K. Vinod Chandran, J.
1. The two appeals, one by the assesee and the other by the State, raise the very same questions. Before we go into the issue, we have to first look at the facts in W.A. No.2695 of 2015. The impugned judgment in W.A. No.2695 of 2015 was not followed by another learned Single Judge in the judgment impugned in W.A. No.202 of 2017; hence the said appeal.
2. The respondent in W.A. No.2695 of 2015 is a metal crusher unit having two machines, one primary and the other secondary, on which permission for compounding was granted. An inspection was conducted by the Intelligence Officer on 19.09.2013. Two Auto Sand Machines were found in the premises, which were not included in the compounding application. Hence penalty proceedings were proposed. The respondents then sought for compounding of offence under Section 74 of the Kerala Value Added Tax Act, 2003 [for brevity, the Act]. The respondent also paid Rs.8 lakhs. The permission for compounding of offence was allowed under Section 74 of the Act. The respondent also paid tax of around Rs.16 lakhs, of which Rs.8 lakhs was adjusted towards compounding fees, under Section 74 of the Act. The respondent also paid the balance tax dues.
3. The respondent was then before this Court, challenging the imposition of Rs.8 lakhs, since according to the respondent, the maximum compounding fee in cases where an offence is repeated and spread over other return periods, in one assessment year, would only be Rs.2 lakhs. The first contention taken by the learned Senior Counsel is that there is no reason for including the two additional machines under the compounding scheme of Section 8 under the Act. The learned Single Judge found that the assessee having obtained the statutory benefit flowing from the composition of offence cannot turn around and question the very proposal for imposition of penalty. We, agree with the reasoning and at the outset, refuse to consider the issue, since on initiation of penalty proceedings, the respondent/ assessee had voluntarily offered to compound the offence under Section 74 of the Act. There could be no contention raised with respect to the machines not being included for the purpose of penalty proceedings. However if such a challenge is made in assessment the same could be independently considered dehors the fact that the crime file was compounded.
4. The 2nd issue considered by the learned Single Judge was as to what was the maximum compounding fee collectible against the single offence spread over a financial year. The learned Single Judge looked at the text and found that the proviso limited the maximum compounding fee to Rs.2 lakhs. Hence the balance amounts were directed to be refunded. The issue is already covered by a judgment of this Division Bench, in WA No.291 of 2016 dated 31.08.2018 [The Intelligence Officer Vs. Amon & Calcutta Co. Ltd.]. However, the learned Senior Counsel seek to submit before us that the said decision has been wrongly rendered without looking at the various amendments over the years. We find that the decision was rendered by us and if we agree with the learned Senior Counsel, we have no way, but to refer it to a Larger Bench. We hence heard the submissions addressed on behalf of the respondent by the learned Senior Counsel.
5. We see that amendments brought in to the Kerala Value Added Tax Act, 2003 [for brevity, the KVAT Act] in the years 2009 and 2011 amending Section 74 of the Act raising the compounding fees to Rs.4 lakhs from Rs.2 lakhs and then to Rs.8 lakhs. We notice that the maximum compounding fee as seen in the proviso was not changed in the text brought out by the various authors. We looked at the amendments from the respective Finance Acts, to find that the revisions or enhancements would be applicable in so far as the limit prescribed everywhere in Section 74(1) of the Act.
6. The learned Senior Counsel would point out that the proviso was brought in for the first time in 2008 by an amendment to Section 74 of the Act introducing the proviso. Later, in 2009, when amendments were made enhancing the amount from Rs.2 lakhs to Rs.4 lakhs, it was confined to Section 74(1) of the Act. Hence the limit in the proviso at Rs.2 lakhs remained as such. In the year 2011, again an amendment was made substituting four lakh with eight lakh. Therein specifically it was stated that the amendment would be applicable wherever the words 'four lakh' occur. Hence even then the two lakhs in the proviso remain as such, since in 2009 there was no amendment to the proviso.
7. We have to notice the various amendments made in 2008, 2009 and 2011, which are as follows:
'2008: (17) in section 74, in sub-section (1), after clause (a), the following proviso shall be inserted, namely:-
'Provided that the maximum compounding fee collectable against a single offence spread over several return periods in a financial year shall be two lakh rupees.'
xxx xxx xxx
2009:- (22) in section 74, in sub-section (1), for the words 'two lakhs', the words 'four lakhs' shall be substituted.
Xxx xxx xxx
2011:- (9) in section 74, in sub-section (1), for the words 'four lakh' wherever they occur, the words 'eight lakh' shall be substituted.'
8. The first amendment bringing in the proviso definitely was a beneficial measure, in so far as avoiding the hardship of assessees like the petitioner, who had not disclosed two machines during an year for the purpose of compounding under Section 8. This can be termed as an offence in every return period, if it continues beyond a return period; the return period as per the KVAT Act being a month. Subsequently, Section 74(1) of the Act was amended enhancing the limit provided from two lakhs to four lakhs. We notice that there is slight difference in the wording employed in 2009 and 2011. We also appreciate the manner in which the arguments were advanced before us, which at first blush would look attractive; but on deeper contemplation would be clearly unsustainable and untenable.
9. We have to give a purposive interpretation to the proviso and the amendments made, especially avoiding any anomalous situation in the imposition of compounding fees on offences under the Act and ensuring that the enhancements made by the legislature are not rendered nugatory. Looking at the amendment made in 2009, if we accept the contention of the learned Senior Counsel, then necessarily it will lead to an anomalous situation. Let us look at a situation where a registered dealer, say an assessee like the respondent herein, carrying on a crusher unit with a number of machines, fails to disclose one or more of such machines; on detection opts to compound the offence under Section 74. If the offence is detected in May itself, after enhancement, HE would be mulcted with a liability of compounding fees of Rs. 4 lakhs or 8 lakhs. Whereas if the offence was detected only in January of the said assessment year, he would be liable to pay only Rs.2 lakhs as compounding fee by virtue of the proviso under Section 74. Hence giving a purposive interpretation to the amendment, it has to be understood as enhancing the limit in the body of the sub-section, which includes the sub-clauses and the proviso also. Hence we cannot accept the contention that in the year 2009 when the amendment was made, the proviso was retained as having a maximum limit of Rs.2 lakhs. As to the amendment made in 2011, the legislature was more careful in prescribing that the enhancement would be made at every place where the earlier limit had been spec
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ified. In such circumstances, we do not find any reason to take a different view from what we took in W.A. No.291 of 2016. We hence set aside the judgment of the learned Single Judge to the extent compounding fee was reduced and allow the writ appeal of the State. 10. In W.A. No.202 of 2017, the assessee had paid up the compounding fees at Rs.8 lakhs and had approached this Court claiming relief on the basis of the judgment impugned in W.A. No.2695 of 2015. The learned Single Judge refused to consider the same, since already the petitioner had paid up the compounding fees without demur. We having set aside the judgment relied by the appellant, we do not see any reason at all to entertain the writ appeal. The writ appeal filed by the assessee hence would stand dismissed. Ordered accordingly without any order as to costs.