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TMI Blog2021 (11) TMI 892X X X X Extracts X X X X X X X X Extracts X X X X ..... d to pay the tax at compounded rates from the previous year or even before that period. Section 8(f)(v) of the Act dealt with the category of dealers who had opted for compounded tax from the previous years. It may be essential to extract section 8(f)(i) and S.8(f)(v) of the KVAT Act as it stood on 31-03-2011. As per the provisions of Article 196(5) of the Constitution of India, a Bill pending before the Legislative Assembly of a State shall lapse on dissolution of the Assembly. The 12th Kerala Legislative Assembly was dissolved on 14-05-2011 and thus, the First Bill lapsed as on that date, by operation of law. The apparent confusion among the dealers is created on account of the wording in the validation clause of Act 16 of 2011. On a deeper scrutiny of sub clause (2) of the validation clause, it can be understood that the language used in the said provision was not with a view to erase the retrospectivity brought in by the amended provisions but was intended only as a measure of validating the First Bill which had by virtue of Article 196(5) of the Constitution lapsed. The First Bill was pending in the Legislative Assembly of the State when the Assembly was dissolved. As pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he balance tax due under the newly introduced compounded rate of tax. It was contended that the compounded tax being in the nature of a contract, the Government was estopped from demanding compounded tax at a higher rate after Ext.P1 sanction was granted by the assessing officer to pay tax under the compounded scheme, that too in instalments. 4. Section 8(f) of the Kerala Value Added Tax Act, 2003 (for short 'the KVAT Act') provides for compounded tax for dealers in ornaments and articles of gold, etc. On 24-02-2011 a finance bill was presented before the 12th Kerala Legislative Assembly, as Bill No.426 (hereinafter referred to as the 'First Bill'). The Bill proposed a revision of the existing rates for compounded tax under section 8(f) of the KVAT Act from 01-04-2011. Even though the Bill was not passed by the legislative assembly, due to statutory prescriptions and declarations made in the Bill, the tax implications under the First Bill came into effect from the proposed date i.e: 01-04-2011. The year 2011 was the year of elections to the Kerala Legislative Assembly. The 12th Kerala Legislative Assembly was therefore dissolved on 14-05-2011 and a new Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly higher than those who had opted to pay the tax at compounded rates from the previous year or even before that period. Section 8(f)(v) of the Act dealt with the category of dealers who had opted for compounded tax from the previous years. It may be essential to extract section 8(f)(i) and S.8(f)(v) of the KVAT Act as it stood on 31-03-2011. (Explanations 1 to 5 and 7 8 and sub-clauses (ii) to (iv) of S. 8(f) are not extracted as they are not relevant for the purpose of these appeals). S.8(f)(i) as on 31.03.2011 was as follows; S.8. Payment of tax at compounded rates.- Notwithstanding anything contained in section 6,- (f)(i) any dealer in bullion or ornaments or wares or articles of gold, silver or platinum group metals including diamond may at his option, instead of paying tax on their sale in the State in respect of such goods in accordance with the provisions of section 6, may pay tax at the rate of,-- (a) one hundred and fifteen per cent, in case the total turnover of the dealer opting to pay tax under this clause, for the preceding year was above rupees ten lakhs or below; (b) one hundred and twenty percent, in case the total turnover of the dealer op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng business under a brand name, the compounded tax payable under this clause shall not be less than the compounded tax payable and the business been run as a branch of the franchisee or of other franchisees. 9. The above compounded rate of tax for dealers falling under section 8(f) was sought to be revised with effect from 01-04-2011 by the First Bill as follows: (ii) in clause (f),- In sub-clause (i), in Explanation 6, for the figures 2009-10 and 2010-11 , wherever they occur, the figures 2010-11 and 2011-12 shall respectively be substituted; After sub-clause (i), the following sub-clause shall be inserted, namely:- (ia) Notwithstanding anything contained in this clause, a dealer shall not be allowed to opt for the payment of tax under this clause unless he has conducted business up to a full year as on the first day of April of the year to which the option relates. ' (c). In sub-clause (v),- (i) In item (a), for the words one hundred and five percent of such , the words the same amount of shall be substituted; (ii) In item (b), for the words one hundred and ten percent , the words one hundred and five percent shall be subst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gher Between 40 lakhs and one crore 135% of the highest tax in the preceding 3 years 115% of previous years tax No change 115% or 1.25% of turnover whichever is higher Above one crore 150% of the highest tax in the preceding 3 years 125% of previous years tax No change 125% or 1.25% of turnover whichever is higher 12. It is pertinent to mention that if a declaration under the provisions of the Kerala Provisional Collection of Revenues Act 1985, is incorporated in any Bill that is introduced in the Legislative Assembly, the tax or fee proposed to be brought in under the Bill, shall have effect from 1st of April following the date of introduction of the Bill, and the said declaration shall have the force of law. This is provided for in sections 3 and 4 of the above mentioned Act. Since the First Bill, introduced in the Legislative Assembly had a declaration as stipulated in the Kerala Provisional Collection of Revenues Act 1985, the imposition of the new rate of tax under the First ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be, shall be paid over to the Government. 15. The legislative power of the State Legislature to amend the Act with retrospective effect, is neither disputed nor challenged. It is settled that the power to legislate carries with it the power to legislate retrospectively also [See M/s. J. K. Jute Mills Co. Ltd. v. State of U.P. and Another, [AIR 1961 SC 1534]; Mt. Jadao Bahuji v. The Municipal Committee, Khandwa and Another, [AIR 1961 SC 1486]; M/s. Raghubar Dayal Jai Parkash and Others v. The Union of India and Another, [AIR 1962 SC 263]; State of Karnataka and Others v. Karnataka Pawn Brokers Association and Others, [(2018) 6 SCC 363]. Though there are limitations to the power to legislate retrospectively, none of the dealers have questioned the retrospectivity in the instant cases. 16. The entire gamut of dispute in these cases therefore revolves around the interpretation of the validation clause as extracted earlier. The learned Government Pleader submitted that the validation clause was only a device for continuity in legislation to avoid a vacuum. It was also submitted that the validation clause in Act 16 of 2011 and the retrospectivity of the taxing provisions were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst blush is that in view of the validation clause brought in as Section 12 to Finance Act 16 of 2011, the commercial tax officers were not entitled to proceed against the petitioner with the demand for the differential tax.8 20. Section 2 of Act 16 of 2011 commences with the words Save as otherwise provided in this Act . In the six sub-clauses that follows, six different dates have been prescribed as the dates on which the provisions come into force. The first sub-section provides for coming into force of the provision on the first day of April 2005. Second sub-section mentions the date as first day of April 2007, the third sub clause mentions first day of April 2010 as the date of coming into force of that provision. Sub clause (4) mentions first day of April 2011 as the date of coming into force while sub clause (5) mentions 19-07-2011 as the date of coming into force of the said provisions. Sub clause (6) mentions at once as the date of coming into force of all the remaining provisions. Therefore, a conscious attempt is made by the legislature to bring the provisions of the different clauses of the amended provisions to be applicable with effect from different dates. We c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the short levy or excess tax that may arise on account of the change of rate of tax brought in by Act 16 of 2011. It would be incongruous to interpret the word 'short levy' in the validation clause as referring to the short levy arising on account of the Act 16 of 2011. Viewed in the above perspective, we have no hesitation to hold that the retrospectivity of tax or its collection brought in by the Finance Act 16 of 2011 is not controlled by the validation clause in section 12 of that Act. 23. In this context it is fruitful to bear in mind the observation of this Court in the decision in State of Kerala v. M/s. Desire Diamond Jewellery (OTR No. 3 of 2010) that, a compounding application is only an application filed for payment of tax at compounded rate in accordance with the statute and not at the rate prescribed by the party because the Act does not visualise any such compounding on parties own terms. 24. We also find force in the argument of the learned Government Pleader that the decision in Varkisons Engineers v. State of Kerala and Another [(2009) 16 SCC 120], had not laid down any proposition against retrospective operation of compounded tax. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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