P.K.ABDUL KHADER & BROTHERS vs. THE COMMISSIONER OF INCOME TAX

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI MONDAY, THE 7TH DAY OF NOVEMBER 2022 / 16TH KARTHIKA, 1944 OT.REV NO. 3 OF 2021 AGAINST THE ORDER/JUDGMENTTAVAT 309/2016 OF AGRL.I.T.ADDITIONAL BENCH,KOZHIKODE REVISION PETITIONER/S:

RANI JEWELLERY, KAMATH LANE, PALAYAM ROAD, KOZHIKODE.

BY ADVS. R.JAIKRISHNA C.S.ARUN SHANKAR

RESPONDENT/S:

STATE OF KERALA, REPRESENTED BY DEPUTY COMMISSIONER(LAW), COMMERCIAL TAXES, THIRUVANANTHAPURAM.

BY SR.GP.V.K. SHAMSUDHEEN THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR ADMISSION ON 07.11.2022, ALONG WITH OT.Rev.180/2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI MONDAY, THE 7TH DAY OF NOVEMBER 2022 / 16TH KARTHIKA, 1944 OT.REV NO. 180 OF 2020 AGAINST THE ORDER/JUDGMENTTAVAT 315/2017 OF AGRL.I.T.ADDITIONAL BENCH,KOZHIKODE REVISION PETITIONER/S:

ARABIAN JEWELLERY,SM STREET, KOZHIKODE, REPRESENTED BY ITS MANAGING PARTNER

BY ADVS. R.JAIKRISHNA C.S.ARUN SHANKAR; P.ANISH RESPONDENT/S:

STATE OF KERALA, REPRESENTED BY DEPUTY COMMISSIONER (LAW), COMMERCIAL TAXES, THIRUVANANTHAPURAM G.P.O., THIRUVANANTHAPURAM-695 001

BY SR.GP.V.K. SHAMSUDHEEN THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR ADMISSION ON 07.11.2022, ALONG WITH OT.Rev.3/2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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O R D E R [OT.Rev Nos.3/2021, 180/2020] S.V. Bhatti, J.

We have heard Mr Jaikrishna R, learned counsel for the petitioner, and Mr V K Shamsudheen, learned Senior Government Pleader, for the respondent.

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OT Rev. 180/2021 3. Arabian Jewellery, S M Street, Kozhikode, a registered dealer is the petitioner. The State is the respondent. The Dealer is in the business of gold and gold ornaments. The Commercial Tax Officer, 2nd Circle, Kozhikode, issued notice dated 23.09.2014 under Section 25 of the KVAT Act (for short, the Act). The reassessment is supposedly on the alleged special rebate availed by the Dealer under Section 12(2) of the Act. The alleged circumstances preceding the availing of special rebate are admitted, and hence we proceed to examine the legal grounds raised by briefly narrating as under.

3.1 The Dealer for the return period 2013-14 was paying tax under Section 6 of the Act. The Dealer, with effect from 01.04.2014, opted to pay tax at compounded rate. The Dealer filed return for 2013-14 in the month of April 2014. The show- cause notice dated 23.09.2014 was issued to reverse the special

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rebate availed by the Dealer for the closing stock on 31.03.2014. The Dealer has given reply and stated that the prescription of Section 12(2) starts applying to the case of the Dealer with effect from 01.04.2014. Therefore, the proposal to reverse the special rebate claimed under Section 12(2) for the closing stock on 31.03.2014 is illegal and unsustainable. The reply further refers to whether the authorities were justified in disallowing the Dealer’s claim or special rebate of purchase tax paid under Section 6(2) of the KVAT Act on the closing stock held by the Dealer on 31.03.2014. As noted earlier, with effect from 01.04.2014, the Dealer opted for payment of compounded rate of tax. All three authorities have held that the proposal to reverse the special rebate availed is legal and tenable.

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(VAT) No.163/2016. Secondly, on a bare perusal of Section 12(2) and (4), which reads thus: “12. Special rebating in certain cases.- (1) ***

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*** (2) unregistered dealers or dealer paying presumptive tax under sub-section (5) of section 6 or dealer paying compounded tax under section 8 shall not be eligible for rebate under sub- section (1). Provided that notwithstanding anything contained in this Act, a manufacturer of medicines who have opted for payment of compounded tax under clause (e) of section 8 shall be eligible for special rebate of the tax paid under sub-section (2) of section 6 of this Act on the purchase of raw materials with effect on and from the 1st day of April, 2005. (3) ***

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*** (4) Where rebate is claimed under sub-section (1) in respect of any goods during a return period and the goods are subsequently used, fully or partly for purposes other than those specified in the said sub-section, or has remained as unsold at the time of closure of business, in relation to such goods, the rebate claimed on such goods used otherwise or remained as unsold at the time of closure shall be the reverse tax for that return period which may be determined in the same manner as

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if it were a reverse tax accrued under sub-section (7) of Section 11.”

none of the conditions covered by Section 12(4) is attracted to the case on hand because the Dealer availed rebate on goods during the previous year, carried the goods and entered the following year, opting to pay compounded rate of tax. The goods are used for resale and not for any other purposes other than the resale or manufacture of taxable goods. For the periods under assessment, the Dealers have not availed any special rebate, and therefore the reverse of tax under Section 11(7) is erroneous and illegal.

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conclusion of the orders impugned, firstly, are not consistent with the view taken by the Tribunal in T A (VAT) No.163/2016; secondly, the State did not file a revision against the order dated 30.08.2016. Therefore, the State is assumed to have accepted the view taken by the Tribunal. We prefer to adopt the reasoning and conclusion recorded in the order dated 30.08.2016 in T A (VAT) No. 163/2016 to maintain consistency on a similar issue. Without much reasoning, it can be stated, by a perusal of Section 12 sub-sections (2) and (4), that the Dealer has not claimed special rebate while availing the option of payment of compounded rate of tax with effect from 01.04.2014 or the Dealer has either by an act of commission or omission invited any one the conditions or contingencies set out in Section 12(4) of the Act. Therefore, reversing the special rebate claimed by the Dealer through the orders impugned in the revision is patently illegal and would be denying the benefit of

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rebate to the Dealer during the currency of tax paid under Section 6 of the Act. We have taken note of the reasoning of the Tribunal in T A (VAT) No.163/2016, and no reason warranting a different view is canvassed. We are also in agreement with the view taken by the Tribunal on Section 12(2) and (4) of the KVAT Act.

For the above reasoning, the orders under revision are set aside. O T Revisions are allowed. No order as to costs.

Sd/- S.V.BHATTI JUDGE

Sd/- BASANT BALAJI JUDGE jjj

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APPENDIX OF OT.REV 180/2020

PETITIONER ANNEXURES ANNEXURE-A TRUE COPY OF THE ASSESSMENT ORDER ISSUED BY THE COMMERCIAL TAX OFFICER, 2ND CIRCLE, KOZHIKODE ANNEXURE-B TRUE COPY OF THE ORDER ISSUED BY THE ASSISTANT COMMISSIONER (APPEALS), KOZHIKODE ANNEXURE-C TRUE COPY OF THE ORDER PASSED BY KERALA VALUE ADDED TAX APPELLATE TRIBUNAL,KOZHIKODE IN TA (VAT) 315/2017

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APPENDIX OF OT.REV 3/2021

PETITIONER ANNEXURES ANNEXURE-A TRUE COPY OF THE ASSESSMENT ORDER ISSUED BY THE COMMERCIAL TAX OFFICER, 2ND CIRCLE, KOZHIKODE. ANNEXURE-B TRUE COPY OF THE ORDER ISSUED BY THE ASSISTANT COMMISSIONER (APPEALS), KOZHIKODE. ANNEXURE-C TRUE COPY OF THE ORDER PASSED BY KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, KOZHIKODE IN TA (VAT) 309/2016.