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TMI Blog2018 (7) TMI 1765X X X X Extracts X X X X X X X X Extracts X X X X ..... en to the appellants/petitioners to file regular return for the respective assessment years. However, it is made clear that the appellants shall not be entitled for refund of any amount paid towards compounded tax. Appeal allowed. - WA Nos. 871/2017 & 239/2018 - - - Dated:- 2-7-2018 - A.M. SHAFFIQUE P. SOMARAJAN, JJ Appellant by: By Advs. Sri. Kurian George Kannanthanam (Sr.) Sri. P.T. Abhilash Sri. Babu Joseph Kuruvathazha Respondent: R4 By Adv. Sri. Murali Purushothaman R4 By Adv. Sri. Deepu Lal Mohan By Government Pleader Sri. C.E. Unnikrishnan JUDGMET Shaffique, J. Common questions have arisen for consideration in these appeals and hence are heard and decided together. WA No. 871/17 has been filed challenging judgment dated 9/3/2017 in WP(C) No.39547/2016 and WA No. 239/18 has been filed challenging judgment dated 26/7/2017 in WP(C) No.853/2011. 2. The short question that has arisen for consideration in the above appeals is concerning an issue relating to the Kerala Value Added Tax Act, 2003 (hereinafter referred to as KVAT Act). The appellants are assessees under the KVAT Act. During an assessment year, they opted for compounding and the quar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from 6/10/2010 onwards and thereafter there was no commercial production or sale. At that time, he requested for exemption from payment of tax which came to be rejected as per Ext.P5 order. Based on judgment in Raju Jacob v. Sales Tax Officer (2006 (1) KLT 788), it was held that once an assessee had opted for payment of tax by compounding, he cannot withdraw the option subsequently. 6. Heard the learned senior counsel appearing for the appellant in WA No.871/17, learned counsel appearing for the appellant in WA No. 239/18 and the learned Special Government Pleader appearing for the revenue. 7. The learned counsel for the appellants raised two specific contentions. The first contention is based on the wording in S.8(b), as it then was, which reads as under:- 8(b):- Any dealer producing granite metals with the aid of mechanized crushing machine, may, at his option, instead of paying tax in accordance with the provisions of the said sections, pay tax at the following rates namely:-. xxxxxx 8. It is argued that the liability to pay tax arises only when there is either production of granite metals or manufacture of sand. When there is no production, the question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an order of compounding. It is therefore submitted that it is not open for the appellants to raise contentions which had not been urged before the learned Single Judge. He also argued that even though no permission was granted to the assesses for payment of tax under the compounding scheme, still, when the assessee had opted for compounding and tax is paid in accordance with the compounding provision, there is no question of withdrawing from the compounding scheme and no exemption could be granted for payment of tax under the compounding scheme. 12. Raju Jacob (supra), was a case in which an assessee opted for payment of tax at the compounded rate as provided u/s 7(1)(a) of the Kerala General Sales Tax Act, 1963. The tax payable by the dealers in gold jewellery at the compounded rate for the financial year 2001-2002 was 150% of the tax payable by a dealer as conceded in the return and accounts for the immediately preceding year. Second proviso to S.7(1)(a) dealt with such dealers who were paying tax for 2001-2002 at the rate of 120% of the preceding year's tax. The assessee had no dispute regarding the payment of tax at 120%. However, an amendment was brought to S.7(1)(a) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent case as sanction has already been granted by the assessing authority. 15. The Special Government Pleader placed emphasis on the following judgments:- (i) State of Kerala v. T.S.Kalyanaraman (Laws (KER) 2009-2-45). In this case, a Division Bench of this Court was considering a revision filed by the State against an order of the Tribunal rejecting an application for review filed by the Revenue under the KGST Act. The short facts was that the assessee filed an application for payment of tax at compounded rate for the assessment year 2000-2001. The assessing officer did not pass any orders or issued Form 21A as required under the Act and the Rules. The assessee started remitting tax along with monthly returns in terms of the compounding application. Assessee paid the entire tax for the whole of the assessment year in terms of the compounding application. When the assessment was taken up, assessing officer noticed some deficiencies in payment of tax at compounded rate at the tax determined by the assessee for the year 1998-99 which constituted the basis for the payment of tax was incorrectly shown. At that stage, the assessee raised objections contending that he does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Regular assessees who are not covered by the scheme of payment of tax at compounded tax can be subject to inspection at any time during the year and in cases where tax is accepted based on application filed for compounding, the department has no right to inspect or harass the assessees. After availing the immunity in such forms, the assessee cannot after the closure of the year go back from the offer he had made for payment of tax at compounded rate. It is in that view of the matter, it was held that the Tribunal went wrong in holding that the assessee is entitled to back out from his offer to pay tax at compounded rate, which stands accepted by the officer while passing the assessment order. In this case, though it is held that submission of an application and payment of compounded tax pursuant to the same is an indication on the part of the assessee to commit himself to pay the compounded tax, he cannot withdraw from the said obligation after the assessment year. On facts, the judgment in T.S.Kalyanaraman (supra ) is slightly different from the facts of the case in which we are dealing with in so far as in the cases on hand, though certain payments have been made, during the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant requested for an option to withdraw from the compounding scheme only after the period of assessment year when already the compounding application was accepted by the officer. Secondly, the portion in the judgment which was relied upon by the learned Special Government Pleader was only a general observation and had nothing to do with the facts of the case. Even otherwise, the observation is that when the compounding application is filed and the tax is paid, both the assessee and the department are bound by it unless assessee recalls application before starting payment of tax in terms of the compounding scheme . 17. But we are concerned with cases in which during the assessment year itself, the assessees have sought for withdrawing from the option exercised by them on the ground that the request for compounding had not been sanctioned. 18. It is true that the assessees had submitted compounding application and they had remitted quarterly tax as well. But before passing an order in terms of R.11(2) of the KVAT Rules, they sought to withdraw from the scheme of compounding. In such circumstance, the question would be whether the department is bound to permit withdrawal f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the petitioner cannot be compelled to remit tax for the quarter where there is no sale or production at all. However, during the course of argument, learned counsel submitted that he had sought for exemption during the currency of the assessment year itself and therefore he should be given exemption from payment of compounded tax. 24. In the counter affidavit filed on behalf of the 1st respondent, it is stated that for the financial year 2010-11, petitioner filed application on 12/5/2010 for payment of tax for the sale of granite metals at compounded rate u/s 8(b) of the KVAT Act. Subsequently, permission was granted on 31/5/2010 to pay tax at compounded rate considering the granite crushing machine size used by the assessee as stipulated under Section 8(b)(iii) of the KVAT Act thereby fixing compounded tax due as ₹ 8,48,400/- for the year 2010-2011 and allowed 4 quarterly instalments of ₹ 2,12,100/- each. No reply has been filed to the above counter affidavit. 25. In so far as WA No.239/18 is concerned, an issue as projected in WA No.871/17 does not arise for consideration. This is an instance where compounding application has already been allowed as stated in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion was filed as WP(C) No. 10660/15 challenging the said order. An interim order was obtained by the petitioner and the Panchayat was directed not to interfere with the activities of the petitioner in the quarry and crushing unit. The permits issued by Mining and Geology Department for conducting quarry expired on 15/1/2016. Necessary environment clearance also had not been obtained. Petitioner submitted a fresh application for license for quarry and crusher unit for the year 2016-17. They also applied for D O license. Proceeding on the basis that petitioner has deemed license, he applied for compounding of tax for the year 2016-17. Petitioner filed WP(C) No. 15530/2016 seeking for such licenses hoping that license would be issued in his favour. He was not successful in getting an interim order to operate the quarry. Hence, he was unable to carry on the business of quarry and crusher and there was no incidence of tax, ie., sale of minerals in the subject assessment year. It was found that even at the time when the petitioner applied for compounding, he did not have necessary license and therefore, there was no supervening subsequent event which was not in contemplation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn of events. Here there is not even such an unforeseen turn of events. The Courts cannot alter or modify the terms of a contract. The petitioner hence cannot be permitted to wriggle out of the obligation to pay the compounding tax. The writ petition would stand dismissed. No Costs. 26. We are of the view that as far as the appellant in WA No.239/18 is concerned, he had encountered an unforeseen event on account of a stay granted by this Court in a writ petition as a result of which he was unable to operate the quarry. As far as the said appellant is concerned, though there was a concluded contract for compounding, by virtue of an order of stay granted by the High Court, he was unable to operate the quarry after the order of stay. In such circumstances, he can definitely plead frustration of contract in terms of S.56 of the Indian Contract Act. However, in respect of the period during which he had already paid tax, he should be permitted to file return for the assessment year 2010-11. However, he shall not be entitled for refund of any amount paid as compounded tax. 27. Now coming to the judgment in WP(C) No. 39547/2016, this is a case where there was no concluded c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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