).
5. Authority's discretion to cancel permission for compounded tax payment in case of default.

Detailed Analysis:
1. The petitioner, an arrack shop contractor, initially opted for the benefit under section 7(14) of the Kerala General Sales Tax Act, 1963. However, he later retracted from this decision through a letter (exhibit P2), citing reasons such as low supply of arrack and lack of spirit purchases from outside the State. The petitioner argued that he should not be held liable for tax under section 7(14) after retracting from it. The court noted that once an assessee agrees to pay tax under section 7(14), there is no provision for retracting from this agreement. The petitioner's inability to foresee future difficulties does not justify backing out from the agreed tax payment.

2. The petitioner contended that the initiation of revenue recovery proceedings after his retraction from the compounding scheme was unjustified. However, the court held that the assessing authority has the discretion to cancel the permission granted for compounded tax payment in case of default. The authority is not obligated to cancel the permission in every instance of default. Therefore, the petitioner could not avoid tax payment based on the initiation of revenue recovery proceedings.

3. The court addressed the issue of whether an assessee can back out from the agreed tax payment under section 7(14). It was emphasized that in the absence of a specific provision allowing retraction, an assessee cannot claim to be assessed in a regular manner after agreeing to pay tax as per section 7(14). The court highlighted that foreseeability of difficulties is not a valid ground for retracting from the agreed tax payment.

4. The petitioner raised a technical argument regarding the absence of a prescribed form for paying tax under section 7(14). The court dismissed this argument, stating that the absence of a prescribed form does not absolve the assessee from fulfilling the agreed tax payment obligations. The court noted that the assessee could have paid the tax with a covering letter, as the tax amount and payment method were clearly defined in the agreement.

5. Lastly, the petitioner contended that the assessing authority should have canceled the permission for compounded tax payment in case of default, instead of initiating revenue recovery proceedings. The court clarified that while cancellation of permission is an option for the assessing authority in case of default, it is not mandatory in every instance of default. The authority has the discretion to choose the appropriate course of action, and the petitioner cannot compel cancellation of permission based on default alone. Consequently, the court found no merit in the original petition and dismissed it, upholding the assessing authority's enforcement of the agreed tax payment under section 7(14).