GAMMON INDIA LTD Vs. STATE OF KERALA

JUDGEMENT

(1.) Both the Writ Appeal and Writ Petition filed by the same company pertain to sales tax liability for a bridge constructed under the Build, Operate and Transfer (BOT) scheme. The bridge is across the backwaters connecting Willingdon Island to the main land. The first contract was between Greater Cochin Development Authority and the appellant / petitioner herein. However, later a subsidiary company of the appellant / petitioner by name Cochin Bridge Infrastructure Co. Ltd., CBICL, was brought in and a tripartite agreement was executed among GCDA, petitioner and CBICL providing for construction of the bridge, operation of the bridge by CBICL and transfer the same after 19 years of use by them. CBICL thereafter awarded the construction contract to the petitioner for Rs.2,215 lakhs. Construction of the bridge commenced in the year 1999-2000, and according to the petitioner, petitioner filed compounding application for payment of tax under S.7(7) of the Kerala General Sales Tax Act, 1963, hereinafter called KGST Act. However, the application was not processed in time and no orders were issued. Even though orders on compounding application was issued in 2004 while completing the assessment, the Deputy Commissioner of Commercial Taxes, in exercise of power under S.35 set aside the order on the compounding application. WP (C) 28084 of 2008 is filed for a declaration that the order issued on compounding application cannot be interfered with by the Deputy Commissioner under suo motu revisional powers. In substance, petitioner prays for a declaration that they are entitled to remit tax in terms of the compounding application on the contract amount referred in the construction agreement. The challenge in WP (C) 8360 of 2008 was against the regular assessment completed for the assessment year 2001-02, the year in which the construction of the bridge was completed. The learned single Judge, without deciding the case on merits, closed WP (C) leaving freedom to the petitioner to pursue statutory remedy before the appellate authority. It is against this judgment of the learned single Judge that Writ Appeal 1023 of 2008 is filed by the petitioner.

(2.) We have heard Sri. N. Venkataraman, counsel appearing for the appellant / petitioner, Special Government Pleader appearing for the State and standing counsel appearing for GCDA.

(3.) Even though sales tax assessment in the normal course should be contested in appeal, as held by the learned Single Judge, we feel assessment in this case calls for interference because it is totally without jurisdiction. In the first place, turnover of construction of the bridge is estimated based on toll collections for 19 years which is impermissible under the statute and so much so assessment is without jurisdiction. Secondly, the case is quite unique in nature because construction contract, the turnover stated therein, with reference to which compounding application is stated to have been filed and accepted by the Officer, is between related parties the contents of which need not be accepted by the department as real. What attracts sales tax liability is on the transfer of property involved in the construction of the bridge, which is works contract assessable under S.5(1)(iv) of the KGST Act. If the consideration of contract shown in the contract is not acceptable to the assessing officer, he can give reasons for the same and estimate the turnover. However, it would not be permissible for the assessing officer to estimate toll collections and treat it as turnover for construction of the bridge and so much so the orders impugned in WP (C) 8360 of 2008 have to be cancelled. The contention of the petitioner that contract amount referred to in the construction agreement between itself and it's subsidiary company namely CBICL should be assessed is also not acceptable because the awarder of the contract is GCDA for which the bridge is constructed. The contract between petitioner and it's subsidiary company is only an internal arrangement between them and it is upto them to fix the price of the contract suitable to parties. However, there would be no difficulty for the assessing officer to estimate the value of materials involved in the execution of contract, because similar bridges were constructed near the very same bridge in the past as well as later. In fact details of other bridges constructed in the area could be collected from PWD, CPWD, or Port Trust, as the case may be and value of the bridge for assessment could be determined after giving opportunity to the petitioner and after calling for particulars available with them.