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TMI Blog2015 (1) TMI 1311X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal, are in relation to the assessment year 2012- 13, challenging the imposition of penalty under Sub-section (7) of Section 22 of the Act and the assessment made under Sub-section (1) of Section 25 of the Act, respectively. 2. The assessee is a dealer paying presumptive tax under Sub-section (5) of Section 6 of the Act. The total turnover conceded by the assessee for the financial year 2011-12 was Rs. 63,92,576/-. A dealer paying presumptive tax under Sub-section (5) of Section 6 of the Act whose total turnover exceeds 60 lakh rupees during the course of a year shall intimate the said fact to the assessing authority within the prescribed time limit and pay tax at the regular rates from the next quarter onwards. The assessee, instead of paying tax at the regular rates, paid Rs. 6,710/-, Rs. 758/-, Rs. 505/- and Rs. 505/-, respectively for the four quarters of the assessment year 2011-12 and Rs. 500/- each for the next two quarters of the assessment year 2012-13. Notices dated 23/11/2012 were issued by the Assessing Authority, for an amount of Rs. 1,68,996/-, under Sub-section (1) of Section 25 of the Act, being the difference of tax payable for the months of April, 2012 to Sept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... procedural irregularity which will not come within the ambit of Sub-section (7) of Section 22 of the Act can only be rejected. According to the assessing authority, since there is clear violation of the provisions laid down under Sub-section (5) of Section 6 of the Act, it is a fit case to impose penalty under Sub-section (7) of Section 22 of the Act. Similarly, for the two quarters of the assessment year 2012-13, the assessing authority by proceedings dated 21/1/2013 completed the assessment under Sub-section (1) of Section 25 of the Act, assessing the balance tax payable at Rs. 1,61,915/-. By another proceedings dated 21/1/2013, the assessing authority imposed a penalty of Rs. 4,85,745/- on the assessee, under Sub-section (7) of Section 22 of the Act, being thrice the amount of tax payable for violation of the statutory provisions under Sub-section (5) of Section 6 of the Act. 5. Aggrieved by the assessment orders passed under Sub-section (1) of Section 25 of the Act, for the years 2011-12 and 2012-13, the assessee filed VATA Nos.315/2011 and 316/2011 before the Deputy Commissioner (Appeals)-II, Kozhikode. Similarly, the assessee filed VATA Nos.317/2011 and 318A/2011 before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject to Sub-section (2), any registered dealer not being those classified under Clauses (a) to (f) of Sub-section (5) whose total turnover for a year is below 60 lakh rupees, may, at his option, pay tax at the rate of half per cent of the turnover of sales of taxable goods as presumptive tax instead of paying tax under Sub-section (1). Prior to the amendment made to Sub-section (5) of Section 6, by the Kerala Finance Act, 2011, the total turnover for a year should be below 50 lakh rupees. Going by the 3rd proviso to Sub-section (5), a dealer shall not be eligible to opt for payment under the Sub-Section (5) if his turnover in respect of goods to which the Act applies, whether under the Act or under the Kerala General Sales Tax Act, 1963, had exceeded 60 lakh rupees during the year preceding the year to which such option relates. Prior to the amendment made to the 3rd proviso to Sub-section (5), by the Kerala Finance Act, 2011, the total turnover of the dealer should not exceed 50 lakh rupees during the year preceding the year to which such option relates. 9. In terms of Sub-rule (7) of Rule 17 of the Kerala Value Added Tax Rules, 2005 (hereinafter referred to as 'the Rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had opted for payment of tax under Subsection (5) of Section 6 or under Section 8 changes over to the payment of tax under Sub-section (1) of Section 6, he shall submit an application in Form No.25A along with a stock inventory on the date of change over, duly certified by a Chartered Accountant or a Cost Accountant, where the dealer is covered by the provisions of Section 42, and a statement of the purchase bills issued by registered dealers paying tax under Subsection (1) of Section 6, within fifteen days from the date of change over. As per Sub-rule (8) of Rule 12, where the dealer referred to in Sub-rules (7) or (7A) has submitted the statements as required by the said sub-rule, the assessing authority shall verify the claim and, where it is satisfied that the claim is in order, permit the dealer to claim input tax credit in respect of such goods held as opening stock in three equal monthly installments commencing from the return period subsequent to the date of order allowing such input tax credit. 12. Sub-section (7) of Section 22 of the Act, deals with imposition of penalty. Going by the said Sub-section, where on scrutiny of returns or verification of accounts in any proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. As per the 6th proviso to sub-section (5), if the turnover of such a dealer has exceeded the turnover limit during the course of a year, he shall be eligible for input tax credit on the turnover in excess of 60 lakh rupees. 15. Sub-rule (7) of Rule 12 mandates that, where a dealer who had opted for payment of tax under Sub-section (5) of Section 6 or under Section 8 changes over to the payment of tax under Sub-section (1) of Section 6, he shall submit an application in Form No.25A along with a stock inventory on the date of change over, duly certified in terms of the said sub-rule, and a statement of the purchase bills issued by registered dealers paying tax under sub-section (1) of Section 6, within the prescribed time from the date of change over. Sub-rule (8) provides that, on verification of such claims the assessing authority can permit the dealer to claim input tax credit in respect of such goods held as opening stock. Going by the relevant provisions of the Act and the Rules, which we have already referred to hereinbefore, the dealer has a statutory obligation to intimate the assessing authority, in the prescribed manner and within the prescribed time limit, the factum o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of purchase bills for change over to the scheme of payment of tax under Sub-section (1) of Section 6. In order to avail the benefit, the dealer has to get permission from the officer who grants it under Sub-rule (8) on being satisfied after verifying Form No.25A and the accounts furnished. The Division Bench further held that, under Sub-rule (8) of Rule 12 there is no provision to grant input tax credit to dealers claiming benefit under Sub-section (5) of Section S.6 for any period prior to filing of Form No.25A even in cases where the dealer was denied the benefit claimed under Sub-section (5) of Section 6 and assessed under Sub-section (1) of Section 6 of the Act for the whole year. 16. Though 6th proviso to Sub-section (5) of Section 6 of the Act, inserted by the Kerala Finance Act, 2011, with effect from 1/4/2005, entitles the dealers to claim the benefit of input tax credit on the turnover in excess of 60 lakh rupees, the said proviso, which begins with a non obstante clause, does not in any manner take away the rigor of the statutory requirement to submit an application in Form No.25A once the total turnover of a dealer paying presumptive tax under Sub-section (5) of Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) of Section 22 alone. Therefore, the contention raised by the assessee regarding non-application of Sub-section (7) of Section 22 of the Act, since the assessment in question is completed under Subsection (1) of Section 25 of the Act, can only be rejected. Further, going by the mandate of Sub-section (7) of Section 22, the assessing authority is vested with no discretion either to reduce or waive the quantum of penalty for any violation of Subsection (5) of Section 6 of the Act. 18. It is not in dispute that, the turnover conceded by the assessee for the financial year 2011-12 has exceeded 60 lakh rupees and as such the assessee is not entitled to continue as a presumptive tax dealer under Sub-section (5) of Section 6 of the Act, paying tax at the rate of half per cent of the turnover of sale of taxable goods. The assessee neither intimated the said fact to the assessing authority nor changed over to payment of tax at regular rates, under Sub-section (1) of Section 6 of the Act, from the next quarter onwards. Instead, the assessee continued as a presumptive tax dealer, without paying tax at regular rates and enjoying the benefits intended for small dealers, which continued as su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade available to small dealers subject to certain conditions. If any of the conditions is violated, they will be assessed for payment of tax as a normal dealer and they have to pay tax accordingly. But while making such assessments, these dealers are finding it difficult for obtaining input tax credit and special rebate. Hence, provisions will be made in the VAT Act to remove the difficulties so as to grant input tax credit and special rebate while assessments are initiated denying their presumptive status." 22. Going by Clause (i) of Section 2 of the Kerala Finance Act, 2014, sub-section (10) of Section 10 of the said Act by which Section 25C was inserted to the VAT Act shall be deemed to have come into force on 1/4/2005. Section 25C of the Act, inserted by the Kerala Finance Act, 2014, reads thus; "25C. Special provision regarding assessment of dealers paying presumptive tax:- Notwithstanding anything contained in sub-section (4) of section 11 or sub-section (2) of section 12, if any assessment or other proceeding is initiated by the assessing authority denying the eligibility of a dealer to pay presumptive tax for the violation of conditions enumerated in subsection (5) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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