2012 (2) TMI 448 - HC - VAT and Sales Tax

Declining to entertain appeal filed by the Department against first appellate authority s order setting aside assessment and remanding the matter for reconsideration by Tribunal - Held that - The assessment is made strictly in accordance with the compounding application but with the correct percentage of increase under the statute. The only deviation is the increase from 150 per cent to 200 per cent, which in our view, is only a mistake committed by the assessee as a result of failure to take note of amendment to statute. We could have permitted regular assessment on turnover of the assessee, if the assessee did not follow up compounding application and paid tax every month based on the turnover declared. However, the assessee has been paying tax only at compounded rate which cannot be anything other than the tax payable under section 8(f) of the Act. We do not think the assessee can now revert back for turnover based assessment because returns filed every month were not accompanied by payment of tax on the taxable turnover but tax payment was under the compounding scheme, though by mistake at 150 per cent of previous years tax as against correct rate of 200 per cent. We do not find any justification for the Tribunal or the first appellate authority to interfere with the assessment which is made based on application filed by the assessee but by adopting the correct percentage of tax payable under the compounding scheme under the amended provisions of section 8(f) applicable for the year 2007-2008. We, therefore, allow the revision case by setting aside the orders of the Tribunal and that of the first appellate authority and restore the assessment.

Summary

Issues involved:
1. Interpretation of compounding application under section 8(f) of the Kerala Value Added Tax Act.
2. Right of the assessee to appeal against assessment under the compounding scheme.
3. Applicability of Division Bench decision in State of Kerala v. T.S. Kalyanaraman to the present case.
4. Correctness of assessment based on compounding application and percentage of tax payable.
5. Justification for interference by the Tribunal and first appellate authority.
6. Liability for interest on delayed assessment and monthly returns.

Analysis:

1. The primary issue in this case is the interpretation of the compounding application under section 8(f) of the Kerala Value Added Tax Act. The respondent, a dealer in gold jewellery, applied for payment of tax at a compounded rate for the year 2007-2008. However, a discrepancy arose as the respondent offered to pay tax at 150 per cent of the highest tax paid for the three preceding years instead of the correct rate of 200 per cent as per the statute.

2. The second issue pertains to the right of the assessee to appeal against the assessment made under the compounding scheme. The Department challenged the first appellate authority's order, arguing that the respondent had no right of appeal. The Tribunal declined to interfere with the first appellate authority's decision, leading to the filing of a revision.

3. The court considered the applicability of a Division Bench decision in State of Kerala v. T.S. Kalyanaraman to the present case. The Government Pleader relied on this decision, which held that an assessee cannot backtrack from an agreement for payment of tax at a compounded rate. However, the respondent contended that this decision was not directly applicable to the present scenario due to specific provisions in the Kerala Value Added Tax Rules.

4. The correctness of the assessment based on the compounding application and the percentage of tax payable was a crucial aspect of the judgment. The court emphasized that compounding is only possible in accordance with the statute, which mandates payment of increased tax at the rate provided in the section. The assessment was deemed correct, with the deviation of 150 per cent to 200 per cent attributed to a mistake by the assessee.

5. The court addressed the justification for interference by the Tribunal and the first appellate authority in the assessment process. It concluded that there was no valid reason for them to interfere with the assessment, which was made based on the application filed by the assessee and the correct percentage of tax payable under the compounding scheme.

6. Lastly, the issue of liability for interest on delayed assessment and monthly returns was discussed. The court directed the assessing officer not to recover any interest from the assessee if arrears of tax were paid within two weeks from the date of receipt of the judgment, considering the delays in processing the compounding application and verifying the monthly returns.

In conclusion, the court allowed the revision case, set aside the orders of the Tribunal and the first appellate authority, and restored the assessment while providing specific directions regarding the recovery of interest.