Kerala High Court
Gammon India Limited vs State Of Kerala on 19 June, 2008
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR
MONDAY,THE 17TH DAY OF NOVEMBER 2014/26TH KARTHIKA, 1936
WP(C).No. 12748 of 2010 (P)
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PETITIONER :
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GAMMON INDIA LIMITED
GAMMON HOUSE, VEER SARVARKAR MARG,
PRABHADEVI, MUMBAI - 400 025.
BY ADV. SRI.A.KUMAR
RESPONDENT(S) :
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1. STATE OF KERALA
REPRESENTED BY FINANCE SECRETARY, SECRETARIAT,
THIRUVANANTHAPURAM.
2. COMMISSIONER OF COMMERCIAL TAXES,
TRIVANDRUM.
3. COMMERCIAL TAX OFFICER
(WCT & LT) MATTANCHERRY.
R1 TO R3 BY GOVT.PLEADER SMT. K.T. LILLY
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 17-11-2014,
ALONG WITH WPC. 28084/2008, THE COURT ON THE SAME DAY DELIVERED
THE FOLLOWING:
Mn
...2/-
WP(C).No. 12748 of 2010 (P)
APPENDIX
PETITIONER'S EXHIBITS :
EXT.P1 : COPY OF THE INTERIM ORDER DATED 19.6.2008 OF THE DIVISION
BENCH.
EXT.P2 COPY OF THE JUDGMENT OF THE DIVISION BENCH IN WA
NO. 1023 OF 2008.
EXT.P3 COPY OF THE COMMUNICATION DT. 9.8.2008.
EXT.P4 COPY OF THE COMMUNICATION DT. 3.6.2009.
EXT.P4A COPY OF THE COMMUNCATION DT. 23.6.2009.
EXT.P4B COPY OF THE COMMUNICATION DT. 1.8.2009.
EXT.P4C COPY OF THE COMMUNICATION DT. 6.3.2010.
EXT.P5 COPY OF THE LETTER DT. 3.12.2009.
EXT.P6 COPY OF THE JUDGMENT IN SLP 9691/2009 DT. 1.2.10.
RESPONDENT'S EXHIBITS : NIL
//TRUE COPY//
P.A. TO JUDGE
Mn
A.K.JAYASANKARAN NAMBIAR, J.
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W.P.(C).No.12748 of 2010
&
W.P.(C).No.28084 of 2008
.........................................................
Dated this the 17th day of November, 2014
J U D G M E N T
Since the issue involved in both these writ petitions is the same they are taken up for consideration together and disposed by this common judgment. For the sake of convenience, the reference to the facts and exhibits is from W.P.(C).No.28084 of 2008.
2. The petitioner is a Company incorporated under the Companies Act and engaged in the execution of works contracts. In connection with the work relating to construction of the new Mattancherry Bridge, it had entered into an agreement with the Greater Cochin Development Authority (GCDA). The said agreement, dated 24.03.1998, contemplated the payment to the petitioner of an amount of Rs.2253.50 lakhs as consideration for the work under the agreement. It would appear that thereafter, the petitioner entered into another agreement dated 03.12.1999 with the Cochin Bridge Infrastructure Company Limited (CBICL), sub- contracting a substantial part of work, for the value of Rs.2215 lakhs. The writ petition is concerned with the tax liability of the petitioner under the Kerala General Sales Tax Act (hereinafter W.P.(C).No.12748 of 2010 & W.P.(C).No.28084 of 2008 2 referred to as 'the KGST Act' for short) for the assessment years 1999-2000, 2000-2001 and 2001-2002. In connection with discharging his tax liability under the contract for the said assessment years, the petitioner had initially applied for registration under the KGST and CST Act. Along with this application for registration he also submitted a copy of the contract entered into with the GCDA. Thereafter, for the first assessment year namely 1999-2000, the petitioner filed an application for compounding and also began filing returns for the amounts received by him from the awarder of the contract (GCDA), and paying tax on the said amounts at compounded rates. These returns and payments of tax were accepted by the Department. It is evident from the records that even for the assessment year 2000- 2001, the same procedure was followed by the petitioner and he had filed the necessary returns and also paid tax at compounded rates. Ext.P17 certificate issued by the assessing authority indicates that the petitioner had filed returns and paid tax in accordance with the returns for the period from 1999-2000 to 2000-2001. For the assessment year 1999-2000 initially, Ext.P2 assessment order dated 03.03.2004 was passed by the 3rd respondent Assessing Officer. The said assessment was completed by accepting the application preferred by the petitioner for W.P.(C).No.12748 of 2010 & W.P.(C).No.28084 of 2008 3 payment of tax at compounded rates and taking into account the returns filed by the petitioner and tax payments made by him on that basis. By Ext.P3 order dated 19.03.2005, however, the Deputy Commissioner who had initiated proceedings under Section 35 of the KGST Act for setting aside Ext.P2 order, proceeded to do so, inter alia, on the ground that the total contract amount involved in respect of the transfer of materials incurred in the construction of the bridge was not forthcoming from the documents produced by the petitioner and that there was a difference noticed, between the amount mentioned in Form 21B filed by the petitioner and what was otherwise conceded by him as contract expenses, to the extent of Rs.23.65 crores. On these grounds, the Deputy Commissioner set aside Ext.P2 assessment order and remanded the matter to the 3rd respondent for de novo disposal in accordance with law. Ext.P6 dated 15.02.2008 is the revised assessment order passed by the 3rd respondent for the year 1999-2000. It would appear that, acting on Ext.P3 order of the Deputy Commissioner, the 3rd respondent, by Exts.P7 and P8 orders dated 23.03.2005 proceeded to reject the applications for compounding preferred by the petitioner for the assessment years 2000-2001 and 2001-2002 respectively. Thereafter, by Exts.P6(a) and P6(b) orders, the assessments for the years 2000-2001 and 2001-2002 were also completed by the 3rd W.P.(C).No.12748 of 2010 & W.P.(C).No.28084 of 2008 4 respondent on regular basis and by not accepting the payment of tax by the petitioner on compounded rates. Although, the petitioner preferred Exts.P9 and P10 revision applications against Exts.P7 and P8 orders, no orders appear to have been passed on the said application till date. In the writ petition, Exts.P3, P7, and P8, along with Exts.P6, P6(a) and P6(b) orders have been impugned. There is also a prayer for a direction to the respondents to re-do the assessments for the years 1999-2000, 2000-2001 and 2001-2002 by accepting the compounding applications preferred by the petitioner for these years.
3. A counter affidavit has been filed on behalf of the respondents wherein it is pointed out that Ext.P3 order passed by the Deputy Commissioner was justified in as much as the petitioner had taken the figures in the contract between the petitioner and CBICL, whereas it ought to have taken the figures in the contract between the petitioner and GCDA for the purposes of paying tax at compounded rates. It is also pointed out that, while the statutory provisions required the petitioner to file the application for compounding before the receipt of contract amounts, the petitioner had actually filed the application in Form 21B for the relevant assessment years long after the contract was completed and W.P.(C).No.12748 of 2010 & W.P.(C).No.28084 of 2008 5 payments received thereunder. Exts.R1, R2 and R3 applications preferred by the petitioner are also produced along with the counter affidavit to show that they were filed belatedly. The contention in the counter affidavit, in otherwords, is that insofar as the petitioner did not comply with the statutory procedure for filing the compounding application, it was not possible to grant permission to the petitioner for payment of tax at compounded rates during the said years. In a reply affidavit filed to the counter affidavit, it is the definite case of the petitioner that there was a provision in the statute for condoning the period of delay in filing the compounding applications and further that the petitioner had all along filed returns and also paid tax on the basis that the compounding applications had been accepted by the Department.
4. In W.P.(C).No.12748 of 2010, the petitioner is basically aggrieved by the inaction on the part of the respondents in passing consequential orders, pursuant to the judgment in W.A.No.1023 of 2008 for the assessment year 2001-2002, and the inaction of the respondents in not refunding amounts that were deposited by the petitioner during the pendency of the writ petition, without passing any consequential orders as directed by the judgment in the writ appeal. The facts in the said writ petition would disclose that, W.P.(C).No.12748 of 2010 & W.P.(C).No.28084 of 2008 6 against the rejection of the petitioner's application for compounding for the year 2001-2002, and the consequent assessment done based on estimation of turnover of the petitioner based on toll charges that were to be received by in future as consideration for the contract, it had been assessed to an amount of Rs.143.82 crores. The assessment order dated 13.02.2008 passed in that regard was challenged by the petitioner in W.P.(C). No.8360 of 2008. By a judgment dated 19.03.2008, the writ petition was dismissed. Aggrieved by the said judgment, the petitioner preferred W.A.No.1023 of 2008. By an interim order dated 19.06.2008, the petitioner was directed to deposit an amount of Rs.125 lakhs with a condition that the amount would be repaid with interest if the petitioner succeeded in the writ appeal. By a judgment dated 22.01.2009 in the said writ appeal, the order dated 13.02.2008, that was impugned in the writ petition, was set aside and the assessment was directed to be conducted afresh as per the directions contained in the judgment dated 22.01.2009 in the writ appeal. Against the said judgment, the petitioner filed SLP.No.9691 of 2009 before the Supreme Court. The said SLP was however dismissed by an order dated 01.02.2010. It was thereafter that the present writ petition was filed, when the consequential orders, as contemplated by the Division Bench in the judgment dated W.P.(C).No.12748 of 2010 & W.P.(C).No.28084 of 2008 7 22.01.2009 in the writ appeal, had not been passed for the assessment years 2001-2002.
5. I have heard Sri.A.Kumar the learned counsel appearing for the petitioner as also Smt.K.T.Lilly, the learned Government Pleader appearing on behalf of the respondents.
6. On a consideration of the facts and circumstances of the case as also the submissions made across the Bar, I feel that the manner in which the assessment under the KGST Act is to be done, in respect of the contract receipts of the petitioner for the work done in terms of the contract entered into between the petitioner and GCDA, has to be separately considered for the assessment years 1999-2000, 2000-2001 and 2001-2002. In the case of the assessment year 2001-2002, on account of the judgment of the Division Bench in W.A.No.1023 of 2008, where the Division Bench of this Court directed the assessments of the petitioner for the said year to be conducted afresh as per the directions in the said judgment, and the said directions indicate that the assessment was to be done on regular basis and not by accepting the application of the petitioner for compounding, the consequential orders of assessments passed by the Assessing Officer had to be strictly in W.P.(C).No.12748 of 2010 & W.P.(C).No.28084 of 2008 8 accordance with the directions of the Division Bench in the said judgment. Apart from ensuring that the assessing authority had passed orders in accordance with the directions of Division Bench, I do not intend to pass any other order in W.P.(C).No12748 of 2010. As regards the assessment years 1999-2000 and 2000-2001, I find that as per the Scheme of payment of tax at compounded rates, under the KGST Act, the assessee is required to file an application in the prescribed form before the first of May of the year in which he seeks to have the assessment on compounded basis. There is a power in the Assessing Officer to condone the delay in preferring the application, if justifiable reasons for condoning the same are shown to exist. On receipt of an application filed by an asessee, the Assessing Officer is required to pass orders either granting the assessee permission to pay tax at compounded rates or to reject the application of the assessee. The rejection however, can only be after hearing the assessee in the matter. If the application submitted by the assessee is accepted, then the Assessing Officer is expected to finalise the assessment on that basis and issue the demand notice to the assessee requiring him to pay the tax amount shown in the demand notice. The assessee on his part is also obliged to file returns with the assessing authority in the manner contemplated under the statute. W.P.(C).No.12748 of 2010 & W.P.(C).No.28084 of 2008 9 It needs to be noted at the out set that, although the statute contemplates that an application has to be filed by an assessee seeking permission from the Assessing Officer for payment of tax at compounded rates, and a specific order by the assessing authority on that application, permitting the assessee to pay tax at compounded rates, before the assesssee can proceed to discharge his tax liability on compounding basis, a Division Bench judgment of this Court in Johnson & Johnson Limited v. Assistant Commissioner (Assessment), Special Circle, Ernakulam and Others [(2009) 23 VST 274 (Ker.)] has held that even without a formal application for compounding, where an assessee adopts the Scheme of compounding for payment of tax and such tax is accepted by the Department along with return, it can be taken that the assessee has opted for payment of tax at compounded rates. Although, the said judgment dealt with the Scheme of compounding under the Kerala Value Added Tax Act that was applicable to dealers of drugs and medicines, I am of the view that the principle laid down by that decision applies to the facts of the instant case as well. In otherwords, when the petitioner had submitted applications for compounding, albeit belatedly, but had filed returns for the relevant period on the basis of the compounding provisions and had paid tax accordingly, and the said tax was accepted by the W.P.(C).No.12748 of 2010 & W.P.(C).No.28084 of 2008 10 Department without demur, it has to be seen as a case where the petitioner had been permitted to pay tax at compounded rates. In the instant case, Ext.P17 certificate issued by the 3rd respondent assessing authority clearly evidences that for the period from 1999-2000 to 2000-2001, the assessee had filed the necessary returns and paid tax in accordance there with. As a matter of fact, even the 3rd respondent assessing authority had acted on this basis while passing Ext.P2 assessment order for the year 1999-2000. It was much thereafter that the Deputy Commissioner initiated proceedings under Section 35 of the KGST Act and proceeded to set aside the said assessment order on the ground that there was some discrepancy in the figures taken by the 3rd respondent Assessing Officer while passing Ext.P2 assessment order. On a perusal of Ext.P3 order of the Deputy Commissioner, I am not convinced that he was justified in cancelling Ext.P2 assessment order and directing the Assessing Officer to resort to a regular assessment for the assessment years 1999-2000. This is because there is nothing in Ext.P3 order that would suggest that there were any valid reasons to justify the rejection of the petitioners application for permission to pay tax at compounded rates or for directing the assessment of the petitioner to be done on regular basis. In Ext.P3 order, the Deputy Commissioner does not consider W.P.(C).No.12748 of 2010 & W.P.(C).No.28084 of 2008 11 the fact that the petitioner had all along been filing returns and also paying taxes on the assumption that his application for payment of tax at compounded rates had been accepted. For the same reason, Ext.P6 revised assessment order for 1999-2000 as also Ext.P6(a) and P6(b) assessment orders for 2000-2001 and 2001-2002 would require to be quashed, since they are all based on Ext.P3 order of the Deputy Commissioner, which I have found to be legally unsustainable. The same reasoning would hold good for Exts.P7 order whereby the application of the petitioner for compounding for the years 2000-2001 has been rejected. The said order too would require to be quashed on account of my findings with regard to the unsustainability of Ext.P3 order passed by the Deputy Commissioner.
Resultantly, I quash Exts.P3, P6, P6(a), P6 (b) and P7 orders. Ext.P6(a) order is quashed only to enable the respondents to pass fresh orders with regard to assessment year 2001-02, based on the directions in the judgment of the Division Bench in WA 1023/2008, but after taking into account the effect of the fresh assessment orders to be passed in respect of the assessment years 1999-2000 and 2000-2001. As regards P8 order, although it suffers from the illegality indicated above as being based on Ext.P3 order of the W.P.(C).No.12748 of 2010 & W.P.(C).No.28084 of 2008 12 Deputy Commissioner which I have found to be legally unsustainable, for reasons already stated in connection with W.P. (C).No.12748 of 2010 above and in view of the fact that a Division Bench judgment of this Court in W.A.No.1023 of 2008 has already directed the assessments for that year to be done on regular basis, I refrain from quashing the said order as a matter of propriety and out of deference to the judgment of the Division Bench.
In view of my finding regarding the unsustainability of Ext.P3 order of the Deputy Commissioner as also the quashing of Ext.P6, P6(a), P6 (b) and P7 orders, I direct the 3rd respondent assessing authority to pass fresh orders of assessment for the assessment years 1999-2000 and 2000-2001 by taking into account the returns filed by the petitioner for these years and the payment of tax made by the petitioner in accordance with the said returns. The assessing authority, shall also taken into account the deductions, if any, effected by the awarder of the contract (GCDA) while making the payments to the petitioner which he has disclosed as its receipts in the returns filed by him for the assessment years. The assessments of the petitioner for the said assessment years shall be completed by treating the petitioner as a person who was opted for payment of tax at compounded rates and by keeping in mind total W.P.(C).No.12748 of 2010 & W.P.(C).No.28084 of 2008 13 contract value under the contract entered into between the petitioner and the GCDA for the purposes of assessment. As far as the assessment for the year 2001-2002 is concerned, the said assessments shall be completed in accordance with the directions contained in the judgment dated 22.01.2009 in W.A.No.1023 of 2008, but taking into account the fresh orders of assessments passed in respect of the years 1999-2000 and 2000-2001. If assessment orders for the said year have already been passed pursuant to the directions of the division bench of this court in WA 1023 of 2008, the said orders shall stand modified to the extent indicated in this judgment. On completion of the assessments for all these years as directed above, the amount of Rs.125 lakhs deposited by the petitioner pursuant to the interim order sated 19.06.2008 in W.A.No.1023 of 2008, together with any other amount if paid by the petitioner, shall be considered by the 3rd respondent assessing authority and he shall appropriate the amounts demanded as per the assessment orders from the said amounts and, if any amounts remain to be paid to the petitioner by way of refund, the same shall be refunded to the petitioner, together with interest as directed in the interim order dated 19.06.2008 in W.A.No.1023 of 2008, within a period of three months from the date of passing of the assessment orders. W.P.(C).No.12748 of 2010 & W.P.(C).No.28084 of 2008 14 The writ petitions are disposed as above.
A.K.JAYASANKARAN NAMBIAR JUDGE mns/ W.P.(C).No.12748 of 2010 & W.P.(C).No.28084 of 2008 15