RP Nos.231/2018, 224/2018, 636/2018 & 679/2018 in WP(C) Nos. 25089/13, 11694/2011, 8577/2014 & WA 1861/2007 (Batch of Review Petitions – KGST Act, Section 7 Compounding Scheme)

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE** ## **&** **THE HONOURABLE MRS. JUSTICE ANU SIVARAMAN** **WEDNESDAY, THE 24TH DAY OF JULY 2019 / 2ND SRAVANA, 1941** ## **RP.No.231 of 2018 IN WP(C). 25089/2013** **AGAINST THE JUDGMENT IN WPC 25089/2013 of HIGH COURT OF KERALA DATED 03-01-2018** ## **REVIEW PETITIONER/PETITIONER:** **HOTEL ASOKA OPPOSITE TOWN HALL, ALAPPUZHA, REPRESENTED BY MANAGING PARTNER A.S NARAYANAN NAIR.** **BY ADV. SRI.K.N.SREEKUMARAN** ## **RESPONDENTS/RESPONDENTS:** **1 COMMERCIAL TAX OFFICER 1ST CIRCLE, ALAPPUZHA - 688 001.** **2 COMMISSIONER OF COMMERCIAL TAXES TAX TOWER, KILLIPPALAM, KARAMANA P.O, THIRUVANANTHAPURAM - 695 002. 3 STATE OF KERALA REPRESENTED BY SECRETARY TO GOVERNMENT, TAXES DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM - 695 001.** ## **SRI C K GOVINDAN SR GP** **THIS REVIEW PETITION HAVING BEEN FINALLY HEARD ON 31.05.2019, ALONG WITH RP.224/2018, RP.636/2018, RP.679/2018, THE COURT ON 24.07.2019 PASSED THE FOLLOWING:** RP No.231/18 in WP(C) No.25089/13 & conn.cases -:2:- ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE** ## **&** **THE HONOURABLE MRS. JUSTICE ANU SIVARAMAN** **WEDNESDAY, THE 24TH DAY OF JULY 2019 / 2ND SRAVANA, 1941 RP.No.224 of 2018 IN WP(C). 11694/2011** **AGAINST THE JUDGMENT IN WPC 11694/2011 of HIGH COURT OF KERALA DATED 03-01-2018** ## **REVIEW PETITIONER/PETITIONER:** **HOTAL ASOKA OPPOSITE TOWN HALL,ALAPPUZHA, REPRESENTED BY MANAGING PARTNER,A.S. NARAYANAN NAIR** **BY ADV. SRI.K.N.SREEKUMARAN** ## **RESPONDENTS/RESPONDENTS:** - **1 COMMERCIAL TAX OFFICER 1ST CIRCLE, ALAPPUZHA 688001** - **2 COMMISSIONER OF COMMERCIAL TAXES TAX TOWER, KILLIPPALAM,KARAMANA PO, THIRUVANANTHAPURAM, 695002** **3 STATE OF KERALA REPRESENTED BY SECRETARY TO GOVERNMENT,TAXES DEPARTMENT, GOVERNMENT SECRETARIAT,THIRUVANANTHAPURAM, 695001** RP No.231/18 in WP(C) No.25089/13 & conn.cases ## -:3:- **4 ADDITIONAL 4TH RESPONDENT DEPUTY TAHSILDAR (RR) AMBALAPPUZHA AT ALAPPUZHA 688561** **BY ADV.SR.GOVT.PLEADER SRI.C.K.GOVINDAN** **THIS REVIEW PETITION HAVING BEEN FINALLY HEARD ON 31.05.2019, ALONG WITH RP.679/2018, RP.636/2018, RP.231/2018, THE COURT ON 24.07.2019 PASSED THE FOLLOWING:** RP No.231/18 in WP(C) No.25089/13 & conn.cases -:4:- **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE** **&** **THE HONOURABLE MRS. JUSTICE ANU SIVARAMAN** **WEDNESDAY, THE 24TH DAY OF JULY 2019 / 2ND SRAVANA, 1941 RP.No.636 of 2018 IN WP(C). 8577/2014** **AGAINST THE JUDGMENT IN WPC 8577/2014 of HIGH COURT OF KERALA DATED 03-01-2018** ## **REVIEW PETITIONER/PETITIONER IN WP(C):** **JAWAHAR TOURIST HOME A FIRM REPRESENTED BY ITS MANAGING PARTNER,M.M.CHACKO,KOTHAMANGALAM,ERNAKULAM.** **BY ADVS. SRI.A.SUDHI VASUDEVAN (SR.) SRI.JOSE JONES JOSEPH SRI.P.K.SEBASTIAN** ## **RESPONDENTS/RESPONDENTS IN WP(C):** **1 THE STATE OF KERALA REPRESENTED BY SECRETARY TO GOVERNMENT,TAXES DEPARTMENT, SECRETARIAT,THIRUVANANTHAPURAM - 695 001.** **2 THE COMMISSIONER OF COMMERCIAL TAXES PUBLIC BUILDING, MUSEUM JUNCTION,THIRUVANANTHAPURAM - 695 033. 3 COMMERCIAL TAXES OFFICE OFFICE OF THE COMMERCIAL TAX OFFICE,KOTHAMANGALAM - 686 666. BY ADV.SRI.C.K.GOVINDAN SR.G.P.** **THIS REVIEW PETITION HAVING BEEN FINALLY HEARD ON 31.05.2019, ALONG WITH RP.679/2018, RP.224/2018, RP.231/2018, THE COURT ON 24.07.2019 PASSED THE FOLLOWING:** RP No.231/18 in WP(C) No.25089/13 & conn.cases -:5:- **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE** **&** **THE HONOURABLE MRS. JUSTICE ANU SIVARAMAN** **WEDNESDAY, THE 24TH DAY OF JULY 2019 / 2ND SRAVANA, 1941 RP.No.679 of 2018 IN WA. 1861/2007** **AGAINST THE JUDGMENT IN WA 1861/2007 of HIGH COURT OF KERALA DATED 03-01-2018** ## **REVIEW PETITIONERS/2ND APPELLANT IN WA:** **D.RAJ KUMAR AGED 55 YEARS, S/O.DAMODRAN,CHATHANNOOR P.O., KOLLAM,RESIDING AT KOCHUVILAYIL PALACE ROAD,KOLLAM WEST VILLAGE,KOLLAM.** **BY ADVS. SRI.A.SUDHI VASUDEVAN (SR.) SRI.JOSE JONES JOSEPH SRI.P.K.SEBASTIAN** ## **RESPONDENTS/RESPONDENTS 1 TO 3 IN WA AND 1ST APPELLANT IN** **WA:** **1 COMMERCIAL TAXES OFFICE OFFICE OF THE COMMERCIAL TAX OFFICE, CHATHANNOOR - 691 572. 2 THE COMMISSIONER OF COMMERCIAL TAXES PUBLIC BUILDING,MUSEUM JUNCTION,THIRUVANANTHAPURAM - 695 033. 3 THE STATE OF KERALA REPRESENTED BY SECRETARY TO GOVERNMENT,TAXES DEPARTMENT, SECRETARIAT,THIRUVANANTHAPURAM - 695 001.** RP No.231/18 in WP(C) No.25089/13 & conn.cases ## -:6:- **4 M/S.HOTEL ALAKANANDA MAIN ROAD, PARIPPALLY, KOLLAM - 691574, REPRESENTED BY MR.ARVINDHAKSHAN,PARTNER.** **BY ADV.SR.G.P SRI.C.K.GOVINDAN** **THIS REVIEW PETITION HAVING BEEN FINALLY HEARD ON 31.05.2019, ALONG WITH RP.636/2018, RP.224/2018, RP.231/2018, THE COURT ON 24.07.2019 PASSED THE FOLLOWING:** RP No.231/18 in WP(C) No.25089/13 & conn.cases -:7:- ## **O R D E R** ## **(R.P. Nos.231/2018, 224/2018, 636/2018 & 679/2018** ## _**Shaffique, J.**_ These review petitions concern a common judgment in a batch of writ appeals and writ petitions. In fact, the petitioners who are bar hotel owners challenged the levy of turnover tax on liquor under the compounding scheme. Under S.5(2) of the Kerala General Sales Tax Act, 1963, (hereinafter referred to as the Act), levy of turnover tax was fixed at 10% on the sales turnover of alcoholic liquor in respect of assessees who availed the compounding scheme. The Act was amended by the Kerala Finance Act, 2005 introducing Section 7 which gave an option to Bar hotels to pay turnover tax at compounded rate thereby indicating that the tax should be paid at 140% of the purchase price of liquor if the bar hotel is situated within the area of a Municipal Corporation/Municipal Council/Cantonment, 135% if the bar hotel is situated in places other than the aforesaid areas. The petitioners had opted for payment of turnover tax at compounded RP No.231/18 in WP(C) No.25089/13 & conn.cases -:8:- rate for the years 2005-2006 and 2006-07 in terms with the said provisions and necessary orders were also issued by the competent authority. 2. The Kerala Finance Act, 2006 was published in the Gazette on 24/10/2006 and the amended provisions were made effective from 1/7/2006. The amended provisions read as under:- ## _**“7. Payment of tax at compounded rates:**_ _Notwithstanding anything contained in sub-section (2) of Section 5, any bar attached hotel, not being a star hotel of and above three star hotel, heritage hotel or club, may, at its option, instead of paying turnover tax on foreign liquor in accordance with the provisions of the said sub-section pay turnover tax on the turnover of foreign liquor calculated:_ _(a) at one hundred and forty percent of the purchase value of such liquor, in the case of those situated within the area of a municipal corporation or a municipal council or a cantonment, and at one hundred and thirty five percent of the purchase value of such liquor, in the case of those situated in any other place, or_ _(b) at one hundred and fifteen percent of the highest turnover tax payable by it as conceded in the return or accounts or the turnover tax paid for any of the previous consecutive three years, whichever is higher._ _(emphasis supplied)_ 3. Petitioner challenged the vires of the amendment. Learned Single Judge of this Court after considering the RP No.231/18 in WP(C) No.25089/13 & conn.cases -:9:- respective contentions held that in so far as the amendment is only prospective, petitioners are entitled to compounding facility accepted by them until the amendment and finally it was held as under: _“So far as liability after amendment is concerned, it is upto the petitioners to opt for the compounding scheme or to file returns and to remit the tax in accordance with other provisions of the Act”._ It was further observed that since the petitioners can opt out of the compounding scheme, there is no reason to challenge the amendment. It was further held at paragraphs 5 and 6 as under:- _“5. Before parting with this case, I feel some clarification is required with regard to scope of clause (b) because petitioners are apprehending that the department will demand tax at compounded rate based on turnover tax liability fixed which is under contest. I make it clear that tax payable under clause (b) after amendment should not be reckoned with reference to assessed turnover tax contested in appeal or any other proceedings. In other words, 115% of the highest turnover tax to be reckoned for the three years is the turnover tax payable based on returns filed or accounts maintained or the tax paid on assessment without any contest, and if contested the tax ultimately sustained, as and when assessment order becomes final._ _6. Since W.P.s are admitted and are pending for quite some time, I feel petitioners should be given an opportunity to pay arrears of tax without interest either under the revised compounding scheme or to file regular_ RP No.231/18 in WP(C) No.25089/13 & conn.cases -:10:- _returns and remit differential tax if any. Accordingly time is granted till 31.7.2007 to exercise fresh option and file returns and remit the tax either under the revised compounding scheme or based on sales turnover and if upto-date arrears in accordance with returns filed are paid on or before 31/7/2007, no interest under Section 23(3) or Section 23(3A) should be charged for belated payment of tax.”_ 4. The matter came to be challenged before this Court in a batch of writ appeals which were disposed of by a common judgment dated 28/9/2007. This Court while dismissing the appeals held that under the amended compounded scheme, a dealer can opt to pay the compounded rate at 140% or 135% as the case may be, on the purchase value of liquor or at 115% of the highest of turnover paid or payable for any of the three previous years, whichever is higher. The judgment of the learned Single Judge was upheld. However, when a request was made to the Division Bench to grant permission to either opt for compounding under the new provisions or in the alternative to permit them to request the assessing authorities to complete the assessments in their case as provided under the charging provision, it was held at para 38 as under:- _“In our view, the request appears to be reasonable. Therefore, the petitioners are granted permission either to opt for payment of the turnover tax under the_ RP No.231/18 in WP(C) No.25089/13 & conn.cases -:11:- _compounding scheme or as provided under Section 5(2) of the Act within a month's time from today. If such a request is made, the assessing authority would consider the same in accordance with law.”_ 5. The petitioners however challenged the judgment aforesaid before the Apex Court, which were disposed in a batch of civil appeals as per order dated 23/4/2009 in Civil Appeal No.2936/2009 and connected cases. Before the Apex Court, the question raised was whether S.7(b) of the Act introduced on 24/10/2006 with retrospective effect from 1/7/2006, could be applied to those dealers who had contracted for payment of turnover tax at the compounded rate under the alternate method of taxation provided for under the unamended S.7 for the assessment year 2006-07. The second question was whether S.7(a) and S.7(b) operate in different spheres and if not, whether the said amendment violates Art.14 and Art.19(1)(g) of the Constitution as contended in the writ petition. 6. As far as the first question was concerned, the Apex Court had already remitted the matter back to the Division Bench as per order dated 23/4/2009 { _**Varkisons Engineers. v. State of Kerala and anther**_ [(2009) 16 SCC 120]. In the cases on hand, we are only concerned with the second question. RP No.231/18 in WP(C) No.25089/13 & conn.cases -:12:- 7. With reference to the second question, direction was issued to the High Court to consider whether S.7(a) and S.7(b) operate in different spheres or in the same sphere and if they operate in the same sphere, whether they obliterate the difference between normal method of taxation u/s 5 and alternate method of taxation u/s 7 (as amended). Further direction was issued to consider whether circular No.44/2006 dated 27/11/2006 issued by the Commissioner of Commercial Taxes was binding on the appellants. It was further observed as under: _“Lastly, we may state that if the High Court finds that to decide the above questions, foundational facts need to be established it may direct the appellant(s) to move the Assessing Officer by filing Returns in accordance with law before adjudicating upon the constitutional question(s) on the validity of the amended Section 7._ _Since above questions have not been answered, we set aside the impugned judgment and we remit the matter to the High Court for fresh consideration in accordance with law and accordingly, Civil Appeals are disposed of with no order as to costs.”_ This Court by judgment dated 3/1/2018 after considering the respective contentions based on the remand order of the Apex Court held as under: RP No.231/18 in WP(C) No.25089/13 & conn.cases -:13:- _“40. In the result, we answer the first question framed by the Apex Court in the 'Affirmative' and hold that the amended provision of Section 7(b) of the KGST Act introduced through the Finance Act with retrospective effect from 01.07.2006 could be applied to those dealers who had opted for payment of compounded tax for the year 2006-07 under the unamended provision as well. We answer the second question in the 'Negative' and hold that Section 7(a) and Section 7(b) of the Act do not operate in different spheres and it is in respect of the same sphere facilitating to identify the proper figures , i..e the higher one of the figures worked out separately under Sec.7(a) and under Sec.7(b). There is no violation of Article 14 or Article 19(1) (g) of the Constitution of India in any manner”._ 8. Once this Court had already considered the appeals and writ petition as per the directions issued by the Apex Court, one cannot contend that there is any error apparent on the face of record. 9. Learned counsel appearing for the petitioner in RP Nos.231/2018 and 224/2018 however submitted that an opportunity should be granted to opt out of the compounding scheme under S.7 of the KGST Act. What we find from the earlier judgments is that, such an opportunity was already granted, but the petitioners did not avail the same as they challenged the same before the Apex Court. 10. The learned counsel appearing for the petitioners in RP No.231/18 in WP(C) No.25089/13 & conn.cases -:14:- RP Nos.636/18 and 679/18 would further submit that the impugned orders were liable to be set aside as the same had been issued without giving an opportunity for a hearing. It is also pointed out that the learned Single Judge while passing the common judgment dated 30/5/2007 had granted time till 31/5/2007 to exercise fresh option or to go for regular assessment or in the alternative an opportunity should be given to remit the compounded tax to be determined without any interest and regular assessment should be made for the period from 1/7/2006 to 31/7/2007. That apart, the liability to pay interest should be waived. 11. Having heard the learned counsel on either side and having found that there is no scope for review, we are of the view that it is only appropriate to extend the benefit of the orders issued by this Court while delivering the judgment dated 28/9/2007. We are extending such a benefit on account of the fact that the matter had been pending before the Apex Court for quite a long time, which delay cannot be attributed to the petitioners. 12. It may not be possible for this Court to direct waiver of interest. If there is any scheme for waiver of interest, it shall be RP No.231/18 in WP(C) No.25089/13 & conn.cases -:15:- open for the petitioners to seek such benefits, or else, it shall be open for them to approach the Department for any such waiver. In the result, these review petitions are disposed of as under:- (i) The review petitioners are granted permission to opt for the compounding scheme and to pay tax accordingly or to opt out of the compounding scheme within one month from today and to pay tax under the normal rate as provided u/s 5(2) of the KGST Act. (ii) It shall be open for the review petitioners to seek waiver of interest by filing appropriate application to that effect, which shall be considered by the respondents in accordance with law. ## **Sd/-** ## **A.M.SHAFFIQUE** **JUDGE Sd/-** **ANU SIVARAMAN** Rp //True Copy// PS to Judge **JUDGE** RP No.231/18 in WP(C) No.25089/13 & conn.cases -:16:- APPENDIX IN RP NO.636/2018 REVIEW PETITIONER'S EXHIBITS ANNEXURE A1: A TRUE COPY OF THE MEDICAL CERTIFICATE DATED 20.07.2018 ISSUED BY DR.BABU JOSEPH OF NETHAJI INSTITUTE OF NATURAL CURE AND YOGA, KAKANAD, KOCHI TO THE PETITIONER. ANNEXURE A2: A TRUE COPY OF THE MEDICAL CERTIFICATE DATED 20.07.2018 ISSUED BY DR.THOMAS ABRAHAM, MD GENERAL MEDICINE, ST.MARY'S HOSPITAL, THODUPUZHA TO THE PETITIONER. RP No.231/18 in WP(C) No.25089/13 & conn.cases -:17:- APPENDIX IN RP NO.679/2018 REVIEW PETITIONER'S EXHIBITS ANNEXURE A1: A TRUE COPY OF THE MEDICAL CERTIFICATE DATED 1.3.2018 ISSUED BY DR.GIREESH S.G TO THE PETITIONER. ANNEXURE A2: A TRUE COPY OF THE MEDICAL CERTIFICATE DATED 10.5.2018 ISSUED BY DR.KRISHNAKUMAR K.M TO THE PETITIONER. //True Copy// PS to Judge Rp