TaxTMI 
TaxTMI 
2020 (6) TMI 141
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....er "KVAT Act").The assessee on 31.03.2010 closed down the branch at Thiruvalla and from the next assessment year the business is carried on from the Head Office and two branches. 3. The assessee for the year 2010-11 applied for compounding and the issue is said to be pending before the Tribunal in appeal. The Department maintains that the compounded tax to be paid by the assessee is at the percentage prescribed of the tax paid in the previous year, ie, 2009-10 which included the Head Office and three branches. In the year 2011-12 and 2012-13 the assessee again applied for compounding and the same was permitted. The assessee had made an application excluding that portion of the tax paid, attributable to the Thiruvalla Branch for the year 2009-10; in the year 2010-11. The assessee was permitted to pay tax under the compounded provision by Exts.P1 and P1(a) orders dated 13.12.2011 and 04.08.2012. Later notice was issued under Section 25(1) of the KVAT Act and Exts. P4 and P4(a) orders were passed for the two consecutive years including that portion which was excluded in the previous year, for the purpose of determining the tax payable under the compounding scheme for the years under ....
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....s also the provisions of the Act, it was categorically held that even if the assessee is permitted to pay tax under the compounding provision, there could necessarily be an assessment determining the actual amounts payable under the compounding provision. This would not detract from the principle of there being a binding contract between the assessee and the department; which is on the aspect of compounding, from which neither can resile from. The binding nature of the agreement between the assessee and the department is insofar as neither being permitted to resile from the compounding provision so as to attempt a regular assessment adopting the complicated process of examination of books of accounts and records. 7. The learned counsel for the assessee Sri.Harisankar V Menon while accepting the said position however, draws a caveat insofar as the compounding provision not intending to tax an assessee more than that, what would necessarily and legally follow from Section 6 which is the charging section. An alternate mode of assessment would not enable the State to levy more tax than that due under the charging provision. It is argued that if the payment under Section 6 was adopted ....
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....at available in the amended section 8(f)(i) in 2014. As it existed in the subject assessment years: Explanation 8:- Where a dealer who had opted and paid tax under this clause during previous years with respect to a branch that had remained closed during the whole of the year 2009-10, for the purpose of determining the compounded tax payable for 2010-2011, the tax paid in respect of that branch shall not be reckoned. Explanation relied on as it existed after the amendment in the year 2014 Explanation 3. Where a dealer paying tax under this clause, closes a branch during the year under option, proportionate reduction considering the number of business places, in the payment shall be granted in the next monthly instalment onwards, for the remaining months of the year". 11. We are unable to agree with the learned Single Judge that Explanation 3 as available in the amended Section 8(f) is clarificatory, for more than one reason. The Hon'ble Supreme Court in Allied Motors (supra) was concerned with a proviso inserted to remedy unintended consequences and make the provision workable which also was held to be supplying an omission in the provision. Section 43B of the Income Tax....
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.... of Section 8 was substituted in its entirety with six explanations where as the original clause (f) had eight explanations. If Explanation 3 in the new clause (f), as introduced in 2014, is found to be clarificatory, it has to be bodily taken out of the amended provision and placed in the un-amended clause (f) which is not a permissible exercise. The Explanation in the amended clause(f) applies to that provision and not to the earlier one. Clause (f) as amended in 2014 can only apply prospectively and the Explanations therein are intended at explaining the meaning and intendment of the section itself, to clarify any obscurity or vagueness thereat, to make meaningful and workable the dominant object of that particular provision and not do any or all of these with respect to the un-amended provision, which had all-together different explanations [S.Sundaram Pillai v. V.R.Pattabiraman (1985 1 SCC 591)]. 13. The fact that in the year 2014 the provision was substituted also would not have the effect of it being retrospective. A Division Bench of this Court in 2018 (3) KLT 877 [Commercial Tax Officer v. Najeem] held that it is not an irrefutable rule that a substitution is invariably r....
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....y from October would be reduced insofar as that portion being excluded. If in the subsequent year 2012-13, the very same provision existed, there could be no reduction claimed insofar as the tax liability for the previous year with respect to the closed branch up to September, 2010; though that branch is not functioned in that subsequent year; which then becomes the year under option. 15. Explanation 3, of the amended Section 8(f) if available in the year 2011-12 and 2012-13 would not enable a reduction insofar as the determination of the quantum of the tax payable under the compounding provision for the year under option merely for reason of the closure of the business in the previous year, which in the present case is on the last date of closure, ie, 31st of March. Explanations, of the year 2014, speak only of a closure in the year of option and does not reckon a closure in the previous year. 16. We also have to take into account the argument of the learned Counsel that under a compounding provision what is not exigible under regular assessment cannot be taken into account. If a regular assessment had been resorted to definitely there would have been no liability with respect t....
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....d no escape from paying tax on the basis of the earlier turnover since that was an alternate mode available to the assessee for which the assessee had voluntarily opted with open eyes. 18. Now, we have to look at whether the Explanation as available in the relevant years under the un-amended Section 8(f) was absurd or unworkable. Explanation 8 as extracted herein above only provided for deduction of the business of a branch which had remained closed during the whole of the year 2009-10. There is no absurdity in the provision nor can it be found unworkable. Hardship, definitely could be pleaded but is no ground against the taxing statute especially one which provided an alternate mode from that of the rigour of a regular assessment which also was available as an alternative option. The assessee had a choice not to opt under the compounding provision. Having so opted, he cannot plead hardship and seek modification of the very computation provided in the alternate mode. 19. The option available was very clear insofar as the tax payable under the compounding scheme to be at a percentage above the tax liability of the previous year. The assessee with open eyes applied under the scheme....