9911796707
TMI Blog2018 (7) TMI 1765X X X X Extracts X X X X X X X X Extracts X X X X ..... quarterly compounding tax was also paid. However, according to the appellants, during the said assessment year, they were unable to carry on the business and therefore applied for withdrawing the compounding application. The same came to be rejected against which these appeals have been filed. 3. The learned Single Judge while deciding WP(C) No.39547/2016 arrived at a conclusion that in so far as compounding is a contract between the assessee and the department, it cannot be allowed to be withdrawn. The issue that was urged and decided by the learned Single Judge was whether the assessee could be absolved from the liability arising from the contract on the ground of the obligation being impossible of performance in terms of S.56 of the Indian Contract Act, 1872. It was found that the petitioner filed two returns for the month of April and May, 2017 and paid the first instalment of tax based on the compounding provision. He applied for withdrawal from the scheme as per Ext.P23(A) which was declined as per Ext.P24 order. 4. The main ground urged was that the appellant was unable to obtain a permit and D & O license in the particular year for operation of the quarry and consequently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not arise at all. We do not think that this provision enables the appellants to take such a contention. Compounding application is filed in terms of S.8(b) and appellants do not have a case that they have not exercised their option. The option is exercised only to avoid compliance of other provisions under which they are obliged to pay tax in accordance with the statutory scheme. By availing the compounding facility, it shall be open for the assessee to pay a specified amount of tax alone depending upon the parameters specified in the sub section. Therefore, the words "dealer producing granite metals with the aid of mechanized crushing machine" does not give any indication that in the absence of any manufacturing activity, he is not under obligation to pay the compounded tax though he had opted for compounding. 9. The second contention is based on Rule 11 of the Kerala Value Added Tax Rules, 2005 (hereinafter referred to as KVAT Rules). As per Rule 11(1), every application for exercising option for payment of compounded tax u/s 8 shall be filed in the prescribed form before the assessing authority on or before 30th day of April every year. Along with the application, in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 2002 applicable for the year 2002-03 by enhancing the compounding fee payable under the main section 7(1)(a) from 150% to 200% of the tax paid for the preceding year. The second proviso to S.7(1)(a) which existed till 2001-2002 was deleted by the Finance Act, 2002 w.e.f 2002-03 as a consequence of which assessees who were paying tax at the compounded rate including for the year 2001-02, had to pay tax for 2003-03 at 200% of the compounded tax paid in the previous year. 13. Even under the KGST rules, there was a provision which enables the assessing officer to conduct necessary enquiry and to pass an order either granting or rejecting the application for compounding. The Division Bench observed that the assessing authority in exercise of the powers conferred under sub rule (2) of Rule 30 granted permission to pay the tax at the rates specified in Form 21 and assessee was accordingly informed to pay the tax for the period from 01/04/2002 to 31/3/2003. Though demand was made, assessee could not pay the amount and he requested for terminating the compounding order issued for the period 2002-03 and to permit him to remit the tax as per the usual procedure. The assessee therefore c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compounded rate u/s 7(1)(a) and the assessment should be completed on the taxable turnover returned or to be determined by the officer. The assessing officer completed the assessment in terms of the compounding application u/s 7(1)(a) and issued assessment and demand notice demanding differential tax at compounded rate of interest. First appeal filed by the assessee was dismissed and in second appeal the Tribunal allowed the claim, against which the State filed a review petition which came to be dismissed. It was observed by the Division Bench that even-though there is no time limit prescribed for passing orders on compounding application filed in Form 21, the right procedure for the assessing officer was to pass an order and inform the assessee his orders before due date for filing the first monthly return due for the year, i.e, before 10th May of the relevant year. It was however observed that since the application is not rejected, nothing bars the assessee from proceeding to file monthly returns and remit the tax at the rate shown in the compounding application. Division Bench observed that the conduct of the assessee obviously shows that the assessee insisted on the assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought to withdraw their compounding application and sought exemption from payment of tax at compounded rate. (ii) Zodiac Regency v. Commissioner of Commercial Taxes (2011 (3) KLT 95). This is also a Division Bench judgment of this Court which had arisen under the KGST Act, 1963. The appellant challenged the assessment of turn over tax on the sale of liquor in his hotel at the compounded rate provided under Section 7(1)(a) of the KGST Act. Appellant applied for payment of tax at compounded rate which was 140% of the purchase value of liquor and his request was allowed by the Officer. Consequently, during 2006-07, he remitted tax at compounded rate and the same was accepted. When the assessment for the year 2006-07 was proposed by issuing notice on 1/3/2011, he requested for an option to withdraw from the compounding scheme for payment of tax granted and to revert back to payment of tax on the actual turnover based on the charging section, S.5(2) of the KGST Act. One of the challenge made was regarding acceptance of his compounding application. It was held that when a compounding application is submitted by the assessee and the assessee starts making payment of tax under the scheme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 9/3/2017 in WP(C) No.39547/2016 proceeded on the basis that there was in fact an order of compounding sanctioned by the department. 19. One contention urged by the learned Special Government Pleader is that there is no specific pleading regarding the contentions now urged before the appellate Court. 20. In WP(C) No.39547/2016, in paragraph 29, it is stated as under:- "It is humbly submitted that Ext.P19 option exercised by the petitioner for compounding for the year 2016-17 has not been accepted by the 3rd respondent so far and no permission to pay tax under compounding scheme category is issued to the petitioner." 21. A copy of Ext.P19 compounding application published in the website and downloaded by the petitioner on 5/12/2016 is produced as Ext.P22. Petitioner therefore contended that Ext.P22 would establish the fact that Ext.P19 application for compounding submitted by the petitioner is still under processing and the same has not been approved by the respondents. Ext.P22 would also show that the application status was "submit". 22. In WP(C) No. 853/11, no such contention is seen urged. It is only stated that the writ petition proceeds on the basis that the compoundi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er obligation to pay tax at compounded rate. The only question that may arise is whether he will be under obligation to pay tax at compounded rate even if he is unable to carry on the business activity. The facts of the present case would disclose that petitioner was having a licence to operate the quarrying unit. By virtue of an order passed in WP(C) No. 21465/2010, functioning of the unit had been stayed until further orders on 6/10/2010. Though the petitioner preferred an appeal, the same was disposed of with a direction to list the writ petition for final hearing. The matter was heard and reserved for judgment. It is in the said circumstances that he submitted an application on 6/10/2010 stating that the machineries are not working and no sale is taking place and therefore, he should be exempted from paying the quarterly tax at the compounded rate. This case according to us stands on a different footing from the facts disclosed in WP(C) No. 39547/2016. That was a case in which the petitioner initially proceeded on the basis that once option for paying tax at compounding rate have been exercised, it becomes a concluded contract and the question was whether the assessee could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e made a compounding application, he had a hope that the writ petition would be allowed in his favour. Learned Single Judge held that the dismissal of the writ petition cannot be claimed as a supervening event which absolved him from complying with the obligations as agreed upon under the compounding scheme. Ultimately it was held at paragraphs 29, 30 and 31 as under:- "29. It is also to be noted that the petitioner had filed monthly returns and had also paid tax in accordance with the returns filed; which disclosed a turnover. Despite the petitioner having no license and permit, the petitioner had effected the sale in the course of the assessment year. It is also pertinent that the rejection of the D & O license by the respondent Panchayath had already occurred before the application was filed for compounding. The petitioner had made an application for compounding before 31.05.2016, since otherwise the petitioner would have lost the opportunity to compound. It cannot be said that the dismissal of the writ petition, filed for D & O license was never in the contemplation of the petitioner at that point of time. In fact, the chances being there for the dismissal, the petitioner coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that an application for compounding has to be sanctioned or rejected. Payment of advance tax under the compounding scheme by itself will not amount to sanctioning of the compounding application. Unless the compounding application is accepted by an order of sanction, it does not become a concluded contract. If there is no concluded contract between the parties, the application remains only as an offer which could be withdrawn at any time and the assessee can go for regular assessment. Viewed at a different angle, if after payment of quarterly tax the compounding application is rejected, necessarily, the assessee will have to file returns by producing the books of account. Therefore, payment of tax at compounded rate by itself cannot be a reason for concluding that there is a concluded contract between the parties. 28. It is true that the contention now urged has not been urged before the learned Single Judge. But specific pleading had been raised in that regard and even in the memorandum of appeal, a specific ground to that extent had been raised. Hence, in the interest of justice, it is only fair that the matter is decided rather than relegating the parties to seek for a review ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
