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TMI Blog2022 (4) TMI 1437X X X X Extracts X X X X X X X X Extracts X X X X ..... able on the turnover conceded in the return/account or the tax paid in the previous three consecutive years - HELD THAT:- There is hardly any scope for ambiguity in the language of Section 7(b) of the Act. We would apply the golden rule of construction and the principle of noscitur-a-sociis for arriving at the meaning and scope of Section 7(b). The golden rule of interpretation is nothing, but literal construction where the words of a statute are, first, understood in their natural, ordinary or popular sense and phrases and sentences are construed, according to their grammatical meaning, unless that leads to some absurdity or unless there is something in the context, or in the object of the statute to suggest the contrary . Noscitur-a-sociis as explained by Lord Macmillan, means, the meaning of a word is to be judged by the company it keeps . For the purpose of explaining these two groups of constructions, we would not burden our order with precedents. Payment of tax at compounded rates is an alternate method of payment of tax. The legislature in lieu of collection of turnover tax at applicable or specified percentage gives an option to the dealer who is eligible for such option to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. 2. Hotel Aida is the petitioner. The petitioner herein runs a hotel attached with a Bar and is an assessee under the Kerala General Sales Tax Act, 1963 (for short 'the Act') in respect of Indian made foreign liquor served in the Bar. The petitioner opted for payment of tax at the compounded rate under Section 7 of the KGST Act. The petitioner satisfied the turnover tax on IMFL for the years 2006-2007 to 2008-09 as follows: 2006-07 Rs.6,67,722.83 2007-08 Rs.10,26,024.00 2008-09 Rs.11,79,924.00 3. The petitioner applied for payment of tax at compounded rate for the assessment year 2009-2010. The petitioner reckoned tax at compounded rate payable at 115% under Section 7(b), on Rs.11,79,924/- and arrived at Rs.13,56,912/-. The petitioner claims to have satisfied compounded rate tax. The Assessing Officer, on 14.01.2010, fixed the tax at the compounded rate payable by the petitioner at Rs.15,27,007/-. The calculation made by the Assessing Officer helps us in understanding the issue in law between the petitioner and the respondent arising under Section 7(b) of the Act. "a) 10% of 140% or 135% on purchase turnover of liquor. b) 115% of the highest tax paid or payable as co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax payable by it as conceded in the return or accounts or the turnover tax paid for any of the previous consecutive three years." 7. Referring to the syntax, place of words viz. payable and paid employed in Section 7(b), it is argued that the dealer shall pay turnover tax on the turnover of foreign liquor at 115% of the highest turnover tax paid for, in any of the previous three consecutive years. To understand the petitioner, it may be stated that for the period 2006- 2007 to 2008-09, the petitioner opted and paid tax at compounded rates, based on the highest turnover tax paid for any of the previous consecutive 3 years. The turnover tax payable as conceded in the return or account is not attracted for turnover tax paid at compounded rate is available and shall form the basis for calculation. On the other hand, the case of the respondent is that 115% of the highest turnover tax payable by the dealer on the turnover conceded in the return/accounts or the turnover tax paid for any of the previous consecutive three years constitutes the basis. The interpretation of the petitioner would substantially restrict the expression in Section 7(b) of the KGST Act. The controversy for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he year 2008-2009 since is the highest, 115% tax at compounded rate is payable. Stated briefly, the turnover conceded in the return or accounts by the dealer is immaterial or tax payable on such turnover. It is argued that Alphonsa case considered the unamended Section 7. The principle in Alphonsa does not have persuasive force before the Full Bench in view of the amendment to Section 7 of the KGST Act. Referring to the decision in Commercial Tax Officer v Hotel Breezeland Ltd. (2019(2) KLT 432), it is argued that Breezeland has not interpreted Section 7(b) in the right perspective and the ratio of the said case for the very same reason is inapplicable. It is argued that since the Full Bench ceased the matter, the question viz. whether for the purpose of paying tax at compounded rate as provided under sub section (b) of Section 7, the turnover conceded in the returns/accounts or tax paid whichever is the highest is examined and view stated. 9. Hotel Breezeland is a judgment for the proposition that the dealer who opts for payment of tax under section 7 cannot be said to have been absolved of the liability for all the consequences arising from such an assessment made for the previo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the figures under Clause (b) of Section 7, accounts have to be maintained, which is totally alien to the concept of compounding as the purpose of the compounding itself is to relieve the assessee from the duty to maintain the accounts. It is contended that no machinery to work out the tax under Clause 7(b) is provided by the Legislature, which in fact has been contributed only by the Commissioner as per Ext. P2 Circular, which cannot be a substitute to the legal provision. It is also pointed out that, interpretation of a provision in a taxing statute is to be strict and there is no room for any equity principle or that the lacuna, if any, cannot be filled up either by the Executive or by the Court. If there is any doubt or confusion, the benefit has to go to the assessee, submits the learned Counsel Reliance is sought to be placed on the verdict passed by a Constitution Bench of the Apex Court in Commissioner of Sales tax, U.P. vs. Modi Sugar Mills Ltd. AIR 1961 SC 1047 (paragraphs 11 and 13). *** ** * *** 34. As per Section 7(b), the amount has to be worked out at 115% of the highest turnover Tax payable by the assessee, as conceded in the returns OR accounts OR the turnover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, shown in the accounts or the tax paid in respect of the previous three consecutive years, but something else, which has to be dealt with more meticulously it is in this context that the expression used the highest turnover in the very same provision requires consideration. Even going by the grammatical peculiarities and interpretations, super relative degree is used in the first limb of the provision, qualifying the same with the word "the". In English language, 'comparative degree' is used only to compare between two instances, whereas super relative degree is to be used when there are more instances than two. For the very same reason, usage of the expression 'the highest Turn Over Tax payable' as conceded by the assessees in the return or the accounts or the turnover tax paid, definitely refers to more than two instances and as such it, evidently is in respect of the three previous consecutive years, i.e., the amount which is the highest in respect of three different consecutive years has to be reckoned for working out the quantum of 115%. The expression whichever is higher is only an instance using 'comparative degree'. It cannot be with reference to the three diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollection of turnover tax at applicable or specified percentage gives an option to the dealer who is eligible for such option to opt for payment of tax at compounded rates. An application specifying the nature of business, in the case on hand a bar attached to a hotel is made. The basis for payment of tax at compounded rates would be in terms of Section 7. The tax is calculated at the higher rate specified in Sec.7(a) or (b). Tax attracted or applicable is decided between Section 7(a) and 7(b), whichever is higher. Section 7(b) deals with three verifiable details viz. turnover conceded in the (a) returns or (b) accounts or (c) the turnover tax paid. The word 'highest' is a superlative degree attracts the highest from the three verifiable figures. Otherwise, the use of highest for two comparable situations would be incorrect and grammatically unacceptable. The turnover tax paid is referable to tax paid at compounded rates. The argument of Mr Harisankar V.Menon is that the turnover tax payable as per the return or account cannot be treated for any purpose as it refers to 'payable' while turnover tax paid is definite in sense, is untenable. 16. We are afraid the said argument omits t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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