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2015 (4) TMI 125 - KARNATAKA HIGH COURT

2015 (4) TMI 125 - KARNATAKA HIGH COURT - [2015] 82 VST 504 (Kar) - 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 .....

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he very same project with the very same customer involving transfer 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 opt .....

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Even if any segregation is made for the purpose of billing and separate 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 .....

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angalore. 2. The brief facts of the case are: - The petitioner which 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 .....

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tion and commissioning of WTGs. These four activities are mentioned 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 considerin .....

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ts viz., (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 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 c .....

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4). 8. Section 15(1)(b) of the Act reads thus: 15(1)(b): Composition 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 .....

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;total consideration" includes both the amount received towards 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 require .....

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ich reads as under: INSURANCE We will take suitable insurance policy 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 installati .....

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nt to the offer letter, is segregated to execute the unique wind farm 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 .....

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s required for installation, erection and commissioning of WTG with 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 Secti .....

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ters into purely labour contract, where no aspect of sale is involved, 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 r .....

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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. 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 segrega .....

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nsfer of goods and labour. 15. The Apex Court while considering an identical 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 .....

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