STATE OF KARNATAKA Vs. REDDY STRUCTURES PRIVATE LIMITED

JUDGEMENT

(1.) AS common question of law is involved in all these batch of cases, they are clubbed together and decided by this common order. However, for the purpose of clarity, the facts in W.P. Nos. 29932 and 29933 of 2009 and W.P. Nos. 29046 to 29048 of 2009 (Nagarjuna Construction Company Limited, Bangalore v. State of Karnataka and Others, 2010 (69) Kar. L.J. 97 (HC)) are set out hereunder.

(2.) A show -cause notice under the provisions of Section 63A of KVAT Act, 2003 came to be issued on 30 -8 -2002 to revise the order of assessment. In the notice it is stated that they have offered for taxes at the rate of 4% on turnover of iron and steel, involved in the execution of the works contract, it is not permissible. The reason being that the schedule entry, the works contract of civil works finds a separate in Sl. No. 23 under the head 'All other works contracts not specified in any of the categories specified' in Sixth Schedule and therefore, it attracts tax on the said turnover at the rate of 12.5% as provided therein under the said entry. In response to the notice issued, the petitioner -Company produced the monthly returns filed for the month of March 2006, details of computation of taxes for the month of March 2006, the details of computation of materials utilized during the month and details of purchases made. Books of accounts were also produced. After considering the aforesaid material, the Assessing Authority held that the incidence of tax in the execution of civil works contract occurs at the time of incorporation/accretion of the building materials during the course of execution of civil works contract. In civil works contract there is end product of taxable goods for taxation under the provision of the KVAT Act. Therefore, the eligibility of taxes under the KVAT Act, is to be made on the value of goods which are incorporated at the time of use of the same in the execution and thereby, it is known as deemed sale. Accordingly, the incidence of tax occurs at that point. The petitioner has admitted the turnover of sale value that is, transfer of property in goods which are consumed for works contract during the particular period and the same is in accordance with the provisions of the KVAT Act. He did not feel it necessary to continue the proceedings under Section 39(1) of the KVAT Act for reassessment and therefore, the proceedings initiated for the period March 2006 under Section 39(1) of the KVAT Act, 2003 was dropped.

(3.) THE assessee in support of their defence for the assessment period April 2006 to December 2007, produced the certificates from sub -contractors along with the return copies, VAT bills copies in support of their claim towards tax collected and statement of input tax credit claimed along with other details such as suppliers TIN, bill numbers and tax amount etc. and objected to levy tax at the rate of 12.5% on the turnover of declared goods i.e., iron and steel used in works contracts in view of various High Court judgments and requested the authority to consider the tax at the rate of 4% only on iron and steel consumption. On 15 -9 -2009 they filed another objection statement setting out the constitutional provisions, the reasons behind constitutional amendment and the various provisions of the Act, Rules and requested the Revisional Authority to drop the further proceedings.