2015 (4) TMI 123 - HC - VAT and Sales Tax

Payment of tax at compounded rates by dealers producing granite metals with the aid of mechanized crushing machines - Section 8(b) of the Kerala Value Added Tax Act - secondary crusher - primary crusher - It is the specific case of the petitioner that when it came to the application of the compounding provision for the assessment year 2009-2010, the respondents took the stand that while computing the liability in respect of the primary crusher in the first unit, the secondary crusher in the second unit would also be reckoned - Held that - The provisions of Section 8(b) clearly indicate that the facility to pay tax at compounded rates is one that is available, as an option, to a dealer producing granite metals with the aid of mechanized crushing machines. It is optional in the sense that there is nothing preventing a dealer from paying tax, as per the normal method, in terms of Section 6 of the Act. The precondition for payment of tax at compounded rates is that the dealer is obliged to reckon the primary crushers and the secondary crushers which he employs in the business of producing granite metals while paying tax at the compounded rate. As per the scheme of S.8 therefore, the mere fact that the petitioner dealer has two separate units with varying numbers of crushers in them will not be of any significance since the computation of tax under the provision is not with reference to the crushers in a unit but with reference to the crushers employed by the dealer in the course of his business. Since the petitioner admittedly has one primary crusher and two secondary crushers in one unit and a third secondary crusher in the second unit, the computation of tax in terms of Section 8(b) of the Kerala Value Added Tax Act must necessarily be by reckoning all the crushers and, consequently, the compounded tax for the primary crusher has necessarily to be at 50% of the aggregate of the tax payable on the three secondary crushers that are employed by the petitioner in the pursuit of his granite metal business. - The challenge against the said orders in the writ petition therefore fails. - Decided against assessee. Several place of business as single unit or not - Held that - In the instant case, while the petitioner had preferred an application under Section 20(3) for treating the various places of his business as separate units, the 3rd respondent acceded to the request of the petitioner with regard to the different businesses carried on by the petitioner, save the granite metal business, by treating those premises as separate units. When it came to the granite metal business carried on by the petitioner, the 3rd respondent found that there were two units where the said business was carried on and accordingly, he took the view that both these units should be treated as a single unit since it pertained to the same line of business. - The exercise of discretion by the 3rd respondent cannot be said to be either arbitrary or illegal. - Decided against the assessee.

Summary

Issues:
1. Interpretation of Section 8(b) of the Kerala Value Added Tax Act regarding payment of tax at compounded rates by dealers producing granite metals with mechanized crushing machines.
2. Application of compounding provisions for granite crushing units with multiple crushers.
3. Treatment of separate places of business as separate units under Section 20(3) of the Kerala Value Added Tax Act.

Analysis:
1. The petitioner, a partnership firm operating granite crushing units, challenged the construction of Section 8(b) of the Kerala Value Added Tax Act. The provision allows dealers producing granite metals with mechanized crushing machines to pay tax at compounded rates. The dispute arose regarding the computation of tax for primary and secondary crushers employed in two separate units. The High Court held that the dealer must consider all crushers employed in the business, not just those in a specific unit, when paying tax at compounded rates. Therefore, the petitioner's contention that each unit should be treated independently for tax calculation was rejected, upholding the legality of the tax assessment orders for the petitioner's units.

2. The petitioner argued that for the assessment year 2009-2010, the tax computation for primary crushers should be based on 50% of the aggregate tax on the crushers in each unit, as done in the previous year. However, the respondents calculated the tax by considering all secondary crushers collectively. The Court ruled that under Section 8(b), the tax for primary crushers must be 50% of the total tax on all secondary crushers used by the dealer in the business. Therefore, the orders passed by the respondents for tax assessment were deemed lawful, dismissing the petitioner's challenge against them.

3. The petitioner sought to treat different places of business as separate units for tax purposes under Section 20(3) of the Act. The 3rd respondent granted this request for various businesses except the two granite crushing units, which were treated as a single unit due to the similarity of business activities. The Court found the 3rd respondent's decision reasonable, as it was based on the nature of the business carried out in the units. Consequently, the challenge against the 3rd respondent's order was dismissed, affirming the legality and validity of treating the two granite crushing units as a single unit for tax assessment purposes.

In conclusion, the High Court upheld the tax assessment orders and the decision to treat the two granite crushing units as a single unit, dismissing the petitioner's writ petition challenging these decisions.