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M/s. Fashion Jewellery, Represented By its Managing Partner C.P. Paul v/s Commercial Tax Officer & Another

    WP(C).No. 4907 of 2013 (K)

    Decided On, 11 March 2013

    At, High Court of Kerala

    By, THE HONOURABLE MR. JUSTICE ANTONY DOMINIC

    For the Petitioner: Harisankar V. Menon, Mrs. Meera V. Menon, Mahesh V. Menon, V. Mrithyunjayan, Advocates. For the Respondents: Mrs. Shoba Annamma Eapen, Senior Government Pleader.



Judgment Text

1. Petitioner is a partnership firm, with its head office at Chalakkudy, where it has established a jewellery. Subsequently, they opened branches at Angamaly and Kollam. Being a dealer registered under the KVAT Act (hereafter referred to as 'Act') from 2010-2011 onwards, the petitioner had opted for payment of tax at compounded rates as provided under Section 8(f) of the Act.

2. According to the petitioner, with effect from 31.03.2012, they closed their branch at Kollam and by Ext.P2 communication intimated the same to the first respondent. For 2012-2013 also the petitioner opted for compounding and that was accepted and the tax payable was specified in Ext.P4 order based on the tax paid for the previous year. However, in view of the closure of their Kollam Branch, with effect from 01.04.2012, they paid tax under Section 8(f) deducting 1/3rd from the tax payable for that year.

3. The Petitioner submitted Ext.P5 seeking rectification of Ext.P4 and that was disposed of by Ext.P6 order. Ext.P6 order was challenged before this Court in W.P.(c) No.30484 of 2012. By Ext.P7 judgment, the writ petition was disposed of setting aside Ext.P6 order and directing reconsideration of Ext.P5. Accordingly, the matter was reconsidered and the first respondent passed Ext.P8 order, holding that the petitioner should pay tax as provided in Section 8(f) of the Act and that in the absence of any provision in the Act allowing deduction on the closure of one of the branches, the request of the petitioner for rectification, is untenable. It is in these circumstances, the writ petition is filed seeking to challenge Exts.P4, P4(a) and P8.

4. According to the learned counsel for the petitioner, payment of tax under Section 8(f) is in lieu of the tax payable under Section 6 of the Act. Under Section 6 of the Act, once the branch is closed, the dealer does not have the liability to pay tax in respect of the closed branch and therefore, the dealer also does not have the liability to pay tax under Section 8(f) reckoning the closed branch also. In support of this contention, counsel relied on the Apex Court in the judgment in State of Kerala and another v. Builders Association of India and Others (104 STC 134 ) and the judgment of this Court in Bhima Jewellery v. Assistant Commissioner (Assessment, Special Circle and Another(129 STC 90), which was confirmed by the Division Bench in Bhima Jewellery v. Assistant Commissioner (Assessment), Special Circle, Commercial Taxes Department and Another(137 STC 377). The second contention raised by the learned counsel for the petitioner is that Explanation 3 to Section 8(f)(1) provides that a dealer opting for payment of tax under Clause 8(f) shall pay tax at compounded rates in respect of all their branches existing in the year, to which, the option relates. This according to him means that if the branch is not existing, dealer is not liable to pay tax for the branch.

5. On the other hand, according to the learned Government Pleader, payment of tax under Section 8 is purely optional and the rights and obligations of the dealer are to be determined by the provisions contained therein. It is pointed out that none of the provisions of Section 8(f) of the permit, a dealer who has opted for payment of tax under Section 8(f) of the Act to proportionately reduce the tax payable on the closure of a branch. Therefore, the learned Government Pleader argued that the petitioner could not have unilaterally reduced the liability.

6. I have considered the submissions made.

7. Under the KVAT Act, the liability of a dealer to pay tax is as provided under Section 6, which is the charging Section. However, an optional system of payment of tax has been introduced by the Legislature by virtue of Section 8 allowing dealers to opt for payment of tax at compounded rates. Insofar as dealers in gold like the petitioner are concerned, Section 8(f) provides for payment of tax at compounded rates. This provision requires the dealer to make an application opting for such payment and on its acceptance, tax is to be paid for the assessment year concerned at the rates prescribed in the section itself. This section also prescribes the rate of tax to be paid for the succeeding years, provided option is exercised for those years also.

8. Insofar as this case is concerned, Section 8(f)(1) together with Explanations 3, 8 and sub-clause (V), being relevant, are extracted below for reference.

"8(f)(1): any dealer in ornaments or wares or articles of gold, silver or platinum group metals including diamond may at his option, instead of paying tax in respect of such goods in accordance with the provisions of Section 6, pay tax at;

(a) one hundred and fifteen per cent, in case their annual turnover for the above goods for the preceding year was rupees ten lakhs or below;

(b) one hundred and twenty per cent, in case their annual turnover for the above goods for the preceding year was above rupees ten lakhs and up to rupees forty lakhs:

(c) one hundred and thirty five per cent; in case their annual turnover for the above goods for the preceding year was above rupees forty lakhs and up to rupees one crore; and at

(d) one hundred and fifty per cent; in case their annual turnover for the above goods for the preceding year exceeded rupees one crore; of the highest tax payable by him as conceded in the return or accounts, or tax paid by him under this Act, whichever is higher, for a year during any of the three consecutive years preceding that to which such option relates.

Explanation 3: Dealers opting for payment of tax under this clause shall pay compounded tax in respect of all their branches existing in the year(to which the option relates).

Explanation 8: Where a dealer who had opted and paid tax under this clause during the previous years with respect to a branch that had remained closed during the whole of the year 2009-2010, for the purpose of determining the compounded tax payable for 2010-2011, the tax in respect of that branch shall not be reckoned.

(V): Where a dealer had paid tax under this clause for the previous year, the tax payable for the succeeding year under this clause shall be calculated at the rates mentioned in item(i) or (ii) below, whichever is higher:

(i)(a) at the same amount of tax paid during the previous year, in case their turnover for the above goods for the preceding year was rupees ten lakh or below,

(b) at one hundred and five per cent of such tax paid during the previous year in case their turnover for the above goods for the preceding year was above rupees ten lakh and up to rupees forty lakh;

(c) at one hundred and fifteen per cent of such tax paid during the previous year, in case their turnover for the above goods for the preceding year was above rupees forty lakh and up to rupees one crore;and

(d) at one hundred and twenty five per cent of such tax paid during the previous year, in case their turnover for the above goods for the preceding year exceeded rupees one crore:

Provided that the tax payable under this sub- clause by the dealers covered under explanation 6 of this clause shall be at the appropriate percentage of tax mentioned in (a) (b) ) or (d) above, of the tax redetermined under the said explanation.

9. Before I proceed to examine the contentions raised, I shall first refer to the Apex Court judgment in State of West Bengal v. Kesoram Industries Ltd (2004(10) SCC 201), in which, the court has indicated the principle to be adopted in interpreting taxing statutes thus:

"106. The judicial opinion of binding authority flowing from several pronouncements of this Court has settled these principles:(i) in interpreting a taxing statute, equitable considerations are entirely out of place. Taxing statutes cannot be interpreted on any presumption or assumption. A taxing statute has to be interpreted in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any deficiency; (ii) before taxing any person it must be shown that he falls within the ambit of the charging section by clear words used in the section; and (iii) if the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject. There is nothing unjust in the taxpayer escaping if the letter of the law fails to catch him on account of the legislature's failure to express itself clearly."

10. These principles have been reiterated in several judgments, the last of which is Vodafone International Holdings BV v. Union of India and Another (2012(6) SCC 613).

11. Section 8(f) of the Act is a self contained code and therefore, the rights and obligations of a dealer, who has opted for payment of tax under Section 8(f), will have to be determined in the light of the words that are used by the Legislature. Reading of Section 8(f)(1) shows that any dealer in ornaments or wares or articles of gold may, at his option, pay tax as provided therein instead of paying tax in respect of such goods in accordance with the provisions of Section 6. Clause 8(f)(1)(a) to (d), prescribes the rate of tax to be paid by the dealer, which is related to his turnover. Sub-clause(V) prescribes the rate of tax to be paid for the succeeding years, where also the dealer has to exercise option. Reading of Explanation 3 of Section 8(f) shows that a dealer opting for payment of tax under Section 8(f) shall pay compounded tax in respect of all their branches existing in the year. Similarly, Explanation 5 shows that where a dealer opens a new branch in the current year, additional compounded tax payable in respect of such branch shall be the average of the tax payable by him in respect of his principal place of business and all branches.

12. Thus, it is evident that under the scheme of compounding, a dealer who has existing branches or who opens new branches during the assessment year, has to pay compounded tax in respect of all the branches. In other words, the scheme of the Section is that a dealer, who has opted for payment of tax under Section 8(f), has to pay tax at the prescribed rate, not only in respect of his head office but also in respect of all his branches. If such a dealer exercises option for the succeeding years, his liability for those years are to be determined in terms of clause (V), which is based on the tax paid for the previous year. The provisions of Section 8(f) do not provide that in the event of closure of a branch, either at the commencement or during the course of the assessment year, a dealer has the right to reduce the tax payable under Section 8(f) proportionally or otherwise. Therefore, even if the petitioner had closed their Kollam branch as on 31.03.2012, that could not have had any impact on their tax liability under the scheme of compounding for the assessment year 2012- 2013.

13. Learned counsel for the petitioner relied on Explanation 3 to the Section and according to him, in view of the explanations, the liability of the dealer is only to pay tax for the existing branches. This Section only provide that a dealer opting for payment of tax under Section 8(f) shall pay compounded tax in respect of all their branches existing in the year. In other words, to my mind, this section only means that a dealer in gold, who has opted for payment of tax under Section 8(f), cannot exclude any of his branches from payment of compounded tax and it does not mean that in case a branch is closed after option is exercised, the dealer is entitled to get reduction of the tax payable under the Section. Therefore, the language of the statute does not entitle the petitioner for reduction of the tax payable by them for the

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year 2012-2013. 14. Insofar as the judgments, that are relied on by the learned counsel for the petitioner are concerned, it is true that if the principles laid down in those judgments, due to the effect that irrespective of the provision for compounding, Section 6 of the Act remains the charging section and that the payment made under Section 8 is a substituted method of payment in discharge of the liability under the charging section. It is relying on these judgments, the counsel says that if he does not have the liability under Section 6, he cannot have the liability under Section 8. First of all, reading of the judgments show that this Court or the Apex Court, did not lay down any such principle. It has been held long in the past that a judgment is an authority for what it actually decides and not for what logically follows from it. Therefore, I am unable to infer any such principle from the judgments relied on by the counsel. Even apart from that, the scope, obligation and the liabilities under Section 8(f), will have to be determined looking at the words used by the Legislature and I have already held that the language of the section does not permit the interpretation canvassed. For these reasons, I do not find any substance in the writ petition. Writ petition is dismissed.
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