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M/s. Suzlon Infrastructure Ltd. (Subsequently Known As M/s Construction Ltd) (Presently Known As. M/s Aspen Infrastructure Ltd.) Versus The State of Karnataka

Levy of tax on activities considering the agreement as an integrated single composite contract - Composition tax under Section 15(1)(b) of the Karnataka Value Added Tax Act, 2003 - Held that:- It is clear that in a works contract involving transfer of goods and labour, tax is payable under Section 15(1)(b) on the total consideration of the works contract. If the labour contract is an individual contract involving only labour, no tax is payable. In the case on hand, the assessee has segregated th .....

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of goods and labour.

Apex Court while considering an identical provision in the case of Builders Association of India (1996 (11) TMI 355 - SUPREME COURT OF INDIA) under the provisions of Kerala General Sales Tax Act has categorically held that the alternate method of composition provided under composition tax is optional, there is no compulsion upon any contractor to opt for the alternate method of taxation and by opting to this alternate method, the contractor saves himself the bothe .....

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rate invoices are raised towards each portion, it does not alter the nature of composite contract. - Tribunal on proper appreciation of the terms of the contract recorded a plausible finding that the contract executed by the assessee is a composite, single, integrated contract and all the four activities mentioned in the work orders as individual activities are intrinsically linked with each other and the main object is for the installation and commissioning of WTGs as per the offer letter. Thus .....

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is a registered dealer under the provisions of the Karnataka Value Added Tax Act, 2003 (hereinafter referred to as 'the Act' for brevity), carried out the activity of laying down civil foundations, installation of electrical components for wind turbine generator (WTG), erection and commissioning of WTG. The petitioner has opted for composition under Section 15 of the Act for the assessment period September 2006 to March 2007, May 2007, June 2007 and August 2007. The WTGs which are under .....

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as: (a) laying down of civil foundation (b) supply and installation of electrical line (C) Supply of electrical items (d) erection and commissioning of WTGs supplied by customer 3. The Assessing Authority (AA) levied tax on these activities considering the agreement as an integrated single composite contract. On appeal this finding of the AA was upheld against which appeals were filed before the Tribunal. The Tribunal considering the terms of the agreement entered into between the parties, dismi .....

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tion of electrical line (c) Supply of electrical items (d) erection and commissioning of WTGs supplied by customer and has paid the tax as per Section 15(1)(b) relating to the contracts (a) to (c) referred to above and only as regards contract relating to erection and commissioning of WTG supplied by the customer, which is purely labour contract, the assessee having discharged the service tax liability is not liable to pay the composition tax under Section 15(1)(b) of the Act. The learned counse .....

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of tax (1) Subject to such conditions and in such circumstances as may be prescribed, any dealer other than a dealer who purchases or obtains goods from outside the State or from outside the territory of India, liable to pay tax as specified in Section 4 and.- (b) who is a dealer executing works contract; or may elect to pay in lieu of the net amount of tax payable by him under this Act by way of composition, an amount at such rate not exceeding five percent on his total turnover or on the tota .....

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the execution of works contract involving transfer of property in goods and the amount received towards the labour work i.e., the total receipts received in a single composite contract. The perusal of the offer letter, a standard format consisting of offering the services with three annexures namely, Annexure.I- quotation, Annexure.II - terms and conditions, Annexure.III - scope of work made by the assessee for services required for erection and installation of WTG in Karnataka reads thus: &quo .....

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for storage & erection during the erection period of the WTGs. This insurance shall cease once the WTGs are commissioned. The Fire & Allied Perils, Earthquake & Third party risk policy will be taken by you as soon as the WTG is commissioned at your project site. Scope of Work @ Annexure III reads as under: "We will do the complete installation, erection and commissioning of the WTG and all electrical installation for WTG using material and also undertake to do the civil work wi .....

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m project at specific location at site addresses given by the customer, it does not lose its composite, single, integrated nature 10. A contract has to be read as a whole and the purpose for which the contract was entered into by the parties has to be ascertained from the terms of the contract. The intention of the parties is to enter into an agreement for the installation, erection and commissioning of WTGs. 11. The perusal of the offer letter, with the terms and conditions of the work orders e .....

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invoice copy. It is also noticed that the WTGs do not come in the assembled manner but rather they are supplied by the customers as turbine, rotors and blades which are to be carried to the site where the assessee has to compulsorily make civil foundation followed by electrical work and then only has to erect and install WTG which is an integral activity. 13. This Court, while considering the issue of composition tax under Section 17(6) of the Karnataka Sales Tax Act which is in pari materia wit .....

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d, and consideration received in the labour contract is outside the claim of Sales Tax Act, no portion of that labour charges is liable to tax under the KST Act. If the total turnover which has declared in the return has both these components i.e., consideration received in a pure labour contract and the consideration received in the works contract, is liable to pay tax under Section 17(6) only in respect of works contract. In respect of the consideration received in the labour contract, no tax .....

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s contract. If the labour contract is an individual contract where the component is only labour, no tax is payable". 14. Thus it is clear that in a works contract involving transfer of goods and labour, tax is payable under Section 15(1)(b) on the total consideration of the works contract. If the labour contract is an individual contract involving only labour, no tax is payable. In the case on hand, the assessee has segregated the activities as per the work orders executed against the offer .....

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dentical provision in the case of Builders Association of India (supra) under the provisions of Kerala General Sales Tax Act has categorically held that the alternate method of composition provided under composition tax is optional, there is no compulsion upon any contractor to opt for the alternate method of taxation and by opting to this alternate method, the contractor saves himself the botheration of book keeping, assessment, appeals and all that it means. The assessee having opted for the c .....

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