TMI Blog2018 (5) TMI 1183X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings can be taken against the assessee in respect of the offence. The tenor of the aforesaid provision, therefore, is that once an offer is made by an assessee for compounding an offence, and the assessee satisfies the pre-requisites for compounding the offence by paying the tax amount determined as payable together with the applicable compounding fee, the acceptance of the offer of the assessee, by the Department, brings into existence a binding contract, closing the penalty proceedings by accepting the amounts due from the assessee, and from the said binding contract, neither party is permitted to resile. On a perusal of Section 56 of the KVAT Act, it is clear that the exercise of suo motu power of revision by the Deputy Commissioner, is expressly made subject to the provisions of the Act. This would mean that the Deputy Commissioner, in the exercise of his power under Section 56 of the KVAT Act, would necessarily be bound by the statutory scheme of finality envisaged in respect of orders passed under Section 74 of the KVAT Act. Petition allowed. - W. P. (C) No. 14220 of 2017 And 14233 of 2017 - - - Dated:- 7-11-2017 - MR. A. K. JAYASANKARAN NAMBIAR, J. For Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s accepted by the respondents, and the petitioner was permitted to compound the offence by paying the aforesaid compounding fee and tax. Ext.P6 is the order permitting the compounding, and collecting an amount of ₹ 8,00,000/- from the petitioner towards compounding fee and an amount of ₹ 1,19,23,332/- towards the tax amount payable. Thereafter, by Ext.P8 notice issued under Section 25(1) of the KVAT Act, the respondents proposed to complete the assessment proceedings for the assessment year 2011-2012 by making additions to the reported turnover. Although the petitioner preferred Ext.P9 reply to the said notice, by Ext.P10 order dated 31.12.2014, the proceedings were completed against the petitioner by effecting an addition to an extent of 50% of the suppressed turnover, to the total of the turnover declared by the petitioner and the suppressed turnover detected by the Intelligence officer. By Ext.P10 order, the liability of the petitioner towards tax and interest was determined in an amount of ₹ 88,98,891/-. Aggrieved by Ext.P10 order, the petitioner preferred an appeal before the First Appellate authority, who, by Ext.P11 order dated 31.07.2015, modified the addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority, by Ext.P11 order, refused to interfere with the assessment order and sustained the addition of 50% of the suppressed turnover. The petitioner therefore preferred an appeal before the Appellate Authority, and the said appeal is stated to be pending consideration before the said authority as Appeal No.238/2017. In this writ petition also, the petitioner is aggrieved by Ext.P15 order dated 18.03.2017, where, as in the previous case, Ext.P6 order, that permitted the petitioner to compound the offence, is cancelled for the same reasons. 5. A counter affidavit has been filed by the respondents in both these writ petitions. The thrust of the averments in the said counter affidavits are to the effect that, the power of the Deputy Commissioner under Section 56 of the KVAT Act, to revise any order or proceedings recorded under the Act by any officer or authority subordinate to him, is one that can be exercised wherever, in the opinion of the Deputy Commissioner, the said order is prejudicial to the interests of revenue. It is the contention of the respondents that, the suo motu power of revision conferred upon the Deputy Commissioner under Section 56 is one that can be passed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wers and, as a matter of first impression, there appears to be no bar or inhibition against getting at escaped income in exercise of the revisional power, so long as the grounds for exercise of that power are made out, viz., that the order is vitiated by illegality, irregularity or impropriety. This is the view that has been taken in more than one decision of the Supreme Court and of this and other High Courts. We are of the opinion that the contrary view which is reflected in at least one of the Division Bench rulings of this Court and in some of the other decisions cannot be sustained later in paragraph 17 the full bench held thus: WE began the discussion of the question by recording our first impression on the statutory provision. The power of assessing escaped turnover and of revision are two distinct and separate powers. They have been conferred on two different authorities under Sections 19 and 35, the latter power different authorities under Sections 19 and 35, the latter power being conferred on a superior authority. An examination of the authorities has only confirmed our first impression . In the same decision at paragraph 18, while considering the question whether an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2009. 6. It is, in particular, stated that, in the instant cases, the respondents had reason to believe that a substantial part of the actual turnover of the assessees were not brought to tax on account of an error occasioned by the Intelligence Officer, and it is in order to recover the short assessed tax that it was thought fit to cancel the compounding proceedings that were completed by Ext.P6 order. 7. I have heard the learned senior counsel Sri. T.M. Sreedharan, duly assisted by Adv. Sri. Aji V. Dev appearing on behalf of the petitioners in both the writ petitions and also the learned Special Government Pleader Sri. C.E. Unnikrishnan appearing on behalf of the respondents. 8. On a consideration of the facts and circumstances of the case and also the submissions made across the Bar, I find that the main issue to be considered in both these writ petitions is the legality of Ext.P15 order that cancelled Ext.P6 order, by which, the petitioners in these writ petitions were permitted to compound an offence that was alleged against them under Section 67 of the KVAT Act. The provision that enables an assessee to compound an offence that is alleged against him is Section 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding contract, closing the penalty proceedings by accepting the amounts due from the assessee, and from the said binding contract, neither party is permitted to resile. This position in law has been recognised by a number of decisions of this Court, and in particular, the decision in State of Kerala v. Molly Babu [(2010) 29 VST 75 (KER)] and S.Viswanathan v. State of Kerala [1999 (113) STC 182 (KER)]. The question then arises as to whether, in exercise of the power under Section 56 of the KVAT Act, the Deputy Commissioner can suo motu revise an order that is passed under Section 74 of the KVAT Act. On a perusal of Section 56 of the KVAT Act, it is clear that the exercise of suo motu power of revision by the Deputy Commissioner, is expressly made subject to the provisions of the Act. This would mean that the Deputy Commissioner, in the exercise of his power under Section 56 of the KVAT Act, would necessarily be bound by the statutory scheme of finality envisaged in respect of orders passed under Section 74 of the KVAT Act. I cannot, therefore, accept the contention of the learned Government Pleader that, the power of suo motu revision can be exercised by the Deputy Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was actually due. The assessing authorities could have independently, in the assessment proceedings, determined the actual liability of the petitioners assessees under the KVAT Act. I note from the facts in the writ petitions that the assessment proceedings were also completed against the assessees, where, once again, the authorities did not take note of the mistake occassioned by the Intelligence Officer and adopted a lower turnover for the purposes of the assessment. No doubt, there were additions made to the turnover reported, towards suppressed turnover and a further addition of 50% of the suppressed turnover. The said addition of 50% of the suppressed turnover was however reduced by the First Appellate authority to 10% in the case of the petitioner in W.P. (C).No.14220/2017, and maintained by the First Appellate authority in the case of the petitioner in W.P. (C).No.14233/2017. In both these cases, although appeals have been filed before the Appellate Tribunal, I find that it may still be open to the Department to initiate proceedings for bringing to tax the escaped turnover, in terms of Section 25 (1) of the KVAT Act. This, however, is something that the department would hav ..... X X X X Extracts X X X X X X X X Extracts X X X X
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