THE STATE OF KERALA vs. M/S. KAY CEES JEWELLERY,

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR & THE HONOURABLE DR. JUSTICE KAUSER EDAPPAGATH THURSDAY, THE 21ST DAY OF MARCH 2024/1ST CHAITHRA, 1946 O.T.REV NO.83 OF 2018 AGAINST THE ORDER DATED 15.02.2018 IN T.A.(VAT).NO.121 OF 2016 OF KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, ERNAKULAM REVISION PETITIONER/APPELLANT/RESPONDENT/REVENUE: THE STATE OF KERALA REPRESENTED BY THE DEPUTY COMMISSIONER (LAW), COMMERCIAL TAXES, ERNAKULAM. BY SRI.V.K. SHAMSUDHEEN, SR. GOVERNMENT PLEADER RESPONDENT/RESPONDENT/APPELLANT/ASSESSEE: M/S. KALYAN JEWELLERS INDIA (P) LTD. SITHARAM MILL ROAD, POONKUNNAM, THRISSUR-680002 BY ADV.SRI.SANTHOSH P.ABRAHAM THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR HEARING ON 21.03.2024 ALONG WITH O.T.REV.NO.124 OF 2020 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

O.T. Rev.Nos.83/2018 O.T. Rev.Nos.124, 140, :: 2 :: 147 & 156 of 2020 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR & THE HONOURABLE DR. JUSTICE KAUSER EDAPPAGATH THURSDAY, THE 21ST DAY OF MARCH 2024/1ST CHAITHRA, 1946 O.T.REV.NO.124 OF 2020 AGAINST THE ORDER DATED 10.01.2020 IN T.A.(VAT).NO.454 OF 2018 OF KERALA VALUE ADDED TAX/AGRL. INCOME TAX & SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, KOZHIKODE REVISION PETITIONER/RESPONDENT/RESPONDENT/REVENUE: THE STATE OF KERALA REP.BY THE JOINT COMMISSIONER OF STATE TAX (LAW), DEPARTMENT OF KERALA STATE GOODS AND SERVICE TAX, ERNAKULAM. BY SRI.V.K.SHAMSUDHEEN, SR. GOVERNMENT PLEADER RESPONDENT/APPELLANT/APPELLANT/ASSESSEE: M/S.KAY CEES JEWELLERY MANJERY, MALAPPURAM DISTRICT-676 121 BY ADV.SRI.K.M.FIROZ BY ADV.SRI.P.C.MUHAMMED NOUSHIQ THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR HEARING ON 21.03.2024 ALONG WITH O.T.REV.NO.83 OF 2018 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

O.T. Rev.Nos.83/2018 O.T. Rev.Nos.124, 140, :: 3 :: 147 & 156 of 2020 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR & THE HONOURABLE DR. JUSTICE KAUSER EDAPPAGATH THURSDAY, THE 21ST DAY OF MARCH 2024/1ST CHAITHRA, 1946 O.T.REV.NO.140 OF 2020 AGAINST THE ORDER DATED 10.01.2020 IN T.A.(VAT).NO.455 OF 2018 OF KERALA VALUE ADDED TAX/AGRL. INCOME TAX & SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, KOZHIKODE REVISION PETITIONER/RESPONDENT/RESPONDENT/REVENUE: THE STATE OF KERALA REPRESENTED BY THE JOINT COMMISSIONER OF STATE TAX (LAW), DEPARTMENT OF KERALA STATE GOODS AND SERVICE TAX, ERNAKULAM. BY SRI.V.K.SHAMSUDHEEN, SR. GOVERNMENT PLEADER RESPONDENT/APPELLANT/APPELLANT/ASSESSEE: M/S.KAY CEES JEWELLERY MANJERY, MALAPPURAM DSITRICT 676 121 BY ADV.SRI.K.M.FIROZ BY ADV.SMT.M.SHAJNA BY ADV.SRI.P.C.MUHAMMED NOUSHIQ BY ADV.SMT.JAHANA SHERIN.K THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR HEARING ON 21.03.2024 ALONG WITH O.T.REV.NO.83/2018 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

O.T. Rev.Nos.83/2018 O.T. Rev.Nos.124, 140, :: 4 :: 147 & 156 of 2020 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR & THE HONOURABLE DR. JUSTICE KAUSER EDAPPAGATH THURSDAY, THE 21ST DAY OF MARCH 2024/1ST CHAITHRA, 1946 O.T.REV.NO.147 OF 2020 AGAINST THE ORDER DATED 10.01.2020 IN T.A.(VAT).NO.457 OF 2018 OF KERALA VALUE ADDED TAX/AGRL. INCOME TAX & SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, KOZHIKODE REVISION PETITIONER/RESPONDENT/RESPONDENT/REVENUE: THE STATE OF KERALA REPRESENTED BY THE JOINT COMMISSIONER OF STATE TAX (LAW), DEPARTMENT OF KERALA STATE GOODS AND SERVICE TAX, ERNAKULAM. BY SRI.V.K.SHAMSUDHEEN, SR. GOVERNMENT PLEADER RESPONDENT/APPELLANT/APPELLANT/ASSESSEE: M/S. KAY CEES JEWELLERY, MANJERY, MALAPPURAM DISTRICT-676121. BY ADV.SRI.K.M.FIROZ BY ADV.SMT.M.SHAJNA BY ADV.SRI.P.C.MUHAMMED NOUSHIQ BY ADV.SMT.JAHANA SHERIN.K THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR HEARING ON 21.03.2024 ALONG WITH O.T.REV.NO.83/2018 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

O.T. Rev.Nos.83/2018 O.T. Rev.Nos.124, 140, :: 5 :: 147 & 156 of 2020 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR & THE HONOURABLE DR. JUSTICE KAUSER EDAPPAGATH THURSDAY, THE 21ST DAY OF MARCH 2024/1ST CHAITHRA, 1946 O.T.REV.NO.156 OF 2020 AGAINST THE ORDER DATED 10.01.2020 IN T.A.(VAT).NO.456 OF 2018 OF KERALA VALUE ADDED TAX/AGRL. INCOME TAX & SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, KOZHIKODE REVISION PETITIONER/RESPONDENT/RESPONDENT/REVENUE: THE STATE OF KERALA REPRESENTED BY THE JOINT COMMISSIONER OF STATE TAX (LAW) DEPARTMENT OF KERALA, STATE GOOS AND SERVICE TAX, ERNAKULAM BY SRI.V.K.SHAMSUDHEEN, SR. GOVERNMENT PLEADER RESPONDENT/APPELLANT/APPELLANT/ASSESSEE: M/S. KAY CEES JEWELLERY, MANJERY, MALAPPURAM DISTRICT-676 121. BY ADV.SRI.K.M.FIROZ BY ADV.SMT.M.SHAJNA BY ADV.SRI.P.C.MUHAMMED NOUSHIQ BY ADV.SMT.JAHANA SHERIN.K THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR ADMISSION ON 21.03.2024 ALONG WITH O.T.REV.NO.83/2018 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

O.T. Rev.Nos.83/2018 O.T. Rev.Nos.124, 140, :: 6 :: 147 & 156 of 2020 'C.R.' O R D E R Dr. A.K. Jayasankaran Nambiar, J. As all these O.T. Revisions deal with a common issue, they are taken up together for consideration and disposed by this common order. 2. The State of Kerala, who is the petitioner in all these O.T. Revisions, has raised the following substantial questions of law: (a) Whether on the facts and the circumstances of the case the Appellate Tribunal has erred in law in holding that even though the respondent has collected tax at the rate in excess of the rate permitted, the said collection cannot said to be excess collection, since the tax liability of the respondent is higher than the tax so collected? (b) Whether in the facts and circumstances of the case the Appellate Tribunal ought to have held that in the case of collection of tax in excess of rate permitted the respondent has to pay the said excess collected tax with interest to the Government, even if the tax liability of the respondent is higher than the tax so collected? 3. The respondents/assessees in these Revisions had opted to pay tax at the compounded rate provided under Section 8(f) of the Kerala

O.T. Rev.Nos.83/2018 O.T. Rev.Nos.124, 140, :: 7 :: 147 & 156 of 2020 Value Added Tax Act [hereinafter referred to as the “KVAT Act”]. The assessment years for which they had preferred the option were 2011-12 to 2014-15 in the case of the respondents in O.T. Revision Nos.124, 140, 147 and 156 of 2020 and assessment year 2014-15 in the case of the respondent/assessee in O.T. Revision No.83 of 2018. It would appear that while the respondents/assessees paid tax in accordance with the formula prescribed under Section 8(f), they collected tax at rates in excess of what was prescribed under the proviso/table under Section 8(f). The details of the tax collected by the respondents/assessees in O.T. Revision Nos.124, 140, 147 and 156 of 2020 are given in the table below: Year Turnover reported Tax eligible to collect Compounded tax fixed Tax collected 2011 - 12 35,96,898 44,961 (@1.25%) 2,68,068 1,43,800 2012 - 13 42,48,023 53,100 (@1.25%) 3,05,232 1,71,283 2013 - 14 36,44,771 45,560 (@1.25%) 3,32,703 1,45,749 2014 - 15 25,47,321 26,237 (@1.03%) 3,42,684 1,02,252 4. Similarly, the details of the tax collected by the respondent/assessee in O.T. Revision No.83 of 2018 is as follows:

O.T. Rev.Nos.83/2018 O.T. Rev.Nos.124, 140, :: 8 :: 147 & 156 of 2020 Month Tax collected Tax to be collected @ 1.15% (Rs.) Excess collected (Rs.) April 24382480.00 22355410.00 2027070.00 May 27124257.00 24931242.00 2193015.00 June 19778517.00 18196339.00 1582178.00 July 15366028.00 14635020.00 731008.00 Total 86651282.00 80118011 6533271.00 It will be apparent from the above tables that the respondents/assessees had collected tax at rates higher than what was prescribed under Section 8(f). The Department therefore initiated action against them for recovery of the excess amounts collected by them by relying on the statutory provisions which made it clear that a dealer who opts for payment of tax under Section 8(f) may collect tax at the rate as shown in the table/proviso but where the tax so collected during the year is in excess of the tax payable for the year under the clause, the tax collected in excess shall be paid over to the Government in addition to the tax payable under the said clause. 5. Before the Appellate Tribunal, the case of the respondents/assessees was essentially that notwithstanding the fact that they had collected tax from their purchasers at rates higher than

O.T. Rev.Nos.83/2018 O.T. Rev.Nos.124, 140, :: 9 :: 147 & 156 of 2020 what was prescribed under the Section, inasmuch as the total tax collected by them from their purchasers was less than the tax that was payable by them under the said Section, there was no requirement for payment of the excess tax collected to the Government. The said contention appears to have appealed to the Appellate Tribunal which found in favour of the respondents/assessees on the said aspect and held that inasmuch as the tax collected by the assessees never exceeded the compounded tax payable by them, there was no obligation on them to pay the excess amounts collected to the Government. It is impugning the said finding by the Appellate Tribunal in the orders impugned in these O.T. Revisions, that the State has approached this Court. 6. We have heard Sri.V.K.Shamsudheen, the learned Government Pleader for the petitioner and Sri.K.M.Firoz, the learned counsel for the respondents/assessees in these Revision Petitions. 7. On a consideration of the rival submissions, we find ourselves unable to accept the interpretation of the Appellate Tribunal of the provisions of Section 8(f). The proviso to Section 8(f)/Section 8(f)(iii) deals with a situation where a dealer in bullion or ornaments or wares or articles of gold, silver or platinum group metals including

O.T. Rev.Nos.83/2018 O.T. Rev.Nos.124, 140, :: 10 :: 147 & 156 of 2020 diamond, who has chosen to pay tax at the compounded rate under Section 8 of the KVAT Act, in lieu of the normal rate under Section 6 of the KVAT Act, is permitted to collect tax from the person to whom he has sold goods at the prescribed rate. The second limb of the said provision clarifies that if the tax so collected during the year is in excess of the tax payable for the year then the tax collected in excess shall be paid over to the Government in addition to the tax payable under Section 8(f). Here, the words “tax so collected” appearing in the second limb assumes importance. In our view, it must be seen as a reference to the tax that is permitted to be collected under the first limb of the provision namely, tax at the rate prescribed therein. Thus, if a dealer collects tax at a rate different from the rate prescribed in the first limb of the proviso/Section 8(f)(iii), then it would not answer to the description of “tax so collected” for attracting the second limb of the provision. It is apparent therefore that the finding of the Appellate Tribunal, in the orders impugned in these O.T. Revisions, are contrary to the express provisions of Section 8(f)(iii)/proviso to Section 8(f).

O.T. Rev.Nos.83/2018 O.T. Rev.Nos.124, 140, :: 11 :: 147 & 156 of 2020 of the KVAT Act can nevertheless collect tax as per the rates indicated in Section 6 by invoking the provisions of Sections 30(1) and (2) of the KVAT Act. Section 30(1) and (2) of the KVAT Act read as under: “30. Collection of tax by dealers:- (1) A registered dealer may, subject to the provisions of sub-sections (2) and (3), collect tax at the rates specified under section 6, on the sale of any goods, from the person to whom he sells the goods and pay it over to Government in such manner as may be prescribed. (2) Dealers registered under this Act, except those dealers paying presumptive tax under sub section (5) of section 6 and those paying tax under clause (a) of section 8 by those undertaking works of Government of Kerala, Kerala Water Authority and Local Authorities, and under clause (b), clause (c) (ii) and clause (d) of section 8, alone shall be eligible to collect any sum by way of, or purporting to be by way of tax under this Act: Provided that the dealers who are paying tax under sub- section (5) of section 6 are entitled to recover from the buyers the amount of tax paid by him on the purchase value of such goods at the time of purchase.” 9. Section 30(1) clearly envisages a situation where a registered dealer is permitted to collect tax at the rates specified in Section 6. Thus, the provision, even if it applies in respect of registered dealers who pay tax under Section 8, cannot apply to cases where the dealer is permitted to collect tax only at the rates specified under Section 8. That apart, even if such a dealer collects tax at the rate specified under Section 6, he is obliged in terms of Section 30(1) of the KVAT Act to pay it over to the Government since there is no provision similar to the proviso to Section 8(f)/Section 8(f)(iii), in

O.T. Rev.Nos.83/2018 O.T. Rev.Nos.124, 140, :: 12 :: 147 & 156 of 2020 Section 30(1) of the KVAT Act. Thus, in any view of the matter, we find that the order of the Appellate Tribunal impugned in these Revisions cannot be legally sustained. We therefore allow these O.T. Revisions, by setting aside the impugned orders of the Appellate Tribunal and answering the questions of law in favour of the Revenue and against the assessees. The O.T. Revisions are allowed as above.

Sd/- DR. A.K.JAYASANKARAN NAMBIAR JUDGE Sd/- DR. KAUSER EDAPPAGATH JUDGE

prp/22/3/24

O.T. Rev.Nos.83/2018 O.T. Rev.Nos.124, 140, :: 13 :: 147 & 156 of 2020 APPENDIX OF O.T.REV.NO.83/2018 PETITIONERS ANNEXURES: ANNEXURE A A TRUE COPY OF THE ORDER DATED 30.11.2015 PASSED BY THE ASSESSING AUTHORITY. ANNEXURE B A TRUE COPY OF THE ORDER PASSED BY THE FIRST APPELLATE AUTHORITY IN KVAT NO.2652/2015 DATED 22.01.2016. ANNEXURE C CERTIFIED COPY OF THE ORDER PASSED BY THE KVAT APPELLATE TRIBUNAL, ERNAKULAM DATED 15.2.2018 IN TA(VAT)NO.121/2016. RESPONDENTS ANNEXURES: NIL. //TRUE COPY// P.S. TO JUDGE

O.T. Rev.Nos.83/2018 O.T. Rev.Nos.124, 140, :: 14 :: 147 & 156 of 2020 APPENDIX OF O.T.REV.NO.124/2020 PETITIONER ANNEXURES: ANNEXURE A TRUE COPY OF THE ASSESSMENT ORDER DATED 8.4.2016 FOR THE ASSESSMENT YEAR 2011-12. ANNEXURE B TRUE COPY OF THE 1ST APPELLATE ORDER DATED 21.3.2017 PASSED BY THE ASSISTANT COMMISSIONER (APPEALS), MALAPPURAM. ANNEXURE C RESPONDENTS ANNEXURES: NIL. CERTIFIED COPY OF THE ORDER PASSED BY THE APPELLATE TRIBUNAL IN TA(VAT) NOS.454 TO 457 OF 2018 DATED 10.1.2020. //TRUE COPY// P.S. TO JUDGE

O.T. Rev.Nos.83/2018 O.T. Rev.Nos.124, 140, :: 15 :: 147 & 156 of 2020 APPENDIX OF O.T.REV.NO.140/2020 PETITIONER ANNEXURES: ANNEXURE A TRUE COPY OF THE ASSESSMENT ORDER DATED 12.04.2016 FOR THE ASSESSMENT YEAR 2012-13. ANNEXURE B TRUE COPY OF THE 1ST APPELLATE ORDER DATED 21.03.2017 PASSED BY THE ASSISTANT COMMISSIONER (APPEALS), MALAPPURAM. ANNEXURE C RESPONDENTS ANNEXURES: CERTIFIED COPY OF THE ORDER PASSED BY THE APPELLATE TRIBUNAL IN TVAT NOS. 454 TO 457 OF 2018 DATED 10.01.2020. NIL. //TRUE COPY// P.S. TO JUDGE

O.T. Rev.Nos.83/2018 O.T. Rev.Nos.124, 140, :: 16 :: 147 & 156 of 2020 APPENDIX OF O.T.REV.NO.147/2020 PETITIONER ANNEXURES: ANNEXURE A TRUE COPY OF THE ASSESSMENT ORDER DATED 12.04.2016 FOR THE ASSESSMENT YEAR 2014- 15. ANNEXURE B TRUE COPY OF THE 1ST APPELLATE ORDER DATED 21.03.2017 PASSED BY THE ASSISTANT COMMISSIONER (APPEALS) MALAPPURAM. ANNEXURE C RESPONDENTS ANNEXURES: CERTIFIED COPY OF THE ORDER PASSED BY THE APPELLATE TRIBUNAL IN TA(VAT)NOS.454 TO 457 OF 2018 DATED 10.01.2020. NIL. //TRUE COPY// P.S. TO JUDGE

O.T. Rev.Nos.83/2018 O.T. Rev.Nos.124, 140, :: 17 :: 147 & 156 of 2020 APPENDIX OF O.T.REV.NO.156/2020 PETITIONER ANNEXURES: ANNEXURE A TRUE COPY OF THE ASSESSMENT ORDER DATED 12.4.2016 FOR THE ASSESSMENT YEAR 2013-14 ANNEXURE B TRUE COPY OF THE 1ST APPELLATE ORDER DATED 21.3.2017 PASSED BY THE ASSISTANT COMMISSIONER (APPEALS), MALAPPURAM. ANNEXURE C RESPONDENTS ANNEXURES: NIL. CERTIFIED COPY OF THE ORDER PASSED BY THE APPELLATE TRIBUNAL IN TA(VAT) NOS.454 TO 457 OF 2018 DATED 10.1.2020. //TRUE COPY// P.S. TO JUDGE