2016 (10) TMI 440 - HC - VAT and Sales Tax

Cancellation of option to pay tax under compounded rate under Section 8(C) of the Kerala Value Added Tax Act - compounding of offence of non-payment of tax in terms of Section 74 of the KVAT Act - option of filing a revised return within three months from the date of the compounding order under Section 22(10) of the KVAT Act - whether cancellation of the option to pay under compounded rate justified? - Held that - the first communication by the petitioner to the respondents, bringing to their notice the fact of non filing of returns and seeking a permission to file revised returns in accordance with Section 22 (10) of the KVAT Act, was made only through Exts.P5 series of letters dated 10.12.2015. This was admittedly beyond the period of three months, that is granted under Section 22(10) of the KVAT Act. Inasmuch as the petitioner did not comply with this requirement of filing revised returns in respect of the tax amount not paid under Section 6(2), no fault found with orders passed by the 1st respondent, cancelling the permission granted to the petitioner for payment of tax under compounded rate. Completion of assessment as per best judgement basis under Section 25(1) of the KVAT Act - Held that - the respondent assessing authority would have to consider the specific claim of the petitioner for the grant of input tax credit/rebate of taxes paid under Sections 6(1) and 6(2) of the KVAT Act, and also give credit to the payments effected by the petitioner, while paying tax on compounded basis before the passing of Exts.P7 series of orders, while completing the assessments pursuant to Exts.P8 series of notices. Proceedings to be completed after giving the petitioner two weeks time and personal hearing to be granted to petitioner. Petition allowed - decided in favor of petitioner.

Summary

Issues:
Challenge against cancellation of permission for compounded tax payment under Section 8(C) of KVAT Act for assessment years 2011-12 to 2014-15 and against completion of assessment on best judgment basis under Section 25(1) of KVAT Act.

Analysis:
The petitioner challenged the cancellation of permission to pay tax under compounded rate and completion of assessment on best judgment basis. The petitioner contended that the cancellation was due to non-payment of admitted tax under Section 6(2) of KVAT Act and sought condonation for revising returns under Section 22(10) of KVAT Act. However, the petitioner failed to file revised returns within the stipulated three months, leading to the rejection of the challenge against cancellation orders (Exts.P7 series) by the 1st respondent under Section 8(C) of KVAT Act read with Rule 11(6) of KVAT Rules. The court upheld the cancellation, citing the petitioner's non-compliance with filing revised returns regarding unpaid tax amounts under Section 6(2).

Regarding the completion of assessment under Section 25(1) of KVAT Act pursuant to notices (Exts.P8 series), the court directed the respondent assessing authority to consider the petitioner's claim for input tax credit/rebate of taxes paid under Sections 6(1) and 6(2) of KVAT Act. The court emphasized that the authority must also credit payments made by the petitioner under compounded basis before the cancellation orders (Exts.P7 series) were issued. The court granted the petitioner two weeks to respond to the notices and instructed the authority to consider objections during a personal hearing. The authority was directed to complete the proceedings within two months, ensuring procedural formalities and considering the absence of suppression in the case.