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2016 (1) TMI 508 - HC - VAT and Sales TaxEligibility to pay VAT on works contract at compounded rates - Kerala Value Added Tax Act (KVAT) - As per the provisions of Section 8(a)(i) of the KVAT Act, as it stood on 1.4.2005, any works contractor who was not an importer or a dealer effecting first taxable sale in the State could, at his option, instead of paying tax in accordance with the provisions of the said section, pay tax at 2% of the whole contract amount. - Effect of subsequent amendment - Held that:- The amendment to Section 8(a)(i) having come into force in the middle of the assessment year, and it being almost impossible on account of the statutory provisions of Section 7(5) of the CST Act, to get a cancellation of the certificate of registration issued to them under the CST Act in 2005-06 itself, it would be unfair on the part of the respondents to insist on the higher rate of compounded tax under Section 8(a)(ii) of the KVAT Act being paid by the petitioners on the works contracts executed by them. The orders of penalty imposed on the petitioners on this ground also cannot be legally sustained. - Demand of differential tax and penalty set aside - Decided in favor of assessee. Regarding the petitioners could have applied for a surrender of their certificate of registration under the CST Act during the assessment year 2005-06 itself, for reasons best known to them, did not choose to apply for a cancellation of the CST registration before the commencement of the assessment year 2006- 07 - Held that:- petitioners had ample time during the assessment year 2005-06 itself to ensure that they were duly qualified for exercising their option under Section 8(a)(i) for the assessment year 2006-07. The petitioners having not chosen to do so, and having opted for payment of tax at the lower rate of compounded tax under Section 8 (a)(i), when they were not entitled for the same, the orders impugned in these writ petitions, where the Assessing officers find that the petitioners are not entitled to the rate of tax under Section 8(a)(i) of the KVAT Act, cannot be said to be illegal - Decided against the assessee.
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