Kerala High Court
Raju Jacob vs Sales Tax Officer on 19 January, 2006
Equivalent citations: 2006(1)KLT788
Author: K.S. Radhakrishnan
Bench: K.S. Radhakrishnan, K.T. Sankaran
JUDGMENT
K.S. Radhakrishnan, Ag. C.J.
1 This appeal arises out of the judgment in O.P.No. 37852 of 2002 which was disposed of along with certain other original petitions. Learned single judge disposed of batch of cases by common judgment dated 16.12.2002 and the judgment is reported in Prakash Jewellery and Anr. v. State of Kerala 2004 (12) KTR 543. Writ Appeal Nos. 1690 and 1708 of 2003 were filed against the common judgment and those appeals were dismissed by this Court on 25.11.2005. Counsel for the appellant however submitted that the facts of this case stand on a different footing and addressed elaborate arguments.
2. Assessee in this case having opted for payment of tax at the compounded rate as provided under Section 7(1)(a) of the Kerala General Salestax Act, 1963 wanted to withdraw the option under Section 5 of the Act. Assessee is a dealer in gold ornaments. Gold and silver ornaments are taxable at the point of first sale in the State by virtue of Section 5(10) read with relevant entry in the first Schedule to the Act. They are also liable to pay purchase tax under Section 5A on the purchase turnover of bullion and old gold ornaments which are used in the manufacture of new ornaments. Instead of payment of salestax on the sales turnover, assessee opted for payment of tax at the compounded rate as provided under Section 7(1)(a) of the Act. Section enables payment of tax at the compounded rate. Tax at the compounded rate payable every year is based on the liability for the previous year and there has been progressive increase in payment of tax at compounded rate for every year as provided by the relevant Finance Act. Tax payable by the dealers in gold jewellery at the compounded rate for the financial year 2001-2002 was 150% of the tax payable by a dealer as conceded in the return and accounts for the immediately preceding year. Second proviso to Section 7(1)(a) had dealt with those dealers who were paying tax for 2001-2002 at the rate of 120% of the preceding year's tax.
3. Assessee had not raised any dispute with regard to the payment of tax at the 120%. Amendment was brought to Section 7(1)(a) of the Act by the Kerala Finance Act, 2002 applicable for the year 2002-2003 by enhancing the compounding fee payable under the main Section 7(1)(a) from 150% to 200% of the tax paid for the preceding year. Second proviso to Section 7(1)(a) which existed till 2001-2002 was deleted by the Finance Act 2002 with effect from 2002-2003. Assessees who were paying tax at the compounded rate including for the year 2001-2002 have to pay tax for 2002-2003 at 200% of the compounded tax paid in the previous year.
4. Assessee on the strength of the above mentioned statutory provision submitted an application for payment of tax under Section 7(1) in the statutory form No. 21A. Assessee declared that the details furnished by him are true and correct and therefore he is not liable to pay tax at the rate. Rule 30 of the Kerala General Sales tax Rule s stipulates that every dealer who is eligible to pay tax at compounded rate under Section 7 of the Act and who desires to exercise the options provided for under the said Section may apply to the assessing authority concerned for permission to pay tax at the rates specified therein in Form 21 on or before the first day of May of the year to which the option relates. Sub-rule (2) states that on receipt of the application, the assessing authority shall conduct necessary enquiries and shall pass such order granting or rejecting the application, as the case may be. The assessing authority in exercise of the powers conferred under Sub-rule (2) of Rule 30 granted permission to pay the tax at the rates specified in Form 21. Assessee was informed that permission was granted for payment of tax for the period from 1.4.2002 to 31.3.2003.
5. Assessing authority in exercise of the powers conferred under Sub-rule (3) of Rule 30 served on the assessee notice of provisional assessment and demand for payment of tax under Section 7. Assessee was directed to pay Rs. 17,60,880/- for the period from 1.4.2002 to 31.3.2003 under Section 7 of the Act and the amount was directed to be paid in monthly instalments of Rs. 1,46,740/-. Further it is also pointed out that if the amount as directed in the notice is not paid the same would be recovered as if it were arrear of land revenue including interest. Assessee committed default in payment of the amount as directed in the demand notice dated 2.5.2002 and sent a letter dated 16.10.2002 to the Salestax Officer requesting to terminate the compounding order issued for 2002-2003 and permit him to remit the tax as in the usual procedure. Yet another letter dated 15.11.2002 was also sent to the Salestax Officer.
6. Counsel appearing for the assessee Sri T.M. Sredharan submitted that before rejecting the compounding application and fixing the amount at 200%, application filed by the assessee for re-option should have been considered by the assessing authority. Instead, assessing officer unilaterally increased the tax to 200% of the compounded tax paid for the preceding year and demanded Rs. 17,60,880/- for the period from 1.4.2002 to 31.3.2003, which according to the counsel, is illegal and against the compounding scheme of the Act.
7. We are of the view, only in a case where assessing authority has rejected the application for option, the question of giving opportunity of being heard arises under Sub-rule (2) of Rule 30. The assessee has filed the application for compounding and furnished the details in the statutory form No 21 as provided in Sub-rule (1) of Rule 30 and made a declaration that he is liable to pay tax at the compounded rate under Section 7 and permission was granted to him to pay tax under Section 7. Assessing authority made provisional assessment and demand notice for payment of tax was served on the assessee, vide Form No 22 dated 2.5.2002. We are of the view, assessee cannot wriggle out of his obligation to pay tax as per the demand. Notice of demand dated 2.5.2002 was served on the assessee requesting the assessee to pay the amount in monthly instalments failing which the amount would be recovered as if it were arrears of land revenue. Apex Court in State of Kerala v. Builders Association of India (1997) 104 STC 134 examined the scope of Section 5(1)(iv), 7(7), (7-A), (11), (12) of the Kerala General Salestax Act and held that the alternate method of taxation provided, therein is optional. Sub-section s expressly provide that the method of taxation provided therein is applicable only to a contractor who elects to be governed by the alternative method of taxation. It is wholly within the choice and pleasure of the contractor. Having voluntarily and with the full knowledge of the features of the alternate method of taxation, opted to be governed by it, contractor cannot be heard to question the validity of the relevant sub-section or the rules. We are of the view, assessee has made the option and that is being enjoyed by the assessee for the last few years. Having gained the advantage and having made the option which was permitted by the Department, we are of the view, assessee cannot wriggle out of the exercise of option and he is estopped from doing so since option has already been accepted and acted upon by the Department. On receipt of the demand notice assessee had on 16.10.2002 withdrawn the compounding application, which in our view is not permissible.
8. In such circumstances, we find it difficult to accept the contention of the learned Counsel and we therefore hold that assessee is bound to pay tax as demanded by Ext.P2 demand notice dated 2.5.2002. Writ Appeal therefore lacks merits and the same would stand dismissed.