2002 (4) TMI 919 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Liability to pay additional sales tax under Section 5D of the Kerala General Sales Tax Act, 1963.
2. Validity of demand notices issued without provisional or regular assessment.

Detailed Analysis:

1. Liability to Pay Additional Sales Tax under Section 5D:

The petitioner, a dealer in gold ornaments, contended that since they opted to pay tax at a compounded rate under Section 7(1) of the Kerala General Sales Tax Act, 1963, they should not be liable for additional sales tax under Section 5D. The petitioner argued that Section 5D applies only to tax payable under Sections 5 and 5A of the Act, not to tax paid under the compounded rate provision of Section 7(1). The petitioner also referenced the Kerala Additional Sales Tax Act, 1978, which explicitly included additional sales tax on the entire sales tax liability, unlike the present Section 5D.

The court, however, disagreed with the petitioner's interpretation. It held that Section 7(1)(a) is not an independent charging section but an option for dealers to discharge their liability under Section 5(1) at a compounded rate. Thus, tax paid under Section 7(1)(a) is essentially tax payable under Section 5(1), and therefore, additional sales tax under Section 5D is applicable. The court cited previous judgments, including Parakkattil Aleyamma v. Sales Tax Officer, which supported the view that additional sales tax is payable by those paying tax at a compounded rate.

2. Validity of Demand Notices Issued Without Provisional or Regular Assessment:

The petitioner also challenged the demand notices issued in form 14D for additional sales tax for September and October 2001, arguing that such demands should be preceded by a provisional or regular assessment. The petitioner maintained that any tax not admitted in the returns should be assessed formally before a demand is raised.

The court agreed with the petitioner on the procedural aspect, stating that tax not shown as due in the return cannot be demanded merely by issuing form 14D under rule 21(10) of the Kerala General Sales Tax Rules, 1963. The assessing officer must issue a notice and conduct a provisional or regular assessment, allowing the assessee to contest the demand.

However, given that the issue was fully contested on merits before the court, and the court had already decided on the applicability of Section 5D, it found no need to remand the matter for assessment. The court declared that the petitioner is liable to pay additional sales tax under Section 5D on the tax paid at the compounded rate. Consequently, the demand notices (exhibits P2 and P3) were sustained, and the original petition was dismissed.

Conclusion:

The court concluded that the petitioner, and other dealers paying tax at a compounded rate under various sub-sections of Section 7, are liable to pay additional sales tax under Section 5D of the Act. The demand notices issued for additional sales tax were upheld, and the petition was dismissed.