2014 (10) TMI 411 - SC - VAT and Sales Tax

Additional tax under section 5D of the Kerala General Sales Tax Act, 1963 - Payment of tax @ compounded rate u/s 7 of the Act - Assessment under regular provisions when assessee has choosen compounded levy - Held that - additional tax can be levied and collected by the Revenue from a dealer who is liable to pay tax under sections 5 and 5A of the KGST Act at a particular rate. In the instant case, the dealer is not being taxed under section 5 or section 5A of the KGST Act but is paying tax at the compounded rate as envisaged in section 7 of the KGST Act and therefore will not be liable to pay additional tax under the amended provision of the KGST Act. The aforesaid proposition is in agreement with several decision of this court, where the court has reached the conclusion that the option of composition of tax is like a bilateral agreement between the parties with an object to dispense with the rigors of regular assessment. The dealer is given the choice to opt for compounded payment of tax and once the option is exercised and the same is accepted by the concerned authority, it is no longer open to the dealer to request for a regular assessment as envisaged under section 5 or 5A of the KGST Act. Therefore, by no stretch of imagination, can it be said that when a dealer is assessed under compounding scheme, one is also being asses sed under the regular procedure of assessment, namely, section 5 or 5A of the KGST Act to have been made liable to pay additional tax as per section 5D of the KGST Act. High Court is not justified in confirming the demand notice issued by the assessing authority for payment of additional tax on the appellant who had already opted for paying tax at the com pounded rates under section 7 of the KGST Act - Decided in favour of assessee.

Summary

Issues:
1. Confirmation of additional tax imposition under section 5D of the Kerala General Sales Tax Act, 1963.
2. Interpretation of section 7 of the KGST Act regarding payment of tax at compounded rates.
3. Application of section 5D of the KGST Act on dealers opting for compounded tax payment under section 7.

Analysis:
1. The judgment deals with the confirmation of additional tax imposition under section 5D of the Kerala General Sales Tax Act, 1963. The appellant, a dealer in gold and silver ornaments, had opted to pay tax at a compounded rate under section 7 of the KGST Act. The High Court upheld the assessing authority's decision to impose additional tax under section 5D. However, the Supreme Court disagreed, stating that when a dealer opts for the compounded rate, they are not liable to pay additional tax under section 5D as it is a bilateral agreement to avoid regular assessment.

2. Section 7 of the KGST Act allows dealers to pay tax at compounded rates, overriding section 5 provisions. The Court emphasized that the purpose of the non-obstante clause in section 7 is to give it an overriding effect. The section specifically mentions payment of tax at compounded rates for gold and silver ornaments, providing an alternative to the tax payable under section 5 or 5A of the KGST Act.

3. The Court analyzed section 5D of the KGST Act, which imposes additional sales tax on dealers taxable under sections 5 and 5A. However, the Court clarified that dealers opting for compounded tax payment under section 7 are not liable to pay additional tax under section 5D. This decision aligns with previous rulings that the compounding scheme is a bilateral agreement exempting dealers from regular assessment procedures under section 5 or 5A, thereby excluding them from additional tax liability under section 5D.

In conclusion, the Supreme Court allowed the appeal, setting aside the High Court's judgment. The assessing authority was directed to refund the additional tax paid by the appellant for specific months, with interest if the refund was delayed. This judgment clarifies the application of tax provisions under the KGST Act concerning compounded tax payment and additional tax liability, providing guidance on dealer obligations and exemptions under different sections of the Act.