The main legal point established is that the assessing authority has the discretion to calculate tax at compounded rate under Section 7 based on the turnover of the previous consecutive three years, and the option to pay tax at compounded rate is governed by the provisions of Section 7.

JUDGMENT :

Heard Sri. Harisankar V. Menon, learned counsel for the petitioner, and Smt. Jasmine M.M., learned Government Pleader, for the respondents.

2. The present writ petition has been filed making a challenge to the orders in Exts.P8 and P9 issued by the 1st respondent under the provisions of Section 7 of the Kerala General Sales Tax Act, 1963 (“Act”, for short) for the financial years 2022-23 and 2023-24, whereby the petitioner's applications for compounding of turnover tax for the said years have been decided and the tax liability of Rs.1,19,96,211/- and Rs.1,49,95,264/-, respectively, have been calculated under the compounding scheme as provided under Section 7 of the Act and the Rules made thereunder.

3. The petitioner is the proprietor of M/s.KBC Green Park Hotel, Edat, Payyannur, Kannur District, a bar attached hotel. The petitioner is an assessee under the provisions of the Act. Under Section 5(2) of the Act, turnover tax @ 10% is required to be paid by a bar attached hotel on the sale of Indian Made Foreign Liquor.

4. Section 7 of the Act provides for payment of tax at compounded rate, which reads as under :

“7. Payment of tax at compounded rates: –

(1) Notwithstanding anything contained in subsection (2) of section 5, any bar attached hotel, not being a star hotel of and above four star hotel, heritage hotel or club, may, at its option, instead of paying turnover tax on foreign liquor in accordance with the said subsection, pay turnover tax on the turnover of foreign liquor calculated at the rates in clauses (a) or (b) of items (i) and (ii), respectively, whichever is higher,-

(i) in respect of a bar attached hotel of and below two star,

(a) at one hundred and forty per cent of the purchase value of such liquor, in the case of those situated within the area of a municipal corporation or a municipal council or a cantonment, and at one hundred and thirty five per cent of the purchase value of such liquor, in the case of those situated in any other place; or

(b) at one hundred and fifteen per cent of the highest turnover tax payable by it as conceded in the return or accounts or the turnover tax paid for any of the previous consecutive three years; and

(ii) in respect of a bar attached hotel of three stars,

(a) at one hundred and eighty per cent of the purchase value of such liquor, in the case of those situated within the area of a municipal corporation or a municipal council or a cantonment, and at one hundred and seventy per cent of the purchase value of such liquor, in the case of those situated in any other place; or

(b) at one hundred and twenty five per cent of the highest turnover tax payable by it as conceded in the return or accounts or the turnover tax paid for any of the previous consecutive three years.”

5. Rule 30 of the Kerala General Sales Tax Rules, 1963 (“Rules”, for short) provides that every dealer eligible to pay turnover tax at compounded rate under Section 7, may apply to the assessing authority for permission to pay turnover tax at the rates specified therein in Form-21 on or before 30th April of the year to which the option relates to. It also provides that if the application is in order, the assessing authority shall grant permission in Form-22 and if the application filed is not in order, the assessing authority shall reject the application for reasons to be recorded in writing, after giving the dealer an opportunity of being heard. For ready reference, Rule 30 of the Rules is extracted hereunder :

“30. Payment of tax at compounded rates:- (1) Every dealer eligible to pay turnover tax at compounded rate under section 7, who desires to exercise the option provided for under the said section may apply to the assessing authority concerned for permission to pay turnover tax at the rates specified therein in Form No.21 on or before the 30th day of April of the year to which the option relates or along with the application for registration under the Act, whichever is later.

Provided that the assessing authorit