2017 (3) TMI 339 - HC - VAT and Sales Tax

Applicability of compounded rate for works contract - KVAT - . The petitioner s contention is that the petitioner had applied for a compounding in the year 2015-16 but, had specifically not filed any application for the year 2016-17 and there was no compounding applied for that particular work, ie; the second contract obtained by the petitioner. - Held that - From the time of introduction of the 4th proviso, necessarily there is a mandate to continue the compounding when applied for and allowed in an year; at least of that work commenced in the year. However, the proviso was introduced only after the commencement of the subject assessment year being 2016-17. The petitioner had not applied for a compounding in that year. The mere fact that the petitioner s work, which commenced in the previous year, had been compounded for that year would not require continuance under the scheme in the subsequent year, for reason of there being no provision available requiring such a continuance. It is pertinent that though the petitioner filed a quarterly return and not a monthly return, the petitioner did not show the tax payable under the compounded scheme, but however made a self assessment under the regular scheme itself. In such circumstance, the omission to file a monthly return can only be considered an inadvertent omission. Petition allowed - decided in favor of petitioner.

Summary

Issues:
Challenge to assessment order under the Kerala Value Added Tax Act, 2003 based on maintainability of writ petition under Article 226 of the Constitution of India.

Analysis:
The judgment concerns the challenge of an assessment order under the Kerala Value Added Tax Act, 2003. The Government Pleader argued against the maintainability of the writ petition, citing the availability of an appeal under the KVAT Act, stating that issues raised in the writ petition cannot be considered under Article 226 of the Constitution of India. However, the petitioner's counsel referred to a legal precedent to support the contention that assessments not sanctioned by law can be set aside under Article 226 without the need for resorting to alternate remedies.

The petitioner, a registered works contractor under the KVAT Act, applied for compounding for works conducted in different assessment years. The dispute arose when the Assessing Officer rejected the return for the assessment year 2016-17, claiming the petitioner could not resile from the compounding for a specific work as per the proviso of Section 8(a) of the KVAT Act. The petitioner argued that since no compounding application was filed for that particular work in 2016-17, the compounding scheme should not apply.

Significantly, the judgment highlighted the evolution of the relevant provisions over the years. It noted that until 2014, there was a mandatory requirement to continue under the compounding scheme once applied for and allowed. However, subsequent changes made the continuance optional. The introduction of the 4th proviso in 2016 mandated the continuation of compounding for a work once applied and allowed in that year. As the petitioner had not applied for compounding in 2016-17, the court found no requirement for continuance under the scheme.

The court also considered the petitioner's conduct, emphasizing that the omission to file a monthly return under the compounded scheme could be deemed inadvertent. The Assessing Officer's lack of action against the petitioner for non-filing of monthly returns further supported this view. Ultimately, the court held that the assessment order could not be sustained as it was not sanctioned by law, setting it aside and allowing the writ petition. The Assessing Officer could re-open the assessment if any defects are found upon filing returns, as per provisions under the KVAT Act.