BHIMA JEWELLERY Vs. ASSISTANT COMMISSIONER

JUDGEMENT

(1.) The petitioner is a dealer in gold ornaments registered under the Kerala General Sales Tax Act, 1963, hereinafter called the "Act", before the first respondent. The Jewellery made of gold, silver and platinum group metals and articles made of such metals are taxable at the point of first sale in the State at the rate of four per cent as provided under Item 75 of the First Schedule to the Act. However, the petitioner has opted to pay tax at compounded rate under Sec. 7(1) of the Act. The said Sec. With the explanations and provisions applicable to this case are extracted hereunder for easy reference : 7. Payment of tax at compounded rates :- (1) Notwithstanding anything contained in sub-section (1) of Sec. 5, (a) any dealer in gold or silver ornaments or wares, may, at his option instead of paying tax in accordance with the provisions of that sub-section, pay tax at one hundred and fifty per cent of the tax payable by him as conceded in the return or accounts for the immediate preceding year. Explanation :- For the purpose of this clause "tax payable as conceded in the return or account for the immediate preceding year" means tax payable on the sales turnover under sub-sec. (1) of Sec. 5 and the tax payable on the purchase turnover under sec. 5A : Provided that where during the preceding year, the dealer had not transacted business for any period the tax payable for the whole year shall be calculated proportionately on the basis of the tax payable for the period during which such dealer had transacted business : Provided further that where a dealer has paid tax under this sub-section for the preceding year, the compounded tax to be paid by him for the succeeding year shall be one hundred and twenty per cent of such tax paid or one hundred and twenty per cent of the tax payable as per the return or accounts of the dealer for the preceding year whichever is higher. Provided also that where such dealer has paid compounded tax consecutively for a period of three years the compounded tax payable for the succeeding year shall be one hundred and fifteen per cent, and in the case of a dealer who has paid compounded tax consecutively for a period of five years, the compounded tax payable for the succeeding year compounded tax paid or payable by him for the immediate preceding year. Provided also that where such a dealer acquires any running business or a branch of a business with respect to gold, the amount of compounding tax payable in respect of such business shall be calculated in accordance with the provisions of this clause as if it were an independent business, taking into account the turnover conceded in the return or accounts thereof for the previous year with respect to that business or on the basis of the quantum of compounded tax fixed for the previous year in accordance with the second and third provisos, as the case may be. Provided also that where a dealer paying tax in accordance with the provisions of this sub-section opens a new branch during a year, such branch shall be treated as if it were an independent place of business and the provisions of this sub-section shall apply to it accordingly. . There is no dispute with regard to tax payable by the petitioner on the gold ornaments as provided in the above said schedule. However, the petitioner's objection is against the demand of additional sales tax by the first respondent on the tax payable by the petitioner at compounded rate under sec. 5D introduced to the Act by Act 7 of 2001 w.e.f. 23.7.2001. Though the proviso to the said Section, as originally enacted, provided that levy would be only upto 31.3.2002, there is a budget proposal in the budget presented for this year to continue the levy for the next financial year also. The petitioner paid additional sales under the said section in addition to payment of tax at compounded rate under section 7(1) along with monthly returns filed for July and August, 2001. However, since the petitioner discontinued the payment for September and October 2001, the first respondent issued demand in form 14 D prescribed under Rule 21(10) of the KGST Rules demanding additional sales tax for the said two months. The petitioner has produced notices in form 14D received for September and October 2001 and marked them as Exts. P2 and P3 respectively. The contention of the petitioner is that since the petitioner has no liability either under sec. 5 or Sec. 5A of the Act, and since the petitioner is paying tax at compounded rate under Sec. 7(1) of the Act, the petitioner has no liability to pay additional sales tax provided under Section 5D of the Act, which applies only to tax payable under Sec. 5 and 5A of the Act. The alternate contention raised by the petitioner is that the demand of additional sales tax by issuing Form 14D is not authorized under the Act because the liability is not admitted in the returns filed and if the first respondent ever wanted to levy additional sales tax, the same should have been done after completing the assessment either provisional or regular after observing the procedural formalities provided under the Act. In other words according to him, for liability under sec. 5D of the Act, the impugned demand notices are unsustainable for want of proper assessment justifying the demand.

(2.) I heard learned counsel appearing for the petitioner, Dr. Mohamed Kutty, and Sri. Raju Joseph, Special Government Pleader for Taxes, appearing for the State.

(3.) Since the dispute is with regard to liability under section 5D, the section is extracted hereunder for easy reference : 5D. Levy Additional Sales Tax :- The tax payable under Section 5 and Section 5A shall be increased by an additional sales tax at the rate of fifteen per cent of the tax payable under the said sections : Provided that no additional sales tax under this Section shall be levied :-