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TMI Blog2023 (12) TMI 671X X X X Extracts X X X X X X X X Extracts X X X X ..... towards penalty and remitted into Government account vide challan Nos. 248 and 255 dated 29th November 2014. The petitioner was directed to pay balance penalty of Rs. 5,18,07,197/-. 2. The Intelligence Squad No. 1, Commercial Taxes, Thiruvananthapuram had conducted an inspection at the business premises of the petitioner and certain documents were recovered from the business premises which were seized for verification. Subsequently, the books of accounts were called for. The authorised representative of the dealer appeared and filed copies of monthly and annual returns and the statement showing the contract receipts and tax paid for the year 2013-2014. No other books of account or any other documents pertaining to the claim made by the petitioner/dealer were produced for verification. The petitioner/dealer had opted to pay tax at the compounded rate for the entire contract works under Section 8 of the KVAT ACT, 2003 and remitted tax on the conceded turn over at the rate of 3%. However, in the absence of books of accounts and other relevant documents, the documents and material recovered and data collected from the petitioner's business premises were processed, and it was noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plea that the petitioner had paid VAT at the rate of 3% on the conceded turn over for all quarters for the year 2013-2014 and the Assessing Officer had approved the compounding tax as filed by them, all the provisions of the Act should be given a go-bye and all further actions would be governed by Section 8 of the KVAT Act. It was further said that the estimation of taxable turn over as provided in Section 6 and penalty imposed at double the amount of tax should be reversed. The Assessing Authority had not cancelled the order of compounding and therefore, no further action for estimation of taxable turnover and penalty could be taken. 6. It was further stated that the assessment for the year 2011-12 was completed on payment of VAT @ 3% on conceded turnover for all quarters in that year and the order was issued in that regard. The amount of escaped turn over on such assessment for all years would be taxed only at the rate of 3% for 2011-2012 and the tax was remitted accordingly. It was also stated that the variance was not considered as 'Suppressed Turnover'. The next contention raised by the petitioner/dealer was that they were following the method of accounting as per AS- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the dealer had wilfully suppressed the actual contract receipts by depleting the figures in the quarterly returns filed for the year 2013-2014 and thereby evaded tax. By filing incorrect and untrue returns, the dealer had violated the provisions of the KVAct and Rules made thereunder, the offence committed by the petitioner/dealer would be punishable under section 67(1) of the KVAT Act, 2003. 10. The Intelligence Officer, considering the gravity of the offence, was of the opinion that the imposition of maximum penalty was warranted in the case. Since the turnover suppression was proved, the dealer was not entitled to pay tax at the compounded rate of 3% of the suppressed portion of turnover. The Intelligence Officer also took note of the judgment of this Court in the case of Getty Joseph v State of Kerala (Judgment dated 31st July 2012) and similar other cases wherein it has been held that if a dealer is not complying with the statutory requirements, such a dealer would not be entitled for any concession provided under the Act. This order is under challenge in the present Writ Petition. 11. Sri Mayankutty Mather, learned counsel for the petitioner has submitted that the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot been disclosed and escaped tax by wilful and deliberate non-disclosure of taxable turnover. The notice under Section 67(1) of the KVAT Act, 2003 is dated 14th October 2014 whereas the order for compounding was passed on 25th May 2013 in Ext. P1. Therefore, the said order has no relevance in respect of the notice issued in Ext. P7 under Section 67(1) of the KVAT Act dated 14th October 2014. After receipt of the said notice, the petitioner moved an application on 27.11.2014 in Ext. P9 for compounding of the offence under Section 74 of the KVAT Act, 2003 and deposited the tax at the rate of 3% amounting to Rs. 80,09,183/- and maximum compounding fee of Rs. 8 lakhs in two bank drafts of the same date, photocopy of which had been placed on record as Ext. P10. It is, therefore, submitted that there was no order passed by the competent authority along with the petitioner to pay the compounding rate of tax and penalty as prescribed in Form-1E and 1B of the KVAT Rules. It is further submitted that the impugned order itself would disclose that the petitioner was afforded an opportunity to produce the Books of Account and documentary evidence and filed their objection to the proposal for i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State Government, Central Government or Government of any Union Territory or any department thereof or any local authority or any autonomous body whatever ben his total turnover for the year, shall be liable to pay tax on his sales or purchases of goods as provided in this Act. The liability to pay tax shall be on the taxable turnover." 20. The provision to pay tax at compounded rate is only in lieu of the obligation to pay tax under Section 6 of the Act. The payment of tax at compounded rate, is only an optional method which assessee may adopt for the purposes of his convenience in making the payment of tax. It is an option available to the assessee as an alternate method of payment of tax which is otherwise charged by Section 6. It is not a right of the assessee. This option can be exercised within the framework of section 8 of the Act. Section 8 of the KVAT Act, 2003 is worded as under: Section 8. Payment of tax at compounded rates.- Notwithstanding anything contained in Section 6,- (a)(i) any works contractor not being a dealer registered under the provisions of the Central Sales Tax Act, 1956 (Central Act 74 of 1956), and who is not an importer may, at his option, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 31st March to the assessing authority on or before the 25th of the month following the respective quarter." 24B. Contractors to file Declaration.-(1) Every contractor or/promoter/developer or by whatsoever name called who undertakes construction or development of flats or apartments or villas shall file a declaration in form No. 49 along with returns containing the details of ongoing projects, transfer or apartments/flats/villas made and the works contract tax paid under the Act etc in respect of every purchaser/intending purchaser. (2) Where such contractors are holding flats or apartments or villas the contract of which was undertaken prior to 1st April, 2007 but pending to be transferred as on the 1st April, 2007 and a portion of or full tax for its construction under the Act has already been paid by them, such contractors shall have to file the declaration in form No. 49 on an annual basis relating to the years in which such payment of tax have been made." 22. Thus, a dealer who opts for making payment at compounded rate under Section 8 is required to file quarterly returns in Form -10, 10A, 10B and 10F for the quarter ending 30th June, 31st September and 31st Marc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar assessment contemplated under the regime of KVAT Act, 2003. A Division Bench of this Court in the case of State of Kerala v Alukkas Jewellery (2018(3) KLT 360) has held that provisions for self-assessment creates an obligation on the assessee to file a correct return which is more onerous than in a regime which mandates regular assessment. Filing of an untrue or incorrect return in view of sub clause (d) of Section 67(1) assumes more rigour in the teeth of the onerous obligation, resulting in imposition of penalty without reference to whether there has been disclosure made in the books of account or not. 25. The same view has been re-iterated by the Division Bench in the case of Diebold Systems Pvt. Ltd. v Intelligence Officer (Writ Appeal No. 2288 of 2018) dated 3rd December 2018. It is also well settled that the assessment proceedings and penalty proceedings are distinct and separate proceedings and have different and distinct scope. 26. From the facts, as narrated in the show cause notice and the order impugned, it is evident that the petitioner/assessee has not made true and correct disclosure, and there has been a pattern of untrue and incorrect returns for all the quarte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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