2024 (6) TMI 751 - HC - VAT and Sales Tax

Liability to pay excess tax collection to the Government when the tax liability of the respondent is higher than the tax collected - direction to respondent to pay the excess collected tax with interest to the Government even if the tax liability of the respondent is higher than the tax collected - HELD THAT - The proviso to Section 8 (f)/Section 8 (f) (iii) deals with a situation where a dealer in bullion or ornaments or wares or articles of gold, silver or platinum group metals including diamond, who has chosen to pay tax at the compounded rate under Section 8 of the KVAT Act, in lieu of the normal rate under Section 6 of the KVAT Act, is permitted to collect tax from the person to whom he has sold goods at the prescribed rate. The second limb of the said provision clarifies that if the tax so collected during the year is in excess of the tax payable for the year then the tax collected in excess shall be paid over to the Government in addition to the tax payable under Section 8 (f) - if a dealer collects tax at a rate different from the rate prescribed in the first limb of the proviso/Section 8 (f) (iii), then it would not answer to the description of tax so collected for attracting the second limb of the provision. It is apparent therefore that the finding of the Appellate Tribunal, in the orders impugned in these O.T. Revisions, are contrary to the express provisions of Section 8 (f) (iii)/proviso to Section 8 (f). Section 30 (1) clearly envisages a situation where a registered dealer is permitted to collect tax at the rates specified in Section 6. Thus, the provision, even if it applies in respect of registered dealers who pay tax under Section 8, cannot apply to cases where the dealer is permitted to collect tax only at the rates specified under Section 8. That apart, even if such a dealer collects tax at the rate specified under Section 6, he is obliged in terms of Section 30 (1) of the KVAT Act to pay it over to the Government since there is no provision similar to the proviso to Section 8 (f)/Section 8 (f) (iii), in Section 30 (1) of the KVAT Act - the order of the Appellate Tribunal impugned in these Revisions cannot be legally sustained. The O.T. Revisions are allowed.

Summary

Issues involved:
The issues involved in this case are:
- Whether the Appellate Tribunal erred in holding that excess tax collection is not liable to be paid to the Government when the tax liability of the respondent is higher than the tax collected?
- Whether the Appellate Tribunal should have directed the respondent to pay the excess collected tax with interest to the Government even if the tax liability of the respondent is higher than the tax collected?

Comprehensive details of the judgment for each issue involved:

1. Issue 1: Excess tax collection and liability
The respondents had opted to pay tax at a compounded rate under Section 8 (f) of the Kerala Value Added Tax Act for certain assessment years. They collected tax at rates higher than prescribed under the law. The Department initiated action against them for recovery of the excess amounts collected. The Appellate Tribunal held that since the total tax collected was less than the tax payable by the respondents, there was no obligation to pay the excess tax to the Government. The State challenged this finding.

2. Issue 2: Interpretation of statutory provisions
The High Court analyzed the provisions of Section 8 (f) which deal with situations where a dealer opts for a compounded tax rate. The Court emphasized that the tax collected in excess should be paid to the Government if it exceeds the tax payable for the year. The Court clarified that the term "tax so collected" refers to the tax permitted to be collected at the prescribed rate. Therefore, collecting tax at a different rate does not fulfill the requirement of paying excess tax to the Government. The Court disagreed with the Appellate Tribunal's interpretation and ruled in favor of the State.

3. Dealer's obligation to pay tax
The Court also addressed the argument that registered dealers paying tax under Section 8 (f) could collect tax at rates specified under Section 6. However, Section 30 (1) of the KVAT Act allows registered dealers to collect tax at Section 6 rates, not Section 8 rates. Even if a dealer collects tax at Section 6 rates, they are still obligated to pay it to the Government. Since there is no provision similar to the proviso in Section 8 (f), the Court concluded that the Appellate Tribunal's order could not be legally sustained.

In conclusion, the High Court allowed the Original Tax Revisions by setting aside the Appellate Tribunal's orders and ruling in favor of the Revenue, directing the assessees to pay the excess tax collected to the Government.