Dealers paying compounded tax under Section 8(f) of the KVAT Act are not liable to pay purchase tax under Section 6(2), as clarified by a 2017 amendment.

JUDGMENT

The petitioners in all these writ petitions are dealers in gold ornaments, who had opted for payment of tax on compounding basis under Section 8 (f) of the Kerala Value Added Tax Act [hereinafter referred to as the “KVAT Act']. For the assessment years 2013-14 onwards, the Assessing Authorities, while completing the assessments pertaining to the petitioners, took a stand that insofar as the tax payable at the concessional rate under (f) of the KVAT Act is in lieu of tax on sale, and not in lieu of purchase tax under Section 6 (2) of the KVAT Act, the said tax under (2) would be payable by the dealers on regular basis, and assessed under a regular assessment. In these writ petitions, the pre-assessment notices, the penalty notices, assessment orders and penalty orders issued to the petitioners by the adjudicating authority under the KVAT Act, are called in question, to the extent, they propose the levy of purchase tax under (2), and imposition of a consequential penalty, on the W.P.(c).No.995 of 2017 &

ground that the payments of tax on compounded basis under Section 8 (f) of the KVAT Act, will not exonerate the dealer from the liability to purchase tax under Section 6 (2) of the KVAT Act.

2. During the pendency of these writ petitions, the Kerala Finance Act, 2017, was enacted with effect from 1.4.2017. Through the said Act, Section 6 (2) of the KVAT Act was amended by inserting the following proviso to (2)(a), namely, “provided that notwithstanding anything contained in clause (f) of Section 8 , a dealer paying compounded tax for the goods mentioned in that clause, shall not be liable to pay tax under this sub section on such goods with effect from 1st April, 2013”.

The amendment aforementioned has the effect of clarifying that, dealers paying tax on compounded basis under Section 8 (f), need not pay tax under Section 6 (2) of the KVAT Act, on the goods in question, with effect from 1.4.2013. In view of the amendment with effect from 1.4.2013, these writ petitions are allowed, by quashing the impugned notices that propose an assessment to purchase tax, the impugned orders, to the extent, they confirm a demand of purchase tax and the impugned penalty orders, to the extent, they W.P.(c).No.995 of 2017 &

are based on the aforementioned assessment orders. The respondent shall do the needful in finalising the assessments and penalty proposals in relation to the petitioners on the basis of the observations in this judgment.