2018 (11) TMI 1356 - HC - VAT and Sales Tax

Imposition of compounding fees on offences - interpretation of statute - Compounding of Offence - Section 74 of the KVAT Act, 2003 - Held that - Giving a purposive interpretation to the amendment, it has to be understood as enhancing the limit in the body of the sub-section, which includes the sub-clauses and the proviso also - Hence we cannot accept the contention that in the year 2009 when the amendment was made, the proviso was retained as having a maximum limit of ₹ 2 lakhs. As to the amendment made in 2011, the legislature was more careful in prescribing that the enhancement would be made at every place where the earlier limit had been specified. The assessee had paid up the compounding fees at ₹ 8 lakhs and had approached this Court claiming relief - The learned Single Judge refused to consider the same, since already the petitioner had paid up the compounding fees without demur. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Interpretation of compounding fee under Section 74 of the Kerala Value Added Tax Act, 2003.
2. Application of maximum compounding fee against a single offence spread over a financial year.

Analysis:
1. The judgment dealt with two appeals, one by the assessee and the other by the State, concerning the same issue. The respondent, a metal crusher unit, faced penalty proceedings for not including two Auto Sand Machines in the compounding application. The respondent sought compounding under Section 74 of the Act and paid &8377; 8 lakhs, with &8377; 8 lakhs adjusted towards compounding fees. The respondent challenged the imposition of &8377; 8 lakhs, arguing that the maximum compounding fee for repeated offences in one assessment year should be &8377; 2 lakhs. The court held that once an assessee voluntarily compounds an offence, they cannot dispute the penalty proposal. However, challenges can be made during assessment, independent of compounding (paragraphs 2-3).

2. The second issue revolved around the maximum compounding fee collectible against a single offence spread over a financial year under Section 74. The court analyzed amendments to the Act in 2009 and 2011, which raised compounding fees to &8377; 4 lakhs and then &8377; 8 lakhs. The proviso, limiting the fee to &8377; 2 lakhs, remained unchanged. The court interpreted the amendments purposively to avoid anomalies and ensure legislative enhancements are upheld. It concluded that the proviso's limit should be understood as part of the enhanced fee structure, leading to the rejection of the contention that the proviso retained a maximum of &8377; 2 lakhs in 2009. The judgment of the Single Judge reducing the compounding fee was set aside, and the State's appeal was allowed (paragraphs 4-9).

3. In the second appeal, the assessee had paid &8377; 8 lakhs in compounding fees and sought relief based on the first judgment. The court, having set aside the earlier judgment, dismissed the appeal as the compounding fees were already paid. The writ appeal by the assessee was hence rejected, and the orders were made without any costs (paragraph 10).