2022 (1) TMI 1009 - HC - VAT and Sales Tax

Court prioritizes deposit adjustment, clarifies interest under Section 23(3A) KGST Act, rejects merger of assessment orders.

STATE OF KERALA Versus THE MALAYALA MANORAMA COMPANY LTD.

STATE OF KERALA Versus THE MALAYALA MANORAMA COMPANY LTD. - [2022] 96 G S.T.R. 318 (Ker) Issues Involved:1. Adjustment of deposited amount against interest or tax due.2. Applicability and calculation of interest under Section 23(3A) of the KGST Act.3. Legality of the assessment orders and subsequent rectification orders.4. Merger of assessment orders with rectified orders.Issue-wise Detailed Analysis:1. Adjustment of Deposited Amount Against Interest or Tax Due:The primary controversy was whether the amount deposited by the dealer should be credited first to the interest due or the tax due. The dealer argued that the amount deposited should be credited to the tax due, as the assessment orders did not stipulate interest for non-payment or delayed payment of tax. The Tribunal accepted the dealer's contention and allowed the appeal, leading to the revision by the Department. The court referred to the Full Bench judgment in 'State of Kerala v. Western India Cosmetic and Health,' which clarified that interest is compensatory and payable from the date the tax would have been due. The judgment emphasized that the adjustment of deposited amounts should first cover interest due, followed by tax arrears.2. Applicability and Calculation of Interest Under Section 23(3A) of the KGST Act:The court examined whether interest under Section 23(3A) is automatic and compensatory. It was noted that interest is payable from the date the tax would have been due, had the dealer included the turnover in the return filed. The court rejected the dealer's argument that interest should not be charged if the turnover was fully returned but misclassified. The court held that the amendment to Section 23(3A) was clarificatory, ensuring that interest is payable on omitted taxable turnover or misclassified goods. The court overruled previous judgments that contradicted this interpretation and affirmed that interest under Section 23(3A) is automatic and does not require a separate order.3. Legality of the Assessment Orders and Subsequent Rectification Orders:The court noted that the original assessment orders dated 05.01.2007 were substantially changed by subsequent orders. The dealer's appeals led to the rectification of these orders, and the legality of the assessments was reconsidered. The court emphasized that the original assessment orders were substantially altered by the rectified orders, and the adjustments made by the Assessing Officer were not in line with the principles established in the 'Western India Cosmetic and Health' case.4. Merger of Assessment Orders with Rectified Orders:The court addressed whether the assessment orders merged with the rectified orders. It was clarified that the assessment orders considered by the first appellate authorities and the rectified orders under Annexure-A were different, and hence, the question of merger did not arise. The court provided a tabulated comparison of the dates of the original assessment orders and the rectified orders, demonstrating that they were distinct and separate.Conclusion:The court set aside the findings of the Tribunal and followed the judgment in 'Western India Cosmetic and Health' regarding the calculation and adjustment of the deposited amount. The court directed the Assessing Officer to reassess the tax payable or refundable to the dealer, considering the final view expressed in the 'Western India Cosmetic and Health' case and the judgment dated 05.12.2017 in W.A. No.1035/2006. The S.T. Revisions were allowed, and the Assessing Officer was given liberty to work out the tax or refund accordingly.