2011 (12) TMI 456 - HC - VAT and Sales Tax

Benefit of compounding facility - whether the Tribunal was justified in holding that the respondent was entitled to the compounding facility for payment of turnover tax on the sale of liquor initially granted, but later withdrawn - Held that - there is nothing to indicate in the section that three years continuous business prior to the year for which compounding sought is mandatory for applying for compounding. In other words, the view taken by the Tribunal that clause (b) of section 7(1)(ii) applies only in cases where the applicants have three years continuous business prior to the year in which compounding is applied for, and that it is not a mandatory requirement for granting the facility. We do not think we should interfere with the order of the Tribunal because the interpretation placed by the Tribunal on the above section is a possible view, the benefit of which the dealer is entitled - Decided against Revenue.

Summary

Issues:
1. Entitlement to compounding facility for payment of turnover tax on the sale of liquor.

Analysis:
The main issue in this case was whether the respondent was entitled to the compounding facility for payment of turnover tax on the sale of liquor, which was initially granted but later withdrawn. The respondent was initially granted the compounding facility to pay turnover tax based on a certain percentage of the purchase turnover of liquor as per the Kerala General Sales Tax Act. However, the assessing officer later discovered that the respondent had not completed three years of business prior to the relevant years for which compounding was sought. The Tribunal held that the clause in the Act applied to the respondent even though they had not completed the required three years of business in the bar. The State challenged this decision in a revision petition.

Upon examination of the relevant section of the Act, the court found that there was no explicit requirement mandating three years of continuous business prior to applying for compounding. The Tribunal's interpretation that this requirement was not mandatory for granting the facility was deemed valid by the court. The court decided not to interfere with the Tribunal's decision as it was a plausible interpretation of the law, granting the dealer the benefit of the doubt. Consequently, the court dismissed the State's revision petition challenging the Tribunal's order.