2010 (9) TMI 1105 - HC - VAT and Sales Tax

Summary

Issues involved: Challenge to notice for cancellation of permission for payment of tax at compounded rate u/s 8(a) of KVAT Act.

The judgment addresses the challenge to Ext.P3 notice issued by the 1st respondent, calling for objections against the proposal for cancellation of Ext.P2 permission granted for payment of tax at the compounded rate u/s 8(a) of the Kerala Value Added Tax Act, 2003 (KVAT Act). The petitioner contends that the 1st respondent lacks jurisdiction to withdraw the permission granted, arguing that compounding creates a concluded contract between the department and the assessee. On the other hand, the 1st respondent argues that the permission for compounding is an option and can be cancelled if granted on erroneous facts, citing section 66 of the KVAT Act which allows rectification of errors apparent on record. The petitioner asserts that the work in question involves activities beyond supply of red earth, such as loading, transportation, and labor, resembling a work contract. The respondents deny granting similar permissions to other assessees for identical contracts, leading to a dispute over the nature of the contract in question.

The petitioner claims entitlement to challenge the cancellation steps despite filing returns and remitting tax at the 12.5% rate. The judgment emphasizes that the decision on the sustainability of the proposed cancellation lies with the 1st respondent, who must consider objections raised by the petitioner and provide a personal hearing. Consequently, the writ petition is disposed of, directing the 1st respondent to finalize the proceedings based on the objections submitted by the petitioner in Ext.P6, after granting an opportunity for a hearing. The petitioner is granted the right to raise all available contentions, including those based on documents Exts.P4 and P5 alleging similar compounding permissions in comparable circumstances.