KAMAKSHY SEKHAR V. AGRL. INCOME TAX & COMMERCIAL TAX OFFICER

WA/1763/2012

AI Insights

The case revolves around the appellant, Kamakshy Sekhar, who contested the assessments made under the Kerala Value Added Tax Act, 2003, for the periods from April to September 2005. The appellant argued that she had collected tax on certain sales by mistake and had not given a written option as required under Section 6(1A)(b) of the Act, which would allow the entire turnover to be taxed. The Assessing Officer had taxed the entire turnover based on this provision, which the appellant challenged. The Single Judge's decision upheld the assessments, leading to the appeal. The Division Bench found that the absence of a written option meant the assessments were illegal, leading to the quashing of the assessments.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 699954 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 18-01-2013
• Assessment Year: misc
• Laws Referred To: Kerala Value Added Tax Act, 2003
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: BOBY JOHN
• Assessee Lawyers: HARISANKAR MENON; MEERA MENON; MAHESH MENON
• Keywords: Exempt turnover; Penalty; Tax assessment; VAT; Written option
• Section: 22; 72; 6(1A)

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.M.JOSEPH & THE HON'BLE MR. JUSTICE BABU MATHEW P.JOSEPH FRIDAY, THE 18TH DAY OF JANUARY 2013/28TH POUSHA 1934 WA.No. 1763 of 2012 () IN WP(C).23728/2006 ------------------------------------------- AGAINST THE ORDER/JUDGMENT IN WP(C).23728/2006 of HIGH COURT OF KERALA DATED 28-03-2012 APPELLANT(S)/APPELLANT: ------------------------ KAMAKSHY SEKHAR PROPRIETRIX,STAR DEBT,583/10 ANIKODE,ARIYANKODE P.O.,PALAKKAD DISTRICT. BY ADVS.SRI.HARISANKAR V. MENON SMT.MEERA V.MENON SRI.MAHESH V.MENON RESPONDENT(S)/RESPONDENTS: --------------------------- 1. AGRL. INCOME TAX & COMMERCIAL TAX OFFICER ALATHUR,PALAKKAD DISTRICT,PIN 678001. 2. STATE OF KERALA REPRESENTED BY SECRETARY TAXES DEPARTMENT,GOVERNMENT SECRETARIAT THIRUVANANTHAPURAM-695001. R BY GOVERNMENT PLEADER SRI. BOBY JOHN THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 18-01-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: [CR] K.M. JOSEPH & BABU MATHEW P. JOSEPH, JJ. ---------------------------------------------------- W.A. No. 1763 OF 2012 ----------------------------------------------------- Dated this the 18th day of January, 2013 J U D G M E N T Joseph, J Appellant is the writ petitioner. The writ petition was filed by the appellant seeking to quash Exts.P2 to P7. The appellant is assessed under the Kerala Value Added Tax Act, 2003 (hereinafter referred to as 'the Act'). The appellant was dealing with a unit which is engaged in the manufacture and sale of 'handmade soaps'. Exts.P2 to P7 are assessments for the monthly return periods from April to September 2005. According to the appellant, she has been assessed illegally under Sections 6(1A) and 6(1A)(b) of the Act. According to the appellant in respect of certain bills for the periods covered by Exts.P2 to P7, by a mistake, the appellant had collected tax even W.A. No. 1763 OF 2012 :2 : though there was no basis for the appellant to collect such tax. According to the appellant, however, she had not given any option within the meaning of S.6(1A)(b). Therefore in terms of Sections 6(1A)(b) of the Act the entire taxable turn over of the appellant which was otherwise exempted, could not be taxed under the said provision, it is submitted. 2. On the other hand, the appellant is subjected to penalty under Section 72 of the Act. According to the appellant notices were issued proposing to tax the entire taxable turnover for the monthly periods and the appellant filed reply. The reply is produced as Ext.P1. In the said reply appellant stated that for the tax which is collected for various return periods, the appellant offered to pay the collected amount with interest and she paid the amount by cheque for a sum of Rs.37,000/- and odd. But, disregarding the law and acting illegally, the appellant was assessed for the entire turnover by the officer to tax invoking Sections 6(1A)(b) of the Act. W.A. No. 1763 OF 2012 :3 : 3. The learned Single Judge did not accept the challenge to the impugned assessments. The learned Single Judge took note of the conduct of the appellant in not responding to the notice except filing the reply. In other words, the appellant's conduct in not making good her contentions was emphasized. It is further reasoned that the appellant did not also remit the tax in terms of the interim order passed. 4. We have heard the learned counsel for the appellant and the learned Government Pleader. The learned Government Pleader would fairly admit before us that as could be seen from the records, the enquiry reveals that the appellant has not given any written option. Section6(1)(A)(b) reads as follows. “where the sale of any goods in exempted at the point of sale by any dealer, such dealer may, at his option, pay tax in respect of the sale of such goods and thereupon he shall, whatever be his total turnover, be liable to pay tax on the W.A. No. 1763 OF 2012 :4 : taxable turnover for the year”. The appellant relied on Rule 10A of the VAT Rules. It reads as follows: \"10A. Filing of option for collection and payment of tax:- Every dealer opting to pay tax in accordance with the provisions of sub-section (1A) of Section 6 shall file application in Form IF before the assessing authority. The option shall be deemed to have been accepted by the assessing authority as and when the assessing authority acknowledges the receipt of such application.” 5. There is no reference to the reply of the appellant which was also adverted to. Thereafter we notice that reference is made to the tax which was apparently collected by the appellant for each return period. Credit is given to the same and the entire taxable turnover was assessed and the entire amount was brought to tax. This, we would think, is in keeping with the mandate of Section 6(1)(A)(b) which declares that if a person is W.A. No. 1763 OF 2012 :5 : entitled to exemption and if he opts to collect tax, he shall be liable to pay tax on the entire taxable turnover. Thus, a reading of the impugned orders(Exts.P2 to P6) would show that the officer has invoked S.6(1A)(b) and it is accordingly that the entire taxable turnover is brought to tax. 6. The learned Government Pleader, no doubt, made an attempt to justify the action of the Assessing Officer with reference to S.22. In other words, he would remind us that erroneous citing of a provision cannot take away the validity of the order if it can be legally premised on other provisions of law available to the officer. Admittedly, he has in mind the provisions of S.22 which entitles the officer to assess the party to the best of its judgment. 7. In a case where no return is filed or return is incorrect notice is necessary. The appellant has not produced the notice. Learned counsel for the appellant would submit a search for the notice in the files made by the appellant was futile and no notice W.A. No. 1763 OF 2012 :6 : could be retrieved by her. We are of the view that the appellant is justified in contending that appellant cannot be taxed for the entire taxable turnover. The appellant has not given any option under Section S.6(1A)(b) which contemplates giving of an option. The rule made (Rule 10A) clearly contemplates giving of a written option. Unless there is written option, even if a person who is otherwise entitled to exemption by mistake or otherwise collects tax S.6(1A)(b), it will not entitle the officer to tax the entire taxable turnover. In other words, if a person is entitled to exemption and for a portion of the turnover he has collected tax without having given a written option within the meaning of Section 6(1)(A)(b) read with Rule 10A, recovery cannot be made by invoking the powers available under Section S.6(1A)(b). In the facts of this case, admittedly there is no option. Therefore, invoking Section 6(1)(A)(b) it would be clearly illegal. 8. Learned counsel would contend that actually the entire tax which has been directed to be paid by the interim W.A. No. 1763 OF 2012 :7 : order under protest was actually paid and only by mistake the same could not be brought to the notice of the Court when the reply affidavit was filed. What ever that be, we feel that the appellant cannot be penalised by a patent illegality. The illegality goes to the root of the matter as the officer would stand deprived of his jurisdiction under Section S.6(1A)(b) unless there is a written option. In such a situation notwithstanding the fact that the appellant did not in fact appear after filing the reply, the order as passed would leave us in little doubt that it was S.6(1A)(b) that was invoked. In such circumstances we are inclined to allow the appeal. 9. As far as Ext.P7 is concerned it relates to a period after he started using machinery depriving the appellant the benefit of such section. Hence, we set aside the judgment of the learned Single Judge and allow the Writ Appeal as follows. Exts.P2 to P6 will stand quashed. We make it clear that the this judgment will not stand in the way of the Assessing W.A. No. 1763 OF 2012 :8 : Officer proceeding against the appellant if the law otherwise warrants such proceedings. SD/- K.M.JOSEPH, JUDGE. SD/- BABU MATHEW P. JOSEPH, JUDGE. ul/- [True copy] P.S. to Judge. "