2015 (2) TMI 234 - HC - VAT and Sales Tax

Scheme of compounding - Whether a dealer who opts to pay compounded tax under section 8(f)(i) of the Kerala Value Added Tax Act, 2003 is entitled to say that, since one of his branches was closed down on the last date of the previous financial year (2011-12) in question, that is, on March 31, 2012, was he entitled to exclude the turnover of that branch for determining the compounded tax payable for the next financial year, that is, 2012-13 - Held that - The liability of a dealer to pay tax under the KVAT Act is in terms of section 6, which is the charging provision. The optional system of payment of tax at compounded rates is permitted in terms of section 8. Section 8(f)(i) relates to dealers in ornaments or wares or articles of gold, silver or platinum group metals, etc. Clauses (a) to (d) under that provision clearly show that the compounded tax has to be determined on the basis of the annual turnover of the assessee. Therefore, those provisions do not admit any classification of the establishment of the assessee into branches, for the purpose of determining the total turnover to determine the annual turnover, for the purpose of such determination. - dealers opting for payment of tax under that clause shall pay compounded tax in respect of their branches existing in the year (to which the option relates). While that Explanation excludes any dissection of the establishment for payment of tax, the principle that the compounded tax has to be determined on the basis of annual turnover remains the same. Therefore, there cannot be any splitting up or proportionate reduction of the annual turn over of the previous year to determine the compounded tax that could be paid in terms of that provision. - No legal infirmity or jurisdictional error in the impugned judgment issued by the learned single judge (Fashion Jewellery v. Commercial Tax Officer 2013 (3) TMI 585 - KERALA HIGH COURT - Decided against Assesse.

Summary

Issues:
1. Interpretation of section 8(f)(i) of the Kerala Value Added Tax Act, 2003 regarding the entitlement of a dealer to exclude the turnover of a closed branch for determining compounded tax payable for the next financial year.

Analysis:
The judgment primarily deals with the interpretation of section 8(f)(i) of the Kerala Value Added Tax Act, 2003, specifically focusing on the entitlement of a dealer opting for compounded tax to exclude the turnover of a closed branch for calculating the tax payable for the subsequent financial year. The court examined the provisions of section 6, which outlines the liability to pay tax, and section 8, which allows for optional payment at compounded rates. It was observed that clauses (a) to (d) under section 8(f)(i) mandate determining compounded tax based on the annual turnover of the assessee, without provision for branch-wise classification. The court emphasized that the determination of compounded tax must be based on the total annual turnover without any splitting or reduction based on branch closures.

Furthermore, the court analyzed Explanation 3 under section 8(f)(i), which explicitly states that dealers opting for compounded tax must pay tax for all branches existing in the relevant year without dissecting the establishment for payment purposes. This explanation reinforced the principle that compounded tax calculation is tied to the annual turnover, precluding any proportionate reduction based on branch closures. The judgment also referenced Explanation 8 applicable to the year 2010-11, clarifying that it does not extend to subsequent years, affirming the legal soundness of the impugned judgment issued by the learned single judge in Fashion Jewellery v. Commercial Tax Officer [2013] 62 VST 346 (Ker).

In conclusion, the court dismissed the writ appeal, upholding the position that a dealer opting for compounded tax under section 8(f)(i) cannot exclude the turnover of a closed branch for calculating the compounded tax payable for the subsequent financial year. The judgment underscores the importance of adhering to the statutory provisions and principles governing the determination of compounded tax under the Kerala Value Added Tax Act, 2003.