TMI Blog2023 (10) TMI 586X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2010-11 in accordance with the statutory provisions then in force. The First Appellate Authority found that since the petitioner had obtained the statutorily prescribed Form 25F to claim exemption of the agency sales turnover from its declared turnover for the year in question, the same could be excluded for the purposes of computation of tax in terms of Section 8(f)(v) for the year 2011-12. The Appellate Tribunal, however, set aside the order of the First Appellate Authority on the finding that Form 25F had relevance only in a situation where the assessment to tax was in terms of Section 6 of the KVAT Act and not in situations where the payment of tax was on compounded basis under Section 8(f)(v) of the KVAT Act. In the instant case while the turnover of the assessee was a factor for determination of tax liability in terms of Section 6 of the KVAT Act, it was not a relevant factor for determination of tax liability, in terms of the formula under Section 8(f) of the KVAT Act in 2010-11 as also till later in the assessment year 2011-12. It was only after the assessee had exercised its option to pay tax on compounded basis for 2011-12 that Section 8(f)(v) was amended to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portions of Section 8(f) of the KVAT Act read as follows: 8. Payment of tax at compounded rates (f) (i) any dealer in ornaments or wares or articles of gold, silver or platinum group metals including diamond may at his option, instead of paying tax in respect of such goods in accordance with the provisions of section 6, pay tax at, - (a) one hundred and fifteen per cent, in case their annual turnover for the above goods for the preceding year was rupees ten lakhs or below; (b) one hundred and twenty per cent, in case their annual turnover for the above goods for the preceding year was above rupees ten lakhs and up to rupees forty lakhs; (c) one hundred and thirty five per cent; in case their annual turnover for the above goods for the preceding year was above rupees forty lakhs and up to rupees one crore; and at (d) one hundred and fifty per cent; in case their annual turnover for the above goods for the preceding year exceeded rupees one crore; of the highest tax payable by him as conceded in the return or accounts, or tax paid by him under this Act, whichever is higher, for a year during any of the three consecutive years preceding that to whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s above rupees forty lakh and up to rupees one crore; and (d) at one hundred and twenty five per cent of such tax paid during the previous year, in case their turnover for the above goods for the preceding year exceeded one crore: Provided that the tax payable under this sub-clause by the dealers covered under Explanation 6 of this clause shall be at the appropriate percentage of tax mentioned in (a), (b), (c) or (d) above, of the tax re-determined under the said Explanation. (ii) 1.25% of the turnover of sales of the goods covered under this clause, for the previous year. ; (emphasis supplied) 3. It is apparent that while at the time of exercising its option for payment of tax on compounded basis for the assessment year 2011 12, the statutory provision required the petitioner to pay tax @ 125% of the tax paid during the previous year (since their turnover of goods for the preceding year exceeded Rs. 1 crore), the amended provisions introduced with retrospective effect required the petitioner to pay tax at the higher of two rates viz (i) 125% of the tax paid during the previous year and (ii) 1.25% of the turnover of sales of the goods for the previous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computing their compounded tax liability for the year 2011-12. In view of the above the undersigned is satisfied that the averments of the appellant is genuine. Therefore the compounded tax payable for 2011-12 is refixed as shown below. Total turnover conceded in the annual return Rs. 10461911623.00 Turnover included in the return of the principal For the computation of compounded tax 3050414268.00 Turnover of sale of own goods of the appellant 7411497355.00 Tax due @ 1.25% 92643717.00 Cess payable @ 1% 926437.00 Total 93570154.00 Monthly compounded tax payable: 93570154.00 12 7797512.00 The assessing authority is directed to give an opportunity to the appellant to file a revised return for the year 2010-11 with supporting documents within 2 months from the date of this order. Appeal stands allowed. 7. Annexure V order of the First Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 10 (1) provide for deduction of turnover of sales or purchases made by a dealer through his agent in respect of which tax has been paid by the agent and turnover of sales or purchases made by an agent on behalf of any principal in respect of which tax has been paid by the principal. 12. The deduction provided for under Rule 10 (1) (h) (I) (ii) of the Rules from the total turnover of the dealer is for arriving at the taxable turnover of the dealer for assessment under Sec. 6 (1) and not for computation of compounded rates of tax under Sec. 8. As mentioned earlier, both Sec. 6 (1) and Sec. 8 provide for different modes of assessment and the procedure prescribed for determining the tax payable under Sec. 6 (1) cannot be adopted for determining the quantum of tax payable at compounded rates under Sec. 8, unless specifically provided for by the provisions. In Sec. 6 (1) the words used are 'taxable turnover' and in Sec. 8 (f) (v) (ii) 'turnover of sale of the goods'. As per Subclause (ii) of Sec. 8 (f) (v) tax payable is at the rate of 1.25% of the turnover of sales of the goods covered under this clause, for the previous year. Thus tax was to be fixed on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be remedied. Contentions of Counsel: 10. The submissions of Sri. Aravind P. Datar, the learned senior counsel, assisted by Adv. Sri. S. Anil Kumar appearing on behalf of the petitioner, briefly stated, are as follows: ● There was no bar on the First Appellate Authority to entertain Form 25F and allow the deduction where appropriate tax has been paid on purchases made by the agent and subsequent sales tax was paid by the principal. In the instant case, the petitioner had paid tax while purchasing gold from the State Bank of India as an agent of its sister concerns and converted the same into ornaments. For accounting purposes, the purchases made on behalf of the sister concerns and delivered to them were recorded a sales to the sister concerns in view of the provisions of the Companies Act, 1956. It is trite that there can be no stock transfer as the petitioner was a limited company and of the sister concerns, one is a limited company and the other is a partnership firm. There is also no dispute that sales tax was paid by the two sister concerns on their sale of the same jewellery. Reliance is placed on the decision in Kedarnath Jute Manufacturing Company Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If the goods are purchased by the agent on behalf of the principal, deduction of turnover has relevance only in cases where such purchases are effected from unregistered dealers which are exigible to tax under Section 6(2) of the KVAT Act on condition that such tax is paid by the principal. In the instant case, the purchases effected by the petitioner are from State Bank of India after paying tax under Section 6(1). Therefore the situations envisaged in Rule 10(1)(h)(ii) for deducting the turnover do not apply. This is also for the reason that the purchase bills obtained by the petitioner were not endorsed with the legend on account of the principal and further there was no delivery note under cover of which the goods were delivered to the sister concerns. ● The submission of the petitioner that the transaction to the sister concern was recorded as a sale only in view of the provisions of the Companies Act, 1956 was not one that was raised before the authorities below and hence it was not open to the petitioner to raise such a contention in a Revision under Section 63 of the KVAT Act. ● The Appellate Tribunal had correctly allowed the Second Appeal preferr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) 1.25% of the turnover of sales of goods for the previous year (2010-11). It is while reckoning the latter that the Assessing Authority proceeded to calculate 1.25% of the turnover shown in the returns for 2010-11 that included even the turnover attributable to agency sales. 15. The First Appellate Authority found that since the petitioner had obtained the statutorily prescribed Form 25F to claim exemption of the agency sales turnover from its declared turnover for the year in question, the same could be excluded for the purposes of computation of tax in terms of Section 8(f)(v) for the year 2011-12. The Appellate Tribunal, however, set aside the order of the First Appellate Authority on the finding that Form 25F had relevance only in a situation where the assessment to tax was in terms of Section 6 of the KVAT Act and not in situations where the payment of tax was on compounded basis under Section 8(f)(v) of the KVAT Act. 16. We do not for a moment deny that the payment of tax on compounded basis is an optional course of action for an assessee and he who chooses to opt for the same cannot wriggle out of it when he perceives its terms as rigid or unfair. In the ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds actual turnover of the previous year for the purposes of determining his compounded tax liability for the next year. 19. We are also of the view that merely because the Form 25 declaration is prescribed under the KVAT Rules in connection with a determination of tax liability in terms of Section 6 read with Rule 10 of the KVAT Act and Rules it does not mean that the facts intended to be proved through it cease to exist or be relevant merely because the assessment is on a different basis, and in accordance with a formula which treats that fact as relevant and incorporates it as a component. In other words, we cannot accept the submission of the learned Government Pleader that by producing Form 25 declarations, the petitioner was virtually trying to compute his taxable turnover under the KVAT Act, which is not a relevant concept for the purposes of payment of compounded tax under Section 8(f)(v) of the KVAT Act. We are of the view that the petitioner was only demonstrating through a mechanism provided under the Statute itself that the amounts covered by valid Form 25 declarations did not constitute his turnover for the purposes of the KVAT Act. Rule 10 permits deduction of cert ..... X X X X Extracts X X X X X X X X Extracts X X X X
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