Fashion Jewellers & Exporters v. Assistant Commissioner (Assessment), Commercial Taxes Special Circle, Thrissur; Commissioner of Commercial Taxes, Thiruvananthapuram

## IN THE HIGH COURT OF KERALA AT ERNAKULAM ## PRESENT THE HONOURABLE MR. JUSTICE DINESH KUMAR SINGH THURSDAY, THE 10[TH] DAY OF AUGUST 2023 / 19TH SRAVANA, 1945 ## WP(C) NO. 32558 OF 2014 PETITIONER/S: M/S.FASHION JEWELLERS & EXPORTERS, MAIN ROAD, CHALAKUDY, THRISSUR DISTRICT, REPRESENTED BY ITS MANAGING PARTNERC.P.PAUL BY ADVS. SRI.HARISANKAR V. MENON SMT.MEERA V.MENON ## RESPONDENT/S: - 1 ASST.COMMISSIONER(ASSESSMENT), COMMERCIAL TAXES SPECIAL CIRCLE, THRISSUR - 680 001. - 2 COMMISSIONER OF COMMERCIAL TAXES THIRUVANANTHAPURAM - 695 001. Ms. RESHMITA RAMACHANDRAN-GP THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 10.08.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: **W.P.(C) No.32558/2014** **-2-** ## J U D G M E N T Heard Mr Harisankar V Menon learned Counsel for the petitioner and Ms Rasmitha Ramachandran learned Government Pleader for respondents. 2. The present writ petition under Article 226 of the Constitution of India has been filed impugning the orders passed on compounding application for Kerala Value Added Tax for the Assessment Year 2014-15. The petitioner had paid compounded tax by calculating the liability for the Assessment Year 2014-15 at 50% of the liability for 2013-14 and calculating 115% thereof. The monthly tax was also being remitted on that basis. However, the 1[st] respondent/Assistant Commissioner (Assessment), Commercial Taxes, Special Circle, Thrissur passed an order dated 24.07.2014 fixing the compounded tax liability of the petitioner for the year 2014-15 at Rs.1,69,09,226/- being 115% of the compounded tax paid for **W.P.(C) No.32558/2014** **-3-** the year 2013-14 in respect of Chalakkudy and Kollam branches. 3. The learned Counsel for the petitioner submits that the petitioner had closed one branch of its business at Kollam on 20.03.2014. Therefore, he was entitled to a proportionate reduction of his tax liability from the month of April 2014 onwards. The Assessing Authority, however, had assessed the tax without giving a rebate of proportionate deduction. 4. Learned Counsel for the petitioner has placed reliance on Explanation 3 of Section 8(f) of the KVAT Act 2003. Explanation 3 was added by the Kerala Finance Act 2014, which would read as under: “Explanation 3 - Where a dealer paying tax under this clause, closes a branch during the year under option, a proportionate reduction considering the number of business places, in the payment shall be granted in the next monthly installment onwards, for the remaining months of the year.” 5. A Single Judge of this Court, while considering the **W.P.(C) No.32558/2014** **-4-** scope of Explanation 3 in Section 8(f)(i) allowed such a petition. However, the Division Bench in _Assistant Commissioner (KVAT) v. Kunnathukalathil Jewellers_[1] set aside the judgment and order of the learned Single Judge and explained the scope of Explanation 3 in paragraphs 12 to 15, which read as under: “12. In the present case we find no such curative exercise having been carried out by the amendment of 2014. Clause (f) of S.8 was substituted in its entirety with six Explanations whereas the original clause (f) had eight Explanations. If Explanation 3 in the new clause (f), as introduced in 2014, is found to be clarificatory, it has to be bodily taken out of the amended provision and placed in the un-amended clause (f) which is not a permissible exercise. The Explanation in the amended clause (f) applies to that provision and not to the earlier one. Clause (f) as amended in 2014 can only apply prospectively and the Explanations therein are intended at explaining the meaning and intendment of the section itself, to clarify any obscurity or vagueness threat, to make meaningful and workable the dominant object of that particular provision and not do any or all of these with respect to the un-amended provision, which had alltogether 1 2020 (3) KLT 584 **W.P.(C) No.32558/2014** **-5-** different explanations S.Sundaram Pillai v. V.R.Pattabiraman (1985 KLT OnLine 1244 (SC) (1985) 1 SCC 591). 13. The fact that in the year 2014 the provision was substituted also would not have the effect of it being retrospective. A Division Bench of this Court in Commercial Tax Officer v. Najeem (2018 (3) KLT 877) held that it is not an irrefutable rule that a substitution is invariably retrospective. We extract paragraph 16 of the aforesaid judgment: "16. The power of the legislature to make an amendment, with retrospective effect, is undisputed but the requirement is that unless the same is expressed in clear language or implied, without any scope for doubt, then the amendment would only be prospective. We are of the opinion that when there is a substitution unless the same is expressed to be prospective the Courts could always interpret it to be retrospective, looking at the scheme of the enactment, the purpose and object of the amendment, especially when the amendment by substitution, was intended at removing an obvious anomaly or correcting a blatant error or obliterating an absurdity or bringing it in consonance with any other law or the Constitution; as was the case in Hassan Co-operative Union. On the other hand, an amendment other than by substitution would be retrospective only if it is so expressed or it follows from necessary intendment, as is implicit from the language employed. Otherwise, there is no requirement for the legislature to express the retrospectivity; it could very **W.P.(C) No.32558/2014** **-6-** well make a substitution, which would operate from the inception of enactment." The above reasoning squarely applies. We find that the provision is not clarificatory nor has it any retrospective effect by virtue only of the Finance Act of 2014 having substituted the provision under S.8(f); which is amended in its entirety. 14. We also pertinently observe that the Explanation relied on by the learned Single Judge does not permit the exclusion of the turnover of a closed branch in a previous year for the determination of tax liability under the compounded provision in the year under option. Explanation 3 is specifically with respect to the closing of a branch during the year under option upon which proportionate reduction in the number of business places can be allowed for the purpose of payment from the next monthly installment. To illustrate, if in the year 2011-12 an assessee has business of one Head Office and three branches which were continued from the earlier year and he applies under the compounding provision the tax liability would be the specified percentage of the highest of the previous three years liability. However, if during the course of the year under option, 2011-12, say in September, one of the branches is closed. The liability from October would be reduced insofar as that portion being excluded. If in the subsequent year 2012-13, the very same provision existed, there could be no reduction claimed **W.P.(C) No.32558/2014** **-7-** insofar as the tax liability for the previous year with respect to the closed branch up to September 2010; though that branch is not functioned in that subsequent year, which then becomes the year under option. 15. Explanation 3, of the amended S.8(f) if available in the year 2011-12 and 2012-13 would not enable a reduction insofar as the determination of the quantum of the tax payable under the compounding provision for the year under option merely for the reason of the closure of the business in the previous year, which in the present case is on the last date of closure, i.e., 31st of March. Explanations of the year 2014 speak only of a closure in the year of option and does not reckon a closure in the previous year. 6. Thus, the issue involved in the present writ petition is covered by the decision of the Division Bench in _Kunnathukalathil Jewellers_ (supra) against the assessee/petitioner. Following the said judgment, the present writ petition is dismissed. Sd/- DINESH KUMAR SINGH JUDGE jjj **W.P.(C) No.32558/2014** **-8-** ## APPENDIX OF WP(C) 32558/2014 ## PETITIONER EXHIBITS EXT.P-1: COPY OF ORDER ISSUED BY THE IST RESPONDENT EXT.P-1(A): COPY OF PERMISSION IN FORM NO.1E ISSUED BY THE IST RESPONDENT EXT.P-2: COPY OF APPLICATION SUBMITTED BY THE PETITIONER BEFORE THE IST RESPONDENT EXT.P-3: COPY OF NOTICE ISSUED BY THE IST RESPONDENT EXT.P-3(A): COPY OF NOTICE ISSUED BY THE IST RESPONDENT EXT.P-3(B): COPY OF NOTICE ISSUED BY THE IST RESPONDENT EXT.P-3(C): COPY OF NOTICE ISSUED BY THE IST RESPONDENT EXT.P-3(D): COPY OF NOTICE ISSUED BY THE IST RESPONDENT EXT.P-4: COPY OF APPLICATION SUBMITTED BY THE PETITIONER BEFORE THE 2ND RESPONDENT EXT.P-5: COPY OF ORDER ISSUED BY THE 2ND RESPONDENT