Kerala High Court
Bhima Jewellery vs Assistant Commissioner (Assessment), ... on 4 July, 2002
Equivalent citations: [2004]138STC272(KER)
Author: C.N. Ramachandran Nair
Bench: C.N. Ramachandran Nair
JUDGMENT C.N. Ramachandran Nair, J.
1. The petitioner is a dealer in gold jewellery who has applied for and was granted the benefit of payment of tax at compounded rate under Section 7(1) of the Kerala General Sales Tax Act, 1963. Exhibit P1 is the order levying compounding fee under Section 7(1) of the Act. However, the grievance of the petitioner is that the assessing officer-first respondent has reckoned surcharge paid for the previous year also for the purpose of levying tax at compounded rate. According to counsel for the petitioner, surcharge is a separate levy governed by Kerala Surcharge on Taxes Act, 1957. Learned counsel for the petitioner contended that what is paid towards tax at compounded rate is the tax payable under Section 5 of the Kerala General Sales Tax Act and since surcharge is a separate levy under a separate statute, the same should not be reckoned for the purpose of demanding tax at compounded rate for the relevant year, i.e., 2000-2001.
2. I heard the Government Pleader also who contends that surcharge is part of the tax payable under the Act and so much so, the compounding fee payable for this year should include the surcharge paid in the earlier year. For the sake of easy reference the relevant section namely, Section 7(1)(a) with explanation and provisos is extracted below.
"7. Payment of tax at compounded rates.-(1) Notwithstanding anything contained in Sub section (1) of Section 5,
(a) any dealer in gold or silver ornaments or wares may, at his option, instead of paying tax in accordance with the provisions of that Sub section, pay tax at one hundred and twenty per cent of the tax payable by him as conceded in the return or accounts for the immediate preceding year and where any such dealer opens new branches the compounded tax payable by him in respect of each new branch for the first year shall be twenty-five per cent of the compounded tax for the principal place of business :
Explanation.-For the purpose of this clause 'tax payable as conceded in the return or account for the immediate preceding year' means tax payable on the sales turnover under Sub section (1) of Section 5 and the tax payable on the purchase turnover under Section 5A :
Provided that where during the preceding year, the dealer had not transacted business for any period the tax payable for the whole year shall be calculated proportionately on the basis of the tax payable for the period during which such dealer had transacted business :
Provided further that where a dealer has paid under this subsection for the preceding year, the compounded tax to be paid by him for the succeeding year shall be one hundred and twenty per cent of such tax paid or one hundred and twenty per cent of the tax payable as per the return or accounts of the dealer for the preceding year whichever is higher :
Provided also that where such dealer has paid compounded tax consecutively for a period of three years the compounded tax payable for the succeeding year shall be one hundred and fifteen per cent, and in the case of a dealer who has paid compounded tax consecutively for a period of five years the compounded tax payable for the succeeding year shall be one hundred and ten per cent, of such compounded tax paid or payable by him for the immediate preceding year.
Provided also that where such a dealer acquires any running business or a branch of a business with respect to gold, silver ornaments or wares during the year, the amount of compounding tax payable in respect of such business shall be calculated in accordance with the provisions of this clause as if it were an independent business, taking into account of the turnover conceded in the return or accounts thereof for the previous year with respect to that business or on the basis of the quantum of compounded tax fixed for the previous year in accordance with the second and third provisos, as the case may be."
3. I have gone through exhibit P1 where rate of tax payable at compounded rate for the year 2000-2001 is computed as follows :
"Tax and Surcharge paid during 1999-2000 at compounded rate : Rs. 1,30,83,804.00 (Tax) Surcharge paid : Rs. 9,81,285.00
--------------------
Total Rs. 1,40,65,089.00
i.e., Rs. 1,40,65,089/-
120 per cent of the above payable
during 2000-2001 at compounded rate : Rs. 1,68,78,106.80
Paid : Rs. 1,46,49,542.00
--------------------
Balance : Rs. 22,28,565"
Section 7(1)(a) provides that a dealer in gold or silver ornaments may, at his option, instead of paying tax in accordance with the provisions of Section 5(1), pay tax at 120 per cent (later increased to 150 per cent) of the tax payable by him as conceded in the return or accounts for the immediate preceding year. The explanation to the above section defines "tax payable as conceded in the return or account for the immediate preceding year" as tax payable on the sales turnover under Sub section (1) of Section 5 and the tax payable on the purchase turnover under Section 5A of the Act. It is clear from the above provisions that what the petitioner is to pay under Section 7(1)(a) is the liability which would have been payable by the petitioner under Section 5(1) of the Kerala General Sales Tax Act read with petitioner's liability under Section 5A of the Act. While Section 5(1) provides for payment of tax on the sale of goods at the point of sale and at the rate provided in the Schedule to the Act, Section 5A of the Act provides for a scheme of purchase tax to be levied in respect of purchase of articles where sales tax is not payable by the sellers at sale point. In the scheme of payment of tax at compounded rate, a progressive increase on a percentage basis of the previous year's tax is provided. During the year 2000-2001, the petitioner was called upon to pay 120 per cent of the tax payable for the immediately preceding year. The details of the tax payable for the immediately preceding year given in the assessment order are extracted above. The explanation to Section 7(1)(a) makes it clear that the tax paid for the previous year based on which compounding fee is payable for the subsequent year is the sales tax under Section 5(1) and the purchase tax under Section 5A. Surcharge though in substance is sales tax, is not a tax payable under the Kerala General Sales Tax Act. Section 2(xxiv) of the Kerala General Sales Tax Act defining "tax" also does not include surcharge which was being levied by a separate statute ; until its repeal. So long as tax based on which compounding fee is payable under Section 7(1) is the sales tax due under Section 5(1) or purchase tax due under Section 5A, it does not include surcharge which is a levy under separate statute. It is not as if Surcharge Act is not applicable to dealers paying tax at compounded rate under Section 7. Surcharge under that Act was a levy on the sales tax payable under the Kerala General Sales Tax Act and dealers paying tax at compounded rate also would have been liable to pay surcharge on the compounding fee but for it's repeal. However, surcharge cannot be reckoned for the purpose of computation of tax at compounded rate under Section 7(1) of the Kerala General Sales Tax Act.
In the circumstances, I feel exhibit P2 order is in clear violation of Section 7(1)(a) of the Act. The original petition is therefore allowed directing the assessing officer to delete surcharge in the computation of tax for 1999-2000 and demand-compounding fee from the petitioner at the rate of 120 per cent of the tax paid for the year 1999-2000 after excluding the surcharge component.
Order on C.M.P. No. 20287 of 2002 in O.P. No. 11716 of 2002 (T) dismissed.