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TMI Blog2010 (7) TMI 913X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has paid a sum of Rs. 2,20,00,000 for main civil work. The remaining amount of Rs. 79,57,344 is paid to unregistered subcontractors for carrying out works like construction of road, market, office, model flat, rock cutting, etc. Therefore, the audit authorities added the value of materials purchased by the said unregistered sub-contractors not supported by bills and used in the construction work is to be treated as unregistered dealer purchases liable to tax under section 3(2) of the KVAT Act, 2003. The tax liable to be paid was proposed to be determined on best judgment assessment basis under section 39(1) of the KVAT Act, 2003. The assessee filed his objections and submitted that some of the works are labour works without materials and secondly, the payments made to the sub-contractors are included in the receipts declared to tax while effecting sales of flats in the apartments. According to the assessee, the said materials are not used in the course of business by the assessee. Therefore, tax under section 3(2) cannot be levied on him. If the goods are purchased for the purpose of resale, tax under section 3(2) cannot also be invoked. The audit officer after examining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the said order, the assessee is before this court. Sri Kamath, learned counsel appearing for the assessee, submitted, firstly that the case is not covered under section 3(2) of the Act. Though the assessee got the works done through unregistered sub-contractors, when he sold the flats, he has paid tax, which is inclusive of the tax payable by him for the purchase of the said goods and therefore, the authorities were wrong in holding that the case falls under section 3(2) and not 3(1) of the Act. Secondly, he contended, admittedly, the assessee has not used the goods in the course of his business. In other words, he has not consumed the said materials. On the contrary, it is sold and therefore, section 3(2) is not attracted, as the application of section 3(2) is restricted to only cases of consumption of the goods purchased from an unregistered dealer not for resale but for use. Thirdly, he contended, even if it is to be held that the assessee has to pay tax under section 3(2), as he has already paid output tax and is entitled to deduction, it is only a book adjustment, which he has to make. The audit officer may be directed to make necessary corrections. Lastly, it was contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of his business, from an unregistered dealer then sales tax is to be paid by him. In common parlance it is called as purchase tax. The liability to pay purchase tax arises only if purchase is made for use in the course of his business. It does not mean that the said business which he is carrying on should be only sale and purchase of such goods. The words employed are "use in the course of his business" and not mere "use". The use of the goods may be in the same condition if he is a re-seller or the said goods may be a raw product which will be absorbed in the final product in respect of which he is carrying on business. The user of the goods purchased depends on the nature of his business. Therefore, if that registered dealer who purchase these goods, sells the goods in the same form or uses in the course of his business by absorbing the same as an input to the final product and then sells the final product, he is liable to levy and pay the sales tax for such input. The said words that section 3(2) applies only to a case where a registered dealer who purchase goods from the unregistered dealer, use the said goods in the same condition in the course of his business, is not t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, rule 3(2) provides for deductions. It provides that the taxable turnover shall be determined by allowing the following deductions from the total turnover. Sub-clauses (l) and (m) provide for deduction of the actual labour charges expended and in the absence of such labour charges, not ascertainable from the books of accounts maintained by the dealer, the amount deductable would be as per the table mentioned in the said sub-clause (m). In respect of civil works like construction of buildings, bridges, roads, etc., 30 per cent is the labour and like charges, which is permitted to be deducted. Though the assessee has not spent any amount towards the labour charges, actually he has given the sub-contract and it is the sub-contractor who has spent the said amount. When the sub-contractor is an unregistered dealer and the entire work entrusted is calculated and taken into account in the accounts of the assessee, he is certainly entitled to the deduction of labour charges. As they are unable to show what is the actual amount expended, he is entitled to benefit of 30 per cent of discount as prescribed under law. That apart, as submitted by the learned counsel for the appellant, if ..... X X X X Extracts X X X X X X X X Extracts X X X X
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