TMI Blog2007 (9) TMI 597X X X X Extracts X X X X X X X X Extracts X X X X ..... escribed under clause (a) of section 7 of the Act and can still insist on the dealer, to pay turnover tax at the highest rate as provided either under clause (a) or (b) of section 7 of the Act. This is made clear by the Legislature by making certain amendments in the Kerala Finance Bill, 2007. For the reasons stated above, we hold that there are no merits in these appeals. They are accordingly dismissed. After the judgment was pronounced in open court, the learned counsel appearing for the assessee would request this court to grant permission to the assessees either to opt for compounding under the new provisions or in the alternative to permit them to request the assessing authorities to complete the assessments in their case as provided under the charging provision. In our view, the request appears to be reasonable. Therefore, the petitioners are granted permission either to opt for payment of the turnover tax under the compounding scheme or as provided under section 5(2) of the Act within a month's time from today. If such a request is made, the assessing authority would consider the same in accordance with law. - W.A. Nos. 1861,1862,1864,1865,1876,1877, 1883 of 2007 - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or municipal council or a cantonment One hundred and forty per cent in the case of those situated in any other place (b) One hundred and thirty five per cent. Section 7 was introduced in the statute, whereby a dealer could exercise his option of composition of payment of turnover tax at the rates prescribed in the section. Under rule 30 of the Kerala General Sales Tax Rules, 1963 a dealer who is exigible to pay tax at the compounded rate under section 7 and who desires to exercise the option has to make an application to the assessing authority concerned for permission to pay tax at the rates specified on or before 1st day of May of the year to which the option relates. The assessing authority on receipt of the application has to conduct enquiries and pass orders granting or rejecting the application, as the case may be, and if the application is allowed by the assessing authority, he shall serve the dealer a notice of provisional assessment and demand for payment of tax under section 7. The dealers who are permitted to pay tax at the compounded rate under this rule shall submit an annual return in form No. 9 on or before the first day of May of the succeeding year along with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve three years, whichever is higher. The Commissioner of Commercial Taxes in the exercise of his power under section 3 of the Act has issued Circular No. 44/2006 dated November 27, 2006 to all the authorities under the Act, for the proper administration of the amended provisions and also to maintain uniformity while permitting the dealers who are desirous of payment of turnover tax envisaged under section 5(2) of the Act at the compounded rate under section 7 of the Act. Omitting what is not necessary, the relevant portion of the circular is extracted and the same is as under: No. C1/520/2006/CT Office of the Commissioner, Department of Commercial Taxes, Thiruvananthapuram 27th November, 2006. Circular No. 44/2006 Sub: Kerala Finance Act, 2006 Amendments under KGST Act, 1963 and KVAT Act, 2003 Payment of tax at compounded rate Dealers in foreign liquor and cooked food Instructions Issued Regarding. As per the Kerala Finance Act, 2006 certain amendments were made in section 7 of the KGST Act and in section 8 of the KVAT Act, 2003 whereby certain changes were made in the provisions for payment of tax at compounded rate by dealers in foreign liquor and cook ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... writ petitions before this court to challenge the validity of the Amendment Act and in that sought for quashing the circular instructions issued by the Commissioner of Commercial Taxes dated November 27, 2006 and further to declare that the petitioners are entitled to pay tax at the rate prescribed in clause (a) of section 7 of the KGST Act on the turnover of foreign liquor calculated at the rates mentioned under clause (a) or (b), as the case may be, of the purchase price of such liquor and lastly to declare that the amended provisions of section 7(a) or (b) of the KGST Act have no retrospective operation in the case of those who have paid compounded tax for the assessment year 2006-07 before the provisions were amended by the Kerala Finance Act, 2006. In aid of the relief sought, it was contended that the retrospective operation given to amended provision by Kerala Finance Act, 2006 from July 1, 2006 while the same was published in the official gazette only on October 24, 2006 is unreasonable and arbitrary in relation to assessees who had opted for compounding prior to the enactment of the new provision and accordingly it was contended that in the case of persons who opted and ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluded contract and should be allowed to be in force for the whole year and, the dealer and the assessing authority are estopped from venturing to withdraw the contract. In aid of his submission, the learned counsel relies on the observation made by this court in the case of V.S. Jyothish Kumar v. State of Kerala [1994] 95 STC 527. In the said decision, the court at para 13 has observed as under: 13. As the compounded rate of tax is payable pursuant to the option exercised by the appellants and as a concluded contract has arisen when they exercised the option and when it was accepted by the department, they cannot get exonerated of their liabilities and obligations under the Act. As rightly observed by the learned single judge, writ petition under article 226 of the Constitution is not the appropriate remedy for impeaching the contractual obligations especially when they exercised their option on their own accord. The learned counsel also invites our attention to the observations made by this court in the case of Surya Rock Products v. Additional Sales Tax Officer [2002] 2 KLT SN 69, Case No. 84: It is pointed out that rules consequent to Finance Act had been brought in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as disjunctive and not conjunctive. The words whichever is higher used at the end of clause (b) of section 7 of the KGST Act therefore can control only the situations in clause (b) of the section. Therefore, the learned counsel would submit that the dealer has an option to pay turnover tax at the compounded rate specified in clause (a) or clause (b) of section 7 of the Act and the contrary view expressed by the Commissioner of Commercial Taxes requires to be set aside by the court. In aid of this submission, the learned counsel relies on the observations made by this court in the case of Norasia Lines (Malta) Ltd. v. Deputy Commissioner of Income-tax [2005] 279 ITR 268; [2005] 4 KLT SN 21, Case No. 26. In the said decision, the court has stated: The intention of the Legislature in a taxation statute is to be gathered from the language of the provisions particularly where the language is plain and unambiguous. In taxing Act it is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language. If the words are ambiguous and reasonably open to two interpretations benefit of interpretation is given to the subject. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the observations made by the apex court in the case of Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh [1979] 44 STC 42; [1979] 118 ITR 326, wherein the court has stated that there can be no promissory estoppel against the exercise of legislative power and the Legislature can never be precluded from exercising its legislative function by resort to the doctrine of promissory estoppel. Further, a reference is also made to the observations made by the apex court in the case of Union of India v. Godfrey Philips India Ltd. [1986] 158 ITR 574; [1985] 4 SCC 369. In the said decision the court at para 13 has observed as under: (page 590 of ITR) 13. Of course we must make it clear, and that is also laid down in Motilal Sugar Mills' case [1979] 44 STC 42; [1979] 118 ITR 326, that there can be no promissory estoppel against the Legislature in the exercise of its legislative functions nor can the Government or public authority be debarred by promissory estoppel from enforcing a statutory prohibition. It is equally true that promissory estoppel cannot be used to compel the Government or a public authority to carry out a representation or promise which is contrary to law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dred and thirty five per cent of the purchase price of such liquor. This provision was inserted by way of amendment to section 7 of the Act by the Kerala General Sales Tax (Amendment) Act, 2005 for the assessment years 2005-06 onwards. Section 7 of the Act which provides for composition of tax liability starts with a non obstante clause and excludes the applicability of other provisions of the Act, which deals with assessment and payment of tax. Compounding of tax under section 7 of the Act, is an option given to a dealer to pay the tax to the extent and at the rates provided under the said section, who would otherwise be liable to pay normal turnover tax under section 5(2) of the Act. The appellants who are running bar-attached hotels opted for payment of turnover tax at the compounded rate by following the procedure prescribed under rule 30 of the KGST Rules for the assessment years 2005-06 and 2006-07. The determination of lump sum amount in lieu of tax displaces the regular assessment proceedings and the quantification of tax liability is by agreement between the parties as envisaged in the section which would bind the parties. The Kerala Finance Bill, 2006 proposed an am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... light to understand the said provision and therefore, we have made that as part of our order by extracting the same: The scheme of compounding envisaged in the above provision can be explained by way of illustration as under: Illustration: Assessment of a bar hotel coming within the purview of section 7 situated in a municipal area for the financial year 2006-07. Supposed values: 1. Total purchase value of liquor for the year 2006-07 = Rs. 2,00,000 2. Turnover tax paid/payable for 2005-2006 = Rs. 20,000 3. Turnover tax paid/payable for 2004-2005 = Rs . 23,000 4. Turnover tax paid/payable for 2003-2004 = Rs. 30,000 Calculation under clause (a) of section 7 on the basis of values given above: The deemed turnover of the assessee as per clause 7(a) would be at 140 per cent of Rs. 2,00,000 being the total purchase value of liquor for the year 2006-2007, i.e., Rs. 2,80,000. Correspondingly the turnover tax at 10 per cent would be Rs. 28,000. Calculation under clause (b) of section 7 on the basis of values given above: Upon comparison of the turnover tax paid/payable for the previous three consecutive years the turnover tax for the year 2003-2004, i.e., Rs. 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axation laws are no exception to this power. The Supreme Court in Empire Industries Limited v. Union of India [1987] 64 STC 42 following Krishnamurthi and Co.'s case [1973] 31 STC 190 has held that the power of Parliament to make retrospective legislation including fiscal legislation is well-settled, such legislation is not per se unreasonable. A retrospective law in the legal sense, is the one which takes away or impairs vested rights acquired under existing laws, or creates a new obligation and imposes a new duty or attaches a new disability, in respect of transactions or considerations already passed. So much so that any restriction enacted with retrospective effect may be valid by affecting rights obtained under the pre-existing law. In the instant case, the grievance of the appellants is that under the preexisting law they had opted for payment of turnover tax at a compounded rate and the same was granted to them by the assessing authority by passing an appropriate order and thereby they have derived a vested right and that right cannot be taken away by subsequent amendment which has been given retrospective operation. This assertion of the appellants and their counsel, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retrospective operation by Act 7 of 1997 was unconstitutional as it violated the rights guaranteed to the petitioners under articles 14, 19(1)(g) and 265 of the Constitution of India. The petitioners and others like them, who had opted to the compounding scheme, as it stood prior to April, 1996 could not be saddled with additional burden of tax by the amended provision which was given effect retrospectively from April 1, 1988. While repelling the contention, the court has observed: (page 110 of 127 STC) So far as the validity of Act No. 7 of 1997 is concerned, the learned judge upheld its validity holding that the Legislature was competent to enact the law with retrospective effect. The High Court however noticed the stand of the State in its statement of objections filed in reply to the writ petition in which it was submitted that with a view to avoid hardship that may be caused by the retrospective operation of the amended provision, the court in the interest of justice may direct that the works contractors may opt, if so advised, for regular assessment under section 5B of the Act, even if they had earlier opted for assessment under the composition scheme. The learned judge t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estoppel The law relating to promissory estoppel has been succinctly explained by the apex court in Motilal Sugar Mills' case [1979] 44 STC 42; [1979] 118 ITR 326 and in Union of India v. Godfrey Philips India Ltd. [1986] 158 ITR 574 (SC); [1985] 4 SCC 369. In Godfrey Philips India Ltd.'s case [1986] 158 ITR 574 (SC); [1985] 4 SCC 369, the Supreme Court has stated: It is well-settled that the doctrine of promissory estoppel represents a principle evolved by equity to avoid injustice and, though commonly named promissory estoppel, it is neither in the realm of contract nor in the realm of estoppel. The basis of this doctrine is the interposition of equity which has always, proved to its form, stepped in to mitigate the rigour of strict law. It is equally true that the doctrine of promissory estoppel is not limited in its application only to defence but it can also found a cause of action. The doctrine is applicable against the Government in the exercise of its governmental, public or executive functions and the doctrine of executive necessity or freedom of future executive action cannot be invoked to defeat the applicability of this doctrine. It is further well-establish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the State Government is bound by such promises and therefore, not entitled to demand purchase tax on milk till date of contrary decision by the cabinet. In our view, the judgment on which reliance was placed by learned counsel for the appellants would not assist him in any manner whatsoever. In fact, in a recent decision, the apex court in the case of Rom Industries Ltd. v. State of Jammu and Kashmir [2006] 147 STC 575; [2005] 7 SCC 348, has observed as under: (page 578 of STC) We are not prepared to hold that the Government policy by itself could give rise to any promissory estoppel in favour of the appellants against the respondents since the policy itself made it absolutely clear that it would come into effect only on appropriate notification being issued. The notification was issued in exercise of the admitted powers of the State Government under the State General Sales Tax Act. The State Government having power and competence to grant the exemption was equally empowered to withdraw it. As we have also noticed there was nothing either in the notification or in the policy which provided that the negative list would not be amended or altered. On the contrary clause (v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very often does use punctuation marks improperly. The Supreme Court in the case of Aswini Kumar Ghose v. Arabinda Bose AIR 1952 SC 369, has observed, that it need not be denied that punctuation may have its uses in some cases, but it cannot certainly be regarded as a controlling element and cannot be allowed to control the plain meaning of a text. The use and purpose of using a semi-colon in a statute is explained by Vepa P. Sarathi in his book interpretation of statutes. It is said semicolon is an important and interesting mark to use. It is stronger than a comma, which is used more for a pause; but the semi-colon does not imply a complete break like the full stop. It only makes a partial break and is at the same time a link between sentences appearing on the subject. It often implies that what follows at least partially explains and amplifies the sentence that comes before it. It is often used instead of a comma when it is followed by and or or or but . The Advanced Law Lexicon by P. Ramanatha Aiyer defines the punctuation semi-colon as According to well established grammatical rules, this is a print only used to separate parts of a sense more distinctly than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... according to the plain and natural meaning of its language and no words should be added, altered, modified unless it is plainly necessary to do so, in order to prevent a provision from being unintelligible, absurd, unreasonable, unworkable or totally irreconcilable with the rest of the statute. It is also well-settled law that if on a provision being literally interpreted, it leads to any kind of absurdity, such interpretation has to be avoided. Lastly, the court while considering a statute is only concerned with the legislative policy. Once the legislative policy is found to be clear and unambiguous, it cannot add any words therein to give a different meaning or to read the same in a manner that a different meaning is attracted. Sri Sudhi Vasudevan, learned counsel submits that the draftsman has used semi-colon at the end of clause (a) of section 7 of the Act and thereby there is break in the sentence and after that the word or is used, which only denotes, the Legislature's intention is to give alternatives to the persons who are eligible to make use of the composition scheme either to choose clause (a) of section 7 of the Act or in the alternative clause (b) of section 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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