2003 (2) TMI 536 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the assessee can withdraw from the compounding scheme and request assessment under Section 17 of the K.G.S.T. Act.
2. Whether the permission granted for payment of tax at a compounded rate can be cancelled by the assessee.
3. Interpretation of relevant clauses in Form 21A prescribed under Rule 30(3) of the K.G.S.T. Rules.

Issue 1 - Withdrawal from Compounding Scheme:
The respondent-assessee, an abkari contractor, had applied for the facility of paying sales tax at a compounded rate for the assessment year 1993-94 but later discontinued the business. The Appellate Tribunal allowed the withdrawal from the compounding scheme, stating that the assessment should be completed under Section 17 of the Act. However, the Deputy Commissioner (Law) challenged this decision in a revision petition. The Government Pleader argued that once the assessee avails the benefit of paying tax at a compounded rate, they cannot seek cancellation of the permission granted. The Division Bench decision in Udaya Traders v. Sales Tax Officer was cited to support this contention. The court upheld the petitioner's argument, emphasizing that there is no provision in the Act allowing an assessee to back out from the agreed tax payment method.

Issue 2 - Cancellation of Permission for Compounded Rate:
The counsel for the respondent-assessee contended that since the assessee had ceased business in August 1993 and did not pay tax at the compounded rate monthly, the permission granted by the assessing authority should be deemed automatically cancelled. Reference was made to Form 21A under Rule 30(3) of the K.G.S.T. Rules to support this argument. However, the court, referring to the Division Bench decision in Udaya Trader's case, clarified that the assessing authority has the discretion to cancel the permission only in case of default in payment. The court emphasized that the assessee cannot compel the assessing authority to cancel the permission once agreed upon, as it is the authority's prerogative to enforce the agreed-upon terms.

Issue 3 - Interpretation of Clauses in Form 21A:
The Division Bench's decision in Udaya Trader's case was pivotal in determining that an assessee cannot retract from the agreed tax payment method under Section 7(14) of the Act. The court highlighted that the clauses in the prescribed Form do not mandate cancellation of permission in every default case but leave the decision to the assessing authority. The court concluded that the Tribunal's decision allowing withdrawal from the compounding scheme was erroneous and set aside the order, restoring the assessing authority's decision. The assessing authority's order under Section 7(14) was deemed valid in determining the assessee's liability based on the proportionate amount of the Kist amount.