2002 (12) TMI 582 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the surcharge paid under the Kerala Surcharge on Taxes Act, 1957, can be included in the computation of tax at the compounded rate under Section 7 of the Kerala General Sales Tax Act, 1963.

Detailed Analysis:

1. Inclusion of Surcharge in Compounded Tax Calculation:
The primary issue addressed in this judgment is whether the surcharge paid under the Kerala Surcharge on Taxes Act, 1957, should be included in the computation of tax at the compounded rate under Section 7 of the Kerala General Sales Tax Act, 1963. The respondent, a jeweller and an assessee to sales tax, opted to pay tax at the compounded rate under Section 7(1) of the Act. The dispute arose when the respondent argued that the surcharge paid in the previous year should not be included in the computation of tax for the current year.

2. Appellate Decisions:
The Appellate Assistant Commissioner of Commercial Taxes, Idukki, accepted the respondent's contention and directed the exclusion of the surcharge from the tax computation under Section 7. This decision was upheld by the Sales Tax Appellate Tribunal upon appeal by the State.

3. Government Pleader's Argument:
The Special Government Pleader contended that the surcharge paid in the previous year should be included in determining the compounded rate of tax. The Pleader relied on several Supreme Court decisions to support this argument, including Cardamom Planters' Association v. Deputy Commissioner of Sales Tax, S. Ramanatha Shenoy & Co. v. Sales Tax Officer, and Ernakulam Radio Company v. State of Kerala.

4. Provisions of Section 7:
Section 7(1)(a) of the Act allows dealers in gold or silver ornaments to pay tax at 150% of the maximum tax payable for any of the three financial years immediately preceding the assessment year. The court noted that the tax payable under Section 7(1)(a) is in lieu of the tax payable under Section 5(1) of the Act, which pertains to the taxable turnover for that year.

5. Surcharge as an Independent Levy:
The court emphasized that the surcharge is a tax payable under the Kerala Surcharge on Taxes Act, 1957, and not under the Kerala General Sales Tax Act. Section 3 of the Surcharge Act specifies that the tax payable under the General Sales Tax Act shall be increased by a surcharge, making it an independent levy. The court concluded that the absence of a specific mention in Section 7(1)(a) to include the surcharge indicates that it should not be included in the computation of compounded tax.

6. Previous Judicial Interpretation:
The court referred to a previous judgment in O.P. No. 11716 of 2002 (Bhima Jewellery v. Assistant Commissioner (Assessment) Special Circle, Commercial Taxes), which held that the surcharge paid during the previous year cannot be included in the computation of compounded tax under Section 7(1) of the Act. The court noted that this judgment aligns with the current case's interpretation.

7. Supreme Court Decisions:
The court examined the Supreme Court's decision in Cardamom Planters' Association and other cited cases but found them irrelevant to the issue at hand. These decisions primarily dealt with the legislative competence and the nature of the surcharge as an independent levy, rather than its inclusion in compounded tax calculations.

Conclusion:
The court upheld the decisions of the Appellate Assistant Commissioner and the Tribunal, concluding that the surcharge paid in the previous year under the Kerala Surcharge on Taxes Act cannot be included in the computation of tax payable under Section 7(1)(a) of the Kerala General Sales Tax Act. The Tax Revision Case was dismissed, affirming the exclusion of the surcharge from the compounded tax calculation.