IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE K.M.JOSEPH TUESDAY, THE 13TH JANUARY 2009 / 23RD POUSHA 1930 WP(C).No. 8627 of 2007(B) ------------------------- PETITIONER(S): --------------- V.MURUGADAS, PROPRIETOR, K.K.N.JEWELLERY KOLLANGODE, PALAKKAD DIST. BY ADV. SRI.M.M.RADHAKRISHNAN RESPONDENT(S): --------------- 1. STATE OF KERALA, REPRESENTED BY THE SECRETARY (TAXES), SECRETARIATE, THIRUVANANTHAPURAM. 2. COMMISSIONER OF COMMERCIAL TAXES, THIRUVANANTHAPURAM. 3. COMMERCIAL TAX OFFICER, CHITTOR, PALAKKAD DIST. BY GOVERNMENT PLEADER ADV.SRI.C.K.GOVINDAN THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 13/01/2009, ALONG WITH WPC NO. 10086 OF 2007 WPC NO. 11272 OF 2007 WPC NO. 33871 OF 2007 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: APPENDIX PETITIONER'S EXHIBITS: P1 COPY OF LETTER DT 30.8.06. P2 COPY OF ORDER DT 27.12.06 P3 COPY OF NOTICE OF DEMAND DT 27.12.06. P4 COPY OF CIRCULAR NO.42/06 DT 27.11.06. // TRUE COPY // P.A. TO JUDGE K.M. JOSEPH, J. ```````````````````````````````````````````````````` W.P.(C) Nos. 8627, 10086, 11272 and 33871 OF 2007 ```````````````````````````````````````````````````` Dated this the 13th day of January, 2009 J U D G M E N T In all these cases the issue is common. The petitioners were conducting business in jewellery. They have filed applications for compounding. The applications came to be dealt with under Circular No.42/06 and demand notices have been issued. Petitioners challenge Circular No.42/06, the orders passed on the compounding applications and the demand notices. Today, when the matter came up, learned Government Pleader points out that the Government issued Circular No.38/08 which reads as follows: “ Kerala Gold and Silver Dealers Association has pointed out certain discrepancies in the circular instruction issued as per the reference cited above for computation of tax payable for the purpose of compounding under section 8f. The same was examined. The tax payable as per KVAT Act has been clearly laid down in Rule 16 of KVAT Rules. The net tax payable bring within its ambit the element of purchase tax under section 6(2) WPC.8627/07 & connected cases : 2 : also. But in the circular issued it was instructed to add purchase tax again to the net tax payable for arriving at the tax payable as per the Act. It is inconsistent with the provisions of the Act. Hence purchase tax under section 6(2) of the Act need not be taken into account for arriving at the compounded tax payable under section 8 (f) of the Act and the circular No.42/2006 stands modified to that extent. All officers are directed to take note of the above legal position.” He submits that in the light of this circular, the orders passed on the compounding applications may not have legs to stand and the compounding applications will have to be considered afresh. Apparently, the Government has realized that the position as declared in Circular No.42/06 does not represent the correct position in law and it is not consistent with the Act. This position is reflected in later Circular No.38/08. In the light of this, I feel that the writ petitions are only to be allowed. Accordingly, writ petitions are allowed and the orders passed on the compounding applications are quashed and the Commercial Tax Officer will, in all these cases, consider the applications for compounding in accordance with law and pass WPC.8627/07 & connected cases : 3 : appropriate orders within one month from the date of receipt of a copy of this judgment. I also quash the demand notices which have been issued. Sd/- (K.M.JOSEPH, JUDGE) aks // TRUE COPY // P.A. TO JUDGE