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2023 (10) TMI 669 - HC - VAT and Sales TaxPayment of tax at compounded rates under Section 8 of the Kerala Value Added Tax Act - Deduction of certain amounts from the gross contract value received by him from the customers and applied the rate of tax prescribed under Section 8 to the said reduced contract value - benefit of sub-contractor deduction evidenced by consolidated Forms 20H issued for multiple years - HELD THAT:- Athough the provision for payment of tax on compounded basis for works contractors provides that the contractor has an option of paying tax at 3% of the whole contract amount instead of paying tax in accordance with the provisions of Section 6 of the KVAT Act, the expression “whole contract amount” for the purposes of the Section is clarified as not including the amount paid to sub-contractors for execution of a portion of works contract if the sub-contractor is a registered dealer liable to pay tax under sub section (1) or sub section (1A) of Section 6, and the contractor claiming deduction in respect of such amount furnishes certificates in such form as may be prescribed. The provisions of a taxing statute have to be read in the backdrop of Article 265 of the Constitution of India, which clearly mandates that there shall be no levy and collection of tax except by the authority of law. Read in the backdrop of the constitutional provision, therefore, Section 8 of the KVAT Act cannot be taken as authorising the levy of tax on any amount that does not bear nexus with the construction activity involved in a works contract in the instant case. Statutory levies and amounts paid by the petitioner as pure agent of the customer, who is legally obliged to bear the burden of those levies and expenses, cannot be included in the contractual receipts of the petitioner for computing the “whole contract amount” for the purposes of Section 8 of the KVAT Act. It is no doubt true that if there was a separate agreement for the sale of the incomplete structure, the consideration shown under such agreement would have been for the purchase of an item of immovable property and no KVAT would have been levied on the said consideration amount. In the instant case, however, there is a situation where in the single agreement that was entered into between the petitioner and his customer, the consideration for the construction activities undertaken by the petitioner for the unfinished portion of the building, at the time of entering into the agreement with the customer, includes not only the amount towards construction of the unfinished portion but also an amount towards the completed portion of the building up to the date of the agreement - Since there was only a single indivisible agreement, for which consideration flowed from the customer to the petitioner, the petitioner cannot be heard to contend that the “whole contract value” in respect of the works contract undertaken for the customer would not include the consideration attributable to the portion of the building that was already constructed at the time of entering into the agreement. The imposition of tax on the whole contract value, the State cannot be seen as imposing tax on the sale of immovable property; on the contrary, it has to be seen as levying tax on the works contract undertaken by the petitioner, albeit on a value that stood enhanced by the cost incurred for the completed construction. These O.T. Revisions are disposed off.
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