2014 (12) TMI 1337 - HC - VAT and Sales Tax

Compounding of tax - Section 8 of the KVAT Act - dealer in Gold - AO found that the highest turn over conceded by assessee which lead to the compounding allowed for the assessment year 2006-2007 was wrong - revision of assessment - Held that - The Deputy Commissioner is competent to revise an assessment prejudicial to the interest of the revenue no matter such assessment is completed based on an erroneous compounding order passed by the officer in Form No.21A which was not cancelled or revised by the Deputy Commissioner. There is no dispute that the order issued by the Deputy Commissioner under Section 35 is within the time for revision of regular assessment passed by the assessing officer under Section 17(3). So much so the Tribunal rightly rejected the assessee s challenge against the order of the Deputy Commissioner on the ground of limitation. Power of rectification provided under Section 66 of the KVAT Act - Held that - Power of rectification provided under Section 66 of the KVATAct can be invoked only when apparent error is found on the face of the record. This therefore necessarily means that the error sought to be rectified is that committed by the assessing officer and is not an error on account of a wrong declaration made by the assessee - there are no substance in the contentions raised. Referring to the provisions of Section 25 counsel contended that the assessment under this Section has to be based only on turn over and that in a case of compounding the said power under Section 25 cannot be invoked - Held that - This contention also cannot be accepted. We have already seen that the assessing officer has found that the compounding allowed was vitiated for the reason that the turn over based on which compounding was allowed as conceded by the assessee was wrong and hence compounding itself is erroneous. Once it is so found the entire turn over of the assessee has to be treated as escaped turn over. In such a situation the entire turn over has to be treated as escaped turn over available for assessment and if so the power under Section 25 can be invoked. The assessee had other legal contentions which were not considered by the Tribunal as according to the Tribunal the fundamental issue to be decided was if the assessing authority was within his powers to assess the dealer under Section 25. Once we uphold the competence of the assessing officer we have to necessarily remit the cases back to Tribunal with a direction to consider the other contentions raised by the assessee and to dispose of the appeals according to law - appeals are remitted to the Tribunal with a direction to consider the other contentions that are urged by the assessee. Revision allowed.

Summary

Issues:
Challenge to common order passed by Tribunal under T.A.(VAT)Nos.890, 891, 892, 893, and 894 of 2013 regarding compounding scheme under Kerala Value Added Tax Act.

Analysis:

1. Factual Background and Assessment Proceedings:
The respondent, a dealer in gold, applied for compounding under Section 8 of the KVAT Act for assessment years 2006-2007 to 2010-2011. Subsequently, the assessing officer found an error in the highest turnover conceded by the assessee, leading to proceedings under Section 25 of the Act and assessments for the mentioned years were completed. Appeals by the assessee were dismissed by the first appellate authority, which were then challenged before the Tribunal.

2. Tribunal's Decision and Legal Position:
The Tribunal allowed the appeals based on the judgment in Zodiac Regency case, stating that any assessment should remain within the framework of the compounding scheme accepted by both parties. However, the High Court disagreed with the Tribunal's view, citing judgments in M/S Joy Alukkas Traders (I) Pvt. Ltd. v. State of Kerala and STR922011, emphasizing the competence of authorities to revise assessments under the compounding scheme.

3. Relevance of Previous Judgments:
The High Court highlighted the significance of judgments in M/S Joy Alukkas Traders (I) Pvt. Ltd. v. State of Kerala and STR922011, which were not considered by the Tribunal. These judgments clarified the powers of authorities to initiate proceedings under Section 25 of the KVAT Act even in cases where compounding errors were identified, unlike the situation in the present case.

4. Applicability of Legal Principles:
The Court rejected the comparison with the case of Prakash Jewellery v. State of Kerala, stating that the principles from that case did not apply to the current scenario where the compounding itself was found to be erroneous due to incorrect turnover declaration by the assessee. The Court also emphasized that the power of rectification under Section 66 of the KVAT Act is limited to errors committed by the assessing officer, not errors resulting from incorrect declarations by the assessee.

5. Remittal of Cases to Tribunal:
While setting aside the Tribunal's orders, the High Court directed the Tribunal to consider other legal contentions raised by the assessee, which were not addressed previously. The Court emphasized the need to remit the cases back to the Tribunal for a comprehensive consideration of all legal aspects raised by the parties.

In conclusion, the High Court allowed the revisions, highlighting the legal principles governing assessments under the compounding scheme and directing a reconsideration of the case by the Tribunal to address all legal contentions raised by the parties.