2017 (1) TMI 1557 - HC - VAT and Sales Tax

Re-opening of assessment - compounding of offences - petitioner s contention is that the turnover computed as suppressed by the Intelligence Officer and the Maximum Retail Price (MRP) taken to estimate the sales turnover of the suppressed opening stock - Held that - The assessee, as is seen from the revision filed, is not aggrieved by the computation of the compounding fee but of the computation of suppression made of turnover and the sale price taken to arrive at the sales turnover; on the suppressed turnover. This was intimated to the assessee by the penalty authorities, after which the assessee accepted the offence and agreed to compound the offence. The assessee was issued with an order of compounding, in which also the computation of suppressed turnover and the sale price taken were clearly laid out. The assessee did not choose to file appeal from the said order and paid the amounts determined as compounding fees. There is absolutely no reason why the assessment order should be kept in abeyance, till a revision which has been held to be not maintainable - petition disposed off.

Summary

Issues:
1. Challenge to assessment order under the Kerala Value Added Tax Act, 2003 for the year 2014-15 based on compounding effect on an offense detected.
2. Rectification application filed from the compounding application on the assessment being finalized.
3. Dispute over compounding fee determined on the ground of irregularity in computing the suppressed turnover and erroneously applying the Maximum Retail Price (MRP) to estimate sales turnover.
4. Conflict between Division Bench decisions on the challenge to compounding order under Section 74 of the KVAT Act.
5. Blocking of online facility of a registered dealer without a specific provision.

Analysis:
1. The petitioner challenged the assessment order under the Kerala Value Added Tax Act, 2003 for the year 2014-15, which was reopened based on a compounding effect on a detected offense. The petitioner disputed the turnover computation and the use of Maximum Retail Price (MRP) to estimate sales turnover, leading to the rejection of a rectification application (Exhibit P2) and a subsequent revision (Exhibit P3) before the Deputy Commissioner. The petitioner relied on a Division Bench decision to argue that the compounding order could be challenged by the assessee.

2. The Government Pleader argued that the compounding cannot be disturbed, citing a Division Bench decision in Jaya Jewellers case. The value of suppressed turnover and the compounding fee were specified in the penalty notice (Exhibit P1), and the petitioner made the deposit based on this order. The Government Pleader contended that the rectification application was not permissible at the finalization stage of assessment.

3. The conflicting Division Bench decisions were analyzed by the Court. Trichur Auto Spares case highlighted that an assessee could challenge the compounding order under Section 74, particularly regarding the quantification of the compounding fee. The discretion of the Officer in fixing the fee should be exercised judiciously to avoid arbitrary decisions. The Court found no conflict between the principles laid down in the two cases.

4. The Court emphasized that once an assessee agrees for compounding and pays the fee, there is no scope for challenging the compounding order. In the present case, the petitioner accepted the offense, agreed for compounding, paid the fees, and later sought rectification, which was deemed futile. The Court held that the revision attempted by the petitioner was not maintainable, and the assessment proceedings should not be kept in abeyance.

5. In a separate issue, the Court addressed the blocking of the online facility of a registered dealer without a specific provision. The respondent-State failed to point out any legal basis for such action, leading the Court to allow the petitioner to operate the online facility as a registered dealer. The judgment concluded by dismissing one writ petition and allowing another, with parties bearing their respective costs.