K.V. CHINNAIAH Vs. THE DEPUTY COMMISSIONER OF COMMERCIAL TAXES, VAT-AUDIT 1, THE COMMISSIONER OF COMMERCIAL TAXES, VANIJYA THERIGE KARYALAYA AND THE STATE OF KARNATAKA REPRESENTED BY ITS PRINCIPAL SECRETARY TO GOVERNMENT, FINANCE DEPARTMENT@RESP

JUDGEMENT

(1.) Petitioner is a civil works contractor registered under the Karnataka Value Added Tax Act of 2003. He, having opted for composition of tax as per Section 15(1)(b) of the KVAT Act of 2003, filed returns in form VAT 120 for the tax period from April 2006 to March 2007 and paid tax at 4% on the total consideration relating to works contract executed. On verification of books of accounts, the 1st Respondent having found that the Petitioner had purchased construction machinery during the year 2005-2006 from outside the State which is held in stock during 2006-2007, stating that he is not eligible for composition assessment for the year 2006-2007 as per Rule 135(2) and Section 144(1) of the KVAT Rules 2005, cancelled the composition assessment and passed the reassessment order as per Section 39(1) of the Act on 15.7.2010 levying the tax @ 12.5% acting under Section 3 of the Act and also levied penalty under Section 72(2) of the Act stating that Petitioner had under-stated his tax liability by more than 5% and also demanded interest as per Section 36(1) of the Act. The Petitioner approached for rectification of the assessment order dated 15.7.2010 as per the amended provisions of Section 15(5)(a) of the Act stating that, by works contract he is eligible for composition assessment even if he purchases the goods from outside the State and therefore, the reassessment order levying tax @ 12.5% be rectified and the composition assessment be restored. The 1st Respondent has rejected the request by issuing an endorsement, dated 1.12.2010 stating that there was no mistake in the assessment order passed. Hence, this petition seeking to read down Rule 135(2) r/w 144(1) of the KVAT Rules 2005 stating that, it is inconsistent with the provisions of Section 15(5)(a) of the Act and, also to issue writ of certiorari declaring the previsions of Section 72(2) of the Act relating to levy of penalty and also Section 36(1) of the Act relating to levy of interest as unconstitutional.

(2.) Heard.

(3.) The scheme under Section 135 of the KVAT Rules, 2005 provides for a composition acting under Section 15 of the Act where a dealer could opt to pay tax by way of composition instead of general assessment for which, he must have made an application for registration under the Act and he shall not have any goods in stock which are brought from outside the State on the date he opts to pay tax by way of composition, and shall not sell any goods brought from outside the State after such date.