TMI Blog2022 (6) TMI 671X X X X Extracts X X X X X X X X Extracts X X X X ..... s a case under the Kerala General Sales Tax Act, 1963 whereunder the appellant had opted for composition of tax in terms of Section 17 thereof. After the appellant had closed his business, he had approached the assessing authority to cancel the permission granted for payment of tax under the composition scheme. It was in that context that the question for consideration before the Supreme Court was whether the appellant could request for a regular assessment in the same year after opting for composition of tax under Section 17 of the Kerala General Sales Tax Act, 1963 - Supreme Court held that composition of tax is nothing but an alternative route to assessment regulated by the terms of the contract between the assessee and the assessing authority to arrive at the same destination. Therefore, the dealer who had voluntarily and with full knowledge of the alternate method of taxation had opted to be governed by it, he cannot in the lean season claim that his assessment for the very same assessment year be made under regular assessment. Once the contract is affected by way of payment of composition tax and acceptance thereof, both the parties are bound by the contract. In the ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Services Tax (GST). 6 It is stated that for the assessment periods from the year 2014 till the year 2017, petitioner had filed monthly returns in Form VAT 200 by duly attaching Form VAT 501 along with certification of tax collection at source. It is stated that petitioner had opted for composition of tax and therefore filed applications under Form VAT 250 on monthly basis covering the aforesaid assessment periods along with the returns filed under Form VAT 200. 7 According to the petitioner it was surprised when it received notice dated 20.07.2019. It was an urgent payment notice issued by respondent No.2. Respondent No.2 stated that assessments under the VAT Act was conducted by the Assistant Commissioner (CT) LTU, Nalgonda Division, Nalgonda as per assessment order Nos.35305, 35309 and 35310, all dated 02.07.2019, following which a total amount of Rs.6,52,46,001-00 was outstanding against the petitioner. Petitioner was called upon to make the payment within seven days of receipt of the said notice. The urgent payment notice dated 20.07.2019 reads as under: GOVERNMENT OF TELANGANA COMMERCIAL TAXES DEPARTMENT Office of the Commercial Tax Officer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnover of the petitioner for the assessment period 2014- 2017 was assessed and tax was paid at the source itself. 9 It is under such circumstances that petitioner filed W.P.No.27866 of 2021 challenging the legality and validity of the urgent payment notice dated 20.07.2019 issued by respondent No.2 for the assessment period 2014 2017. 10 While the aforesaid writ petition was pending before this Court, respondent No.2 issued arrear notice dated 14.02.2022 which was followed by the garnishee notices dated 24.02.2022. The garnishee notices were issued to respondent No.4 as well as to the Branch Manager of Canara Bank, Malakpet, Hyderabad. It was mentioned therein that petitioner was in arrears of Rs.6,56,52,213-00 to the Commercial Tax Department, Government of Telangana. Therefore, under Section 29 of the TVAT Act, the bankers were requested to enforce payment / debit fees from the accounts of the petitioner maintained with the bankers. 11 Garnishee notices dated 24.02.2022 have been impugned in W.P.No.11006 of 2022. 12 A common counter affidavit has been filed by respondent No.2 covering both the writ petitions. 13 In paragraph No.3 of the counter affidav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s labour charges Taxable turnover Rs Tax payable at 14.5% Tax Paid Adjustment of tax Balance of Tax payable Rs. 1 2 3 4 5 6 7 8 9 1 2014-15 20,79,08,821 6,23,72,646 14,55,36,174 2,11,02,745 0 70,86,234 1,40,16,511 2 2015-16 47,86,30,607 14,35,89,182 33,50,41,425 4,85,81,007 0 1,67,52,088 3,18,28,919 3 2016-17 25,31,35,975 7,59,40,793 17,71,95,163 2,56,93,302 0 62,92,731 1,94,00,571 16 The above show cause notices wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If that be the position, respondents could not have initiated fresh assessment proceedings and levy tax at a higher rate. To support his above contention, learned senior counsel has placed reliance on a decision of the Supreme Court in Koothattukulam Liquors v. Deputy Commissioner of Sales Taxes (2015) 12 SCC 794. 20 In his reply, Mr. K. Raji Reddy, learned senior standing counsel submits that contention of the petitioner that it did not receive preassessment notice as well as the assessment orders is not correct. The notice and the assessment orders were sent to the business address of the petitioner by way of registered post with acknowledgement due. Therefore, under Rule 64 of the TVAT Rules, notices were validly sent and would be deemed to have been served on the petitioner. Since the petitioner did not come forward with material papers, the assessing authority had no other option but to make best judgment assessment. That apart, the assessment orders were not challenged and the consequential urgent payment notice dated 20.07.2019 was belatedly challenged in the year 2021. In these circumstances he contends that the assessments made have attained finality and should no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture. Provided further that single Form VAT 250 can also be filed by the contractor for the full or part of financial year, which will cover all the contracts on which work is commenced during the full or part financial year as the case may be. (d) On receipt of any payment related to the contract, the contractor VAT dealer shall calculate the tax due at five percent (5%) of the amount received and shall enter such details on Form VAT 200. The tax due shall be paid with the return in Form VAT 200; (e) VAT dealer shall not be eligible for input tax credit and shall not be eligible to issue tax invoices; (f) In the case of a contractor mentioned in clause (a), if any part of the contract is awarded to a sub-contractor, the subcontractor shall be exempted from tax on the value of the subcontract. The sub-contractor shall not be eligible to claim input tax credit on the inputs used in the execution of such sub-contract; 25 Thus the above provision says that any VAT dealer who executes a contract and opts to pay tax by way of composition, must register himself as a VAT dealer and he shall pay tax at the rate of 5% of the total consideration received or receivable. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heme and is ultimately accepted by the authority concerned, it becomes an agreed amount of tax. The department and the dealer are thereafter bound by the said agreement. 27 According to the Supreme Court, payment of tax under the composition scheme is a bilateral agreement between the parties. The scheme provides for a bilateral agreement between an assessee and the taxing authority with an object to dispense with the requirement of regular assessment and for the easy purpose of levy and collection of tax. It is the choice of a dealer to opt for compounded payment of tax and if the said choice is in accordance with the scheme and is accepted by the taxing authority, it becomes an agreed amount of tax. Thereafter, the department and dealer are bound by the said agreement. 28 Supreme Court further held as follows: 20. The compounding of the tax by way of contract of payment of tax is a lump sum on the value of contract on an agreed rate. The contract of compounding is a statutory contract under a scheme, in which the State Government can increase or decrease the rate of compounding of tax. It is an invitation to offer for compounding for each financial year resulti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the position and having regard to the law laid by the Supreme Court in Koothattukulam Liquors v. Deputy Commissioner of Sales Taxes (1 supra) it was not open to the respondents to have resorted to regular assessments of the petitioner for the very same assessment periods and thereafter levy tax at a much higher rate. We agree with the submission made by Mr. Srinivas, learned senior counsel for the petitioner that this is a jurisdictional fact which goes to the root of the matter. If there is payment of tax under the composition scheme, question of regular assessment would not arise. In such circumstances receipt or nonreceipt of pre-assessment notices or assessment orders would have no significance or bearing as those are besides the point. When an action is without jurisdiction, the fact that the same has been put to challenge after two years would not be of material consequence. 33 Resultantly, the impugned urgent payment notice dated 20.07.2019 and the consequential garnishee notices dated 24.02.2022 being wholly untenable in law and fact are hereby set aside and quashed. 34 Both the writ petitions are accordingly allowed. However, there shall be no order as to co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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