2014 (3) TMI 121 - HC - VAT and Sales Tax

Compounding tax - Section 8 (f)(i) of the Kerala Value Added Tax Act and Rules - Held that - though the petitioner has indicated that one of the shops was closed, according to the revision petitioner s counsel, the request could have been rejected and he must have been asked for regular assessment instead of compounding. Therefore, the Assessing Authority was not justified in proceeding with the compounding, if it was possible for bifurcating the previous year s turnover and reduced proportionately the tax to be paid - Once the application is accepted and the Assessing Authority completed the assessment, the question of either hearing the revision petitioner or rejecting the application seeking compounding would arise. Therefore, the reason brought out in the revision petition that the Assessing Authority if could not bifurcate the turnover of 2007-08 for the purpose of arriving at the proportionate tax, ought to have rejected as considering the application not in order cannot be accepted - once the dealer had opted out and paid tax under the Scheme of compounding, can never be allowed to revert back - Following decision of Zodiac Regency v. Commissioner of Commercial Taxes and another 2014 (2) TMI 962 - KERALA HIGH COURT - Decided against assessee.

Summary

Issues:
1. Interpretation of Section 8(f)(i) of the Kerala Value Added Tax Act regarding compounding tax for dealers in gold.
2. Consideration of turnover for compounding tax in the case of multiple branches.
3. Application of Rule 11 for granting or rejecting compounding tax requests.

Analysis:
1. The judgment revolves around the interpretation of Section 8(f)(i) of the Kerala Value Added Tax Act concerning the payment of compounding tax by dealers in gold. The petitioner, a gold dealer, opted for compounding tax for the first time for the year 2009-10. The contention arose when the assessing authority considered the tax paid for the year 2007-08, which included turnover from both the Head Office and a branch, in determining the compounding tax rate. The petitioner argued that since the Head Office was closed, the turnover should not have been combined. The Government Pleader cited a previous court decision to emphasize that the Act does not allow for the classification of branches in determining annual turnover for compounding tax purposes.

2. The court analyzed the provisions of Section 8(f)(i) and highlighted that the determination of compounding tax should not involve splitting or proportionate reduction of annual turnover from previous years. The petitioner's counsel argued that the assessing authority should have rejected the compounding request and opted for regular assessment instead of considering combined turnover. The court deliberated on whether the assessing authority was justified in proceeding with compounding without bifurcating the turnover from the closed branch. The application of Rule 11, which outlines the procedure for considering compounding tax requests, was also discussed.

3. The judgment addressed the application of sub-rule 2 of Rule 11, which specifies the procedure for rejecting compounding tax applications if found to be not in order. The court considered whether the assessing authority's decision to accept the application and proceed with compounding tax, despite the closure of one branch, was appropriate. The court referred to precedents and concluded that once a dealer opts for and pays tax under the compounding scheme, reverting back to regular assessment is not permissible. The revision petition was dismissed based on the lack of justification for the grounds raised, including the handling of turnover, application of rules, and the dealer's initial choice of compounding tax.

This detailed analysis of the judgment provides a comprehensive understanding of the legal issues involved and the court's reasoning in deciding the case.