2002 (12) TMI 646 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Applicability of the Finance Act, 2002 from the beginning of the financial year 2002-03.
2. Validity of the amendment to the Finance Bill introduced by an erratum.
3. Authority of the assessing officer to revise the demand notice after the passing of the Finance Act, 2002.
4. Right of the petitioners to back out from the compounded tax payment offer.
5. Exemption from the tax payable at compounded rate on the purchase tax component of tax paid for the previous year.

Detailed Analysis:

1. Applicability of the Finance Act, 2002 from the beginning of the financial year 2002-03:
The court held that the Finance Act, 2002, which was passed on 29-7-2002, applies from the beginning of the financial year, 2002-03, i.e., from 1-4-2002 onwards. This is because a declaration was issued under the Kerala Provisional Collection of Revenues Act, 1985, along with the Finance Bill, 2002, which authorized the Government to notify that the provisions of the Finance Bill would take effect from the beginning of the financial year. Therefore, the increase in tax from 150% to 200% introduced under Section 7(1)(a) has come into force from 1-4-2002.

2. Validity of the amendment to the Finance Bill introduced by an erratum:
The court found that the amendment to delete the second proviso to Section 7(1)(a) introduced by an erratum published in the Gazette dated 30-3-2002 is valid and effective from 1-4-2002. The erratum is considered an amendment to the Finance Bill, and the declaration issued under the Provisional Collection of Revenues Act applies to the Finance Bill as amended by the erratum. Hence, no separate declaration is required for the erratum.

3. Authority of the assessing officer to revise the demand notice after the passing of the Finance Act, 2002:
The court held that the assessing officer has the authority to revise the demand notice after the passing of the Finance Act, 2002. The acceptance of the application for compounding and the issuance of proceedings in Form No. 21A and demand notice in Form No. 22 are subject to the provisions of the Finance Act when passed. The officer is bound to implement the Act with effect from the beginning of the financial year. The proceedings are deemed to have been issued in exercise of the officer's power under Section 43 of the Act, even if the section is not specifically mentioned.

4. Right of the petitioners to back out from the compounded tax payment offer:
The court ruled that the petitioners who have opted to pay tax at the compounded rate and have been granted the facility to do so are bound to pay tax under the amended provisions of Section 7(1)(a) of the Act. The petitioners cannot reverse their decision to pay tax at the compounded rate once it has been accepted by the department. This is because the department does not verify the books of accounts or business transactions of those who opt to pay tax at the compounded rate, and the petitioners have disabled the department from monitoring their business.

5. Exemption from the tax payable at compounded rate on the purchase tax component of tax paid for the previous year:
The court found no basis for the petitioners' contention that there is an exemption available from the tax payable at the compounded rate on the purchase tax component of tax paid for the previous year. The tax payable at the compounded rate under Section 7(1)(a) includes and is in lieu of the tax payable under Section 5(1) and Section 5A of the Act. The notification SRO 402/94 and the clarification issued by the Commissioner do not grant exemption from the purchase tax component but clarify that no separate assessment is possible for the liability under Section 5A for those paying tax at the compounded rate.

Conclusion:
The court dismissed the petitions, ruling that the petitioners are liable to pay tax at the compounded rate of 200% of the previous year's tax as per the amended provisions of the Finance Act, 2002. The petitioners' arguments regarding the applicability of the Finance Act, the validity of the erratum, the authority of the assessing officer, the right to back out from the compounded tax payment offer, and the exemption from the purchase tax component were all rejected.