IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE K.M.JOSEPH MONDAY, THE 17TH NOVEMBER 2008 / 26TH KARTHIKA 1930 WP(C).No. 33270 of 2008(I) -------------------------- PETITIONER(S): --------------- JOSE MATHEW, NOBLE JEWELLERY, P.O.MANANTHAVADY, WAYANAD DISTRICT. BY ADV. SRI.P.V.JYOTHI PRASAD RESPONDENT(S): --------------- 1. STATE OF KERALA REPRESENTED BY SECRETARY TO COMMERCIAL TAXES, TRIVANDRUM. 2. THE COMMISSIONER OF COMMERCIAL TAXES, TRIVANDRUM. 3. THE COMMERCIAL TAX OFFICER, MANANTHAVADY. BY GOVERNMENT PLEADER ADV.SRI.C.K.GOVINDAN THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 17/11/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: K.M. JOSEPH, J. ```````````````````````````````````````````````````` W.P.(C) No. 33270 OF 2008 I ```````````````````````````````````````````````````` Dated this the 17th day of November, 2008 J U D G M E N T Prayers in the writ petition are as follows. (i) to call for the records leading up to Ext.P1 whereby the dealers like the petitioner has to pay more tax than the similarly situated person has to pay less tax who opted for compounding only during this financial year and quash the same by issuance of a writ of certiorari or other appropriate writ or direction and direct to refund the amount excess paid by the petitioner. (ii) to issue a writ of mandamus directing the respondents to pass orders on Exts.P2 to P4 forthwith. (iii) to declare that the amendment brought out as clause(V) in Section 8(c)(f) in Kerala Value Added Tax Act, 2003 by the Finance Act as shown below: (V) Where a dealer has paid tax under this clause for the previous year, the tax payable for the succeeding year under this clause shall be 115% of such tax paid during the previous year and in case of the dealers WPC.33270/08 : 2 : covered under Explanation 6 of this clause, 115% of the tax so re-determined is illegal and against the provisions of Constitution of India. (iv) to issue a writ of mandamus directing the respondents to bring all the dealers in gold ornaments under the same category who opted for compounding during the current financial year and the previous year and make payable the same rate of tax to avoid competition in the business. 2. Case of the petitioner in brief is as follows. Petitioner is a dealer in gold jewellery and an assessee under the Kerala Value Added Tax Act. For the year 2007-08, the petitioner applied for compounding under section 8 of the KVAT Act. The amount payable was fixed at 200% of the tax paid for the year 2006-07 being the highest for the past three years. In the current year also compounding is permitted. The complaint of the petitioner is that the provision amended by the Finance Act, 2008 mandates that in respect of dealers in ornaments who had compounded earlier tax has to be redetermined as 115% of the tax paid for the previous year. Since the petitioner opted for compounding for the year 2007-08, the petitioner paid at 200% of Rs.1,53,525/- i.e., WPC.33270/08 : 3 : Rs.3,07,050/- with 1% cess. Now, the petitioner is forced to pay Rs.3,56,673/-. It is the case of the petitioner that for the only reason that the petitioner opted for compounding in the previous year, the petitioner is being visited with liability to pay at 115% of 200% of the tax. According to him, it comes to 230% of the tax. On the other hand, persons who are compounding for the year 2008-09 need pay only 150% of the tax paid for the previous year. In other words, it is his complaint that if he had not opted for compounding, he need pay only around to Rs.1.5 lakhs instead of Rs.3,07,050/-. It is the case of the petitioner that this provision is unconstitutional. It is distinguishing similarly situated dealers and it will drastically affect the petitioner's business, he contends. 3. I heard learned counsel for the petitioner and learned Government Pleader. Learned counsel for petitioner submits that the petitioner and the dealers who are compounding for the year 2008-09 should be treated equally. The petitioner should be permitted to pay at 150% of the tax paid for the highest tax paid for the past three years or all the persons should pay at the rate of which is made applicable to the petitioner, he submits. In this way, WPC.33270/08 : 4 : equality will be achieved. 4. Per contra, learned Government Pleader would contend that the reduction of rate of tax for compounding for the year 2008-09 from 200% to 150% is essentially value judgment of the legislature and this court will not pass judgment over the same as the wisdom of the policy cannot be subject to judicial scrutiny. Secondly, he would contend that the provisions relating to compounding are not mandatory and not compulsory and it is for the assessee to exercise his choice and to apply for compounding. The provision relating to compounding under section 8 of the Act provides a choice either to go by regular assessment or to opt for compounding. The petitioner had applied for compounding in the year 2007-08 in accordance with the provisions as obtained then and calculating the rate of tax the petitioner paid tax under section 8 in a sum of Rs.3,07,050/-. When it came to the financial year 2008-09 the legislature felt that the rate of tax for those who applied for compounding need not be at 200% and it should be reduced to 150%. In other words, those who applied for compounding for the year 2008-09 need pay only at 150% of the WPC.33270/08 : 5 : highest of tax payable for the previous three years. This is essentially a valid judgment. The case of the petitioner is admittedly not governed by the provision permitting compounding for those who have applied for first time for compounding in 2008- 09. This is for the reason that the petitioner had applied for compounding in the previous year 2007-08. As per clause (V) of section 8, persons like the petitioner are to pay at 115% of the tax payable in the previous year. It cannot be said to be per se arbitrary. Going by the petitioner's volition, the petitioner has opted for compounding. The tax at compounded rate was fixed in a particular sum. The person like the petitioner who applied for compounding for the previous year cannot be treated as similarly situated with persons who has applied for compounding for the first time in the year 2008-09. Equality under Article 14 is to be predicated between equals. Article 14 does not forbid reasonable classification. Article 14 forbids classification which is not reasonable. In the case of a person like the petitioner apparently legislature has provided for essentially 15% increase in the tax paid. It cannot be said to be so unreasonable or discriminatory as WPC.33270/08 : 6 : to warrant this court's interference. As already noticed, the petitioner cannot be treated as similarly situated with persons who applied for the first time in the year 2008-09. The request of the petitioner to hike the rate of tax for those who are applying for compounding for 2008-09 to the same level as the petitioner is unacceptable as both fall in two different categories as already noticed. The petitioner had already applied for compounding and he is paying tax in terms of the order sanctioning the order. I see no merit in the writ petition and it is dismissed. Sd/- (K.M.JOSEPH, JUDGE) aks // TRUE COPY // P.A. TO JUDGE