2013 (5) TMI 317 - HC - VAT and Sales Tax

Application for remitting the tax at the compounded rate under Section 8 (b) of the KVAT Act was rejected - opportunity of being heard - Held that - the respondents are not justified in having rejected the application for compounding, placing reliance on Section 8 (f) (ii), which even according to them is applicable only to gold/silver .... dealers. There is no case for the respondents that there is any enabling provision under Section 8 (b) which is applicable to the petitioner, who is a dealer in metal crusher unit, to reject the compounding application. When the respondents contend that Section 8 (f) (ii) exclusively deals with dealers in gold, silver, they also rely on the same clause to reject the compounding application, which cannot be a paradox. If Section 8 (f) (ii) does not pertain or is applicable to the persons like the petitioner who are doing the business in metal crusher, how the said clause can be used to reject an application for compounding, is a matter mystery.. - the said order is not correct or sustainable. - Decided in favor of assessee.

Issues Involved:
1. Rejection of the application for payment of tax at the compounded rate under Section 8(b) of the KVAT Act.
2. Correctness and sustainability of the Tribunal's verdict dismissing the appeal against the order passed by the second respondent.

Detailed Analysis:

Issue 1: Rejection of the Application for Compounded Tax
The petitioner, a dealer operating a metal crusher unit, submitted an application to remit tax at the compounded rate under Section 8(b) of the KVAT Act. The application was rejected by the second respondent without providing an opportunity for a hearing, which led the petitioner to file W.P.(C) No. 20811 of 2011. The High Court set aside the initial rejection and directed the second respondent to reconsider the application in compliance with Section 8 of the Act and Rule 11(2)(ii) of the Rules.

Upon reconsideration, the second respondent again rejected the application, citing that the petitioner had purposefully suppressed relevant information and violated Rule 11(1) of the KVAT Rules. The rejection was based on the assertion that the application was filed without mentioning the year and was submitted belatedly after an inspection by the intelligence squad.

Issue 2: Tribunal's Verdict on Appeal
The petitioner appealed against the rejection order (Ext. P11) to the Tribunal (Ext. P12 appeal). The Tribunal dismissed the appeal, stating that the provisions under Section 8(f)(ii) and 8(f)(iii) of the KVAT Act, which provide for an appeal, apply only to "gold dealers" and not to dealers like the petitioner operating metal crusher units under Section 8(b). The Tribunal concluded that the appropriate remedy for the petitioner was to appeal to the Deputy Commissioner.

The respondents supported the Tribunal's decision, arguing that Section 8(f)(ii) is specific to gold dealers, as evidenced by the Budget Speech 2008-09. They contended that the petitioner, being a dealer in granite metals, could not benefit from this provision.

Court's Findings:
The Court examined the statutory provisions, particularly Section 8(b) and 8(f) of the KVAT Act. Section 8(b) pertains to dealers producing granite metals, allowing them to pay tax at specified rates for different sizes of crushing machines. Section 8(f) deals with dealers in ornaments or wares of gold, silver, or platinum, providing different tax rates and conditions for compounding.

The Court noted that Section 8(f)(ii) allows the assessing authority to refuse or cancel permission for compounded tax due to valid reasons, with a proviso requiring an opportunity for hearing and prior approval of the District Deputy Commissioner. Section 8(f)(iii) provides for an appeal against orders under sub-clause (ii).

The Court found that the respondents inconsistently relied on Section 8(f)(ii) to reject the petitioner's application while simultaneously arguing that the provision applies only to gold dealers. This contradictory stance was deemed unjustifiable. The Court emphasized that if Section 8(f)(ii) does not apply to metal crusher dealers, it cannot be used to reject their compounding applications.

Conclusion:
The High Court concluded that the rejection of the petitioner's application for compounded tax under Section 8(f)(ii) was incorrect and unsustainable. Consequently, Ext. P11 order was set aside. The Court directed the second respondent to reconsider the petitioner's application for compounding and pass appropriate orders within six weeks from the date of receipt of the judgment. The Tribunal's order (Ext. P14) and subsequent proceedings were deemed inconsequential.

The Writ Petition was allowed to the extent of setting aside the rejection order and directing reconsideration of the compounding application. No costs were awarded.

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