Justice A.K. Jayashankaran Nambiar of the Kerala High Court, in a recent ruling, held that assessment under section 25(1) of the Kerala Value Added Tax (VAT) Act cannot be made merely on ground of change of opinion.
The Petitioner, a company engaged in manufacture and sale of ice creams, applied for payment of tax on compounded basis u/s 8 of the Act, by taking the view that the ice cream that was manufactured and sold by it was an item of cooked food which was one of the items covered under the Act.
Accordingly, the petitioner preferred an application dated 22.04.2015 for the assessment year 2015-16 and a similar application dated 30.04.2016 for the assessment year 2016-17, before the respondent. There was no response from the department intimating the petitioner of the acceptance or rejection of their application either time. Consequently, the petitioner started paying tax on compounded basis and he tax paid by the petitioners during the various quarters in assessment year was accepted without demur by the respondents.
Subsequently, the department sent a notice to the petitioners objecting the payment of tax on compounded basis, for the first time, putting the petitioner on notice of a proposal to reject the application seeking payment of tax on compounded basis, and to assess the petitioner on regular basis for the said assessment year.
The objections of the petitioners to avail detailed reply to the said notice were overruled and re-assessment proceedings u/s 25(1) of the Act was initiated against the assessee.
Allowing the writ petition challenging the above order, the High Court took a view that there has been a serious lapse on the part of the department in the matter of issuing notice to the petitioner, who in their opinion, was not entitled to opt for payment of tax on compounded basis, in respect of the product dealt with by them during the previous assessment year.
The Court further asked the Commercial Tax Department in the State to look into this lapse on the part of the officers under the department and take appropriate action against the said officers, in the event of a finding that there was negligent conduct on the part of the officers in permitting the petitioners to pay tax on compounded basis.
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