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2007 (11) TMI 574 - HC - VAT and Sales TaxExcess tax paid without refunding the same or adjusting the same against the surcharge payable - Held that - In the present case the tax paid at compounded rate by the assessee is under section 7 of the Act wherein the question of any deduction of tax does not arise. Further the assessee has no option in the matter of deduction at source, since even the statute mandates the awarder to deduct at source. So ultimately if it is found, at the time of assessment, any further tax liability, certainly the assessee will be obliged to pay such excess and if it is found that such tax paid before the completion of the assessment is in excess over his liability, necessarily he should be given refund of the amount after adjusting any balance due or surcharge due under the order of assessment. In this case, there is a further liability on the assessee to pay surcharge. Therefore, whatever excess amount paid by him has to be adjusted against the surcharge payable and if there is any further excess, necessarily the assessee is entitled for refund of the same. The confirmation under section 7(12) of the Act in such circumstances, is wholly unauthorised and without juris- diction. The assessment orders to the extent confirmation under section 7(12) are set aside.
Issues:
1. Excess tax deduction at source by awarder. 2. Forfeiture of excess amount paid under section 7(12) of KGST Act. 3. Refund of excess tax paid by assessee. 4. Interpretation of section 7(12) of KGST Act regarding refund of excess tax on purchases. 5. Application of section 46A(1) of KGST Act. Issue 1: Excess tax deduction at source by awarder The petitioners, Public Works Department contractors, opted to pay tax at a compounded rate of two percent under section 7(7) of the Kerala General Sales Tax Act. The awarder was required to deduct tax at source at the same rate. However, assessments revealed that the tax deducted at source exceeded the actual tax liability of the petitioners, leading to a demand for adjustment or refund of the excess amount paid. Issue 2: Forfeiture of excess amount paid under section 7(12) of KGST Act Assessment orders confirmed the excess amount paid by the petitioners, but under section 7(12) of the KGST Act, the excess amount was forfeited without being refunded or adjusted against surcharge payable by the assessee. This led to a dispute regarding the treatment of excess payments and the lack of reasons provided by the Sales Tax Officer for such actions. Issue 3: Refund of excess tax paid by assessee The petitioners sought adjustments of excess payments towards surcharge and refunds of the remaining balance. The Sales Tax Officer rejected these requests without providing detailed justifications, leading to the petitioners approaching the court for relief and citing previous court decisions on similar matters. Issue 4: Interpretation of section 7(12) of KGST Act regarding refund of excess tax on purchases The court analyzed section 7(12) of the KGST Act, which prohibits refunds of excess tax paid on purchases under compounded rates. However, the court differentiated between tax on purchases under section 7(12) and tax at compounded rates under section 7, emphasizing that excess payments under compounded rates should be refunded after adjusting any surcharge payable by the assessee. Issue 5: Application of section 46A(1) of KGST Act The court clarified that section 46A(1) of the KGST Act, which allows forfeiture of excess tax collected, does not apply to cases of excess tax remitted by the assessee. The court emphasized that if an assessee has overpaid taxes and subsequently found a reduced or nil tax liability, they are entitled to a refund of the excess amount paid, subject to adjustments for any outstanding dues. In conclusion, the court held that the confirmation of excess tax payments under section 7(12) was unauthorized and without jurisdiction. The assessment orders confirming such excess payments were set aside, and the assessing authority was directed to refund the balance amount due to the petitioners after adjusting any surcharge payable. The court allowed the original petitions and dismissed related orders on the matter.
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