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2018 (7) TMI 1705 - HC - VAT and Sales TaxEvasion of tax - Section 6(1)(f) of the KVAT Act - case of Revenue is that the entire contract amount had to be disclosed in the turnover and tax paid at 12.5% after eligible deductions as available in Rule 10, whereas the assessee having paid only the scheduled rate of those goods, which were incorporated in a works contract - Held that:- There occurs a sale from the awardee to the awarder on incorporation or accretion of such goods to the works contract. Such sale when involved in a works contract, the tax liability would be different from the liability imposed by the Schedule on the separate goods. The works contract is liable to tax at a uniform rate for the transfer of goods by way of accretion in the works contract; on the total contract receipts after exemptions provided under Rule 10 Hence, there is a suppression in the return leading to tax evasion. The Tribunal was not correct in relying on U.K.Monu Timbers [2012 (6) TMI 795 - KERALA HIGH COURT] which found that the power of best judgment conferred on the Assessing Officer is not available to the officer proceeding for imposition of penalty under Section 67 of the KVAT Act - In the present case, there is no best judgment assessment made and the Intelligence Officer has merely taken the total contract receipts including the deduction made by the awarder for supply of goods, which the assessee disclosed in the returns as a mere sale. Hence, there is no best judgment or estimation carried out by the Intelligence Officer and the turnover found to have been suppressed is from the total contract amount received by the awardee-assessee. Whether in computing the tax evaded there has to be deduction of the input tax credit which could be claimed by the assessee? - Held that:- When the awarder purchases goods and supplies it to the awardee, and then deducts the purchase price from the total contract amounts, the purchase made is on behalf of the awardee. There would hence be 'zero' tax liability on the awarder at the time of supply to the awardee. But, the subsequent sale in the present case is by accretion of goods into the works contract and the value addition insofar as the execution of the works contract is concerned, has to be taxed at the rate of 12.5% after allowing the deductions under Rule 10 of the KVAT Rules. At this point, definitely the awardee would be entitled to claim input tax credit being the tax originally paid by the awarder at the time of purchase - However, the claim can be raised only in assessment proceedings and there could be no deduction made of such probable claim, in computing the tax sought to be evaded. Revision allowed - decided in favor of Revenue.
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