2002 (7) TMI 778 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of section 7(1)(a) of the Kerala General Sales Tax Act, 1963 regarding the inclusion of surcharge paid in the previous year for computing tax at a compounded rate.

Analysis:
The petitioner, a dealer in gold jewellery, applied for and was granted the benefit of paying tax at a compounded rate under section 7(1) of the Kerala General Sales Tax Act, 1963. The assessing officer included the surcharge paid for the previous year while levying tax at a compounded rate for the current year, leading to the petitioner's grievance. The petitioner argued that surcharge, governed by the Kerala Surcharge on Taxes Act, 1957, should not be considered for demanding tax at a compounded rate, as the tax payable under section 5 of the Kerala General Sales Tax Act is distinct from surcharge. The Government Pleader contended that surcharge is part of the tax payable under the Act, including it in the compounding fee calculation. The relevant section, 7(1)(a), allows dealers in gold or silver ornaments to pay tax at a percentage of the tax payable in the immediate preceding year. The explanation to this section clarifies that the tax payable includes sales turnover tax under section 5 and purchase turnover tax under section 5A of the Act.

The court examined the computation of tax payable at a compounded rate for the year 2000-2001, where the assessing officer included surcharge paid in the previous year. It was noted that the petitioner was required to pay 120% of the tax payable for the immediate preceding year under section 7(1)(a). The court emphasized that the tax for the previous year, on which the compounding fee is based, consists of sales tax under section 5(1) and purchase tax under section 5A, excluding surcharge. Surcharge, although akin to sales tax, is not a tax under the Kerala General Sales Tax Act and is not included in the compounding fee calculation. The court highlighted that the Surcharge Act was applicable to dealers paying tax at a compounded rate but was repealed. Therefore, the inclusion of surcharge for computing tax at a compounded rate under section 7(1) was deemed inappropriate.

Consequently, the court found the assessing officer's order to be in violation of section 7(1)(a) of the Act and directed the exclusion of surcharge from the tax computation for 1999-2000. The petition was allowed, instructing the assessing officer to demand the compounding fee from the petitioner at 120% of the tax paid for the year 1999-2000, excluding the surcharge component. The court dismissed the order on C.M.P. No. 20287 of 2002 in O.P. No. 11716 of 2002(T), ultimately allowing the petition.