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M/s. JOY ALUKKAS TRADERS (I) PVT. LTD. Versus STATE OF KERALA, REP. BY SECRETARY,

2009 (11) TMI 960 - KERALA HIGH COURT

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? - Held that: - the compounding scheme for payment of tax opted by the assessee and accepted by the officer, does not achieve finality, because it is subject to supervisory jurisdiction by the Deputy Commissioner. Therefore, if the scheme approved by the officer is in violation of the charging provision, then the Deputy Commissioner h .....

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d for by the assessee in violation of the charging provision - the assessing officer is directed to limit levy of interest under Section 23(3A) or Section 23(3) at compensatory rate of 12% per annum, for the entire period of delay. - 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 T .....

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sion petitioner and the Government Pleader appearing for the respondent. 3. The facts leading to the controversy are the following:- The assessee is engaged in the business of gold jewellery. 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 .....

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e to pay tax under the compounding scheme only for the two branches applied for by them. Approval for payment of tax under Section 7(1)(a) was granted by the assessing officer by issuing Form 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 ass .....

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not in accordance with the charging provisions of Sections 5(1) and 7(1)(a) of the Act inasmuch as, there is no provision for compounding of part of the turnover and payment of tax for the 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( .....

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K.G.S.T.Rules and so much so, the revision, if any, under Section 35 should have been on the approval granted by the officer for compounding, i.e., with reference to the compounding order 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 accou .....

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pounding is not permissible under Setion 7(1)(a) and assessee's request for the same is impermissible under Section 7(1)(a) read with Section 5(1) of the Act. It is against these findings 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 refer .....

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x payable as conceded in the return or account for the immediate preceding year" means tax payable on the sales turnover under sub- section (1) of section 5 and the tax payable on the 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; Provi .....

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or the previous year in accordance with clause (a); Provided also that where a dealer paying tax in accordance with the provisions of this sub- section opens a new branch during a year, such 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 unde .....

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, the compounding, as an alternate method of payment of tax under Section 7(1)(a), is for the business as a whole irrespective of the number of branches maintained by the assessee. In fact, 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 war .....

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iolation of statutory provisions by allowing payment of tax at compounded rate under Section 7(1)(a) in respect of gold business in two branches and by permitting payment of tax under Section 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 .....

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der Section 7(1)(a) of the Act. Since the regular assessment has led to loss of revenue, the Deputy Commissioner rightly directed revision of assessment. We therefore hold that the Tribunal 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 th .....

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Form No.21A is only an approval granted on application filed under Rule 30 and in such case, the dealer is permitted to file return under sub-clause(5) of Rule 30 in Form No.9 on which the 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 o .....

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in Form No.21A and the demand notice issued under Form No.22 also could be corrected by initiating proceedings under Section 35 if the Deputy Commissioner is of the view that approval granted 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 mont .....

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ll be served by modifying those orders which have lost significance once assessments are made. Therefore, we are of the view that the Deputy Commissioner is competent to revise an assessment 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 .....

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e of suo motu revisional power under Section 35 of the K.G.S.T.Act. Counsel has relied on a Division Bench decision of this Court reported in Jyothish Kumar v. State of Kerala [1994] 95 STC 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 .....

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