EVEREADY INDUSTRIES INDIA LIMITED Versus ASSISTANT COMMISSIONER, SPECIAL CIRCLE-I, STATE GOODS AND SERVICES TAX DEPARTMENT, ERNAKULAM AND ANOTHER
VAT and Sales Tax
2018 (8) TMI 1773 – KERALA HIGH COURT – [2018] 58 G S.T.R. 147 (Ker)
KERALA HIGH COURT – HC
Dated:- 13-8-2018
W. P. (C). No. 12478 of 2018 .
CST, VAT & Sales Tax
Dama Seshadri Naidu J.
For the Petitioner : Joseph Jerard Samson Rodrigues
For the Respondents : V. K. Shamsudeen , Senior Government Pleader and Dr. Thushara James , Government Pleader
JUDGMENT
DAMA SESHADRI NAIDU J.-
1. Facts in brief : Petitioner-Eveready Industries India Ltd., is an assessee under the Kerala Value Added tax Act, on the rolls of the Assistant Commissioner, the first respondent. Eveready (“the company”) filed its annual returns for the year 2015-2016 and paid the tax. Later, it had its books of account audited, as section 42 of the Act mandates. Then, the company realised that in its annual return it inadvertently showed
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31, 2017.
4. Eventually, the Asst. Commissioner issued the exhibit P6 order, rejecting the company's request for revising the returns ; he reiterated his earlier assertion : the likely change of turnover. Aggrieved, eveready filed this writ petition.
4. Submissions : Petitioner's :
5. Sri Joseph Jerard Samson Rodrigues, the company's counsel, has submitted that the Assistant Commissioner has mechanically declined the company's request, but with no valid reason. According to him, the company's conduct was bona fide, yet the Asst. Commissioner failed to appreciate it. To elaborate, Sri Rodrigues has submitted that the omission was inadvertent and the company's request for revision synchronises with the audit report.
6. Sri Rodrigues has stressed that the company only inadvertently omitted to reflect in the annual return a few items of inter-State purchase and also stock transfer. No sooner did the audit report reveal the inadvertent omission than the company s
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ion is unassailable. According to her, the company's case does not fall within the scope of section 42(2) of the Act. According to her, even the Circular No. 8 of 2018 bars the company's revision, for it would result in changed turnover.
9. To be specific, Dr. James has contested the company's claim of bona fide approach and the inadvertent omission. According to her, the company ought to have filed the return along with audit certificate. But the company, she maintains, requested for revision of return only after its filing the audit certificate.
10. Referring to C. R. Varghese [2018] 58 GSTR 137 (Ker) ; MANU/KE/1248/ 2018, Dr. James has submitted that the Division Bench has hold that the assessing authority can verify the bona fides of the assessee's request and then decide whether the permission can be granted. She has also submitted that the company, to prove its good faith, ought to have produced before the Asst. Commissioner the statutory declarations like Forms
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tion and permit.
14. Important for our purpose is Chapter V : Assessment, recovery of tax, and penalty. Section 20 mandates filing of returns. Section 21 describes how a return submitted under sub-section (1) of section 20 amounts to self-assessment. Under section 21(2), as set out succinctly in C. R. Varghese [2018] 58 GSTR 137 (Ker) ; MANU/KE/1248/2018, the dealer, on its detecting any mistake in the monthly return, can rectify a mistake and file a revised return within two months from the last day of the return period. But sub-section (9) of section 22 prohibits any such revision if the authorities have initiated any proceedings on their detecting an offence. And the bar continues until they finalise the proceedings. Sub-section (10) of section 22 permits a revised return incorporating the turnover, covered in the penal proceedings after the proceedings are finalized and compounded. Then, too, “the assessment is deemed to be completed subject to the provisions of sections 24 and 25
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return will be filed along with the audit certificate, accompanied by proof of payment of tax, any interest, and penal interest calculated at twice the rate specified under sub-section (5) of section 31. The proviso to section 42(2) also prohibits any revision by a dealer against whom penal action is started. The provision, pivotal for our purpose, reads :
“42.(2) Where any dealer detects any omission or mistake in the annual return submitted by him with reference to the audited figures, he shall file revise annual return rectifying the mistake or omission along with the audit certificate. Where, as a result of such revision, the tax liability increases, the revised return shall be accompanied by proof of payment of such tax, interest due thereon under sub-section (5) of section 31, and penal interest, calculated at twice the rate specified under sub-section (5) of section 31 :
Provided that this sub-section shall not apply to a dealer against whom any penal action is initiated in
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about through Act 5 of 2018 (The Kerala Finance Act, 2018), the Government issued Circular No. 8 of 2018, dated April 21, 2018. Granted, sections 21(2), 22(9), 22(10), 42(2) and 79B of the Act deal with the revision of returns, but they are subjected to a few conditions.
19. Section 79B, too, contains a non-obstante clause and prohibits revised return when the Department detects tax evasion and begins proceedings against that evasion.
19. The company's concern :
20.
Inv. No.
Date
TIN
Party
Location
Uploaded Value
Correct -Value
26122253
11.6.2015
9150000006
Eveready
Lucknow
1,619,109
169,109
271187320
4.3.2016
33310640024
-do
Chennai
84,106
43,231
21. The company's counsel would have this court hold that the error arose out of arithmetic jumbling and doubling of figures. To be precise, the item has an extra digit-(1)-after the first two digits, and the second one doubled the correct value. But with no response from the authorities, the company filed W.
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e that this court, on earlier occasions, has examined this issue threadbare. In Syed Ali Rajba Judgment, dated November 16, 2017, in W. P. (C) No. 34709 of 2017, the assessee showed the total invoice amount as Rs. 81,600, but while giving the details of turnover of inter-State purchase in a separate part of the return, he showed it as Rs. 8,01,600. The court found it to be a clerical error. HDFC Bank Ltd. [2018] 58 GSTR 134 (Ker) judgment, dated May 23, 2018, in W. P. (C) No. 13691 of 2018, however, noticed the problem of change in turnover if revision was allowed. The court remanded the matter to be decided under section 42(2). No decision rendered on merits, the case has no precedential value.
23. Alwaye Sugar Agency :
24. In Alwaye Sugar Agency [2017] 5 KHC 638, a learned single judge, in a well articulated judgment, exhorted tax officials to adopt a pragmatic approach. The judgment exemplifies what the noted lawyer Nani Palkhivala once said : “Taxes are the life-blood of any Gove
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ing the technical omissions to ensure tax compliance.
26. The mechanical application of procedural provisions, Alwaye Sugar Agency [2017] 5 KHC 638 cautions, in a taxing statute, without regard to the statutory purpose, does not augur well for the reputation of the taxman, whose attitude must change with the times, so citizens see him more as a facilitator for tax compliance rather than a legally empowered money snatcher.
27. If we note the facts of Alwaye Sugar Agency [2017] 5 KHC 638, an assessee under the KVAT Act filed annual returns for the year 2011-2012 and paid the tax. Later, when its accounts audited, it noticed some mistakes. The assessee, then, sought the Department's permission to revise the returns. But the Department did not respond. So the assessee wanted this court to let him revise its returns. The Department opposed.
28. The Department contended that the assessee's request was belated ; the limitation, for revising the returns was over. A learned single ju
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48/2018, has affirmed Alwaye Sugar Agency [2017] 5 KHC 638. In yet another well articulated judgment, the Division Bench has treated the issue exhaustively. In fact, it is a common judgment in appeals arising out of four writ petitions. In all the cases, a few common features were found : (1) The time granted for the revising the returns was over ; (2) the request for revision was not simultaneous with the filing of the audit report ; (3) the Department began no assessment proceedings before it received the assessee's request for revision ; (4) the defects sought to be rectified cannot be strictly labelled technical or clerical ; and (5) the revised returns, if permitted, would alter the sales turnover (this issue not directly presented itself for consideration, though).
31. After scanning the entire statutory gamut, C. R. Varghese [2018] 58 GSTR 137 (Ker) ; MANU/KE/1248/2018 observes that the sole prohibition is only against the revision of returns when the dealer has been procee
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ually due and keeping himself on tender-hooks as to when and if the assessing officer detects such mistake . . . .”
33. The court never found, C. R. Varghese [2018] 58 GSTR 137 (Ker) ; MANU/KE/1248/2018 also notes, that the revision of return is not permissible unless there is a mistake or omission as reflected in the audited statement. The assessing officer does have the authority to examine the claims for revision, according to C. R. Varghese [2018] 58 GSTR 137 (Ker) ; MANU/KE/1248/2018, even beyond the period and decide the question under well-established principles of law and ensure that the attempt is not to cover up or get over a penal provision or avoid the penal consequences of detection.
34. On the input-tax credit, C. R. Varghese [2018] 58 GSTR 137 (Ker) ; MANU/KE/1248/2018 has, however, observed that the possible claim by the assessee of a benefit available in the statute cannot be a reason to deny revision of return if it is a bona fide claim. Yet the judgment clarifies o
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r was notified as escaped turnover under section 25 of the Act was returned as tax suffered. It found favour with the Tribunal. On appeal, the Division Bench reversed it. M. M. Enterprises [2013] 63 VST 323 (Ker) ; [2012] (0) SCJ Online (Ker) 3193 (DB) accepts that the notice under section 25 will not amount to penal action. So the proviso to section 42, as it stood then, would not apply. But the revised return, under section 42, must confine itself to any omission or mistake in the returns as the audited figures expose.
37. On facts, M. M. Enterprises [2013] 63 VST 323 (Ker) ; [2012] (0) SCJ Online (Ker) 3193 (DB) reveals that the omission detected was not one of difference between the audited figures and the annual returns filed. In fact, on the verification of the books of account as also the annual returns, the assessing authority found definite instances of suppression of purchase. This prompted the assessing officer to act against the dealer under section 25 for assessment of es
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ds repeatedly addressed by this court and precedents with clear holding subsist, driving the suitor to the rigmarole of a remedy, be it an alternative one, serves no purpose. After all, for a Constitutional Court, the alternative remedy is a self-imposed limitation. And it is “self-imposed”, not “other-imposed”, at that.
41. Next, about the documents not produced : Form F and Form FA. Indeed, the company admits its omission and calls it inadvertent. To prove an admitted fact, documentary proof is a superfluity.
42. And, finally, about the core objection-change of admitted turnover. First, to be fair to the Department, this issue did not directly present itself before either in Alwaye Sugar Agency [2017] 5 KHC 638 or in C. R. Varghese [2018] 58 GSTR 137 (Ker) ; MANU/KE/1248/2018. But we will cull out from the judicial pronouncements, how section 42(2) and its newly added provisos have been interpreted.
43. True, Alwaye Sugar Agency [2017] 5 KHC 638 has precedentially disappeared, und
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statute, without regard to the statutory purpose, does not augur well for the reputation of the taxman.
(4) The Department cannot adopt a hyper-technical approach if the dealer volunteers to rectify the omissions and pay the differential tax- especially if there is no departmental detection of any suppression.
(5) If an honest dealer volunteers to pay his taxes, the Department should not come in the way ; on the contrary, it should reward him.
(6) The sole prohibition is only against the revision of returns when the dealer has been proceeded against for a defalcation or other offense.
(7) Barring section 42(2), all other provisions-Sections 21(2), 22(9), 22(10), 42(2) and 79B of the KVAT Act as also rule 22(4A)-are only ena bling ones, facilitating revisions.
(8) The assessee's possible claim of a benefit (say, input-tax credit) cannot be a reason to deny revision of return if its claim is bona fide.
45. Here, the company submitted its audit certificate on January 31, 20
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rprises [2013] 63 VST 323 (Ker) ; [2012] (0) SCJ Online (Ker) 3193 (DB), on the other hand, contemplated twin conditions : suppression and Departmental action. Here, rather than suppression, I find omission, an inadvertent one, at that. And there is no Departmental detection or action, to repeat.
Conclusion :
47. So, I allow this writ petition, setting aside the exhibit P6, and also by directing the respondents to permit the petitioner to revise the returns for the assessment year 2015-16. The respondents will enable the company to revise the returns, in the presence of the assessing officer, within four weeks after receiving the judgment copy. I also clarify that, because of the revision of returns, if the company is found liable to pay any differential tax, then it will comply with rule 22 of the KVAT Rules and pay not only the differential tax but also the interest and penal interest contemplated under the Statute, simultaneously with the revision of the returns. No order on costs
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