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TMI Blog2013 (2) TMI 648X X X X Extracts X X X X X X X X Extracts X X X X ..... n was allowed and by Ext.P5 order dated 1.9.2010, the first respondent permitted the petitioner to pay tax at compounded rate. The order also stated the tax liability for the year 2010-11. 3.In the mean time, on 6.8.2010, the petitioner sent Ext.P2 letter to the first respondent informing that they are opening a new branch at Nedumangad and that they wanted to pay tax under the compounding system for that showroom also. It is also stated that by Ext.P3 letter dated 14.7.2010, the petitioner had already sought a clarification from the first respondent whether they can continue compounding facility if they stock 100 kgs of gold in the newly opened showroom. Though the respondents do not admit receipt of this letter, case of the petitioner is that they did not get any reply to Ext.P3. 4.Their Nedumangad branch was opened on 8.8.2010. This branch was inspected by the officers of the Commercial Taxes Department on 17.8.2010 and Ext.P4, the shop inspection report, discloses that the physical stock of gold in that branch was 98567.241 gms. 5.Subsequently, on 25.10.2012, the first respondent issued Ext.P6 notice under Section 8(f)(ii) of the Act, calling upon the petitioner to show caus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P3 they also sought a clarification on the stock which they proposed to hold in the new showroom that there was no reply to that letter. Further, it is also their case that the stock was inspected on 17.8.2010 and in Ext.P4 shop inspection report, it was found that they had a closing stock of 98567.241 gms of gold. According to the petitioner, it was after all these developments, including the shop inspection, that compounding was allowed by Ext.P5 order issued on 1.9.2010. Therefore, it was argued that there was no malafide attempt on their side and that in such a case, Section 8(f)(ii) of the Act should be read down as one conferring a discretionary power on the authority to cancel the permission granted or not. It was argued that if the Section is read as providing mandatory provisions for cancellation of the permission already granted, the Section is unconditional as it violates Articles 14 and 19(1)(g) of the Constitution. 11.Admittedly, the petitioner is a dealer in gold, registered under the Act. Therefore, the petitioner is liable to pay tax as provided under Section 6 of the Act. However, the Legislature has introduced Section 8 in the Act, giving dealers freedom to opt f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . . . . . . . . . (ii) The assessing authority, for valid and sufficient reasons, such as shifting of place of business, holding of stock exceeding double the quantity held in the previous year, furnishing of false information, suppression of relevant information, failure to furnish such information demanded, may refuse permission to pay tax under this section and cancel the permission if any granted: provided that no orders under this sub-clause shall be issued without giving the dealer an opportunity of being heard and without prior approval of the District Deputy Commissioner." 12.A reading of the aforesaid provisions of Section 8(f) shows that notwithstanding Section 6, which provides for levy of tax on sale or purchase of goods, the dealers in gold ornaments, like the petitioner, are permitted to pay tax at compounded rates as prescribed in clauses (a), (b), (c) or (d) of Section 8(f) (i), provided they exercise option for the same. Rule 11 of the KVAT Rules provides for filing of option by dealers for payment of tax at compounded rates and forms also have been prescribed for making such application. Ext.P1 is the application filed by the petitioner opting for payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke every effort to save a statute from becoming unconstitutional. If on giving one interpretation the statute becomes unconstitutional and on another interpretation it will be constitutional, then the court should prefer the latter on the ground that the legislature is presumed not to have intended to have exceeded its jurisdiction." Therefore, the question of reading down a provision arises, not for avoiding any hardship to an assessee, or to sustain any administrative action, but only if it is found that but for such an exercise, the legislation would be an unconstitutional one. Therefore, the first question to be examined is whether Section 8(f)(ii) of the Act which authorised cancellation of the permission granted for payment of tax at compounded rates from suffer any unconstitutionality justifying its reading down. 16.Apart from the division of taxing power between the Union and State Legislatures by the relevant Entries in the legislative lists in Schedule VII, taxing power of the Legislatures is subject to the following limitations imposed by the Constitution: "(i) It must not contravene Art.13. (ii) It must not deny equal protection of the laws (Art. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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