2011 (1) TMI 1281 - HC - VAT and Sales Tax

Whether the highest tax payable to be reckoned from out of the preceding years is the assessed tax or the tax due under the return filed by the assessee? Held that - If the tax declared as payable in the return is equal or more than the tax found payable under the accounts then such amount of tax as disclosed in the return has to be reckoned for the purpose of assessment of tax at compounded rate for the relevant year. So long as the provision in the statute does not provide for assessment of tax at compounded rate based on the tax assessed or demanded for any of the preceding three years the Department cannot raise such a contention before the statutory authorities or before the Tribunal or before this court. We therefore uphold the order of the Tribunal and dismiss this revision case.

Summary

Issues:
Interpretation of section 8(f)(i) of the Kerala Value Added Tax Act, 2003 for determining tax payment under the compounding scheme.

Analysis:
The case involved a revision filed by the State challenging the Tribunal's order regarding the assessment year 2006-07 for a jewellery shop selling gold and silver ornaments. The key issue was whether the highest tax payable for compounding purposes should be based on the tax assessed or the tax due under the return filed by the assessee. The Tribunal found that the tax payable under compounding for 2006-07 should be determined at 200 per cent of the tax returned as payable by the assessee for the year 2005-06. The State contended that tax at the compounding rate should be based on the highest tax returned for any of the years or the tax found payable based on assessment.

The relevant provision under consideration was section 8(f)(i) of the Kerala Value Added Tax Act, which states that tax payable under the compounding scheme is 200 per cent of the "highest tax payable by the assessee as conceded in the return or accounts under this Act or under the Kerala General Sales Tax Act." The section does not specify the assessed tax as the basis for payment at the compounded rate, but rather emphasizes the tax payable based on the return or accounts. The Tribunal found discrepancies between the tax due as per return and accounts and the tax assessed by the officer for the preceding years.

The Court held that the statute does not provide for payment of tax at the compounded rate based on the highest tax assessed or demanded for the preceding years. The assessing officer's jurisdiction is limited to considering the return filed by the assessee and accounts, with the tax payable being determined based on the accounts if they show a higher amount compared to the return. If the tax declared in the return equals or exceeds the tax found payable in the accounts, the return amount should be considered for assessing tax at the compounded rate. As the statute does not allow for assessment based on previous years' taxes assessed or demanded, the Department's contention in this regard was dismissed, upholding the Tribunal's order.