2015 (8) TMI 741 - HC - VAT and Sales Tax

Payment of Tax at compounding rate Rejection of benefit due to Shifting of place of business Application was filed for payment of tax at compounding rate during which period business premises was shifted Kerala Value Added Tax Act, 2003 Held that - Reasons enumerated in section 8 were only illustrative and not exhaustive Section 8(f)(i) provides option for dealer in ornaments or articles of gold, silver, platinum group metals to pay tax at compounding rate instead of paying tax in accordance with provisions of section 6 Assessing authority for valid and sufficient reason such as shifting of place of business, may refuse permission to pay tax under this section and cancel permission if any granted In spite of shifting of place of business, dealer had not changed address of business place Proviso to section 8(f)(ii) requires prior approval of District Deputy Commissioner before proceeding with orders There was no application of mind so far as, Assistant Commissioner concerned was informed by dealer that they were proposing to shift their place of business. No opportunity of being heard was given to petitioner Assessing authority must give valid reason why such shifting deserves such treatment Unless reasoning was mentioned it may not be ground upon which permission can be cancelled without valid and sufficient reason In light of the said observations, orders of Tribunal lacks consideration and orders deserve to be set aside Decided in favour of Assesse.

Issues Involved:
1. Shifting of business premises as a reason for rejecting the application for composition under section 8(f)(ii) of the Kerala Value Added Tax Act, 2003.
2. Discretionary power of the assessing authority under section 8(f)(ii) of the Kerala Value Added Tax Act, 2003.
3. Justification for rejecting the application for composition for the year 2011-12 based on the events of the previous year.
4. Compliance with the requirements of section 8(f)(v)(d) of the Kerala Value Added Tax Act, 2003.
5. Necessity of prior approval of the District Deputy Commissioner as per the proviso to section 8(f)(ii) of the Kerala Value Added Tax Act, 2003.
6. Opportunity for the revision petitioner to be heard before the rejection of the application for composition.
7. Inconsistency between the reasons stated in the show-cause notice and the final order rejecting the application for composition.

Detailed Analysis:

1. Shifting of Business Premises:
The court examined whether the shifting of business premises alone is a valid and sufficient reason under section 8(f)(ii) of the Kerala Value Added Tax Act, 2003, to reject the application for composition. It was noted that the assessing authority must provide valid and sufficient reasons for such rejection, and merely shifting the business premises without elaboration does not suffice.

2. Discretionary Power of Assessing Authority:
The court considered whether the assessing authority's discretion under section 8(f)(ii) is proper and reasonable. It was emphasized that the discretion must be guided by judicial principles and should not be arbitrary. The Tribunal's interpretation that the power to reject the application for composition is not discretionary was found to be erroneous.

3. Justification for Rejection Based on Previous Year's Events:
The court evaluated whether the rejection of the application for composition for the year 2011-12 was justified when the application for the previous year (2010-11) was accepted despite the business premises being shifted. The court found that the reasons for rejection must be consistent and supported by objective reasons.

4. Compliance with Section 8(f)(v)(d):
The court assessed whether the revision petitioner complied with the requirements of section 8(f)(v)(d) by paying tax as provided therein during the year 2011-12. It was found that the Tribunal erred in holding that the rejection of the compounding facility was in order despite compliance by the petitioner.

5. Necessity of Prior Approval:
The court scrutinized whether the prior approval of the District Deputy Commissioner was obtained before rejecting the application for composition, as mandated by the proviso to section 8(f)(ii). It was found that such approval was not obtained, indicating non-compliance with the statutory provision.

6. Opportunity to be Heard:
The court examined whether the revision petitioner was given an opportunity to be heard before the rejection of the application for composition. The court noted that the petitioner was not given a proper opportunity to explain the valid and sufficient reasons for shifting the business premises, which is a procedural lapse.

7. Inconsistency Between Show-Cause Notice and Final Order:
The court identified inconsistencies between the reasons stated in the show-cause notice (annexure A3) and the final order (annexure A5) rejecting the application for composition. The show-cause notice cited the failure to change the business address and non-intimation of the new branch, while the final order cited different reasons, including the nature of the business and the location of the new premises. This inconsistency indicated a lack of application of mind by the assessing authority.

Conclusion:
The court concluded that the orders of the Tribunal lacked consideration of relevant facts and failed to ensure compliance with the statutory provisions. The rejection of the application for composition was found to be arbitrary and illegal due to the absence of valid and sufficient reasons, failure to obtain prior approval from the District Deputy Commissioner, and not providing the petitioner an opportunity to be heard. Consequently, the revision was allowed, and the orders of the Tribunal were set aside.

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