M/S. ALWAYE SUGAR AGENCY v. ASST COMMISSIONER (ASSESSMENT), COMMERCIAL TAXES SPECIAL CIRCLE, MATTANCHERRY AT ALUVA; COMMERCIAL TAX OFFICER, ALUVA; DEPUTY COMMISSIONER, DEPARTMENT OF COMMERCIAL TAXES, MATTANCHERRY

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR** ## **FRIDAY, THE 27TH DAY OF OCTOBER 2017/5TH KARTHIKA, 1939** ## **WP(C).No. 22147 of 2017 (P)** **----------------------------** **PETITIONER(S): ---------------------** **M/S.ALWAYE SUGAR AGENCY, XVII/602,KAROTHUKUZHY JUNCTION, MARKET ROAD,ALUVA,REPRESENTED BY ITS MANAGING PARTNER,A.V.RAYID.** ## **BY ADVS.SRI.HARISANKAR V. MENON SMT.MEERA V.MENON** ## **RESPONDENT(S):** **------------------------** **1. THE ASST COMMISSIONER (ASSMNT), COMMERCIAL TAXES SPECIAL CIRCLE,MATTANCHERRY AT ALUVA-683101.** **2. COMMERCIAL TAX OFFICER, ALUVA-683101.** **3. DEPUTY COMMISSIONER,** ## **DEPARTMENT OF COMMERCIAL TAXES,MATTANCHERRY-682002.** **BY GOVERNMENT PLEADER SRI.SHAMSUDHEEN V.K** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 19-10-2017, THE COURT ON 27.10.2017 DELIVERED THE FOLLOWING:** **TS** ## **WP(C).No. 22147 of 2017 (P)** **---------------------------------------** ## **APPENDIX** ## **PETITIONER(S)' EXHIBITS -------------------------------------** **EXT.P1 COPY OF ANNUAL RETURN OF THE PETITIONER FOR THE YEAR 2011-12. EXT.P2:- COPY OF AUDIT REPORT IN FORM NP.13 & 13A.** **EXT.P2(A) COPY OF RECONCILIATION STATEMENT OF THE PETITIONER.** **EXT.P2(B) COPY OF RECONCILIATION STATEMENT OF THE PETITIONER.** **EXT.P3 COPY OF LETTER SUBMITTED BY THE PETITIONER BEFORE THE 1ST RESPONDENT.** **EXT.P3(A) COPY OF LETTER SUBMITTED BY THE PETITIONER BEFORE THE 2ND RESPONDENT.** **EXT.P3(B) COPY OF LETTER SUBMITTED BY THE PETITIONER BEFORE THE 3RD RESPONDENT.** **RESPONDENT'S EXHIBITS - NIL** **-----------------------------------------------** ## **/TRUE COPY/** **PS TO JUDGE** **TS** **'C.R.'** ## **A.K.JAYASANKARAN NAMBIAR, J. -------------------------------** ## **W.P.(C).NO.22147 OF 2017 (P) ----------------------------------Dated this the 27[th] day of October, 2017** ## **J U D G M E N T** The facts in this writ petition compel me to begin this judgment with some observations as regards the manner in which procedural provisions in a taxing statute ought to be interpreted in a developing economy such as ours. Although taxing statutes must receive a strict interpretation, designed as they are to exact money from a citizen so as to finance Government expenditure, the interpretation cannot be a reckless one, mindless of the probable impact that it could have on tax paying assessees or, as in the instant case, members of the trading community. To err is human, more so in accountancy, and unless it is established that the accounting lapse was the result of a willful omission or suppression with an intent to evade tax, the trade tax authorities in a civilized society should give due regard to the dignity of the members of the trading community and be more accommodative to reasonable requests for regularising technical omissions with a view to ensuring tax compliance. Ralph Waldo Emerson famously remarked that 'a foolish consistency is the **W.P.(C).No.22147/2017** **2** hobgoblin of the mediocre mind'. In a similar vein, a mechanical application of procedural provisions in a Taxing Statute, without considering the purpose for which they were inserted in the Statute, does not augur well for the reputation of the tax man, whose attitude must change with the times, so that citizens see him more as a facilitator for tax compliance rather than a legally empowered money snatcher. 2. The petitioner in this writ petition is engaged in the trade of various items and is an assessee under the Kerala Value Added Tax Act [hereinafter referred to as the 'KVAT Act'] on the rolls of the 1[st] respondent. The petitioner filed annual returns for the year 20112012 and duly paid the tax payable based on the returns filed. Subsequent to the filing of returns, the books of accounts of the petitioner were audited, and during the course of audit, certain mistakes were noticed, in that, certain purchases and sales had been omitted to be reported to the Department. The petitioner therefore applied to the respondents, for permission to revise the returns that were submitted for the assessment year 2011-12. The request of the petitioner was not acted upon by the respondents, and it is therefore **W.P.(C).No.22147/2017** **3** that the petitioner has approached this Court, through the present writ petition, seeking a direction to the respondents to permit the petitioner to revise the annual return for the assessment year 201212, so as to incorporate details of the transactions that were omitted to be included while filing the original return. 3. A statement has been filed on behalf of the 1[st] and 2[nd] respondents, wherein, after referring to the omissions occasioned by the petitioner, it is stated that the respondents did not grant permission to the petitioner to revise the returns, since, the time permitted under the Statute, for revising returns, had already expired. It is contended that the limitation provisions under the Statute have to be strictly construed, and a belated request for revising a return is not maintainable, more so, when a revision of the return would lead to an alteration of the turnover and tax liability already declared by the petitioner. 4. I have heard the learned counsel for the petitioner as also the learned Government Pleader for the respondents. **W.P.(C).No.22147/2017** **4** 5. The learned Government Pleader relies on the decision of a Division Bench of this Court in **Venus Marketing v. State of Kerala** **- [(2011) 19 KTR 575 (Ker)]** as also a decision of the Supreme Court in **Jayam & Co. v. Assistant Commissioner and Another - [(2016) 96 VST 1 (SC)]** , to contend that the provisions regarding availment of concessions, under a Taxing Statute, have to be strictly construed, and they cannot be treated as rights conferred on assessees under the Statute, and further, when there is a suppression of facts by a dealer, concessions envisaged under the Taxing Statute should not normally be extended to the assessee. 6. On a consideration of the facts and circumstances of the case as also the submissions made across the bar, I find that, in the instant case, the petitioner, on detecting an omission in the returns originally filed by it, came forward to rectify the defects, by expressing his readiness to pay the differential tax and interest in respect of the transactions that were omitted in the return that was originally filed. Since the petitioner voluntarily came forward to rectify the omissions and pay the differential tax, and the action of the petitioner is not pursuant to the detection of any suppression by the Department, the **W.P.(C).No.22147/2017** **5** mere apprehension that, on the petitioner being permitted to pay the differential tax, he might lay claim to the input tax credit of tax paid on purchases that were not reported, cannot, in my view, be a ground to deny the petitioner the opportunity to come forward and rectify an anomaly in the returns, so as to ensure a compliance with the statutory provisions. The statutory provisions which deal with the revision of returns, and the procedure to be complied there for, are to be found in Sections 22, 31 and 42 of the KVAT Act and Rule 22 of the Kerala Value Added Tax Rules [hereinafter referred to as the 'KVAT Rules']. A perusal of the said provisions would indicate that an opportunity is granted to an assessee to revise returns, on his detecting omissions, and then, if no objections are raised by the Department, the assessment itself is deemed to be complete based on the returns filed by the assessee. Rule 22 of the KVAT Rules enables a dealer to revise returns within a period of two months from the last date of the return period to which the return relates. A proviso to the said Rule suggests that the Rule will not apply to a dealer against whom penal action is initiated for the same materials as necessitated the revision of the returns. The statutory provisions are silent, however, with regard to the course of action to be adopted in respect **W.P.(C).No.22147/2017** **6** of a dealer, who has filed his returns and paid tax in accordance with the returns, and who, after completion of the self assessment to tax detects an omission in the returns that he had filed, and wishes to correct the said mistake and pay the correct tax due to the Government after revising his returns suitably. In my view, going by the object of the Statute, which is to ensure that tax due from a dealer is duly levied and collected, in situations where no proceedings have been initiated against a dealer for a differential tax demand or noncompliance with the statutory provisions, an honest dealer, who voluntarily comes forward to pay his taxes, ought not to be prevented from doing so. On the contrary, such dealers should be rewarded for their honesty, by permitting them to revise the returns and pay the differential tax and interest applicable, and extending to them the concessions envisaged in the Statute such as input tax credit, based on their compliance with the statutory provisions. 7. It has to be borne in mind that, under the KVAT Act and Rules, the grant of input tax credit removes the cascading effect of a tax on tax, in the chain of transactions leading up to the sale to the ultimate consumer. Thus, the grant of the said concession to a dealer **W.P.(C).No.22147/2017** **7** is ultimately with the object of benefiting a consumer, who ought not to be saddled with a liability more than the price of the product together with the applicable taxes thereon. When there is a proper payment of tax by a dealer, after due compliance with the statutory provisions, the concession that is granted to him by the Statute matures into a right to claim the concession, since he establishes himself as a person who has satisfied the necessary pre-conditions for the same. Thus, in cases where there is no dispute with regard to payment of tax by a dealer, his claim for input tax credit, of the tax paid in the immediate preceding transaction, cannot ordinarily be denied, and the limitation provisions in the Statute, that provide for taking of the credit or for revising returns so as to avail such credit, have to be construed liberally so as to enable the dealer to effectively comply with the provisions of the taxing Statute, and legitimately claim the benefits that he is entitled to. The petitioner in this case having established that he had approached the respondents, for correcting omissions in the returns filed by him for the assessment year 2011-12, before any proceedings were initiated against him for differential tax demands or for the **W.P.(C).No.22147/2017** **8** imposition of any penalty for breach of any statutory provision, ought, in my opinion, to be permitted to revise his returns to include the omissions noticed. I therefore allow this writ petition, by directing the respondents to permit the petitioner to revise the returns for the assessment year 2011-12, by enabling the KVATIS system to facilitate such a revision of returns. The respondents shall do the needful to enable the petitioner to revise the returns, in the presence of the Assessing Officer, within three weeks from the date of receipt of a copy of this judgment. I make it clear that if, as a consequence of the revision of returns, the petitioner is found liable to pay any differential tax, then the petitioner shall comply with the provisions of Rule 22 of the KVAT Rules, and pay not only the differential tax but also the interest and penal interest contemplated under the Statute, simultaneously with the revision of the returns. ## **A.K.JAYASANKARAN NAMBIAR JUDGE** ## **prp/**