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TMI Blog2011 (3) TMI 1444X X X X Extracts X X X X X X X X Extracts X X X X ..... sued notice on November 3, 2008 pointing out that the petitioner is not eligible for payment of tax at 0.5 per cent of the turnover under section 6(5) of the Act, because the petitioner's turnover, even according to the petitioner's accounts, exceeded Rs. 50 lakhs on January 1, 2008 itself. In other words, the petitioner ceased to be a dealer eligible for the benefit under section 6(5) from January 1, 2008 onwards and as required under rule 12(7) of the Kerala Value Added Tax Rules, 2005 hereinafter called "the Rules", the petitioner ought to have, within 15 days therefrom, started paying tax at the rate provided under section 6(1) of the Act. The petitioner not only did not start paying tax at the rate provided under section 6(1) from January 1, 2008 onwards, that is even for part of the assessment year 2007-08, but continued to avail of the benefit under section 6(5) by filing quarterly returns and paying tax even for the assessment year 2008-09, until the assessing officer issued notice proposing assessment and levy of penalty. It is only after receipt of notice, the petitioner filed revised returns and remitted tax, that too after availing of input-tax credit, to which the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on all these matters, and therefore we have to refer to statutory provisions. Admittedly the petitioner was remitting tax under section 6(5) at the lower rate of 0.5 per cent of the turnover from the beginning of the financial year 2007-08 because as estimated by the petitioner, the petitioner's annual turnover in the year would be below Rs. 50 lakhs. However, the question to be considered is as to how the petitioner should switch over from the scheme of payment of tax under section 6(5) to payment of tax under section 6(1) on the petitioner's turnover exceeding Rs. 50 lakhs in the course of a year. As on December 31, 2007, the petitioner had crossed the turnover of Rs. 50 lakhs and therefore from January 1, 2008 onwards the petitioner ceased to be eligible to pay tax under section 6(5) and under the statute the petitioner should pay tax on various goods sold by it at the appropriate rate as provided under various Schedules and notifications to the Act, subject of course to the petitioner's entitlement for input-tax credit. Even though the Act does not specifically provide the procedure for switching over from payment of tax under section 6(5) to section 6(1), on the deale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order, he should permit the dealer to claim input-tax credit in respect of such goods held as opening stock in three equal monthly instalments, commencing subsequent to the order allowing such input-tax credit. What is clear from this provision is that entitlement to claim input-tax credit on the turnover crossing Rs. 50 lakhs for a dealer converting from the scheme of payment of tax under section 6(5) to section 6(1) is not automatic and it is only on the assessing officer approving the claim made by the dealer under sub-rule (7) through an order and the benefit of input-tax credit itself can be availed of by the dealer for the return period after the date of the order issued by the assessing officer under sub-rule (8). What we notice in this case is that even though the petitioner's turnover exceeded Rs. 50 lakhs on December 31, 2007, the petitioner did not comply with sub-rule (7) of rule 12 within 15 days from the date of crossing Rs. 50 lakhs and in fact even after the close of the financial year 2007-08, the petitioner did not intimate the assessing officer about the turnover crossing Rs. 50 lakhs in the preceding year. On the other hand, until the notice was issued by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n raised by counsel for the petitioner is that the Tribunal has no jurisdiction to fix for the first time penalty under section 67 of the Act. There is force in this contention because penalty challenged before the Tribunal was levied under section 22(7) whereunder the penalty levied is three times the tax and if the Tribunal felt that penalty should have been levied only under section 67 and not under section 22(7), they should have remanded the matter. The Government Pleader submitted that violation by the petitioner is covered not only by section 22(7) but also by section 67 as well. However, the Government Pleader cannot argue for sustaining penalty levied under section 22(7) because State has not so far filed any revision for restoring the said penalty. We have to consider the issue in the above situation. The relevant provisions relating to penalty are extracted hereunder for easy reference:- "22. Assessment in case of non-filing of return and filling of defective return:- (1) to (6) ... (7) Where on scrutiny of returns or verification of accounts in any proceedings under this Act, in respect of dealers paying tax under sub-section (5) of section 6, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and we feel, that the Tribunal's conclusions are not correct because section 22(7) exclusively provides for penalty for violations by dealers remitting tax at the lower rate of 0.5 per cent under section 6(5) of the Act. The contention of petitioner's counsel is that section 22(7) only deals with a case of penalty where a dealer remitting tax under section 6(5) does not disclose full turnover or in other words there is suppression of turnover in the returns filed and failure in regard of payment of tax on such turnover. We are unable to accept this contention because all cases of non-payment and short payment of tax by dealers paying tax under section 6(5) are covered under section 22(7). One situation is a case where a dealer whose turnover is below Rs. 50 lakhs suppresses part of his turnover leading to non-payment of tax even at lower rate of 0.5 per cent on such suppressed turnover. The next situation is a case where a dealer who is not entitled to continue to enjoy the benefit of payment of tax at lower rate of 0.5 per cent on his turnover crossing Rs. 50 lakhs in the course of a year continues to pay the same rate of tax under section 6(5) to which he is not entitled. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 22(7), penalty should be considered and levied under the said provision. Since in this case, the violation is specifically covered by section 22(7), penalty has to be levied under the said provision, no matter but for the said provision, violation would have been punishable under section 67 of the Act. Counsel for the petitioner referred to the decision of the Supreme Court in Sree Krishna Electricals v. State of Tamil Nadu [2009] 23 VST 249 (SC), wherein the Supreme Court exempted a dealer from penalty for the reason that turnover was included in the accounts and the dealer only claimed exemption. Even though on facts, the case before us is not similar, in this case what we notice is that dealer has remitted tax and interest on receipt of assessment order. Further the State has not so far challenged the order of the Tribunal converting penalty levied under section 22(7) to one under section 67. We therefore do not want to disturb the orders of the Tribunal reducing the penalty to equal the amount of tax, though in law the same is not sustainable for the reasons stated above. We also direct the State to treat the matter as concluded by accepting the order of the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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