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2015 (2) TMI 1207 - HC - VAT and Sales TaxPayment of tax at compounded rates - Section 8(f) of the KVAT Act, 2003 - the petitioners had exercised their option, to pay tax in accordance with the provisions of Section 8(f) of KVAT Act, at a time when the Finance Act, 2011 had not yet been enacted, the permission of which was granted by respondent - whether payment of tax u/s 8(f) of KVAT Act in the present case applicable? - Held that: - It is trite that, when an assessee opts to pay tax at compounded rates, and such an option is accepted by the authorities under the KVAT Act, either expressly through an order or impliedly through their conduct, there comes into existence a contract from which neither side can resile. This legal position with regard to the binding nature of compounding proceedings has been reiterated in a number of judgments of the Supreme Court, the latest being the decision in Bhima Jewellery v. Assistant Commissioner (Assessment), Kerala & Another [2014 (10) TMI 411 - Supreme Court of India] - there was no justification in the respondents proceeding against the petitioners with a demand for differential tax based on the amended provisions introduced through the Finance Act, 2011. The Finance Act, 2011, when enacted, contained a validation clause that made it clear that, the passage of the Finance Act would not affect any action taken in terms of the provisions of the Kerala Finance Bill, 2011 (Bill No.426 of the 12th Kerala Legislative Assembly). In the instant cases, the payment of tax at compounded rates, and the acceptance of the said tax by the respondents, all took place when the provisions of the Kerala Finance Bill, 2011 (Bill No.426 of the 12th Kerala Legislative Assembly), were in force. That being the case, by virtue of the validation clause in the Finance Act, 2011, those actions cannot be revisited, and it would be legally impermissible, and patently unfair, to permit the respondents to proceed against the petitioners with a demand for differential tax under Section 8 (f) of the Act. The actions of the respondents in demanding differential tax amounts from the petitioners after having accepted the payment of tax by the petitioners in accordance with the applications submitted by them for the assessment year 2011 – 2012, cannot be legally sustained - penalty set aside. The payment of the tax by the assessee on the basis of the provisions of the Kerala Finance Bill, 2009, could only be viewed as one effected under a mistake of law and hence the enhanced tax consequent to the enactment of the Finance Act could be validly collected from the assessee - the petitioners become entitled to any amounts by way of refund of excess tax paid to the Government, then, the respondents shall take steps to either refund the amounts to the petitioners or adjust the same towards the future tax liability of the petitioners. Petition allowed - decided in favor of petitioner.
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