2015 (10) TMI 2710 - HC - VAT and Sales Tax

Compounding fee - whether the petitioner can escape from his liability to pay the compounding fee demanded in Ext.P8 order by placing reliance on a subsequent declaration of law by this court? - Held that - Having obtained the statutory benefits flowing from the composition of the offence the petitioner cannot now turn around and question the very proposal for imposition of penalty based on a subsequent judgment of this Court. The conduct of the petitioner wood estop him from attempting such a course of action. The challenge in the writ petition against Ext.P8 order of the 1st respondent on the aforesaid ground is therefore rejected. Whether in the event of the petitioner having to pay the compounding fee demanded in Ext.P8 order he can claim a reduction in the fee payable by invoking the provisions of the proviso to S. 74 (1)(a) of the KVAT Act? - Held that - when the legislative history of the said provision clearly indicates that while there were two amendments that enhanced the compounding fee payable under S.74 (1)(a) in 2009 and 2011 on both those occasions the amending body did not deem it necessary to amend the proviso to the said provision - Thus the proviso has to be read as it stands in the statute book and when so read Ext.P8 order of the 1st respondent to the extent it fixes the compounding fee payable by the petitioner @ 8 Lakhs cannot be legally sustained. Petition allowed in part.

Summary

Issues:
1. Whether the petitioner can escape liability to pay the compounding fee demanded in Ext.P8 order by relying on a subsequent declaration of law by the court?
2. Whether, if the petitioner has to pay the compounding fee demanded in Ext.P8 order, can he claim a reduction in the fee payable by invoking the provisions of the proviso to S. 74 (1)(a) of the KVAT Act?

Analysis:

Issue 1:
The petitioner applied for compounding the offence with certain stipulations, which were partly accepted by the 1st respondent. The petitioner admitted the offence, paid the compounding fee demanded in Ext.P8 order, and obtained statutory immunities from penalty and prosecution. The court rejected the challenge against Ext.P8 order, stating that the petitioner cannot question the penalty proposal based on a subsequent judgment after obtaining statutory benefits from the composition of the offence. The petitioner's conduct estopped him from challenging the order.

Issue 2:
Regarding the quantum of compounding fee payable, the proviso to S. 74(1)(a) of the KVAT Act clearly states that the maximum compounding fee collectable against a single offence in a financial year shall be two lakh rupees. The court found that the proviso must be read as it stands in the statute book. The court quashed Ext.P8 order to the extent it fixed the compounding fee at &8377; 8 Lakhs, declaring that the compounding fee payable by the petitioner is only &8377; 2 Lakhs. The court emphasized that it cannot ignore the express provisions of a taxing statute and noted that previous amendments did not alter the proviso's amount.

In conclusion, the court partly allowed the writ petition, rejecting the challenge against Ext.P8 order on the first issue and quashing the order to the extent it fixed the compounding fee at &8377; 8 Lakhs on the second issue, declaring it as &8377; 2 Lakhs.