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TMI Blog2015 (2) TMI 1207X X X X Extracts X X X X X X X X Extracts X X X X ..... roceeding against the petitioners with a demand for differential tax based on the amended provisions introduced through the Finance Act, 2011. The Finance Act, 2011, when enacted, contained a validation clause that made it clear that, the passage of the Finance Act would not affect any action taken in terms of the provisions of the Kerala Finance Bill, 2011 (Bill No.426 of the 12th Kerala Legislative Assembly). In the instant cases, the payment of tax at compounded rates, and the acceptance of the said tax by the respondents, all took place when the provisions of the Kerala Finance Bill, 2011 (Bill No.426 of the 12th Kerala Legislative Assembly), were in force. That being the case, by virtue of the validation clause in the Finance Act, 2011, those actions cannot be revisited, and it would be legally impermissible, and patently unfair, to permit the respondents to proceed against the petitioners with a demand for differential tax under Section 8 (f) of the Act. The actions of the respondents in demanding differential tax amounts from the petitioners after having accepted the payment of tax by the petitioners in accordance with the applications submitted by them for the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the preceding year was above rupees forty lakhs and up to rupees on crore; and at (d) one hundred and fifty per cent; in case their annual turnover for the above goods for the preceding year exceeded rupees one crore; of the highest tax payable by him as conceded in the return or accounts, or tax paid by him under this Act, whichever is higher, for a year during any of the three consecutive years preceding that to which such option relates.; Explanation 1:- Where a dealer had not transacted any business for the last three years consecutively, the highest tax paid or payable for the year during the year or years he transacted business shall be considered for the above purpose. Explanation 2:- [Where during any such preceding year, the dealer had not transacted business for any period in that financial year, the tax payable for the twelve months shall be calculated proportionately on the basis of the tax payable or the turnover conceded, as the case may be, for the period during which such dealer had transacted business.; Explanation 3:- Dealers opting for payment of tax under this clause shall pay compounded tax in respect of all their branches existing in the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d: Provided that no orders under this sub-clause shall be issued without giving the dealer an opportunity of being heard and without prior approval of the District Deputy Commissioner. (iii) Notwithstanding anything contained in sections 55 or 60 of this Act, orders under sub-clause (ii) shall be appealable only to the Appellate Tribunals. (iv) In case where permission has been cancelled, the amount, if any paid based on the permission, shall be apportioned against the output tax due of the dealer. (v) Where a dealer had paid tax under this clause for the previous year, the tax payable for the succeeding year under this clause shall be, (a) One hundred and five per cent of such tax paid during the previous year, in case their turnover for the above goods for the preceding year was rupees ten lakhs or below; (b) one hundred and ten per cent of such tax paid during the previous year, in case their turnover for the above goods for the preceding year was above rupees ten lakhs and up to rupees forty lakhs; (c) one hundred and fifteen per cent of such tax paid during the previous year, in case their turnover for the above goods for the preceding year was above rupee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e succeeding year under this clause shall be calculated at the rates mentioned in item (i) or (ii) below, whichever is higher, - (i) (a) at the same amount of tax paid during the previous year, in case their turnover for the above goods for the preceding year was rupees ten lakh or below; (b) at one hundred and five per cent of such tax paid during the previous year, in case their turnover for the above goods for the preceding year was above rupees ten lakh and up to rupees forty lakh; (c) at one hundred and fifteen per cent of such tax paid during the previous year, in case their turnover for the above goods for the preceding year was above rupees forty lakh and up to rupees one crore; and (d) at one hundred and twenty five per cent of such tax paid during the previous year, in case their turnover for the above goods for the preceding year exceeded rupees one crore: Provided that the tax payable under this sub-clause by the dealers covered under Explanation 6 of this clause shall be at the appropriate percentage of tax mentioned in (a), (b), (c) or (d) above, of the tax re-determined under the said Explanation. (ii)1.25% of the turnover of sales of the goods c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orce during the period between 01.04.2011 and 19.07.2011. In some cases, although the petitioners had filed their applications within the period envisaged in the Statute, the authorities concerned did not pass orders on the said applications immediately, but passed orders only subsequently, after the coming into force of the Finance Act, 2011. Even in such cases, however, it is not in dispute that the petitioners, after filing their applications, went ahead and filed the necessary returns in accordance with the provisions of the Act and Rules and also paid tax in accordance with the returns filed. A tabulated chart showing the details of the applications filed by the petitioners in the various writ petitions, and the date on which the orders were passed on the said applications by the respondents is given below :- W.P(C) Nos. Application Dtd. Order Dtd. 3740 of 2012 Application not dated 13.06.2011 4664 of 2012 Application not dated 24.01.2012 6433 of 2012 27.04.2011 in Form 1B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s validly and effectively done or taken under the provisions of KVAT Act, as if the said amendment had been in force at all material times. It is pointed out that the validation clause envisaged that no action would lie against any dealer or authority on the ground of short levy, or refund of excess tax or duty, and tax or duty collected, if any, by a dealer or an authority as the case may be, would be paid over to the Government. 8. It is the contention of the petitioners, therefore, that on account of the validation clause in the Finance Act, 2011, their payment of tax at compounded rates as per the pre-amended provisions, stood validated, and they could not be fastened with any demand for differential tax. The petitioners would place reliance on the decision of the Supreme Court in Varkisons Engineers v. State of Kerala and another [(2009) 25 VST 1 (SC)] as also the decision of this Court in Baniyas Granite Industries v. Agricultural Income Tax Commercial Tax Officer [2015 (1) KLT 657] . 9. Per contra, the stand of the Government is that, insofar as the Finance Act, 2011 made the amendments, that it introduced, effective from 01.04.2011, the petitioners, who had o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay tax at compounded rates, and such an option is accepted by the authorities under the KVAT Act, either expressly through an order or impliedly through their conduct, there comes into existence a contract from which neither side can resile. This legal position with regard to the binding nature of compounding proceedings has been reiterated in a number of judgments of the Supreme Court, the latest being the decision in Bhima Jewellery v. Assistant Commissioner (Assessment), Kerala Another [(2014) 71 VST 110 (SC)]. I am of the view, therefore, that there was no justification in the respondents proceeding against the petitioners with a demand for differential tax based on the amended provisions introduced through the Finance Act, 2011. 12. There is yet another aspect to be noticed. The Finance Act, 2011, when enacted, contained a validation clause that made it clear that, the passage of the Finance Act would not affect any action taken in terms of the provisions of the Kerala Finance Bill, 2011 (Bill No.426 of the 12th Kerala Legislative Assembly). In the instant cases, the payment of tax at compounded rates, and the acceptance of the said tax by the respondents, all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied upon is that of the Division Bench of this Court in Sasi v. The Commercial Tax Officer [2010 (1) KLT 661] where the Division Bench found that when a compounding application had been permitted on the basis of the rate of tax provided in the Kerala Finance Bill, 2009, and the said rate of tax was enhanced by the Kerala Finance Act, 2009 which was enacted subsequently, it could not be said that there was an enhancement of tax prejudicial to the interest of the assessee, since the permitted rate of compounded tax had not existed in the Statute at any point of time. In the said decision it was held that the payment of the tax by the assessee on the basis of the provisions of the Kerala Finance Bill, 2009, could only be viewed as one effected under a mistake of law and hence the enhanced tax consequent to the enactment of the Finance Act could be validly collected from the assessee. The said decision cited by the learned Special Government Pleader is also clearly distinguishable as it did not have to deal with a validation clause such as the one contained in the Kerala Finance Act, 2011, that validated any action that was taken in terms of the provisions of the Kerala Finance Bil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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