2007 (9) TMI 574 - HC - VAT and Sales Tax

Compounded rate of tax demanded - Held that - Sub-section (ii) of section 8(f) read with Explanation applies to a dealer who commenced business in the previous year relevant to the year for which tax at compounded rate is to be computed where such dealer had not carried out business for the full period of the said previous year. In the circumstances, the Compounded tax computed under impugned order namely, exhibit P2 under section 8(f)(i) read with Explanation I thereto is perfectly in order and the writ petition is therefore rejected.

Summary

Issues:
Challenge to order computing value-added tax at compounded rate under section 8(f)(i) of the Kerala Value Added Tax Act, 2003 for the assessment year 2006-07. Interpretation of provisions under section 8 for determining tax liability at compounded rate based on business history.

Analysis:
The petitioner, a jeweler, contested the order (exhibit P2) by the assessing officer calculating the value-added tax at a compounded rate under section 8(f)(i) of the Kerala Value Added Tax Act, 2003 for the assessment year 2006-07. The petitioner argued that tax liability should be under section 8(f)(ii) instead of section 8(f)(i) as determined by the officer. The crux of the matter lies in the interpretation of section 8, specifically sub-sections (i) and (ii), and the application of Explanation I to both sub-sections. The petitioner commenced business in February 2004, operating for 51 days in the financial year 2003-04 and continuously for the subsequent years.

The court analyzed the provisions of section 8, emphasizing that sub-section (i) applies to dealers who conducted business for at least two full years out of the three preceding financial years. In contrast, sub-section (ii) is for dealers who did not carry out business for the full period of the previous year relevant to the assessment year. The court clarified that Explanation I is applicable to both sub-sections, contrary to the petitioner's argument that it only pertains to sub-section (ii).

Given the petitioner's business history, conducting business for 51 days in 2003-04 and continuously for the subsequent years, the court concluded that the petitioner falls under sub-section (i) of section 8(f) with Explanation I. Consequently, the officer's calculation under exhibit P2, applying section 8(f)(i) read with Explanation I, was deemed appropriate. The court dismissed the writ petition challenging the order.

Additionally, the court provided relief to the petitioner by stating that no interest could be demanded for belated payment under section 8(f)(i) if the arrears were cleared within three weeks from the date of the judgment, issued on March 15, 2007.