IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE B.P.RAY FRIDAY, THE 12TH NOVEMBER 2010 / 21ST KARTHIKA 1932 OT.Rev.No. 26 of 2010() ----------------------- TAVAT.292/2009 of KERALA VAT APPELLATE TRIBUNAL, ERNAKULAM .................... REVN.PETITIONER/RESPONDENT/REVENUE ------------------------------------------------------ STATE OF KERALA, REPRESENTED BY DEPUTY COMMISSIONER (LAW), COMMERCIAL TAXES, ERNAKULAM. BY GOVERNMENT PLEADER SRI. MOHAMMED RAFEEQ RESPONDENT(S): APPELLANT/ASSESSEE --------------------------------- P.MOHANLAL, THEKKEDATHUCHIRA, GOVINDASADANAM, C.M.C.-16, CHERTHALA. ADV. SRI.E.P.GOVINDAN FOR R1 SMT.G.DEEPA FOR R1 THIS OTHER TAX REVISION (VAT) HAVING BEEN FINALLY HEARD ON 12/11/2010, ALONG WITH OT REV. 80 OF 2020 AND WPC 23764 OF 2009 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C .N. RAMACHANDRAN NAIR, & BHABANI PRASAD RAY, JJ. -------------------------------------------- O.T. Rev. Nos. 26 & 80 of 2010 & W.P.C. 23764 of 2009 -------------------------------------------- Dated this the 12th day of November, 2010 JUDGMENT Ramachandran Nair, J. Connected Revisions and the WPC pertain to sales tax liability of the assessee for the assessment years 2005-06 and 2006-07. The department noticed that the assessee whose sales tax registration expired on 31.3.2005 did not apply for registration or renewal of registration under the KVAT Act which came into force on 1.4.2005. Even though no registration was taken under the KVAT Act, assessee continued business which was construction of a building for a Co- operative Bank for a total consideration of Rs. 23 lakhs-odd on which no tax was remitted along with monthly returns. Admittedly, the work spread over two years, 2005-06 and 2006-07, and assessee's case is that he has not executed any other contract during those two years. There was an enquiry by the department which did not detect any work done by the assessee that was not accounted. Since monthly returns were not OTRV 26 & 80/10 & WPC 23764/09 2 filed, and tax on the work executed was also not paid, the Intelligence Officer levied penalty at double the amount of tax which is around Rs. 3, 80,000/- for both the years. Assessee filed appeals before the first appellate authority who modified the penalty orders and dissatisfied with the said orders, he filed second appeals before the Tribunal, which refixed the penalty at Rs. 10,000/- each for both the years. It is against this order of the Tribunal Revision cases are filed, one by the assessee for cancellation of penalty sustained by the Tribunal, and the other by the revenue for restoration of penalty confirmed by the first appellate authority. So far as WPC is concerned, relief sought is for cancellation of the order of the Deputy Commissioner declining compounding facility based on belated application for compounding filed by the assessee. 2. We have heard counsel for the assessee and Government Pleader for the tax authorities. Admittedly the awarder-Bank recovered tax at 2% from the bills released to the assessee for the construction carried out by him. Obviously the understanding between the parties was to recover tax at 2% on the work bills which pertain to civil OTRV 26 & 80/10 & WPC 23764/09 3 construction contract. If the assessee had filed compounding application in time, certainly the department would have allowed the compounding application, because the work involved is a civil construction work for a co-operative Bank. Assessee's case is that his Chartered Accountant who was handling the matter all through died in an accident and that led to filing of belated appliction for renewal of registration and for applying for compounding. Counsel has pointed out before us that assessee is 85 years old and he has give up his business and as of now his son is doing work as a contractor. In other words, assessee is not proposing to renew registration for subsequent years or he does not wish to take up any work in future in his own account. Considering the age of the assessee and considering the fact that delay in renewal of registration, and the delay in filing application for compounding are on account of the tragic death of assessee's Chartered Accountant, and since the awarder and the assessee had in fact agreed for payment of sales tax at 2% which was recovered by the awarder from the work bills released to the assessee, and since tax has been remitted by the awarder in the assessee's account, we feel, OTRV 26 & 80/10 & WPC 23764/09 4 assessee is entitled to get the delay condoned in filing application for compounding and to have the assessment completed at the compounded rate. So far as penalty is concerned, we notice that the Tribunal reduced the penalty because assessee did not attempt to conceal the turnover for assessment. Even though Government Pleader submitted that there is nothing on record to indicate that the assessee volunteered to pay tax, we feel recovery of tax by the awarder itself is indicative of the fact that assessee has never decided to avoid payment of tax because recovered tax in any case will be remitted by the awarder to the department. So much so, the work executed by the assessee would have come to the notice of the department, even if assessee did not file return or files belated returns. In the circumstances, suppression or concealment does not stand proved, and so much so, we feel penalty sustained by the Tribunal at Rs. 10,000/- each is sufficient for the lapses on the part of the assessee. In view of the observations and findings above, OTRVs and WPC are disposed of as follows: 1. The assessing officer will allow the compounding application OTRV 26 & 80/10 & WPC 23764/09 5 filed by the assessee, determine the tax at compounded rate applicable and demand tax thereon and interest payable upto date. This should be done after calling for particulars from the Bank which awarded the contract to the assessee, and after enquiry with the PWD as to whether assessee had executed any other work during the relevant years. The assessing officer should specify the amount of tax reimbursed by the awarder so that tax should not be recovered in excess of what is remitted by the awarder and adjustment of tax recovered based on TDS certificates against penalty levied should be cancelled and the amounts should be adjusted towards tax so that interest actually due for the period of delay in payment of tax will be recovered from the assessee. 2. If the assessee co-operates with the department and remits tax and in terms of the assessment order issued at compounded rate as stated above, then penalty sustained by the Tribunal at Rs. 10,000/- each for both the years will stand confirmed and the assessee will remit the said penalty within a period of two weeks OTRV 26 & 80/10 & WPC 23764/09 6 after remittance of tax with interest. 3. If the assessee does not co-operate in assessment proceedings or does not remit tax and interest in terms of demand, then penalty should be levied at double the amount of tax assessed at compounded rate and the same should be recovered from the assessee. (C.N.RAMACHANDRAN NAIR) Judge. (BHABANI PRASAD RAY) Judge. kk OTRV 26 & 80/10 & WPC 23764/09 7