2011 (8) TMI 999 - HC - VAT and Sales Tax

Whether the Tribunal was justified in condoning the delay in filing the application for compounding and in granting compounding facility to the respondent to pay turnover tax on liquor under section 7(1)(b) of the Kerala General Sales Tax Act, 1963 after the closure of the relevant assessment year? Held that - The ground shown in support of the delay condonation petition, in our view, is also not reasonable or genuine because, for food sales assessee availed of the facility under the KVAT Act by making application at least at the fag end of the year. In fact the application was submitted with delay of an year, i.e., on May 18, 2009. We do not know on what basis the Tribunal could accept the grounds stated by the respondent in support of the delay condonation petition, assuming that delay could be condoned even beyond the year for which the application was submitted. We therefore, allow this sales tax revision by setting aside the orders of the Tribunal and by restoring the first appellate authority s order rejecting the delay condonation application and compounding application.

Summary

Issues Involved:
Delay in filing application for compounding and granting compounding facility for turnover tax on liquor under the Kerala General Sales Tax Act, 1963 after the closure of the relevant assessment year.

Analysis:
The judgment of the Kerala High Court dealt with the issue of condoning the delay in filing an application for compounding and granting compounding facility for turnover tax on liquor under the Kerala General Sales Tax Act, 1963 after the relevant assessment year had ended. The respondent, who operated a bar hotel, was required to pay turnover tax on liquor at 10% under the KGST Act and tax on sale of cooked food at 4% under the KVAT Act. The respondent failed to submit the application for compounding under the KGST Act by the due date and even after the end of the relevant year. Instead, a belated application for compounding for cooked food was submitted under the KVAT Act. The delay in filing the application for compounding for liquor sales was condoned, and compounding was allowed for cooked food. Subsequently, after the closure of the financial year, the respondent applied for compounding for liquor sales, which was rejected by the assessing officer. The Tribunal later allowed the compounding application, leading to the State filing a revision against this decision.

The High Court opined that the power to condone delay in filing a compounding application is exceptional and does not extend beyond the end of the relevant year. The court highlighted that the application for compounding was submitted half a year after the end of the relevant year, and regular assessment had already been completed before the compounding application was filed. The court emphasized that when regular assessment is finalized, there is no room for entertaining an application for compounding. The High Court found fault with the Tribunal's decision to condone the delay in filing the compounding application, as it was submitted after the closure of the financial year. The court also noted that accepting the delay condonation petition's grounds was not reasonable, especially considering that the respondent had availed of the compounding facility for cooked food with a significant delay. The High Court allowed the sales tax revision, setting aside the Tribunal's orders and restoring the first appellate authority's decision to reject the delay condonation application and compounding application. However, the court clarified that the respondent could continue to pursue appeals against the regular assessment on other issues.