Point of Law: Section 7 of KGST Act, which reads as payment of tax at compounded rates.

JUDGMENT :

The petitioner, a partnership firm, is a registered dealer under the Kerala General Sales Tax Act, 1963 (for short, “the KGST Act”) on the rolls of the first respondent and is running a three star hotel situated in the panchayat area in Kozhikode district. It started business on 11.02.2010 during the assessment year 2009-10. While so, as per the Finance Act, 2010, Section 7 of the KGST Act was amended by including a new provision for compounding by three star hotels. It was stipulated that three star bar attached hotels in the areas other than Municipal Corporations will have the option to pay turnover tax on foreign liquor instead of paying turnover tax under Section 5(2) of the KGST Act @ 170% of the purchase value of such liquor or at 125% of the highest turnover tax payable as conceded in the return or accounts or the turnover tax paid for any of the previous consecutive three years, whichever is higher. While so, as per Ext.P2 application dated 30.04.2010, the petitioner applied for permission to pay tax under Section 7 of the KGST Act; and accordingly, tax was being paid for all the months of the year; and monthly returns filed along with payment of compounded tax for each month were accepted by the first respondent. The total tax thus paid is Rs.22,65,716/-, which is reflected in Ext.P4 Trading Account along with Form 50-A. While so, as per Ext.P5 order dated 25.01.2014, the petitioner was asked to pay differential turnover tax on liquor. The petitioner, though objected to the same, paid the said amount. Thereafter, as per Ext.P6 notice, the first respondent proposed to revise the assessment already made under the compounding scheme, which was reaffirmed by Ext.P5. The petitioner filed Ext.P7 objection to Ext.P6 notice, objecting to the proposal and the method of calculation adopted by the first respondent, stating that it was totally against the provisions of law. However, as per Ext.P8 order, the first respondent confirmed the proposal to make assessment, taking the average and multiplying the same into 12 for fixing up the yearly compounded tax; and thus, the total demand was arrived at Rs.2,36,757/-along with interest amounting to Rs.92,335/-. On receipt of Ext.P8, when a representative of the petitioner approached the first respondent, informing that no compounding order was issued to the petitioner intimating the calculation duly made in regard to the payment of tax, the first respondent handed over Ext.P9 proceedings dated 14.05.2010 to the petitioner's representative on 25.07.2014. Thereafter, Ext.P10 revenue recovery notice was issued to the petitioner in respect of the differential amount demanded by the first respondent. Aggrieved by this, the petitioner has approached this Court with the above writ petition.

2. The first respondent filed a counter affidavit, contending that as per the amendments made to Section 7 of the KGST Act, bar attached hotels of three star and above are liable to pay turnover tax at 10% on 170% of the purchase turnover of Indian Made Foreign Liquor or 125% of the highest turnover tax payable as conceded in the return or accounts of the turnover tax paid for any of the previous consecutive three years, whichever is higher. According to the first respondent, there is no mistake in the provisions applied and the amount is legitimately due to be paid by the assessee. It is further contended that since the compounding order was served on the petitioner by hand, there is no acknowledgment for serving the same; and pre-assessment notice also had been issued to the dealer before finalizing the proceedings. Therefore, according to the first respondent, there is no violation of principles of natural justice in issuing Ext.P8 order.

3. I have heard Sri.Firoz K.M., learned counsel for the petitioner; and Sri.V.K.Shamsudheen, learned Senior Government Pleader.

4. The learned counsel for the petitioner submits that the petitioner started business on 11.02.2010 during the assessment year, 200