JUDGMENT
G. Sivarajan, J.
1. The petitioner is a partnership-firm engaged in the manufacture of granite stones. It is an assessee on the files of the first respondent. Though registration under the Kerala General Sales Tax Act was obtained as early as on February 24, 1997, the petitioner could start commercial production, according to it, only from February, 1998 due to the delayed electrical connection and other factors. The petitioner applied for permission to pay tax at the compounded rates for the year 1997-98 as provided under Section 7(1)(b) of the Kerala General Sales Tax Act, 1963 as amended on December 11, 1997. The first respondent after conducting enquiry passed an order on December 18, 1997 (exhibit P-1) allowing the compounding application and directed the petitioner to pay a sum of Rs. 27,500 as demanded in exhibit P-2 demand notice. Being aggrieved by exhibit P-1 order and exhibit P-2 demand notice, the petitioner filed exhibit P-3 revision before the second respondent which was rejected as per exhibit P-6. It took up the matter in further revision before the third respondent which was also disposed of as per exhibit P-8. By exhibits P-6 and P-8 orders, exhibit P-1 assessment order and exhibit P-2 demand notice are confirmed. The petitioner challenges exhibits P-1, P-2, P-6 and P-8 orders in this original petition.
2. The main contention taken by the petitioner is that since it had started commercial production only from February, 1998, it is liable to pay tax at the compounded rates for 1997-98 attributable to the months of February and March, 1998 alone. It is their case that the respondents had demanded tax at the compounded rate for the whole year which is contrary to the provisions of Section 7(1)(b) of the Act read with Rule 30 and form 22 of the Kerala General Sales Tax Rules, 1963. Sri P.N. Ravindran, learned counsel appearing for the petitioner submits that though the tax at the compounded rates in respect of mechanised crushing units is fixed on annual basis, the petitioner is liable to pay only the proportionate tax attributable for the months during which the commercial production is made and if that is done, the petitioner is liable to pay only two by twelfth of the amount provided in the said section. The counsel further submitted that such an interpretation would be consistent with the Scheme of the Act and the Rules and the respondents are not justified in demanding the tax for the whole year.
3. I have heard the learned Government Pleader appearing for the respondents also. He submitted that the provisions of Section 7 which gives an option to pay the tax at compounded rate is very clear. The compounded rate provided in Section 7(1)(b) is the amount payable for the year irrespective of whether the unit started production from the beginning of the year or not. He further submitted that wherever the Legislature wanted to give any concession for the period during which no commercial production was made it has been specifically provided in the section itself. He, in support of the above, took me to the provisions of the proviso to Section 7(1)(a) in respect of dealer in gold or silver ornaments. The Government Pleader submitted that the respondents have rightly understood the provisions of the Act and had demanded the tax at the compounded rate for the whole year even though the commercial production was made only for two months in the assessment year 1997-98.
4. In order to appreciate the rival submissions, it is necessary to refer to the relevant provisions of the Act and the Rules. Section 7 of the Act deals with payment of tax at compounded rates by dealers in different kinds of goods. Section 7(1)(a) of the Act, which deals with gold or silver ornaments, provides that notwithstanding anything contained in Sub-section (1) of Section 5, any dealer in gold or silver ornaments may, at his option, instead of paying tax in accordance with the provisions of that sub-section, pay tax at one hundred and fifty per cent of the maximum amount of tax payable by him for a period of twelve months in a financial year, as conceded in the return or accounts, in any of the three financial years immediately preceding the assessment year. The proviso thereto states that where during any such preceding year, the dealer has not transacted business for any period in a financial year, the tax payable for the twelve months shall be calculated proportionately on the basis of the tax payable for the period during which such dealer had transacted business. In the case a unit producing granite metals by applying mechanical crushing, Clause (b) of Sub-section (1) of Section 7 provides that it may, at its option, instead of paying tax in accordance with the provisions of Sub-section (1) of Section 5, pay tax at the following rates, namely :–
(1) for each crushing machine of size ....... Rs. 12,500 per
not exceeding 30.48 cm. x 22.86 cm. annum.
(ii) for each crushing machine of size ....... Rs. 25,000 per
exceeding 30.48 cm. x 22.86 cm. but annum.
not exceeding 40.64 cm. x 22.86 cm.
(iii) for each crushing machine of size ....... Rs. 50,000 per
exceeding 40.64 cm. x 22.86 cm. annum.
It is significant to note that there is no provision similar to the proviso to Clause (a) of Sub-section (1) of Section 7 providing for paying tax proportionately in case the dealer has not transacted any business for any period in a financial year. Rule 30 of the Rules provides the mode of disposing of an application submitted under Section 7(1) of the Act. The relevant portion reads as follows :–
“30. Payment of tax at compounded rates.–(1) Every dealer who is eligible to pay tax at compounded rate under Section 7 of the Act and who desires to exercise the options provided for under the said section may apply to the assessing authority concerned for permission to pay tax at the rates specified therein in form 21 on or before the first day of May of the year to which the option relates :
Provided that the assessing authority may admit an application filed after the prescribed date for good and sufficient reasons to be recorded in writing.
(2) On receipt of the application, the assessing authority shall conduct necessary enquiries and shall pass such order granting or rejecting the application, as the case may be. No application shall be rejected unless the dealer is given an opportunity of being heard.
(3) On the application being allowed, the assessing authority shall serve on the dealer a notice of demand in form No. 22.”
Sub-rule (2) provides for the mode of disposal of the application and Sub-rule (3) provides that once an application is allowed, the assessing authority shall serve on the dealer a notice of demand in form No. 22. Form No. 22 is as follows :
“FORM No. 22
Notice of provisional assessment and demand for payment of tax under Section 7.
(See Rule 30)
Take notice that you have been permitted to pay a sum of Rs…………… for the period from ……………… to………………. under Section 7 of the Act. The amount shall be paid in monthly/quarterly instalments of Rs………… (rupees………….) (in words) only. The amount due for the months preceding the date of this notice shall be paid within thirty days from the date of service of this notice. The tax for the current month shall be paid within thirty days from the date of service of this notice or before the 15th day of the next month whichever is later and the tax for each of the remaining months before the tenth day of succeeding month, by crossed cheque or crossed demand draft in favour of the undersigned or by remittance into the Government Treasury at…………… failing which the amounts payable under this notice will be recovered as if it were an arrear of land revenue and/or fine imposed by a Magistrate and you will be liable to pay the interest prescribed under Sub-section (3) of Section 23 of the Act.
Place : ……………….
Date : .................. Assessing Authority. Note.--If payment is made by cheque, the cheque shall be crossed and shall be such as may be received by the treasury concerned." Though the provisions of Section 7(1)(b) and Rule 30 do not provide for payment of tax in monthly instalments, form 22 provides for payment of tax in monthly instalments.
5. A reading of the provisions of Section 7(1)(b) and Rule 30 read with form 22 does not support the stand taken by the petitioner. It must be noted that form 22 which provides for payment of the tax assessed at the compounded rates in monthly instalments, is common to all the Subsections and Clause (a) of Sub-section (1) of Section 7 also provides for payment of tax at the compounded rates in instalments. In the instant case, the question raised by the petitioner is not relating to the payment of tax in instalments every month. The question raised is regarding the liability to pay tax at the compounded rate for the period during which it did not produce any materials. It must be noted that the Legislature did not think it necessary to provide for giving any deduction or reduction in the rate of tax for the period in any financial year during which commercial production was not made. Presumably it is for the reason that the rate of tax provided under Clause (b) is not geared to the turnover. It is geared only to the capacity of the machinery employed.
6. That apart, the compounding provision is only optional. If an assessee feels that the application of the compounding provision may work hardship in a financial year, it is not necessary for such assessee to make application for payment of the tax at the compounded rate. It is for the assessee to consider as to whether the exercise of the option is advantageous to the assessee in any particular year. Only if it is found to be advantageous, the option need be exercised. Here in this case the petitioner might have thought that the exercise of option as provided under Section 7(1)(b) would be beneficial. After having exercised the option and have courted an order, it is not open to the petitioner to turn round and say that it is not liable to pay the tax as determined by the assessing authority in accordance with the provisions of Section 7(1)(b). As already pointed out, if the Legislature wanted to give any deduction from the tax as determined under the provisions of Section 7(1)(b) of the Act for the period during which it did not work, Legislature would have specifically provided for that as has been done in the case of a dealer in gold and silver ornaments by incorporating a proviso as done in Section 7(1)(a). In this case, the legislative’s intention is very clear that the tax payable under Section 7(1)(b) is for the whole year notwithstanding the fact that it has effected commercial production only for a period of two months. In this view of the matter, the respondents are perfectly justified in issuing exhibits P-1, P-2, P-6 and P-8. There is no merit in this original petition. It is accordingly dismissed.
Order on M.P. No. 45955 of 1999 in O.P. No. 27203 of 1999-L dismissed.