Kamakshy Sekhar Proprietrix,Star Debt v. Menon Smt.meera V.menon Sri.mahesh V.menon

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.M.JOSEPH &THE HON'BLE MR. JUSTICE BABU MATHEW P.JOSEPH FRIDAY, THE 18TH DAY OF JANUARY 2013/28TH POUSHA 1934 WA.No. 1763 of 2012 () IN WP(C).23728/2006 ------------------------------------------- AGAINST THE ORDER/JUDGMENT IN WP(C).23728/2006 of HIGH COURT OF KERALADATED 28-03-2012 APPELLANT(S)/APPELLANT:------------------------ KAMAKSHY SEKHAR PROPRIETRIX,STAR DEBT,583/10 ANIKODE,ARIYANKODE P.O.,PALAKKAD DISTRICT. BY ADVS.SRI.HARISANKAR V. MENON SMT.MEERA V.MENON SRI.MAHESH V.MENON RESPONDENT(S)/RESPONDENTS:--------------------------- 1. AGRL. INCOME TAX & COMMERCIAL TAX OFFICER ALATHUR,PALAKKAD DISTRICT,PIN 678001. 2. STATE OF KERALA REPRESENTED BY SECRETARY TAXES DEPARTMENT,GOVERNMENT SECRETARIAT THIRUVANANTHAPURAM-695001. R BY GOVERNMENT PLEADER SRI. BOBY JOHN THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 18-01-2013, THECOURT ON THE SAME DAY DELIVERED THE FOLLOWING: ## K.M. JOSEPH & BABU MATHEW P. JOSEPH, JJ. ---------------------------------------------------- W.A. No. 1763 OF 2012 ----------------------------------------------------- Dated this the 18[th] day of January, 2013 J U D G M E N T Joseph, J Appellant is the writ petitioner. The writ petition was filedby the appellant seeking to quash Exts.P2 to P7. The appellantis assessed under the Kerala Value Added Tax Act, 2003(hereinafter referred to as 'the Act'). The appellant was dealingwith a unit which is engaged in the manufacture and sale of'handmade soaps'. Exts.P2 to P7 are assessments for themonthly return periods from April to September 2005.According to the appellant, she has been assessed illegally underSections 6(1A) and 6(1A)(b) of the Act. According to theappellant in respect of certain bills for the periods covered byExts.P2 to P7, by a mistake, the appellant had collected tax even W.A. No. 1763 OF 2012 though there was no basis for the appellant to collect such tax.According to the appellant, however, she had not given anyoption within the meaning of S.6(1A)(b). Therefore in terms ofSections 6(1A)(b) of the Act the entire taxable turn over of theappellant which was otherwise exempted, could not be taxedunder the said provision, it is submitted. 2.On the other hand, the appellant is subjected topenalty under Section 72 of the Act. According to the appellantnotices were issued proposing to tax the entire taxable turnoverfor the monthly periods and the appellant filed reply. The replyis produced as Ext.P1. In the said reply appellant stated that forthe tax which is collected for various return periods, theappellant offered to pay the collected amount with interest andshe paid the amount by cheque for a sum of Rs.37,000/- andodd. But, disregarding the law and acting illegally, theappellant was assessed for the entire turnover by the officer totax invoking Sections 6(1A)(b) of the Act. W.A. No. 1763 OF 2012 :3 : 3.The learned Single Judge did not accept the challengeto the impugned assessments. The learned Single Judge tooknote of the conduct of the appellant in not responding to thenotice except filing the reply. In other words, the appellant'sconduct in not making good her contentions was emphasized. Itis further reasoned that the appellant did not also remit the taxin terms of the interim order passed. 4.We have heard the learned counsel for the appellantand the learned Government Pleader. The learned GovernmentPleader would fairly admit before us that as could be seen fromthe records, the enquiry reveals that the appellant has not givenany written option. Section6(1)(A)(b) reads as follows. W.A. No. 1763 OF 2012 :3 : 3.The learned Single Judge did not accept the challengeto the impugned assessments. The learned Single Judge tooknote of the conduct of the appellant in not responding to thenotice except filing the reply. In other words, the appellant'sconduct in not making good her contentions was emphasized. Itis further reasoned that the appellant did not also remit the taxin terms of the interim order passed. 4.We have heard the learned counsel for the appellantand the learned Government Pleader. The learned GovernmentPleader would fairly admit before us that as could be seen fromthe records, the enquiry reveals that the appellant has not givenany written option. Section6(1)(A)(b) reads as follows. “where the sale of any goods in exemptedat the point of sale by any dealer, suchdealer may, at his option, pay tax inrespect of the sale of such goods andthereupon he shall, whatever be his totalturnover, be liable to pay tax on the W.A. No. 1763 OF 2012 taxable turnover for the year”. The appellant relied on Rule 10A of the VAT Rules. Itreads as follows: "10A. Filing of option for collection and payment of tax:- Every dealer optingto pay tax in accordance with the provisionsof sub-section (1A) of Section 6 shall fileapplication in Form IF before the assessingauthority. The option shall be deemed tohave been accepted by the assessingauthority as and when the assessingauthority acknowledges the receipt of suchapplication.” 5. There is no reference to the reply of the appellant which was also adverted to. Thereafter we notice that referenceis made to the tax which was apparently collected by theappellant for each return period. Credit is given to the same andthe entire taxable turnover was assessed and the entire amountwas brought to tax. This, we would think, is in keeping with themandate of Section 6(1)(A)(b) which declares that if a person is W.A. No. 1763 OF 2012 entitled to exemption and if he opts to collect tax, he shall beliable to pay tax on the entire taxable turnover. Thus, a readingof the impugned orders(Exts.P2 to P6) would show that theofficer has invoked S.6(1A)(b) and it is accordingly that theentire taxable turnover is brought to tax. 6.The learned Government Pleader, no doubt, made anattempt to justify the action of the Assessing Officer withreference to S.22. In other words, he would remind us thaterroneous citing of a provision cannot take away the validity ofthe order if it can be legally premised on other provisions of lawavailable to the officer. Admittedly, he has in mind theprovisions of S.22 which entitles the officer to assess the partyto the best of its judgment. 7. In a case where no return is filed or return is incorrect notice is necessary. The appellant has not produced the notice.Learned counsel for the appellant would submit a search for thenotice in the files made by the appellant was futile and no notice W.A. No. 1763 OF 2012 could be retrieved by her. We are of the view that the appellantis justified in contending that appellant cannot be taxed for theentire taxable turnover. The appellant has not given any optionunder Section S.6(1A)(b) which contemplates giving of anoption. The rule made (Rule 10A) clearly contemplates giving ofa written option. Unless there is written option, even if a personwho is otherwise entitled to exemption by mistake or otherwisecollects tax S.6(1A)(b), it will not entitle the officer to tax theentire taxable turnover. In other words, if a person is entitled toexemption and for a portion of the turnover he has collected taxwithout having given a written option within the meaning ofSection 6(1)(A)(b) read with Rule 10A, recovery cannot be madeby invoking the powers available under Section S.6(1A)(b). Inthe facts of this case, admittedly there is no option. Therefore,invoking Section 6(1)(A)(b) it would be clearly illegal. 8.Learned counsel would contend that actually theentire tax which has been directed to be paid by the interim W.A. No. 1763 OF 2012 order under protest was actually paid and only by mistake thesame could not be brought to the notice of the Court when thereply affidavit was filed. What ever that be, we feel that theappellant cannot be penalised by a patent illegality. The illegalitygoes to the root of the matter as the officer would standdeprived of his jurisdiction under Section S.6(1A)(b) unlessthere is a written option. In such a situation notwithstanding thefact that the appellant did not in fact appear after filing thereply, the order as passed would leave us in little doubt that itwas S.6(1A)(b) that was invoked. In such circumstances weare inclined to allow the appeal. 9.As far as Ext.P7 is concerned it relates to a periodafter he started using machinery depriving the appellant thebenefit of such section. Hence, we set aside the judgment of thelearned Single Judge and allow the Writ Appeal as follows. Exts.P2 to P6 will stand quashed. We make it clear thatthe this judgment will not stand in the way of the Assessing W.A. No. 1763 OF 2012 Officer proceeding against the appellant if the law otherwisewarrants such proceedings. ul/- [True copy] SD/-K.M.JOSEPH, JUDGE. SD/- BABU MATHEW P. JOSEPH,JUDGE. P.S. to Judge.