TMI Blog2016 (4) TMI 610X X X X Extracts X X X X X X X X Extracts X X X X ..... eturns filed and that the same has been reflected in the assessment orders later on passed, copy of which has been also produced, without going into the constitutional validity of Rule 3(2)(i-1) of KVAT Rules, the matter is remanded to the Joint Commissioner of Commercial Taxes for fresh consideration in accordance with law keeping in mind the principle of law enunciated in the case of LARSEN & TOURBO LIMITED AND OTHERS and also in the case of BUILDERS ASSOCIATION OF INDIA Vs. UNION OF INDIA [1989 (3) TMI 356 - SUPREME COURT OF INDIA] and the purpose and object behind Rule 3(2)(i-1) of KVAT Rules. - Decided partly in favour of petitioner - WP Nos. 107787-107791/2015, WPNos.107839-107845/2015 (T-RES) - - - Dated:- 24-3-2016 - B. S. Patil, J. For the Petitioner : Sri M Thirumalesh, Sri H R Kambiyavar Smt Amrutha S Babladi, Advs. For the Petitioner : Sri M Kumar, AGA ORDER 1. In these writ petitions, petitioner - Company is challenging the order dated 12.06.2015 passed by the Joint Commissioner of Commercial Taxes (Admin.) DVO., Davangere Division - respondent No.3 herein. By the said order, exercising his powers under Section 63-A, 72(2) and 36 of the Karnatak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... THERS - (2008) 17 VAT AND SERVICE TAX CASES 1 (SC). The Deputy Commissioner passed reassessment order after verifying the returns filed by the sub-contractors and allowed deduction of payments made to the sub-contractors to an extent of ₹ 32,89,60,004/- in the case of M/s.Venkata Sai Constructions Private Limited and ₹ 1,71,68,764 in the case of M/s.R.K.Infra Engineering (India) Private Limited. 4. When the Joint Commissioner of Commercial Taxes took up the matter for revision and issued notice proposing to review the reassessment order passed by the Deputy Commissioner of Commercial Taxes, Ballari, stating that deductions allowed towards sub-contractors had not been assessed to tax nor they had filed returns declaring turnovers to the extent of payments made by the petitioner in favour of sub-contractors, petitioner submitted his reply. The Joint Commissioner of Commercial Taxes rejected the reply submitted by the petitioner and has passed the order under Section 63-A of KVAT Act on 12.06.2015 disallowing the deduction in respect of sub-contract payments to the extent of of ₹ 30,83,06,284/- and ₹ 1,71,68,764/-. This order is produced at Annexure-D. Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SH OTHERS Vs. LARSEN TOURBO LIMITED AND OTHERS - (2008) 17 VAT AND SERVICE TAX CASES 1 (SC). In the said case, dealing with Andhra Pradesh VAT Act, 2005 while examining the provisions contained under Section 4(7) of the said Act, the Apex Court has stated that in terms of the said provision, 'every dealer executing works contract shall pay tax on the value of goods at the time of incorporation of such goods in the works executed at the rates applicable to the goods under the Act and point to be noted was that as per the said Section taxable event was transfer of property in goods involved in the execution of works contract and the said transfer of property in such goods takes place when the goods were incorporated in the works and value of the said goods which constitutes the measure for levy of tax at the incorporation of goods in the works'. In laying down the said proposition, the Apex Court has referred to the judgment in the case of BUILDERS ASSOCIATION OF INDIA Vs. UNION OF INDIA - (1989) 73 STC 370 (SC) quoting the following passage found at page 400 of the said judgment - Ordinarily unless there is a contract to the contrary in the case of works contract th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts in a single transaction. It is this ratio laid down by the Apex Court which the Deputy Commissioner took into consideration while giving deduction of turnover towards the amount paid to the sub-contractor by the petitioner - Company. 9. The Joint Commissioner of Commercial Taxes has not referred to the decision of the Apex Court at all. He has simply laid the entire emphasis on Rule 3(2)(i-1) of KVAT Rules. Rule 3(2) of KVAT Rules deals with determination of taxable turnover of a dealer by allowing certain deductions from the total turnover. One of the deductions provided for is mentioned in sub-clause (i-1) of clause (2) of Rule 3 i.e., 'all amounts paid or payable to sub-contractors as consideration for execution of works contract whether wholly or partly'. Proviso to this Rule states that no such deduction shall be allowed unless the dealer claiming deduction produces document in proof that the sub-contractor was a registered dealer liable to pay tax under the Act and that the turnover of such amounts was included in the return filed by such sub-contractor. 10. The Joint Commissioner of Commercial Taxes, in the impugned order, has held that the Assessing Authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the light of several documents which the petitioner has now produced and keeping in mind the object of the Rules which is indeed aimed at ensuring that sub-contractor declares the amount received by him from the contractor in his turnover and payment of tax does not escape, in my view the Joint Commissioner of Commercial Taxes has to re-examine the matter. When the law declared by the Apex Court makes it clear that in case of a dealer executing works contract, the property in goods used in the construction of a building passes to the owner of the land on which the building is constructed when the goods or materials used are incorporated in the building and that the said principle is based on the principle of accretion of property in goods, apparently, there cannot be two deemed sales, one from the main contractor to the contractee and the other from the sub-contractor to the main contractor. This principle of law has to be borne in mind and thereafter, compliance with Rule 3(2)(i-1) of KVAT Rules which is aimed at securing full information regarding the returns submitted and the documents furnished by the sub-contractor in his turnover has to be insisted upon. 13. The Joint ..... X X X X Extracts X X X X X X X X Extracts X X X X
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