IMPORTANT POINT
The absence of formal acceptance of a compounding application does not negate an assessee's entitlement to a concessional tax rate when tax is paid under regular provisions.

JUDGMENT :

A.K.Jayasankaran Nambiar, J.

In this Writ Appeal, the appellant, who is an assessee under the Kerala General Sales Tax Act (hereinafter referred to as “the KGST Act”), and runs a Three Star Bar Attached Hotel, impugns the judgment dated 29.11.2023 of a learned Single Judge in WP(C). No.13264 of 2023. The brief facts necessary for the disposal of the Writ Appeal are as follows:

2. The appellant had filed an application for remitting turnover tax (TOT) on compounded basis for the financial year 2021-22. The application was submitted on 29.04.2021 under Section 7 of the KGST Act. Although there is no express provision under the KGST Act for accepting an application and granting permission to the dealer for payment of tax on compounded basis, since the compounding provision is permitted to be availed on an annual basis, one would expect that a decision on the application is taken by the authority concerned within the said period of one year. In the instant case, no decision was taken on the application till 04.01.2023, by which time the assessment year for which the appellant had sought permission to pay tax on compounded basis had long since expired.

3. It is significant that although the appellant had filed the application seeking permission for paying tax on compounded basis, he did not actually pay tax on compounded basis pending an acceptance of the application by the department. On the contrary, he paid tax as per the regular provisions of the KGST Act (Section 5) and not in terms of Section 7 of the KGST Act. However, taking note of the fact that while paying the tax under Section 5 of the Act, the appellant had used the form of return prescribed for those paying tax under Section 7 of the Act, the department, in 2023, passed a formal order accepting the application for compounding that was filed in 2021, and assessing the appellant to a differential tax (difference between the tax that was paid under S.5 and the tax that would have been payable under S.7 of the Act) through an assessment order passed on 15.03.2023.

4. It is relevant to note at this stage that, with a view to help dealers tide over the difficulties that were faced during the Covid period, the State Government had through a notification reduced the rate of tax applicable to sales of liquor by bar attached hotels from 10% to 5%, and the appellant, who had paid tax under S.5 of the Act, filed an application for refund of the tax paid @10% in the year 2021-22. It was at that stage that Ext.P1 order was passed by the department on the compounding application dated 29.04.2021 preferred by the appellant. It was therefore that on receipt of Exts.P1 and P2 orders, belatedly accepting the compounding application of the appellant, and completing the assessment against him, that the appellant approached this Court through the Writ Petition impugning the said orders.

5. The learned Single Judge, who considered the matter found that inasmuch as the appellant had filed his returns in Form 10-DA, which was the return that had to be used by those opting to pay tax on compounded basis under Section 7 of the KGST Act, he could not deviate from his obligation to pay tax on compounded basis, and hence the assessment order that finalised the assessment and demanded a differential tax from the appellant did not require to be interfered with. In coming to the said conclusion, the learned Single Judge relied on a Division Bench Judgment of this Court in State of Kerala v. Kalyanaraman ]2009 (3) KLT SN 31 (C.No.34)].

6. Before us, it is the submission of Sri.Premjit Nagendran, the learned counsel for the appellant that the learned Single Judge erred in placing reliance on the judgment of this Court in Kalyanaraman (Supra). It is in particular, pointed out that while it may be a fact that the appellant had applied on 29.04.2021 for payment of turnover tax on compounded basis for the assessment year 2021-22, in terms of Section 7 of the KGST Act, the said application seeking perm