TMI Blog2015 (1) TMI 453X X X X Extracts X X X X X X X X Extracts X X X X ..... ising that an assessed tax could be modified in subsequent proceedings by way of appeal or revision, thus depriving the figure of a certainty and finality that is warranted for compounding purposes. Similar matter has been decided in State of Kerala Versus Malabar Ornaments (P.) Ltd. [2011 (1) TMI 1281 - KERALA HIGH COURT] the option of payment of tax at compounded rates is an alternative to the regular method of payment of tax after an elaborate procedure of assessment - Section 7 begins with a non-obstante clause that clearly indicates that the scheme of payment of tax envisaged thereunder is an alternative to the regular method of assessment and payment of tax - thus, when an assessee opts to pay tax at compounded rates and such an option exercised by the assessee is accepted by the department, then it will not be open to the department, at a later point in time, to re-open those proceedings save to the limited extent of rectifying any apparent computational mistakes that have been occasioned during the compounding proceedings - the option of composition of tax is like a bilateral agreement between the parties with an object to dispense with the rigours of regular assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C).No. 36210/2010, are bar attached hotels that opted for the compounding facility under Section 7 of the Kerala General Sales Tax Act, hereinafter referred to as the 'KGST Act', for the assessment years commencing from 2006-07. As per the scheme for payment of tax at compounded rates during the relevant period, the assessee had an option to discharge his tax liability by paying tax in accordance with a formula, in lieu of the amounts determined pursuant to the normal method of assessment to turnover tax under the KGST Act. Section 7 of the KGST Act, as it stood during the relevant period read as follows: 7. Payment of tax at compounded rates:- Notwithstanding anything contained in sub-section (2) of section 5, any bar attached hotel, not being a star hotel of and above three star hotel, heritage hotel or club, may, at its option, instead of paying turnover tax on foreign liquor in accordance with the provisions of the said sub-section pay turnover tax on the turnover of foreign liquor calculated,- (a) at one hundred and forty per cent of the purchase value of such liquor, in the case of those situated within the area of a municipal corporation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is for the figures taken for determining the amount of tax to be paid under the compounding scheme for 2006-07 and subsequent years was wrong. The notices issued to the petitioners for the years 2006-07 to 2009-10 culminated in orders passed by the assessing authority re-determining the amounts payable by the petitioners for the said years. Although the petitioner filed appeals against the said orders before the first appellate authority, the said appeals were dismissed. W.P.(C).No. 1514/2013 was therefore preferred by the petitioner challenging the orders of the assessing authority as also those of the appellate authority and the consequent demand notices that were issued to the petitioner. While this writ petition was pending before this Court, the assessing authority proceeded to issue similar notices to the petitioner in respect of the assessment years 2010-11, 2011-12 and 2012-13. As this Court was already considering the issue in W.P.(C).No.1514/2013, the notices were challenged in W.P.(C).No.7200/2011 (Assessment year 2010-11); W.P.(C).No.3446/2012 (Assessment year 2011-12) and W.P.(C).No.10776/2013 (Assessment year 2012-13). 6. As far as the petitioner in W.P.(C).No.3621 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were all passed beyond that date. As regards W.P.(C).No.36210/2010, it is contended that the requirement of adding the opening stock of the first year of compounding, to the purchase turnover figures of that year for the purposes of determining the amount that had to be paid in terms of Section 7, was inserted in the said Section only with effect from 2010. The said provision could not have been made applicable to a compounding order passed for the assessment year 2006-07. The plea of time bar with reference to Section 43 of the KGST Act is also reiterated for the purposes of this writ petition. 9. Per contra, the learned Government Pleader would contend, by placing reliance on a Division Bench decision of this Court in M/s Joy Alukkas Traders (I) Pvt Ltd v. State of Kerala - [2010 (1) KHC 844[, that it was well within the powers of the respondents to re-open a compounding order that was seen passed erroneously and in contravention of the statutory scheme. The judgment of this Court in MSP Family Jain Trust v. State of Kerala - [2006 KHC 682] is also relied upon for the proposition that proceedings for assessment of escaped tax can also be initiated to assess tax that has escape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of tax liable to be paid by the assessee for that year on compounding basis. It is therefore, that the legislature appears to have deliberately omitted a reference to the assessed tax of the previous years in the formula prescribed for compounding, probably on realising that an assessed tax could be modified in subsequent proceedings by way of appeal or revision, thus depriving the figure of a certainty and finality that is warranted for compounding purposes. 12. A Division Bench of this Court in State of Kerala v Malabar Ornaments - [2013 (57) VST 309], had occasion to consider a similar issue with regard to the compounding application preferred by a dealer running a jewellery shop. The scheme of compounding applicable for such dealers contemplated the payment of compounded tax at 200% of the highest tax payable for any of the immediately three preceding years. The assessment year under consideration in that case was 2006-07 and the dealer paid tax at 200% of the tax returned as tax payable for the year 2005-06. The payment of tax at compounded rate was found to be in order by the Appellate Tribunal. In a revision filed before this Court, the contention of the department was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealer to request for a regular assessment as envisaged under Sections 5 and 5A of the KGST Act. 14. In the light of the discussions above, I am of the view that the re-opening of concluded compounding proceedings, based on the revised assessments for the assessment year 2005-06, cannot be legally sustained. Resultantly, I quash Exts.P9 to P12 revised orders, Exts.P19 to P22 appellate orders and Exts.P13 to P16 Demand notices in W.P.(C).No.1514/2011 (Assessment years: 2006-07 to 2009-10) and the notices impugned in W.P.(C).No.7200/2011 (Assessment year 2010-11); W.P.(C).No.3446/2012 (Assessment year 2011-12); W.P.(C). No.10776/2013 (Assessment year 2012-13) and allow the said writ petitions. 15. As regards W.P.(C).No.36210/2010, while the general principle discussed above would apply to the compounding proceedings adopted for the petitioner in this case as well, it is seen that the re-opening of the concluded proceedings was sought on a different ground namely, that while computing the figure representing 140% of the purchase turnover for the year 2006-07, the petitioner had not included the opening stock of that year in the purchase turnover for the year. While the learned Se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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