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TMI Blog2019 (2) TMI 1086X X X X Extracts X X X X X X X X Extracts X X X X ..... facts in each of the appeals briefly. M/s.Hotel Breezeland Ltd. is the respondent in four appeals [W.A.Nos.121, 163, 220 & 229 of 2015] concerned with the assessment for the years 2006-07 to 2012-13. Admittedly, the assessee had applied for compounding under Section 7 of the Kerala General Sales Tax Act, 1963 [for brevity "KGST Act"], which permission was granted. After the close of the first year, within four years a notice was issued by the Assessing Officer [for brevity "AO"] under Section 7 of the KGST Act, modifying the computation of the tax payable under Section 7. This was on account of a variation of the tax assessed for the prior year, which was the reference point of determination of the compounded tax. The compounded tax payable in the subsequent years also were subject to modification, for reason of the change in the highest paid tax for the prior year, of the first year under consideration here. This had a cascading effect in all the subsequent years and the compounded tax payable for those subsequent years, were also modified by various orders. The modification in the first year was on account of the crime file in the just previous year, i.e., 2005-06, when addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 19 as has been held by a Full Bench of this Court in State of Kerala v. Shahid [2006 (2) KLT 484 [F.B.]. 6. Sri.V.K.Shamsudheen, learned Senior Government Pleader appearing for the State, however, would seriously challenge the judgment of the learned Single Judge. It is argued with much emphasis that the finding of the learned Single Judge that there can be no regular assessment, under Section 17, in the case of a dealer who has opted for compounding under Section 7 is erroneous. Regular assessment is a term denoted to refer to the assessment carried out to determine the tax payable under Section 5 and there could be assessments carried out for a dealer opting for compounding. Section 17, only delineates the procedure for assessment; the exercise by which the tax payable is determined. To canvas the said proposition, the learned Senior Government Pleader relies on the decisions in Joy Alukkas Traders (I) Pvt. Ltd. (M/s.) v. State of Kerala [2010 (1) KHC 844], and unreported decisions in State of Kerala v. George Thomas S.T.Rev.No.92 of 2011 dated 15.11.2011 and State of Kerala v. M/s.Divya Gold Palace Jewellery (P) Ltd., O.T.Rev.No.139 of 2014 dated 08.12.2014. It is submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employed in clause (b) of Section 7 that turnover tax payable as conceded in the return or accounts or the turnover tax actually paid; did not include the assessed tax. The specific observation was that the legislature consciously omitted a reference to the assessed tax of the previous years in the formula prescribed for compounding. Reliance was also placed on a Division Bench decision of this Court in State of Kerala v. Malabar Ornaments [(2013) 57 VST 309]. 9. The learned Single Judge, who later referred the matter for consideration to a Division Bench, has more or less agreed with the propositions in the judgment impugned in the appeals. However, it was noticed that George Thomas, Joy Alukkas Traders and M/s.Divya Gold Palace Jewellery (P) Ltd. took a contrary view. We are essentially called upon to examine the said decisions of the Division Bench and decide as to whether the same can be accepted. In the event of our finding difficulty in accepting the propositions of the said decisions, definitely a reference has to be made to a Larger Bench. 10. Joy Alukkas Traders was a single registered dealer with a Head Office and three branches who, under Section 7 compounded only for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te to file a return is available there too. 13. The amended Rule, to the extent it is relevant, is as below: "30.Payment of tax at compounded rates:-(1) Every dealer eligible to pay turnover tax at compounded rate under section 7, who desires to exercise the option provided for under the said section may apply to the assessing authority concerned for permission to pay turnover tax at the rates specified therein in Form No.21 on or before the 30th day of April of the year to which the option relates or along with the application for registration under the Act, whichever is later. XXX XXX ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a circular, enabling an application under Section 7 only for dealers having at least three years of continuous business;the dealer sought assessment under Section 5. Despite the fact of the compounding applied in the first year of business, it could be made effective under clause (a) of Section 7. The assessee applied with open eyes, fully aware of the fact that there could be no choice made between clauses (a) & (b) of Section 7. The Division Bench refused to permit the cancellation of compounding already opted and accepted, which facts have no significance here. 17. Before proceeding further, we have to extract Section 7(a) and (b) of the KGST Act as available in the relevant assessment years. "7. Payment of tax at compounded rates:- Notwithstanding anything contained in subsection (2) of section 5, any bar attached hotel, not being a star hotel of and above three star hotel, heritage hotel or club, may, at its option, instead of paying turnover tax on foreign liquor in accordance with the provisions of the said sub-section pay turnover tax on the turnover of foreign liquor calculated,- (a) at one hundred and forty per cent of the purchase value of such liquor, in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under the KGST Act. Section 17 is the procedure to be followed by the assessing authority in the case of every registered dealer and every dealer liable to take out registration under the KGST Act, who is obliged to submit such return or returns relating to his turnover in such manner and within such period as may be prescribed. The prescription we already noticed as available in the Rules, would necessarily oblige a dealer who applied under the compounding provision also to file a return. Section 7 speaks of the manner in which the compounded tax has to be computed and merely because an option is exercised under Section 7, it would not absolve the dealer from filing a return; both monthly and annually. 21. We, then, come to sub-Section (3) of Section 17 which enables the assessing authority to assess the dealer to the best of judgment, if the returns are incorrect or incomplete. True, additions for probable omissions and suppressions would only apply in the case of an assessment on the basis of the turnover of the subject year ie: under Section 5. Bhima Jewellery is an authority for the proposition that once the application for compounding has been accepted, there is a bilatera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on period. 24. We then notice the contention of the learned Senior Counsel that Section 43 is the only enabling provision by which the AO could rectify the mistakes. Section 43 specifically speaks of an error apparent on the face of the record, which we are afraid is not a ground, to interfere with the computation arrived at in the commencement of an year, based on a compounding provision. Especially when the revision of provisional computation arises, on a subsequent assessment made, for a previous year, which enhances the tax liability of the assessee in any of the three prior years. Even under clause (a) of Section 7, the closing stock has to be verified, which is available only at the close of the year. The learned Senior Counsel would insist that, if at all, a re-opening can be permitted, it can only be permitted in the context of the tax payable under clause (a) being in excess of that payable under clause (b). We cannot accept such a contention, since the tax paid under an assessment for a previous year, which forms the basis of the computation under clause (b) could be ascertained only when the assessment under Section 17 is completed for that previous year, determining th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e stipulated for payment of tax and filing of annual returns. Whenever such payment is made it would definitely be tax paid by the assessee for the particular assessment year. The decision of the Division Bench in Malabar Ornaments Case(Supra) cannot be applied to the provision that has come up for consideration in the above revision. Both the facts and the law could be clearly distinguished." 27. Malabar Ornaments, hence, is not applicable insofar as the relevant provision under Section 7(a) and (b); applicable for the subject years, which also takes in the tax paid by the assessee. If the reference is only to what is available in the returns or the books of accounts, then there was absolutely no point in adding the additional words. These words would be rendered otiose, if the interpretation is that the revision of tax payable as carried out in an assessment or a re-assessment cannot be made reference of, for the purpose of computing the tax payable under Section 7 of the KGST Act. We, hence, find the proceedings initiated by the AO for the subject years, making computation of the actual tax payable based on the final assessment of the prior year referred under clause (b) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t not deducted the closing stock of the said year. We specifically notice that Section 7 speaks of payment of tax at a percentage of purchase value of such liquor, which has to be understood as the purchase value of the turnover of foreign liquor as found in the main body of Section 7. Hence, what is to be determined is the percentage of the purchase value of the liquor sold in that particular relevant year. This has to be computed by adding the opening stock with the purchases of the relevant year and then deducting the closing stock. The AO shall carry out such exercise and now determine the tax payable. 31. It is also pointed out by the learned Senior Counsel that in the case of M/s Hotel Breezeland Ltd., a penalty proceeding was initiated based on which certain additions were made in the assessment of the year 2005-06. This was taken into account to determine the tax payable for the relevant year under Section 7; which resulted in the modifications impugned herein. The learned Senior Counsel points out that the penalty proceedings itself were set aside by this Court, with minor penalty, left to be levied. The additions made for the year based on the penalty proceedings were al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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