2010 (7) TMI 941 - HC - VAT and Sales Tax

Whether the petitioner which is a registered dealer with turnover below ₹ 10 lakhs is entitled to collect tax without obtaining a prior permission in terms of rule 10A of the Rules? Held that - We allow the O.T. Revision case by declaring that the collection and remittance of tax by the petitioner who is a registered dealer without prior permission does not involve violation of any provisions of the Act and Rules and so much so, no penalty is leviable either under section 67(2) or under section 72 of the KVAT Act. Consequently the Tribunal s order confirming the orders of the lower authorities is quashed. The penalty levied will stand cancelled and assessment will be modified granting input-tax credit to the petitioner. We hold that the form prescribed is not in order and consequently State or the Commissioner as the case may be, is directed to prescribe form in the place of form 1F under rule 10A for suiting the provisions of section 6(1A)(b) of the Act.

Summary

Issues:
1. Whether a registered dealer with a turnover below Rs.10 lakhs is entitled to collect tax without obtaining prior permission under rule 10A of the Kerala Value Added Tax Rules.
2. Whether the petitioner was required to take prior permission for tax collection and remittance under rule 10A by filing form 1F.

Analysis:

1. The main issue in this case was whether a registered dealer with a turnover below Rs.10 lakhs is allowed to collect tax without prior permission under rule 10A of the Kerala Value Added Tax Rules. The petitioner argued that rule 10A and form 1F apply only to dealers covered by section 6(1A)(b) of the Act, not to dealers registered under the Act with a turnover below the specified limit. The Court examined the relevant provisions of the Act and Rules, emphasizing that section 6(1A)(a) mandates that a dealer with turnover below the limit must pay tax on the entire taxable turnover, regardless of being below the taxable limit. The Court noted that registered dealers can collect and remit tax without specific permission, as long as they are registered and follow the prescribed procedures. The Court concluded that there was no violation in the petitioner's actions, and no penalty was applicable under the Act.

2. The second issue revolved around whether the petitioner needed prior permission for tax collection and remittance under rule 10A by filing form 1F. The petitioner contended that rule 10A does not apply to dealers like them, only to those covered by section 6(1A)(b). The Government Pleader argued that rule 10A applies to both categories of dealers under section 6(1A) and that form 1F is for dealers with turnover below Rs.10 lakhs. The Court analyzed the distinction between section 6(1A)(a) and (b), highlighting that clause (a) does not require an option to be exercised, unlike clause (b). The Court clarified that the circular provided by the petitioner supported the argument that form 1F is for dealers under clause (b). Ultimately, the Court held that a registered dealer with turnover below the taxable limit does not need prior permission under rule 10A for tax collection and remittance, as the form prescribed does not differentiate between the clauses of section 6(1A).

In conclusion, the Court allowed the O.T. Revision case, declaring that the petitioner's tax collection without prior permission did not violate any provisions of the Act or Rules. The penalty was canceled, and the assessment was modified in favor of the petitioner. Additionally, the Court directed the State or Commissioner to prescribe a suitable form under rule 10A for dealers covered by section 6(1A)(b) of the Act.