TMI Blog2014 (11) TMI 967X X X X Extracts X X X X X X X X Extracts X X X X ..... be paid. The liability to pay compounded tax arises only if there is a liability to pay tax. If it is a composite contract involving a labour contract and supply of materials, the assessee will become liable to pay tax. If the labour contract is pure and simple there is no liability to pay tax and consequently there is no liability to pay compounded tax as well. Under these circumstances, we are of the view that the assessing officer has to verify the contract in question especially the contract with Indian Oil Corporation and verify whether it amounts to works contract or a pure and simple labour contract. - Decided partly in favor of assessee. - O.T. Rev. Nos. 57, O.T. Rev. Nos. 130, O.T. Rev. Nos. 134, O.T. Rev. Nos. 135, O.T. Rev. Nos. 136 of 2013, O.T. Rev. Nos. 22, O.T. Rev. Nos. 23, O.T. Rev. Nos. 24 of 2014 - - - Dated:- 31-3-2014 - DR. MANJULA CHELLUR C.J. AND SHAFFIQUE A.M. J. N. Muraleedharan Nair, V. K. Shamusudheen, Harisankar V. Menon, Smt. Meera V. Menon and Mahesh V. Menon for the assessee. Bobby John, Government Pleader, for the Department. O. T. Rev. Nos. 57 of 2013, 134 of 2013, 135 of 2013 and 136 of 2013 are filed by the assessee challengin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 4. The Tribunal, after referring to two decisions of the Karnataka High Court and also referring to the definition of works contract under section 2(iv) of the Act, opined that contractor was entitled to opt for payment of tax at compounded rate of three per cent. of the whole contract amount as provided under section 8(a)(i) of the Act. According to the Tribunal, whole contract amount means the works executed by the assessee in works contract and pure labour contract is exempted from tax liability because no material is involved in execution of labour contract from the side of the assessee. According to them, as details of works contract could be bifurcated for each year as per the turnover details, they remanded back all the four matters to the assessing authority to verify the documents and allow the claim as per the documents produced. 5. Aggrieved by this, State is before us contending that reading of sections 6(1) and 8(a)(i) of the Act clearly indicate how computation of tax under both claims are operating in different areas. According to learned Government Pleader, exemptions and deductions which are provided in one of the methods cannot be made applicable to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 46th Constitution Amendment Act State Legislature has the power to levy tax only on the composite works contract involving sale of goods and supply of labour and service and therefore the contract referred in section 8 of the Kerala Value Added Tax Act is only the works contract and not labour contract ? 8. In O. T. Rev. Nos. 134 of 2013, 135 of 2013 and 136 of 2013, the second question of law is the same as in O. T. Rev. No. 57 of 2013, but the first question reads as under:- Whether, on the facts and circumstances of the case, the Appellate Tribunal was correct in law in confirming the demand of tax on the amount received by the petitioner for doing labour work, particularly considering the fact that the said work is not taxable under the charging section of the Kerala Value Added Tax Act and as per rule 9(4) of the Kerala Value Added Tax Rules the said amount will not come under the purview of turnover ? 9. So far as O. T. Rev. No. 57 of 2013, the dealer/assessee is before us. In this case, final order pertains to the assessment year 2008-09. He opted for payment of tax at compounded rate of three per cent. under section 8(a)(i) of the Act. He also claimed exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax at the compounded rate is the same as that of the charging section 6 except for the fact that it is a different method of computation to arrive at the same destination. 11. We have gone through the provisions of section 6 as well as section 8(a) (i) of the Act which read as under:- 6. Levy of tax on sale or purchase of goods:- (1) Every dealer whose total turnover for a year is not less than ten lakhs rupees and every importer or casual trader or agent of a non-resident dealer or dealer in jewellery of gold, silver and platinum group metals or silver articles or contractor or any State Government, Central Government or Government of any Union Territory or any Department thereof or any local authority or any autonomous body whatever be his total turnover for the year, shall be liable to pay tax on his sales or purchases of goods as provided in this Act. The liability to pay tax shall be on the taxable turnover:- (e) in the case of transfer of goods involved in the execution of works contract where transfer is in the form of goods, at the rates specified for such goods, clause (a) or (d) above, as the case may be. (f) in the case of transfer of goods involved in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self the bother of book keeping, assessment, etc. Therefore, there is no necessity to enquire and determine the extent or value of the goods which have been transferred in the course of execution of works contract, the rate applicable to them and so on. In that context, they opined that object of introducing payment of compounding rate of tax, section is the same as that of the charging section and the compounding provision is only a different route to arrive at the same destination. According to the learned counsel representing dealer/assessee, whatever is applicable to regular charging section, deserves to be applied to concessional provision, hence they are entitled to bifurcate the contract works and claim exemption and then opt to pay tax at a particular rate. 13. They also referred to H. S. Chandra Shekar Hande v. State of Karnataka [2013] 57 VST 234 (Karn). Section 17(6) of the Karnataka Sales Tax Act provides for payment of tax on the total consideration of the works contract. In the said case, the assessee was engaged in the business activity of fabrication and erection of structural works. He filed annual return for the year 1999-2000 showing the total consideration re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e accounts maintained by the assessee to demonstrate that he is involved both in works contract as well as in labour contract. In other words a works contract is a composite contract which includes payment of labour contract plus payment of material. In respect of that labour charges under section 17(6) tax is payable on the total consideration in the works contract. If the labour contract is an individual contract where the component is only labour, no tax is payable. 14. Placing reliance on these two decisions, learned counsel appearing for the assessee/dealer contends that the assessee/dealer is entitled to claim exemption on the value of turnover, so far as labour charges. As against this learned Government Pleader contends that the word used under section 8(a)(i) of the Act is very clear and tax is payable on the whole contract amount and question of bifurcation of contract amount is not possible. According to him, whole contract amount means whatever is received towards a particular contract. He further contends that very purpose of introducing section 8(a) (i) of the Act is to create hassle-free and concessional rate of tax payable by a dealer/assessee. Therefore, inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t whether such contract was bifurcated into two different agreements, one with reference to labour and the other for procurement and supply of materials or under the same agreement two different rates, one for labour work and another for supply of materials. Therefore, we are of the opinion that whole contract amount would refer to entire value of contract. Section 6(1) is a regular assessment process where taxable turnover is fixed after giving deductions and exemptions permissible therein. Depending upon the taxable turnover arrived at, tax is computed at appropriate rate. So far as section 8(a)(i), it is a compounding scheme under which assessee chooses to pay tax at concessional rate on the whole contract amount without reference to turnover. 17. Coming to sections 6 and 8 of the Act, one has to see intention of the Legislature in introducing section 8(a)(i). It is well-settled, section 8(a)(i) is not unconstitutional, as it is another mode of assessment of tax which is hassle-free without much burden on the assessee like maintaining the accounts, etc. He can choose to pay tax under section 8(a) (i) at much lesser rate than what is provided under section 6. Reading of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act is the whole contract amount for a particular work or work done in a year, if such work does not come within the definition of works contract under section 2(lv) of the Act taxable under section 6(1) (e) or (f), it has to be verified whether the labour work undertaken by the assessee in the work site of Indian Oil Corporation is purely a labour work or whether it comes under the category of works contract liable to tax. If it is purely a labour work, the question of taxation does not arise. Hence a reference to the terms and conditions of the contract has to be considered before arriving at such a conclusion. But, in regard to O. T. Rev. Nos. 134 of 2013, 135 of 2013 and 136 of 2013, no such material is produced to show that he had done a separate labour contract. In those cases the Assistant Commissioner (Appeals) has come to a finding that no evidence was placed before it to challenge the findings of the assessing officer. This factual finding is confirmed by the Tribunal. Hence we do not intend to interfere with the said findings. 20. But, as far as O. T. (Rev) No. 57 of 2013 is concerned, materials have been placed on record by way of annexures A and B to indica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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