2018 (12) TMI 296 - HC - VAT and Sales Tax

Refund of the amounts paid at the time of admission - amounts paid on the basis of an estimation made of the toll charges, which could have been collected on operation of the toll for a period of 19 years - Compounding of Offences - Cancellation of suo moto order - Held that - In the present case, it is not clear from the assessment order as to the date on which the application for compounding was filed in the year 1999-2000. Further, the application stood allowed by the AO when the assessment order was passed in the year 2004. There was admittedly payment before the AO of the tax at the compounded rate on receipts by the assessee. The Deputy Commissioner, invoking powers of suo motu revision had merely directed denovo assessment for reason of audited balance-sheet having not been filed and there being a shortfall of turnover. Denovo assessment can only be under the compounding scheme/provision, since admittedly tax was paid at the compounded rate and in any event, atleast, at the time of assessment the application for compounding was allowed by the AO; which was not the subject of suo motu revision. Sub-rule (1) of Rule 30 speaks of an application to be filed at the commencement of the year, at least before the first of May of that assessment year. Form Nos. 21 and 21A also indicate that the permission is granted for a specific period; mostly the assessment year. Rule 30 and the Forms prescribed thereunder are period specific; while Rule 30A and the Forms prescribed thereunder are contract specific, is the contention of the assessee, which we are inclined to accept. If that be so, when the compounding has been applied for the first year, necessarily, it has to be applied in the second year also, when the very same contract is continued in the second year. The cancellation of the suo motu order is set aside - The refund shall be only after the working of the assessments under the compounding scheme and under the regular scheme - appeal allowed in part.

Issues Involved:
1. Validity of the compounding application for the assessment years 1999-2000 and 2000-2001.
2. Assessment procedure for the year 2001-2002.
3. Interpretation of Rule 30A and Section 7(7) of the KGST Act.
4. Impact of previous judgments and orders on the current case.

Detailed Analysis:

1. Validity of the Compounding Application for the Assessment Years 1999-2000 and 2000-2001:

The State of Kerala appealed against the judgment that allowed the assessee to compound their tax for the years 1999-2000 and 2000-2001. The learned Single Judge found that the assessee was entitled to compounding for these years and quashed the assessment orders (Exts. P3, P6, P6(a), and P7). The State argued that the compounding application was belated, filed in 2004 for the years 1999-2000 and 2000-2001. However, the assessee provided evidence (Ext. P13 and Ext. P16) indicating that an application for compounding was filed before 2001 and was accepted by the Deputy Commissioner. The Court noted that the Deputy Commissioner’s suo motu revision (Ext. P3) did not interfere with the compounding permission but only directed a denovo disposal due to a shortfall in turnover.

2. Assessment Procedure for the Year 2001-2002:

For the assessment year 2001-2002, the AO rejected the compounding application and proceeded with a regular assessment (Ext. P8). The learned Single Judge did not interfere with this decision, aligning it with the Division Bench judgment in Ext. P2. The Court directed that the assessment for 2001-2002 should follow the regular scheme but should deduct the turnover already assessed under Section 7(7) for the previous years.

3. Interpretation of Rule 30A and Section 7(7) of the KGST Act:

The Court examined the provisions of Rule 30A and Section 7(7) of the KGST Act, which allow civil contractors to opt for tax compounding. Rule 30A(2) mandates that the application should be filed before receiving the contract amount. The Court found that the compounding application for 1999-2000 was allowed by the AO, and the Deputy Commissioner’s suo motu revision did not revoke this permission. For 2000-2001, the Court noted that the AO rejected the compounding application, but the assessee argued that the permission granted in the first year should apply to subsequent years for the same contract. The Court agreed, stating that the compounding scheme should apply contract-wise rather than period-wise.

4. Impact of Previous Judgments and Orders on the Current Case:

The Court considered previous judgments, including the Division Bench judgment in Ext. P2 and the Supreme Court’s orders. The Division Bench had directed the AO to assess the value of materials involved in the bridge construction based on the original contract and technical details. The Supreme Court remanded the case for fresh consideration uninfluenced by the Division Bench’s decision. The Court also analyzed cases cited by the Senior Government Pleader, such as M.P. Raju, Reliance Construction Company, and Sivasakthi Traders, and found them distinguishable from the present case.

Conclusion:

The Court partly allowed the appeal of the Government, setting aside the cancellation of the suo motu order but maintaining the compounding permission for 1999-2000 and 2000-2001. The assessments for these years should be completed under the compounding scheme, considering any shortfall in turnover. For 2001-2002, the assessment should follow the regular scheme, deducting the turnover assessed in previous years. The refund will be processed after the assessments are completed as directed. The appeal in W.A. No. 713/2015 was closed as unnecessary.

← Previous Next →