M/S.Pavanapuri Builders vs. Assistant Commissioner (Works Contract)

J U D G M E N T The petitioner, a partnership firm, is aggrieved by Exts.P5 and P5(a) orders passed under Section 25(1) of the Kerala Value Added Tax Act [KVAT Act] for the assessment years 2011-12 and 2012-13. By the said orders, a differential tax demand was made on the petitioner for the assessment years in question by applying the higher rate of tax of 12.5%/13.5% on the turnover that was conceded by the petitioner, along with the revised return that was filed by the petitioner while compounding an offence relating to suppression of turnover. It is the case of the petitioner that while, initially, the assessments for the said years were completed by accepting the returns filed by the petitioner, under Section 8(a)(i) of the KVAT Act and accepting payment of tax @ 3% on the turnover declared, a case of suppression of turnover came to be initiated against the petitioner and proposal for levy of penalty was also served on the petitioner. The petitioner then sought permission of this Court to revise his returns to include the suppressed turnover also and thereafter compounded the offence

W.P.(C).No.12137/2019 : 3 : departmentally under Section 74 of the KVAT Act. While compounding the offence, the petitioner also paid the tax on the suppressed turnover at the rate applicable to assessments completed under Section 8(a)(i) namely, 3%. It is stated that thereafter, the respondents issued Exts.P5 and P5(a) orders, completing the assessment under Section 25(1) of the KVAT Act for the same year by adopting the regular method of assessment and consequently, the higher rate of tax on the suppressed turnover. It is the case of the petitioner that the action of the department is contrary to the decision of a Division Bench of this Court in Silver Line Villas and Apartments Pvt. Ltd. v. State of Kerala - [2017 (2) KLT 770] as also the judgment dated 16.11.2017 of this Court in R.P.No.865/2017 in W.P.(C).No.33259/2016. 2. A counter affidavit has been filed on behalf of the 1st respondent refuting to the averments in the writ petition. A reply affidavit has also been filed by the petitioner to counter the statements in the counter affidavit of the respondents.

W.P.(C).No.12137/2019 : 4 : On a consideration of the facts and circumstances of the case as also the submissions made across the bar, I find from a perusal of the judgments referred above that the issue is now squarely covered in favour of the petitioner by the said judgments. In the last mentioned judgment, while dealing with the applicability of the Division Bench judgment to a case where the assessee had not declared the correct turnover in the returns originally filed under Section 8(a)(i), this Court found that the judgment of the Division Bench would apply to insulate an assessee from a fresh assessment under Section 25(1), only in cases where it was shown that the declaration made by the assessee while paying tax under Section 8(a) included the whole turnover, including the suppressed turnover. In the instant case, it is not in dispute that the petitioner had, at the time of compounding the offence of suppression of turnover, obtained permission from this Court and revised the return so as to include the suppressed turnover also for the assessment year in question. Under the said circumstances, the petitioner has to be seen as an assessee who included the suppressed turnover also in the returns filed with the Department for the purposes of payment of tax at 3% as envisaged under Section 8(a)(i) of the KVAT Act. In that event, the petitioner could be subjected to tax only at the concessional rate of 3% even on the W.P.(C).No.12137/2019 : 5 : suppressed turnover, as was done at the time of compounding of the offence alleged against the petitioner. It follows therefore that the demand of differential tax by applying a different rate of tax for the purposes of assessment under Section 6 of the KVAT Act, cannot be sustained. The writ petition is therefore allowed, by quashing Exts.P5 and P5(a) orders with consequential reliefs to the petitioner. A.K.JAYASANKARAN NAMBIAR JUDGE prp/28/10/19

W.P.(C).No.12137/2019 : 6 : APPENDIX PETITIONER'S EXHIBITS: EXHIBIT P1 COPY OF RETURN SUBMITTED FOR 2011- 12 UNDER COMPOUNDED RATE OF TAX, AS PERMITTED BY THE 1ST RESPONDENT. EXHIBIT P1(A)OF RETURN SUBMITTED FOR 2012-13 UNDER COMPOUNDED RATE OF TAX. EXHIBIT P2OF COMMON NOTICE DATED 05.03.2019 SERVED TO THE PETITIONER ON 11.03.2019,ALLOWING 15 DAYS TO FILE REPLY. EXHIBIT P2(A)OF NOTICE U/S.25(1)OF THE KVAT ACT ISSUED FOR 2012-13 ON 23.03.2019,PROPOSING

TO DEMAND HIGHER RATE OF 12.50% TAX ON RS.44,50,000/-. EXHIBIT P3OF REPLY DATED 23.03.2019 SUBMITTED BY PETITIONER AGAINST EXT P2 NOTICE FOR 2011-12 EXHIBIT P3(A)OF THE REPLY DATED 23.03.2019 SUBMITTED BY PETITIONER AGAINST EXT P2 NOTICE FOR 2012-13. EXHIBIT P3(B)OF REPLY DATED 29.03.2019 SUBMITTED BY PETITIONER AGAINST EXT P2(A)NOTICE FOR 2012-13. EXHIBIT P4OF PROOF OF DELIVERY OF EXT P3 TO 1ST RESPONDENT ON 25.03.2019. W.P.(C).No.12137/2019 : 7 : EXHIBIT P4(A)OF PROOF OF DELIVERY OF EXT P3(A) TO 1ST RESPONDENT ON 25.03.2019. EXHIBIT P4(B)OF PROOF DELIVERY OF EXT P3(B)TO 1ST

RESPONDENT

ON 29.03.2019. EXHIBIT P5OF THE ORDER FOR 2011-12 SERVED

TO PETITIONER

ON 29.03.2019,WITHOUT CONSIDERING EXT P3 REPLY. EXHIBIT P5(A)OF THE ORDER FOR 2012-13 SERVED

TO PETITIONER

ON 20.04.2019,WITHOUT CONSIDERING EXT P3(B)REPLY. EXHIBIT P6OF

CLARIFICATION NO.C3/22771/14/CT/DATED 11.11.2015 PASSED BY CLARIFYING AUTHORITY UNDER THE KVAT ACT. EXHIBIT P7OF

COMPOUNDING PROCEEDINGS DATED 02.03.2015 PASSED BY THE 2ND RESPONDENT FOR 2011-12 EXHIBIT P7(A)COMPOUNDING PROCEEDING DATED 02.03.2015 PASSED BY THE 2ND RESPONDENT FOR 2011-12 EXHIBIT P8 RESPONDENTS EXHIBITS:JUDGMENT DATED 09.02.2016 PASSED BY THIS HONOURABLE COURT IN WP(C) NO.4142 OF 2016 NIL. //// P.S. TO JUDGE