2016 (12) TMI 1695 - HC - VAT and Sales Tax

Payment of tax at compounded rate - works contracts - The singular contention of the petitioner is that they had already been granted an order to pay tax at compounded rates under the provisions of Section 8(a)(ii) of the Act and that, therefore, they are eligible to pay tax at such rates for all the works that they had obtained for execution. Held that - It is ineluctable that the provisions to pay tax at compounded rates is only in lieu of the obligation to pay tax under Section 6 of the Act. Therefore, the primary charging Section is always Section 6 of the Act and Section 8, which provides for payment of tax at compounded rates, is only an optional method offered to the assessee for ease and convenience in payment of tax. The main charging Section, namely, Section 6 of the Act, proposes levy of tax on sale or purchase of goods. It is admitted by the petitioner and is evident from the permission granted under Section 8 of the Act, which orders are produced as Annexure-A in the revisions, that they had applied for compounding of certain works contracts covered by a particular work order but not for other works that were being undertaken by them. They had, however, claimed that going by the third proviso to Section 8(ii), they are entitled to pay tax even for those works at the compounded rates. This is totally unacceptable and against the express intendment of the provisions of the section. The petitioner, having accepted the orders of the Assessing Authority under Section 8(a)(ii) of the Act to pay tax at compounded rates for certain works, cannot renege from the obligation cast upon them under the statute and then try to interpret the provisions to suit its convenience and its cause to claim benefits which they were never entitled to and which was never intended by the statute to be granted. The petitioner would be entitled to pay tax at the compounded rates only for the works for which permission was granted and not for the others. Revision dismissed.

Issues Involved:
1. Interpretation of provisions for payment of tax at compounded rates.
2. Eligibility for compounded tax rates on suppressed turnover.
3. Applicability of the third proviso to Section 8(a)(ii) of the Kerala Value Added Tax Act.
4. Obligation to file separate applications for individual works contracts.
5. Binding nature of permission granted for compounded tax rates.

Issue-wise Detailed Analysis:

1. Interpretation of provisions for payment of tax at compounded rates:
The court emphasized that the provisions for payment of tax at compounded rates are designed for ease, expedience, and convenience but are often misinterpreted by assessees to evade taxes. The court clarified that these provisions should not be construed in a manner that was never intended by the legislature.

2. Eligibility for compounded tax rates on suppressed turnover:
The petitioner, a works contractor, was assessed for suppressed turnover relating to the sale of Villas and Flats and other works contracts. The petitioner admitted the offence and sought to pay tax at compounded rates. However, the Assessing Authority rejected this claim for the suppressed turnover as no option was filed for such works. The Tribunal upheld this decision, stating that the concessions made by the Intelligence Officer did not constrain the Assessing Authority from making a proper assessment.

3. Applicability of the third proviso to Section 8(a)(ii) of the Kerala Value Added Tax Act:
The petitioner argued that they were eligible to pay tax at compounded rates for all works undertaken during the assessment year based on a single option filed under the third proviso to Section 8(a)(ii). The court found this interpretation to be incorrect, stating that the third proviso allows for a single option for all works undertaken but does not extend to works for which no specific application was made or permission granted.

4. Obligation to file separate applications for individual works contracts:
The court highlighted that the third proviso to Section 8 allows a works contractor to file a single option for all works undertaken in a year instead of separate applications for each work. However, this does not mean that a single option covers all works indiscriminately. The contractor must still declare each work and obtain specific permission for each under the compounded tax scheme.

5. Binding nature of permission granted for compounded tax rates:
The court reiterated that once an option for compounded tax is exercised and accepted, it is binding on the assessee. The assessee cannot later request a regular assessment or claim compounded rates for works not covered by the initial permission. This principle was supported by precedents from the Hon'ble Supreme Court and previous judgments of the Kerala High Court.

Conclusion:
The court dismissed the revisions, confirming the Tribunal's orders and stating that the petitioner could only pay tax at compounded rates for works for which specific permission was granted. The petitioner could not extend this benefit to other works based on a misinterpretation of the third proviso to Section 8(a)(ii). The court made no order as to costs, leaving the parties to bear their respective costs.

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