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2009 (11) TMI 960 - KERALA HIGH COURT

2009 (11) TMI 960 - KERALA HIGH COURT - TMI - ST. Rev.. No. 219 of 2009 - Dated:- 11-11-2009 - MR. JUSTICE C.N.RAMACHANDRAN NAIR AND MR. JUSTICE V.K.MOHANAN FOR THE PETITIONER :SRI.HARISANKAR V. MENON O R D E R Ramachandran Nair,J: The question raised in the revision filed by the assessee is whether the Sales Tax Appellate Tribunal was justified in upholding the order of the Deputy Commissioner issued under Section 35 of the Kerala General Sales Tax Act, 1963 (for short 'the K.G.S.T.Act' .....

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ry. It has it's head office at Ernakulam and three branches in the State at Kottayam, Angamaly and Thodupuzha. The assessee holds single registration under the K.G.S.T.Act with branch certificate for each of the three branches. During the assessment year 2003- 04, the assessee made an application before the assessing officer in Form No.21 for payment of tax at compounded rate as provided under Section 7(1)(a) of the K.G.S.T.Act for two branches located at Kottayam and Angamaly. Even though t .....

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orm No.21A based on which assessee started remitting tax. Since the compounding scheme for payment of tax was granted only for two branches, the assessee started filing regular returns and remitting tax thereon for the business carried on in the head office and another branch. After the end of the year, the assessment was completed by the assessing officer under Section 17(3) of the K.G.S.T.Act wherein tax is computed under the compounding scheme for two branches and tax is assessed under Sectio .....

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balance turnover. He, therefore, initiated proceedings under Section 35 and ordered revision of assessment by directing assessment under Section 7(1)(a) in terms of the request made by the assessee and accepted by the officer, but by including the business of all Branches of the assessee in terms of Section 7(1)(a) of the K.G.S.T.Act. 4. The assessee filed appeal against the order of the Deputy Commissioner issued under Section 35 contending that the order is time barred and that the regular as .....

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in Form No.21A and demand in Form No.22, for payment at compounded rate, with reference to which the matter was time barred. However, the Tribunal found that the order revised by the Deputy Commissioner was a regular assessment which was completed under Section 17(3) which led to reduced payment of tax on account of misapplication of the compounding scheme by the assessing officer and the order directing revision of assessment under Section 35 was issued by the Deputy Commissioner within the tim .....

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ngs of the Tribunal, the assessee has filed this revision. 5. The first question to be considered is whether the partial compounding applied for by the assessee and approved by the assessing officer is permissible under the provisions of Section 7(1)(a) of the Act which are extracted herein below for easy reference:- "7. Payment of tax at compounded rates:- (1) Notwithstanding anything contained in Sub- section(1) of Section 5, (a) any dealer in gold or silver ornaments or wares may, at his .....

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purchase turn over under Section 5A: Provided that where during the preceding year, the dealer had not transacted business for any period the tax payable for the whole year shall be calculated proportionately on the basis of the tax payable for the period during which such dealer had transacted business; Provided also that where such a dealer acquires any running business or a branch of a business with respect to gold, silver ornaments or wares during the year, the amount of compounding tax pay .....

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ch branch shall be treated as if it were an independent place of business and the provisions of this sub-section shall apply to it accordingly." 6. It is very clear from the above provisions that the payment of tax at compounded rate under Section 7 (1)(a) is an option given to the assessee to pay tax under the compounding scheme in lieu of tax payable under Section 5(1) of the Act. Therefore, necessarily, the scope of Section 7(1) has to be considered with reference to the main charging se .....

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, Section 7(1)(a) provides for payment of tax at compounded rate only in respect of one line of business, i.e., any gold or silver ornaments or wares and if assessee is engaged in any other line of business, the compounding under Section 7 (1)(a) will apply for only business in gold and silver ornaments and wares. In other words, in the same line of business, viz., gold and silver ornaments, the assessee cannot opt to pay tax under compounding scheme for some branches and pay tax on the turnover .....

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ion 5(1) on the turnover of gold and silver ornaments in the head office and another branch. The assessee, who is engaged only in the business of gold and silver ornaments and wares, is liable to be assessed under Section 7(1)(a) for the entire turnover covering the head office and all the branches in the State. However, if the assessee is engaged in the other line of business, i.e., business other than in gold and silver ornaments and wares, then in respect of such other line of business, the a .....

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l rightly confirmed the order of revision on merit. 7. The next contention raised by counsel for the petitioner is that the mistake, if any, is in the approval granted by the assessing officer in Form No.21A permitting the payment of tax at compounded rate only for two branches and simultaneously, permitting the assessee to pay tax under Section 5(1) for the head office and another branch and so much so, the order prejudicial to the interest of the revenue requiring correction through revision u .....

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assessment has to be made by the assessing officer under Section 17(1) or 17(3) of the Act. It is clear from Form No.21A and Form No.22 issued under Rule 30 that the payment of tax based on the approval and the demand notice are only provisional and the same has to find acceptance in a regular assessment. In other words, even if there is a mistake or omission in the approval granted by the assessing officer, it is within his powers to modify such order and demand the tax escaped under the compo .....

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nted and the demand tax are detrimental to the interest of the revenue. However, failure or omission on the part of the Deputy Commissioner in interfering at that stage does not bar him from scrutinising the correctness of the regular assessment completed under Section 17(3). We have already found that the monthly payment of tax based on the approval for compounding granted by the assessing officer in Form No.21A and the demand notice issued under Form No.22 are only provisional and the same sho .....

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nt prejudicial to the interest of the revenue, no matter, such assessment is completed based on an erroneous compounding order passed by the Officer in Form No.21A which was not cancelled or revised by the Deputy Commissioner. There is no dispute that the order issued by the Deputy Commissioner under Section 35 is within the time for revision of regular assessment passed by the assessing officer under Section 17(3). So much so, the Tribunal rightly rejected the assessee's challenge against t .....

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C 527 and that of the Supreme Court in State of Kerala and Another v. Builders Association of India and Others (104 STC 134). In this case, the scheme of compounding for payment of tax had been opted by the assessee and accepted by the Department. However, the question to be considered is whether a wrong order passed on a compounding application which has resulted in reduced payment of tax at compounded rates in violation of the statutory provisions could be corrected by a higher authority exerc .....

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