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2014 (7) TMI 444 - KERALA HIGH COURTDemand of higher rate of tax - Constitutional validity of the newly introduced provisos to section 8(a)(iiii) of the Kerala Value Added Tax Act, 2003 by the Finance Act, 2007, taking away the benefit of the lesser rate of compounding, being availed of by the petitioners with retrospective effect from April 1, 2005 - Held that:- There is no challenge with regard to the source of power to bring about the enactments, with reference to the relevant entry in the State List under the Seventh Schedule of the Constitution of India. Similarly, why the provisos become inequitable is also not substantiated. If there was a works contract, as on March 31, 2005 and the assessee opted to pay compounded rate of tax under section 7(7) or 7(7A) of the KGST Act, such assessee is entitled to continue to pay at the same rate of tax in respect of the unexecuted portion of said works contract. It is corollary to note that, if the works contract is on or after April 1, 2005, it was not a works contract prior to the date of coming into force of the KVAT Act and in such case, the benefit of lesser tax under section 8(a)(iii) is not available. There was no works contract prior to coming into force of the said Act, in respect of any agreement executed on or after April 1, 2005. This being the position, it cannot be said that the petitioners had commenced the construction of the buildings prior to April 1, 2005, pursuant to any agreement executed on or after April 1, 2005, for claiming lesser compounded rate of tax as given in section 8(a)(iii), (dehors the newly added provisos as per the Finance Act, 2007). By virtue of the very nature of contract being undertaken by the petitioners, whereby "independent" residential flats are intended to be constructed on behalf of the different prospective purchasers (awarders) based on different agreements to be executed in between, accepting consideration from such different persons, it gives rise to several independent works contracts and is taken care of by section 8(a)(iii) itself. This being the position, the petitioners cannot be heard to say that they became aggrieved only by introduction of the newly added provisos as per the Finance Act, 2007. With reference to the substitution of the newly added proviso as per the Kerala Finance Act, 2009, it is contended that, this will take care of the whole situation, as the benefit is intended to be given in respect of the works which commenced prior to April 1, 2008 and remains partly unexecuted as on April 1, 2008, to be mulcted with tax liability as it existed prior to April 1, 2008 till the completion of the work or up to March 31, 2009. - Since it is a substantive provision and not a procedural one, it cannot have any retrospective application and the intention of the law makers cannot be widened by any "reading into" exercise, at the instance of this court to suit the convenience of the petitioners. This court finds that the reliance sought to be placed on the said provisions is quite out of context. Challenge raised against the constitutional validity of the provisos impugned in the writ petitions is devoid of any merit. There is no irregularity or illegality on the part of the respondents for having issued the impugned notices demanding higher rate of tax in respect of the works contracts entered into between the petitioners (contractors) and the prospective purchasers (awarders) based on any agreement executed on or after April 1, 2005. - Decided against assessee.
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