(2012) 262 KLR 079 IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT: THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON MONDAY, THE 2ND DAY OF JULY 2012/11TH ASHADHA 1934 WP(C).No. 11783 of 2012 (W) --------------------------- PETITIONER(S): ------------- AHAMMED SHERIEF, PROPRIETOR, M/S. PUTHANPURAYIL CRUSHERS, CHALAKAL, MARAMPILLY.P.O, ALUVA. BY ADV. SRI.C.K.THANU PILLAI RESPONDENT(S): -------------- 1. THE KERLALA VALUE ADDED TAX APPELLATE TRIBUNAL, ERNAKULAM - 682 013. 2. THE COMMERCIAL TAX OFFICER, ALUVA - 683 101. 3. THE INTELLIGENCE OFFICER, SQUAD NO.III, COMMERCIAL TAXES, ERNAKULAM - 682 013. BY ADV.SMT.SOBHA ANNAMMA EAPEN, GOVERNMENT PLEADER THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 02-07-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: DG WP(C).No. 11783 of 2012 (W) APPENDIX PETITIONER(S) EXHIBITS:
RESPONDENTS' EXHIBITS -
//TRUE COPY// P.A TO JUDGE DG (CR.) P.R. RAMACHANDRA MENON J. ~~~~~~~~~~~~~~~~~~~~~~~ W.P(C) No. 11783 of 2012 ~~~~~~~~~~~~~~~~~~~~~~~ Dated, this the 2nd day of July, 2012 Head Note:- Kerala Value Added Tax Act, 2003 - Sections 8(b) and 8(f)(ii) Proviso - Whether the application submitted by the petitioner for payment of tax at the compounded rate under Section 8 (b) of the KVAT Act could have been rejected by referring to the course stipulated under the 'proviso' to Section 8 (f) (ii)? Held:- There is no case for the respondents that there is any enabling provision under Section 8 (b) which is applicable to the petitioner, who is a dealer in metal crusher unit, to reject the compounding application. When the respondents contend that Section 8 (f) (ii) exclusively deals with dealers in gold, silver, they also rely on the same clause to reject the compounding application, which cannot be a paradox. If Section 8 (f) (ii) does not pertain or is applicable to the persons like the petitioner who are doing the business in metal crusher, how the said clause can be used to reject an application for compounding, is a matter mystery. In other words, the respondents are blowing hot and cold simultaneously, which is liable to be deprecated. This Court finds that the respondents are not justified in having rejected the application for compounding, placing reliance on Section 8 (f) (ii), which even according to them is applicable only to gold/silver dealers. JUDGMENT Two legal questions are involved in this writ petition; first one is, whether the application submitted by the petitioner for payment of tax at the compounded rate under Section 8 (b) of the KVAT Act could have been rejected by referring to the course stipulated under the 'proviso' to Section 8 (f) (ii) and the second one is, whether the verdict passed by the Tribunal dismissing Ext. P12 appeal, observing that the challenge against Ext. P11 order passed by the second respondent will not lie before the Tribunal and that the same has to be preferred before the Deputy Commissioner is correct or sustainable. 2. The sequence of events as narrated in the writ petition shows that, the petitioner, who is conducting the business of metal crusher unit and a registered dealer on the rolls of the second respondent, was mulcted with penalty of Rs. 9,87,682/- in respect of the assessment year 2007 - '08. Placing reliance on the penalty imposed, the assessment was sought to be completed fixing huge liability upon the petitioner; which was subsequently set aside by the appellate authority, simultaneously intercepting the penalty order as well and directing the original authority to pass fresh orders as specified. In the meanwhile, the petitioner filed an application to permit the petitioner for remitting the tax at the compounded rate under Section 8 (b) of the Act. The application preferred by the petitioner was however rejected without giving any opportunity of hearing, which made the petitioner to approach this Court by filing W.P.(C) No. 20811 of 2011. This Court set aside the impugned order and directed the second respondent to consider the matter complying with the statutory requirement under Section 8 of the Act and Rule 11 (2) (ii) of the Rules, as per Ext. P8 judgment. Pursuant to the above verdict, notice was issued to the petitioner by the second respondent again, proposing to reject the option for compounding on 16.09.2011, in response to which, a detailed objection was preferred by the petitioner on 03.10.2011, vide Ext. P10. After considering the same, the application was rejected as per Ext. P11 order, observing as follows: "In the light of the above I found that the dealer has purposefully suppressed the relevant information as per section 8 (ii) of the KVAT Act 2003 and filed application without mentioning the year along with a reply for the above 4th referred pre assessment notice belatedly in violation of Rule 11 (1) of the KVAT rules 05 after an inspection on 17.10.2007 by the intelligence squad in the business place of the dealer. Hence the application of the dealer for permission to opt payment of tax at compounded rate is not admissible. So the following orders are passed." 3. Being aggrieved of Ext. P11 order, the petitioner preferred Ext. P12 appeal before the first respondent Tribunal, along with Ext. P13 petition for stay. After considering the matter, the first respondent held that the appeal itself was not maintainable, since the course provided under section 8 (f) (ii) and 8 (f) (iii) would be applicable only to the "gold dealers" and not the persons like the petitioner, who are operating metal crusher units covered by Section 8 (b). This in turn is under challenge in this writ petition, contending that, the only provision to prefer appeal on being aggrieved of the order rejecting application for compounding, is stipulated under Section 8 (f) (ii), which is to be uniformly applied to all the dealers, who are seeking the benefit of compounding. 4. The respondents 2 and 3 have filed a statement before this Court contending that Section 8 (f) (ii) is applicable only to "gold dealers" and since the petitioner is a dealer in granite metals, he cannot have the benefit of Section 8 (f) (ii). The respondents have also projected the circumstances under which the above provision was incorporated in the Statute Book, based on the Budget Speech 2008 - '09 (with reference to paragraphs 165 to 167). Accordingly, it is stated that the first respondent Tribunal is perfectly justified in having rejected Ext. P12 appeal and the remedy to the petitioner, if at all aggrieved of Ext. P11, is only before the Deputy Commissioner. The petitioner has filed a reply affidavit seeking to reiterate the contentions raised in the writ petition. 5. Heard the learned counsel for the petitioner as well as the learned Government Pleader at length. 6. For the purpose better appreciation of the statutory prescription, it is worthwhile to extract the provisions, particularly Section 8 (b) and 8 (f). Section 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 :- (i) for each crushing machine of size not exceeding 30.48 cm x 22.86 cm = Rs. 40,000 per annum (ii) for the each crushing machine of size exceeding 30.48 cm x 22.86 cm but not exceeding 40.64 cm and 25.40 cm = Rs. 1,40,000 per annum (iii) for the each crushing machine of size exceeding 40.64 cm x 25.40 cm = Rs. 2,80,000/- per annum (iv) for each cone crusher Rs. 15,00,000/ per annum. Provided that in the case of dealers, who opted to pay compounded tax under this clause, no separate assessment shall be made in respect of M-sand produced by them. Provided further that notwithstanding anything contained in this clause, dealers with a single crushing machine of size not exceeding 30.48 cm x 22.86 cm shall pay rupees twenty five thousand only per annum and those with a single crushing machine of size above 30.48 cm x 22.86 cm but not exceeding 40.64 cm x 25.40 cm shall pay rupees one lakh only per annum, as tax under this clause. Explanation : For the purpose of this clause, primary crushers shall also be reckoned for the purpose of computation of compounded tax, and the rate applicable to primary crushers shall be at fifty percent of the aggregate of the tax payable on secondary crushers. Section 8(f) (i) any dealer in ornaments or wares or articles of gold, silver or platinum group metals including diamond may at his option, instead of paying tax in respect of such goods in accordance with the provisions of section 6, pay tax at (a) one hundred and fifteen percent, in case their annual turnover for the above goods for the preceding year was rupees ten lakhs or below ; (b) one hundred and twenty percent, in case their annual turnover for the above goods for the preceding year was above rupees ten lakhs and upto rupees forty lakhs; (c) one hundred and thirty-five percent, in case their annual turnover for the above goods for the preceding year was above rupees forty lakhs and upto rupees one crore; and at (d) one hundred and fifty percent; in case their annual turnover for the above goods for the preceding year exceeded rupees on 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 (to which the option relates) Explanation 4 : Where a dealer has not opted to pay compounded tax with respect to a new branch opened in 2008 - 09, the compounded tax payable for such branch for the year 2008 - 09 shall be notionally fixed as the average of the compounded tax paid for the principal place and branches in that year and if the new branch opened is the first branch, the compounded tax payable for it shall be the same as that payable for the principal place of business. Explanation 5 : Where a dealer opens a new branch in the current year, the additional compounded tax payable under this clause in respect of such branch shall be the average of the tax payable by him in respect of his principal place of business and all branches. Explanation 6 : Where a dealer has opted for payment of tax under this clause for the fist time in 2010 - 11 and has commenced business only in 2009 - 10 and the tax payable as per return or account during 2009 -10 is less than the output tax payable, then the tax payable for 2009 - 10 shall be notionally re-determined on the basis of output tax for determining the tax liability for 2010 - 11 Explanation 7 : Tax payable as conceded in the accounts includes the tax payable on suppressed turnover subsequently detected also, Explanation 8 : Where a dealer who had opted and paid tax under this clause during previous years with respect to a branch that had remained closed during the whole of the year 2009 - 10, for the purpose of determining the compounded tax payable for 2010 - 2011, the tax paid in respect of that branch shall not be reckoned. Explanation 9 : For the removal of doubts, it is clarified that for the purpose of this clause, articles of gold, silver or platinum group metals shall also include bullion (ii) The assessing authority, for valid and sufficient reasons, such as shifting of place of business, holding of stock exceeding double the quantity held in the previous year, furnishing of false information, suppression of relevant information, failure to furnish such information demanded, may refuse permission to pay tax under this section and cancel the permission, if any granted. As per the Kerala Finance Bill, 2011 In section 8, in clause (f) in sub-clause (ii) the words "holding of stock exceeding double the quantity held in the previous year" shall be omitted. 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. There is no dispute with regard to the nature of the business being performed by the petitioner, who comes squarely within the purview of Section 8 (b). The situation covered by Section 8 (f) is in respect of the dealers in ornaments or wares or articles of gold, silver or platinum group metals including diamond. It is under this provision, that various 'explanations' have been given, different rates of payment of tax are provided in respect of the slabs mentioned therein and it also contains other clauses like ii, iii, iv and v which are relevant to the case in hand. Section 8 (f) (ii) gives power to the assessing authority to refuse permission to pay tax under the compounded rate and also to cancel the permission, if at all granted, if the authority is satisfied that there is valid and sufficient reason because of the circumstances available, as narrated therein. Under the 'proviso' to Section 8 (f) (ii), it is stipulated that, no orders under this sub-clause shall be issued without giving the dealer an opportunity of hearing and without 'prior approval' of the District Deputy Commissioner. As per Section 8 (f) (iii), it is stipulated that appeal is maintainable before the Appellate Tribunal against the orders passed under sub clause (ii). No other provision is there, specifically dealing with appellate remedy and Section 8 as such is in respect of the dealers who opt for compounding as discernible therefrom. This being the position, the case of the petitioner is that, there is absolutely no rhyme of reason for having rejected Ext. P12 appeal by the first respondent Tribunal. 7. Now coming to the crucial question as to whether clauses (ii) and (iii) of Section 8(f), exclusively deal with dealers in gold, silver, platinum ... etc., the specific case of the respondents is that these circumstances are with specific reference to the option proposed to be given and those decided to be given to the dealers of gold, silver and platinum ornaments and such other persons who are specifically dealt with under Section 8 (f). The learned Government Pleader appears to be justified in referring to the budget speech, particularly paragraphs 165 to 167, so as to highlight the said proposition. It is in respect of such gold/silver/platinum and the like dealers, that various rates as provided under Section 8 (f) are provided with further explanation to remove the ambiguity, if any. It is with respect to the pivotal position and nature of transaction being pursued by the dealers engaged in gold, silver and platinum, that the particular course has been provided therein, including as to the power vested with the authority to reject the permission sought for, to opt as per the compounding system as given in Section 8 (f) (ii). The proviso places a rider, that such an order can be passed only by 'prior approval' of the Deputy Commissioner. This being the position, the petitioner is not justified in saying that dealers like the petitioner who are operating metal crusher units coming under Section 8 (b) are also to be grouped in the said category and that Ext. P14 order is to be intercepted by this Court. But, then, the question is, whether the respondents are justified in having rejected the application for compounding preferred by the petitioner vide Ext. P11. 8. When the respondents place reliance on the 'budget speech' and various circumstances, asserting that, clauses (ii) and (iii) under Section 8 (f) relate to gold/silver dealers and not applicable to the dealers like the petitioner, who are doing metal crusher business, the respondents conveniently forget the fact that the sole reason for rejecting the application for compounding preferred by the petitioner is by placing reliance on Section 8 (f) (ii) as mentioned in Ext. P11. There is no case for the respondents that there is any enabling provision under Section 8 (b) which is applicable to the petitioner, who is a dealer in metal crusher unit, to reject the compounding application. When the respondents contend that Section 8 (f) (ii) exclusively deals with dealers in gold, silver, they also rely on the same clause to reject the compounding application, which cannot be a paradox. If Section 8 (f) (ii) does not pertain or is applicable to the persons like the petitioner who are doing the business in metal crusher, how the said clause can be used to reject an application for compounding, is a matter mystery. In other words, the respondents are blowing hot and cold simultaneously, which is liable to be deprecated. This Court finds that the respondents are not justified in having rejected the application for compounding, placing reliance on Section 8 (f) (ii), which even according to them is applicable only to gold/silver .... dealers. 9. In the said circumstances, this Court does not require any second thought to hold that Ext. P11 order is not correct or sustainable. Accordingly, Ext. P11 is set aside. As a natural consequence, this Court makes it clear, further proceedings preferred by way of Ext. P12 appeal and Ext. P14 order passed by the Tribunal are of no consequence or reliance. The second respondent is directed to reconsider Ext. P3 application for compounding and pass appropriate orders with regard to the claim for satisfying/paying tax at the compounded rate. The proceedings as above shall be finalized as expeditiously as possible at any rate within 'six weeks' from the date of receipt of a copy of this judgment. The Writ Petition is allowed to the said extent. No cost. sd/ P. R. RAMACHANDRA MENON, (JUDGE) kmd |
