WIPRO LIMITED Vs. THE STATE OF KARNATAKA

JUDGEMENT

(1.) THESE revision petitions are preferred by the assessee against the order passed by the authorities levying Value Added Tax of 75% of the contract value on the ground that the value of the goods supplied under the annual maintenance contract is only 10%. The assessee is engaged in the business of sale of computer hardware and software and registered under the VAT Act. They also provide consulting services to various plants and Annual Maintenance Contract. In relation to these AMC services, the ' assessee has discharged service tax on 90% of such AMC turnover. The assessee has charged VAT on the applicable rate of 10% on 10% of the AMC turnover. The service is rendered by the assessee on all India basis by filing the income tax returns in terms of the Finance Act. For the assessment year 2006 -07, the assessee duly filed its return as required under the KVAT Act. An inspection was conducted by the Deputy Commissioner of Commercial Taxes, Bangalore on 23.2.2010 in the office premises of the assessee at Bangalore. Thereafter the said authority has furnished a detailed investigation report on 28.9.2011. The assessee was served with three proposition notices in respect of the same assessment period. The assessee filed its' reply on various occasions to the said proposition notices.. The DCCT issued several endorsements seeking clarifications and documents. The assessee has complied with the said request. Thereafter, the DCCT passed an order confirming the proposal for levy of penalty and interest. Aggrieved by the said order, the assessee preferred an appeal before the 1st Appellate Authority which came to be dismissed. Aggrieved by the said order, he preferred an appeal to the Tribunal, which also came to be dismissed affirming the orders passed by the authority. It is against the said order, the present appeal is filed.

(2.) LEARNED Senior counsel appearing for the petitioner -assessee submits that, for the turnover under the Annual Maintenance Contract which is purely a service contract, they are liable to pay only service tax and not any VAT as there is no sale of goods. However, even before the judgment of the Hon'ble Supreme Court in the year 2005, the Assessing Authority initiated reassessment proceedings. In the re -assessment proceedings, the Assessing Authority, after looking into the entire material produced before him, was of the view that out of the total turnover, 10% of the turnover represents the value of the goods supplied and sold and therefore, he levied a VAT on 10% of turnover. Accordingly, accepting the said order, the assessee has been paying taxes on 10% of the turnover under VAT Act and 90% of the turnover as service tax. Even for the year 2006 -07, he had paid the tax accordingly. It is in that context, three proposition notices were issued. The assessee replied and produced all the materials, but still, not being satisfied, now the authorities have come to the conclusion that 75% of the total turnover represents the value of the goods supplied and sold, which finding is without any basis. Infact, they have sent notices to various customers, obtained their reply and they have used that material against the assessee without giving an opportunity of cross -examining or having a say in respect of those statements. Therefore, he submits that the order is violative of principles of natural justice and requires to be set aside.

(3.) WE have gone through the orders passed by the three authorities. It is not in dispute that till the judgment of the Hon'ble Supreme Court in BSNL case, the assessee was paying only service tax of the turnover for the Annual Maintenance Contract. After the orders were passed in the re -assessment proceedings, where 10% was held to be the value of the goods supplied, they accepted the said finding and they are paying a VAT on 10% and service tax on 90%. Now, the authorities issued proposition notices, three in number, to the assessee, for which, reply has been given and all documents produced. However, they have issued notices to the customers and on the basis of the so -called information collected from them, they have come to the conclusion that the total value of the goods supplied is 75%. The said material collected by the customers is not put to the assessee nor given any opportunity to cross -examine them and in the orders also, we do not find any reference to the said material collected and how the authorities have come to the conclusion that 75% represents the value of the goods supplied. The Tribunal was of the view that the certificates filed by the Chartered Accountant show that actually, it is around 4.3% of the total value of the goods supplied and when the assessee is paying VAT on 10%, the case of the assessee cannot be believed.