2023 (6) TMI 896 - HC - VAT and Sales Tax

Cancellation of the permission to pay tax on compounded basis for the year 2015-16 - alleged shifting of business premises - principles of interpretation - HELD THAT - The statutory provision that enables an assessee to pay tax on compounded basis Section 8(f) of the KVAT Act does not mandate that the assessee should not change its place of business during the year in which it has sought to pay tax on compounded basis. The provision of sub clause (iv) of Section 8(f) only empowers an Assessing Authority to cancel a permission already granted for valid and sufficient reasons such as shifting of place of business, furnishing of false information, suppression of relevant information, failure to furnish such information demanded etc. It can be seen therefore that sub clause (iv) of Section 8(f) uses the phrase 'shifting of place of business' along with other phrases such as 'furnishing of false information', 'suppression of relevant information' etc. to denote those reasons which are treated as valid and sufficient by the Statute for the purposes of cancellation of a permission already granted. It is a settled principle of interpretation of statutes that the true scope and ambit of a phrase used in a statute must be gathered from the other words/phrases which are used along with it in the statutory provision. The principle of noscitur a sociis is a rule of interpretation that stipulates that where the general words in a statutory text are flanked by restricted words, the meaning of the general words are taken to be restricted by implication with the meaning of the restricted words. The Latin term, noscitur a sociis contemplates that a statutory term is recognised by its associate words. On applying the principle of noscitur a sociis, to determine the scope and ambit of sub clause (iv) of Section 8(f), it can be safely stated that the shifting of a place of business can be cited as a valid and sufficient reason for cancelling a permission already granted only if such shifting is without the knowledge of the Assessing Officer and thereby had an element of suppression of relevant information or failure to furnish relevant information. Justification refers to the principle that the exercise of public power must be justified, intelligible and transparent, not in the abstract, but to the individuals subject to it. Demonstrated expertise refers to the requirement of the decision maker establishing the reasonableness of his decision by demonstrating therein his experience and expertise. On the facts in the instant case, it is not found that the Assessing Authority or the Tribunal to have indicated or provided a clear justification for the action of the Assessing Authority in cancelling the permission that was granted to the petitioner to pay tax on compounded basis for the assessment year 2015-16. The cancellation of the permission already granted was illegal and unreasonable, and hence, liable to be set aside. The O.T. Revision is allowed.

Summary

Issues:
The issues involved in this case are related to the cancellation of permission to pay tax on a compounded basis under Section 8(f) of the Kerala Value Added Tax Act due to the shifting of business premises during the assessment year 2015-16.

Summary:

Issue 1: Shifting of Business Premises
The petitioner, a partnership firm engaged in the jewellery trade, shifted its business premises to a new building with three door numbers in February 2015. The necessary changes in the registration certificate were effected by the Assessing Authority in March 2015. The petitioner applied for and obtained permission to pay tax on a compounded basis for the year 2015-16. However, the permission was later cancelled by the Assessing Authority due to the alleged shifting of business premises in August 2015, coinciding with the formal inauguration of the renovated premises.

Issue 2: Interpretation of Statutory Provision
The Assessing Authority and the Appellate Tribunal cited the shifting of business premises as a reason to cancel the permission granted to the petitioner. The statutory provision under Section 8(f) empowers the Assessing Authority to cancel such permission for valid reasons, including the shifting of place of business. However, a detailed analysis of the provision reveals that cancellation can only be justified if the shifting is done without the knowledge of the Assessing Officer, involving suppression of relevant information or failure to furnish information.

Issue 3: Administrative Decision Making
The court applied the principle of noscitur a sociis to interpret the scope of sub clause (iv) of Section 8(f) and concluded that the cancellation of permission was not justified in this case. The Assessing Authority and the Tribunal failed to demonstrate any suppression of turnover or deliberate furnishing of false information by the petitioner. The court emphasized the importance of administrative decision-making conforming to the culture of justification, requiring responsiveness, justification, and demonstrated expertise.

Conclusion:
The High Court allowed the O.T. Revision, setting aside the impugned order of the Tribunal and holding that the cancellation of permission to pay tax on a compounded basis for the assessment year 2015-16 was illegal and unreasonable. The court ruled in favor of the assessee, highlighting the lack of justification for the action taken by the Assessing Authority and the Tribunal.