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TMI Blog2016 (1) TMI 508X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the statutory provisions of Section 7(5) of the CST Act, to get a cancellation of the certificate of registration issued to them under the CST Act in 2005-06 itself, it would be unfair on the part of the respondents to insist on the higher rate of compounded tax under Section 8(a)(ii) of the KVAT Act being paid by the petitioners on the works contracts executed by them. The orders of penalty imposed on the petitioners on this ground also cannot be legally sustained. - Demand of differential tax and penalty set aside - Decided in favor of assessee. Regarding the petitioners could have applied for a surrender of their certificate of registration under the CST Act during the assessment year 2005-06 itself, for reasons best known to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in these writ petitions concerns the option for payment of tax at compounded rates, that was extended to dealers who were engaged in works contracts. As per the provisions of Section 8(a)(i) of the KVAT Act, as it stood on 1.4.2005, any works contractor who was not an importer or a dealer effecting first taxable sale in the State could, at his option, instead of paying tax in accordance with the provisions of the said section, pay tax at 2% of the whole contract amount. For those who opted for payment of tax at compounded rates, but did not satisfy the conditions in S. 8 (a)(i) of the Act, compounded tax was payable at the rate of 4% of the contract amount. S. 8 (a)(i) was amended by Act 39 of 2005 dated 28.8.2005 with effect from 1.4.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns for payment of tax on compounded basis, also filed the necessary returns and paid tax thereon, on the basis of the applications filed by them for payment of tax, at the concessional rate of 2%, on compounded basis. In some cases, the petitioners also surrendered their CST registrations during the assessment year 2005- 06, and before the date of the amendment of S. 8 (a) (i). In the case of some others, the petitioners surrendered their CST registrations only subsequent to the date of the amendment, namely, 28.8.2005. The Assessing Officers, taking note of the amendment that was introduced on 28.8.2005 with effect from 1.4.2005, proceeded to issue notices to the petitioners proposing to cancel their option for payment of tax on compounded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of the case as also the submissions made across the bar, I find that the contention of the petitioners is essentially that, for the assessment year 2005-06, they had opted for payment of tax on compounded basis at the lower rate of 2% in accordance with Section 8(a)(i) of the KVAT Act, as it stood prior to its amendment, on 28.8.2005, and had commenced payment of tax at the said rate by filing necessary returns with the respondent authorities. It was while so that the amendment dated 28.8.2005 came into force with effect from 1.4.2005 and the petitioners found themselves in a situation where they could not comply with the condition regarding surrendering of their CST registration certificates so as to conform to the status of a dealer n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate of compounded tax under Section 8(a)(ii) of the KVAT Act being paid by the petitioners on the works contracts executed by them. The orders of penalty imposed on the petitioners on this ground also cannot be legally sustained. I therefore quash the orders impugned in W.P.(C).Nos.17800/2007, 18768/2007 and 21219/2007, to the extent they demand differential tax under Section 8(a)(ii) of the KVAT Act and impose a penalty on the petitioners for erroneously opting to pay tax under Section 8(a)(i) of the Act during the said assessment year. The said writ petitions are therefore allowed, as above, with consequential reliefs to the petitioners. As regards W.P.(C).Nos.19675/2007, 23062/2007 and 26474/2007, I find that, in these cases, the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X
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