TMI Blog2018 (12) TMI 484X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax paid or payable by the dealer, in respect of the principal place of business and all branches. Hence, the intention of the legislature is clear in the said year and the tax conceded in the accounts of each of the branch and the Head Office had to be specifically taken for determining the compounded tax payable at 200% as payable for each of such distinct business place. Circular No.42/2006 also is in tandem with the provision. Based on the time in which the new branch was opened, there is a further provision made under sub-clause (iv) of Section 8(f). All these would together indicate that the specific intention of the legislature was to provide for compounded tax, taking the separate tax paid by each of the branches and computing the compounded tax for that particular branch on the basis of the highest tax conceded by it in the returns or accounts in the last three preceding years - decided against assessee. Whether the computation has to be made on the basis of the tax conceded in the returns or accounts or that determined in assessment? - Held that:- The words employed in the provision being very clear, we are in perfect agreement with the judgment of the other Divis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Q For The Respondent : ADVS. SRI. A. KUMAR AND SMT. G. MINI(1748) ORDER Vinod Chandran, J . Before we look at the questions of law, we have to notice the facts. The assessment year, which is the subject matter of these revisions, is 2006-07; in which year a compounding scheme was introduced first under the Value Added Tax regime. The Kerala Finance Bill, 2006 {Bill No. 355}[for brevity Bill-I] was introduced with a provision for compounding. Subsequently when the Government changed, another Bill was introduced as the Kerala Finance Bill, 2006 on 29.06.2006 [for brevity Bill-II]. A different provision for compounding was proposed in that Bill, which also stood drastically altered when the Kerala Finance Act, 2006 was enacted. The assessee is a jeweller and has more than one branches and the provision we are concerned with is that applicable for jewellery's. 2. The assessee filed an application for compounding in April, 2006, obviously in tune with Bill-I. However, no action was taken on the said application. Subsequently when the Act came into force, the Assessing Officer [for brevity AO ] passed Annexure-A order, produced in both the revisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, paid by the assessee in either of the said three years. The first appellate authority remanded the matter finding that there should be a reconsideration by the AO based on Circular No.42/2006. The first appellate authority by Annexure-N order also found that as per Circular No.42/2006 there is an instruction that in the event of a revision of tax liability in pursuance of any best judgment assessment or on account of any orders of an appellate authority, the tax payable shall be the tax finally arrived at by such orders. The first appellate authority, however, found that the tax for each year has to be looked at, based on what has been conceded by him in the return or accounts and not on the assessed tax. The AO was directed to re-compute the compounded tax for the year 2006-07. The contention of the assessee with respect to no segregation of Head Office and branch offices was possible, was not accepted. 6. Appeals were filed by the Revenue as also the assessee from the order of the first appellate authority. Obviously the appeal of the Revenue was on the question of whether the tax payable should be that conceded or that which is finally assessed. The assessee in their appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestions of law also, which arise on an interpretation of the provision for compounding, as also considering the terms of the Circulars issued and the observations made on these aspects by the appellate authorities: (iii) Whether the purchase tax component under Section 5A of the KGST Act would be included in the tax conceded in the accounts or returns of the three preceding years? (iv) Whether the purchase tax component under Section 5D of the KGST Act would be included in the tax conceded in the accounts or returns of the three preceding years? 9. The learned Senior Government Pleader submits that the compounding provision brooks no anomaly and it is very clear that the highest tax payable for each of the three preceding years has to be separately taken for the branches for purposes of determination of the compounding tax payable at 200% for each particular branch in the assessment year 2006-07. It is also contended that the words employed being 'tax payable for three preceding years', necessarily the component of tax under Section 5 and Section 5A as also Section 5D has to be included in arriving at the highest tax payable for each year. As far as the KVAT perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . ( ii) A dealer who is not eligible for option under sub-clause (i) may at his option, instead of paying tax in accordance with the provisions of section 6, pay tax at four hundred per cent of the tax payable by him as conceded in the return or accounts, or tax paid by him under this Act, whichever is higher, for the previous year. Explanation I: Where during any such preceding year the dealer had not transacted business for any period in that financial year, the tax payable for the twelve months shall be calculated proportionately on the basis of the tax payable for the period during which such dealer had transacted business. Explanation II: A branch shall be treated as an independent place of business for the purpose of calculating the tax under this section. ( iii) Where a dealer who has opted to pay tax under clause (i) or (ii), had opened any new branch subsequent to 31st day of March, 2005, then the additional compounded tax payable with respect to any such branch shall be the average of the tax paid or payable by him in respect his principal place of business and all branches, as if such new branch had not been opened: Provided no additional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res or articles of gold, silver or platinum group of metals who have dealings in items covered under serial number 51A of the Third Schedule and under serial numbers (1), (3), (4) and (5) of Second Schedule are eligible for compounding under section 8(f) of the KVAT Act. 4. The 'tax payable' in the relevant years to be considered for the purpose of arriving at the compounded tax liability will be the total of the tax under section 5(1) and 5A of KGST Act, 1963 for the periods prior to 1.4.2005. For the subsequent periods it will be the total of the net tax payable and purchase tax u/s.6(2) under KVAT Act, 2003. In order to arrive at the compounded tax liability of dealers in jewellery u/s.7 of the KGST Act, 1963 the tax liability u/s.5A of the said Act was also considered; the same yardstick is adopted for fixing the tax liability u/s.8(f) of KVAT Act, 2003. 5. The compounded tax to be paid by such dealers for 2006-07 will be calculated as follows: ( i) At 200% of the highest tax payable for a period of twelve months during any of the years 2003-04, 2004-05 or 2005-06. ( ii) At 400% of the tax payable or paid for the year 2005-06 in the case of deale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strictly complied with. COMMISSIONER . 13. Looking at the provision at Section 8(f)(i), as we noticed, it speaks of the highest tax payable by the assessee in the earlier three years either under the KGST Act or KVAT Act to be taken as the basis for determining the compounded tax payable. Explanation II, however, makes it very clear that a branch has to be treated as an independent place of business for the purpose of computing the tax payable as compounded tax. Sub-clause (iii) is with respect to a branch opened in the subject year, wherein there is prescribed an average of the tax paid or payable by the dealer, in respect of the principal place of business and all branches. Hence, the intention of the legislature is clear in the said year and the tax conceded in the accounts of each of the branch and the Head Office had to be specifically taken for determining the compounded tax payable at 200% as payable for each of such distinct business place. 14. Circular No.42/2006 also is in tandem with the provision. Based on the time in which the new branch was opened, there is a further provision made under sub-clause (iv) of Section 8(f). All these would together indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the tax payable under Section 5 and Section 5A by a percentage. The AOs directed the dealers who applied under the compounding provision, to pay the additional levy under Section 5D. This Court found the levy to be permissible. The Hon'ble Supreme Court, however, reversed the judgment of the Division Bench and found that Section 5D specifically speaks of an additional tax to be levied and collected by the Revenue from a dealer who is liable to pay tax under Section 5 and 5A of the KGST Act at a particular rate. The dealers who were paying tax under the compounding scheme were not paying tax under Section 5 and 5A and, hence, could not be directed to pay additional tax, was the finding. 18. In such circumstances, if the assessees herein were regularly assessed under Section 5 5A and paid the additional sales tax under Section 5D for any of the years under the KGST regime, then the same would also be includable for determining the highest tax payable in the preceding three years. However, in the case of the assessees having opted for compounding the tax payable in either of the years under the KGST Act, even if there was additional sales tax levied and paid on the basis o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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