GAMMON INDIA LIMITED Vs. STATE OF KERALA

JUDGEMENT

(1.) SINCE the issue involved in both these writ petitions is the same they are taken up for consideration together and disposed by this common judgment. For the sake of convenience, the reference to the facts and exhibits is from W.P.(C).No.28084 of 2008.

(2.) THE petitioner is a Company incorporated under the Companies Act and engaged in the execution of works contracts. In connection with the work relating to construction of the new Mattancherry Bridge, it had entered into an agreement with the Greater Cochin Development Authority (GCDA). The said agreement, dated 24.03.1998, contemplated the payment to the petitioner of an amount of Rs.2253.50 lakhs as consideration for the work under the agreement. It would appear that thereafter, the petitioner entered into another agreement dated 03.12.1999 with the Cochin Bridge Infrastructure Company Limited (CBICL), sub - contracting a substantial part of work, for the value of Rs.2215 lakhs. The writ petition is concerned with the tax liability of the petitioner under the Kerala General Sales Tax Act (hereinafter referred to as 'the KGST Act' for short) for the assessment years 1999 -2000, 2000 -2001 and 2001 -2002. In connection with discharging his tax liability under the contract for the said assessment years, the petitioner had initially applied for registration under the KGST and CST Act. Along with this application for registration he also submitted a copy of the contract entered into with the GCDA. Thereafter, for the first assessment year namely 1999 -2000, the petitioner filed an application for compounding and also began filing returns for the amounts received by him from the awarder of the contract (GCDA), and paying tax on the said amounts at compounded rates. These returns and payments of tax were accepted by the Department. It is evident from the records that even for the assessment year 2000 - 2001, the same procedure was followed by the petitioner and he had filed the necessary returns and also paid tax at compounded rates. Ext.P17 certificate issued by the assessing authority indicates that the petitioner had filed returns and paid tax in accordance with the returns for the period from 1999 -2000 to 2000 -2001. For the assessment year 1999 -2000 initially, Ext.P2 assessment order dated 03.03.2004 was passed by the 3rd respondent Assessing Officer. The said assessment was completed by accepting the application preferred by the petitioner for payment of tax at compounded rates and taking into account the returns filed by the petitioner and tax payments made by him on that basis. By Ext.P3 order dated 19.03.2005, however, the Deputy Commissioner who had initiated proceedings under Section 35 of the KGST Act for setting aside Ext.P2 order, proceeded to do so, inter alia, on the ground that the total contract amount involved in respect of the transfer of materials incurred in the construction of the bridge was not forthcoming from the documents produced by the petitioner and that there was a difference noticed, between the amount mentioned in Form 21B filed by the petitioner and what was otherwise conceded by him as contract expenses, to the extent of Rs.23.65 crores. On these grounds, the Deputy Commissioner set aside Ext.P2 assessment order and remanded the matter to the 3rd respondent for de novo disposal in accordance with law. Ext.P6 dated 15.02.2008 is the revised assessment order passed by the 3rd respondent for the year 1999 -2000. It would appear that, acting on Ext.P3 order of the Deputy Commissioner, the 3rd respondent, by Exts.P7 and P8 orders dated 23.03.2005 proceeded to reject the applications for compounding preferred by the petitioner for the assessment years 2000 -2001 and 2001 -2002 respectively.

(3.) A counter affidavit has been filed on behalf of the respondents wherein it is pointed out that Ext.P3 order passed by the Deputy Commissioner was justified in as much as the petitioner had taken the figures in the contract between the petitioner and CBICL, whereas it ought to have taken the figures in the contract between the petitioner and GCDA for the purposes of paying tax at compounded rates. It is also pointed out that, while the statutory provisions required the petitioner to file the application for compounding before the receipt of contract amounts, the petitioner had actually filed the application in Form 21B for the relevant assessment years long after the contract was completed and payments received thereunder. Exts.R1, R2 and R3 applications preferred by the petitioner are also produced along with the counter affidavit to show that they were filed belatedly. The contention in the counter affidavit, in otherwords, is that insofar as the petitioner did not comply with the statutory procedure for filing the compounding application, it was not possible to grant permission to the petitioner for payment of tax at compounded rates during the said years. In a reply affidavit filed to the counter affidavit, it is the definite case of the petitioner that there was a provision in the statute for condoning the period of delay in filing the compounding applications and further that the petitioner had all along filed returns and also paid tax on the basis that the compounding applications had been accepted by the Department.