2006 (1) TMI 574 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the assessee can withdraw the option under section 5 of the Act after opting for payment of tax at the compounded rate.
2. Interpretation of the statutory provisions related to payment of tax at compounded rates.
3. Validity of demand notice issued by the assessing authority.
4. Consideration of re-option application by the assessing authority.

Analysis:

1. The case involved an assessee who opted for payment of tax at a compounded rate under section 7(1)(a) of the Kerala General Sales Tax Act, 1963 but later wanted to withdraw this option. The assessing authority demanded tax under section 7 for a specific period, which the assessee contested, claiming the increase to 200% was illegal and against the compounding scheme of the Act.

2. The court analyzed the relevant statutory provisions, including the amendment brought by the Kerala Finance Act, 2002, which increased the compounding fee from 150% to 200% of the tax paid for the preceding year. The court noted that the assessee had voluntarily opted for the compounded rate, and once the option was accepted and acted upon by the department, the assessee could not withdraw from it.

3. The assessing authority issued a demand notice for payment of tax under section 7, which the assessee failed to comply with, leading to a request to terminate the compounding order. The court held that the assessee could not avoid the obligation to pay tax as per the demand notice, emphasizing that the alternate method of taxation provided by the Act was optional and once chosen, the assessee was bound by it.

4. The court further clarified that the opportunity of being heard would arise only if the assessing authority rejected the application for the option. Since the assessee had made the option and the permission was granted, the court found no grounds for the assessee to wriggle out of the obligation to pay tax as demanded by the assessing authority. Therefore, the court dismissed the writ appeal, concluding that the assessee was bound to pay the tax as per the demand notice.

In conclusion, the judgment upheld the validity of the demand notice issued by the assessing authority and emphasized that once an assessee voluntarily opts for a particular tax payment scheme, they are bound by that choice and cannot withdraw from it at a later stage.