V.K. Shajan vs The Commercial Tax Officer, Irinjalakuda and State of Kerala

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** **THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR** **TUESDAY, THE 18TH DAY OF JULY 2017/27TH ASHADHA, 1939** **WP(C).No. 13318 of 2017 (L)** **----------------------------** **PETITIONER:** **-----------** **V.K.SHAJAN, M/S.SEVENSTAR INDUSTRIES, THRIKKUR, THRISSUR DISTRICT** **BY ADVS.SRI.HARISANKAR V. MENON SMT.MEERA V.MENON** **RESPONDENT(S):** **--------------** **1. THE COMMERCIAL TAX OFFICER, IRINJALAKUDA- 680 121** **2. STATE OF KERALA,** **REPRESENTED BY ITS SECRETARY TAXES DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM- 695 001** **BY GOVERNMENT PLEADER SMT JASMIN.M.M** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 18-07-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **K.V.** ## **WP(C).No. 13318 of 2017 (L)** ## **----------------------------** ## **APPENDIX** **PETITIONER(S)' EXHIBITS ----------------------EXHIBIT P1 COPY OF APPLICATION IN FORM 1B FILED BY THE PETITIONER DT.31.5.2016. EXHIBIT P2 COPY OF LETTER SUBMITTED BY THE PETITIONER BEFORE THE 1ST RESPONDENT DT 9.2.2017. EXHIBIT P3 COPY OF NOTICE ISSUED BY THE 1ST RESPONDENT DT 3.3.2017. EXHIBIT P4 COPY OF LETTER SUBMITTED BY THE PETITIONER BEFORE THE 1ST RESPONDENT DT 16.3.2017 EXHIBIT P5 COPY OF NOTICE ISSUED BY THE 1ST RESPONDENT TO THE PETITIONER DT 20.3.2017 EXHIBIT P6 COPY OF THE POSTAL RECEIPT ISSUED BY THE POSTAL DEPARTMENT EVIDENCING THE PROOF OF THE LETTER SENT THROUGH REGISTERED POST DT 17.3.2017. RESPONDENT(S)' EXHIBITS NIL -----------------------** **/TRUE COPY/** **P.S.TO JUDGE** **K.V.** ## **A.K.JAYASANKARAN NAMBIAR, J.** ------------------------------------ ## W.P. (C) No.13318 of 2017 ------------------------------------ ## Dated this the 18[th] day of July, 2017 ## **J U D G M E N T** The petitioner runs a metal crusher unit, and is an assessee under the Kerala Value Added Tax Act on the files of the 1[st] respondent. For the assessment year 2016-2017, the petitioner opted to pay tax on compounded basis and towards this end, he filed Ext.P1 application seeking to exercise his option to pay tax on compounded basis in terms of Section 8(b) of the KVAT Act. 2. It is the case of the petitioner that no orders were passed by the respondents on Ext.P1 application submitted by him and in the meanwhile, the petitioner, on the assumption that his application for compounding was not accepted, continued to pay tax on regular basis based on the turn over that was returned by him before the authorities. By way of abundant caution, the petitioner, by Ext.P2 communication dated 09.02.2017, wrote to the respondents informing them that he **W.P.(C) No.13318/2017** **2** was formally cancelling his application for payment of tax on compounded basis for the assessment year 2016-2017. 3. In the writ petition, the petitioner states that notwithstanding the issuance of the aforesaid communication, the petitioner was served with Ext.P3 notice demanding differential tax for the period from April 2016 to February 2017. The notice indicated that the respondents were proceeding against the petitioner on the basis that he had opted for payment of tax on compounded basis. Although the petitioner, on receipt of Ext.P3 notice, wrote to the respondents indicating that since the compounding application had not been accepted by the respondents, he was under no liability to pay tax on compounded basis, the said stand of the petitioner was not accepted by the respondents, who issued Ext.P5 notice directing the petitioner to remit the differential compounded tax for the assessment year 2016-2017 immediately on receipt of the notice. 4. In the writ petition, Ext.P5 notice is impugned inter alia **W.P.(C) No.13318/2017** **3** on the ground that the application for payment of tax on compounded basis, not having been accepted by the respondents, there was no obligation on the petitioner to discharge his tax liability for the assessment year in question on compounded basis. 5. A counter affidavit has been filed on behalf of the 1[st] respondent wherein it is stated that the petitioner did not file any letter in the office of the 1[st] respondent, cancelling the compounding option filed by him on 31.05.2016. The counter affidavit, however, is silent as to whether Ext.P1 application preferred by the petitioner, for payment of tax on compounded basis was accepted by the respondents within the time prescribed under the statute. Ext.P5 communication is sought to be justified of the grounds stated therein. 6. I have heard the learned counsel for the petitioner as also the learned Government Pleader for the respondents. **W.P.(C) No.13318/2017** **4** 7. On a consideration of the facts and circumstances of the case and the submissions made across the bar, I find that as per the provisions of Section 8(b) of the Kerala Value Added Tax Act, the petitioner, who runs a metal crusher unit, is given an option to pay tax on compounded basis in lieu of the regular method of payment of tax under Section 6 of the KVAT Act. The statutory provisions envisage a procedure whereby a dealer has to prefer an application seeking permission to pay tax on compounded basis and the departmental authorities have to accept the said application and permit the dealer to pay tax on the said basis, before the dealer can actually remit tax on compounded basis. The analogy, as per the statutory provisions, is to the formation of a contract between the assessee on the one hand, and the tax department on the other, and consequent to the formation of the contract, neither side is permitted to resile therefrom. 8. In the instant case, while the petitioner had preferred Ext.P1 application seeking permission for payment of tax on compounded basis, the said application was not acted upon by **W.P.(C) No.13318/2017** **5** the respondents, who did not either grant permission or refuse the same. Although a Division Bench of this Court has, in the case of **Johnson & Johnson Limited vs. Assistant Commissioner (Assessment), Special Circle 1, Ernakulam and Others [(2009) 23 VST 274 (Ker.)]** permitted assessees, who have paid tax on compounded basis, without obtaining any formal permission to do so from the department, to insulate themselves from a subsequent demand for payment of tax on regular basis, the said decision cannot come to the aid of the department in contending that, even without accepting an application from a dealer, the dealer can be directed to pay tax on compounded basis. 9. On the facts of the instant case, in the absence of any acceptance of the application of the petitioner, I am of the view that the petitioner was obligated to discharge his liability only on the basis of the regular method of assessment of tax as indicated in Section 6 of the KVAT Act. Since there is no dispute in the instant case that, the petitioner had discharged his liability for **W.P.(C) No.13318/2017** **6** the period in question in accordance with Section 6(1) of the KVAT Act, I am of the view that the demand in Ext.P5 notice cannot be legally sustained. Accordingly, this writ petition is allowed by quashing Exts.P3 and P5 communications issued to the petitioner. Sd/- **A.K.JAYASANKARAN NAMBIAR JUDGE** smp