TMI Blog2016 (6) TMI 750X X X X Extracts X X X X X X X X Extracts X X X X ..... rise to a situation warranting interference under Section 25(1), Section 22 cannot control Section 25. Section 25 is an independent power available to the Department to consider and take action in respect of escaped assessment, under assessment etc,. That apart, Section 22(2) would further clarify that even in an instance where revised return is filed, assessment is deemed to be completed subject to Section 25 of the Act. Therefore merely for the reason that the authorities did not invoke Section 22 within the prescribed period does not preclude them from invoking Section 25, if the facts give rise to an eventuality as provided therein. Hence, I do not find anything wrong in the action of the Department in invoking Section 25(1). In this case, no compounding application was ever filed and there is no question of any other person claiming benefit based on the same. In order to invoke Section 8 (a) of the Act, option is to be exercised by the works contractor. Option can be exercised only on compliance of the statutory format. In so far as the petitioner did not comply with such procedure, the Department was justified in acting accordingly as if petitioner had not opted for paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompounding rate which was being remitted from time to time. At any rate, if the petitioner was not eligible to pay tax at the compounded rate, the return submitted under section 20(1) ought to have been rejected and an opportunity should have been granted to file fresh return after curing the defects in terms of Section 22 of the KVAT Act and, having not done so within the prescribed period, proceedings under Section 25 could not have been invoked. Further, it is contended that petitioner had not undertaken any works contract. 5. Reference is also made to the judgment of the Supreme Court in Larsen and Toubro Ltd. v. State of Karnataka [(2014) 1 SCC 708]. It is submitted that as far as the petitioner is concerned, the transaction is only for its members. Reliance is also placed on the judgment in Assotech Reality Pvt. Ltd v. State of U.P. [(Allahabad) 2007 8 DST 738] and M/s.K.Raheja Development Corporation v. State of Karnataka [2005 141 STC 2989.(SC)]. Petitioner has also a case that time was not granted though request was made to that extent. 6. Counter affidavit has been filed on behalf of the 1st respondent in WP(C) No.9770/2016. It is stated that petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22. Assessment in case of non-filing of return and filing of defective return -(1) Where the return submitted under sub-section (1) of section 20 is not in the prescribed manner or not accompanied by the prescribed documents or with incorrect particulars, the assessing authority shall, after recording its reasons, reject the return with due notice to the dealer. Provided that the payment of any tax declared as payable as per the return shall be provisionally accepted. (2) A dealer whose return is rejected under subsection (1) may, file a fresh return curing the defects in such manner and within such time as may be prescribed and accompanied by such documents as provided under sub-section (1) of section 20 together with proof of payment of interest on the tax payable at the rates provided under section 31 for the period from the due date of filing of return till the date of filing of such fresh return. On the receipt of such return by the assessing authority, the assessment for the return period shall, subject to the provisions of section 24 and section 25, be deemed to have been completed. According to the petitioner, they have filed their returns and if at all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further clarify that even in an instance where revised return is filed, assessment is deemed to be completed subject to Section 25 of the Act. Therefore merely for the reason that the authorities did not invoke Section 22 within the prescribed period does not preclude them from invoking Section 25, if the facts give rise to an eventuality as provided therein. Hence, I do not find anything wrong in the action of the Department in invoking Section 25(1). 8. Next question is whether payment of tax at compounded rate in terms of Section 8(a) without a formal application would preclude the Department from invoking Section 25(1). Learned counsel for the petitioner relies upon judgment of the Division Bench in Johnson and Johnson Ltd. v. Asst.Commissioner (Assmt.) [(2009) 17 KTR 613]. Reference to the facts of the said case would show that appeal is filed against clarification issued by the Commissioner of Commercial Taxes under Section 94 of the KVAT Act. The appellant, a manufacturer and a dealer in drugs and medicines, did not file application for compounding in Form 1D. However, the appellant was remitting tax at the compounding rate which was 4% on the maximum retail price on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Division Bench was only approving a clarification issued by the Commissioner wherein the Division Bench clarified that all what the Commissioner has stated is that once the appellant had started billing in accordance with compounding scheme, then the same itself amounts to opting to pay tax under the compounding scheme and the appellant cannot therefore back out of the same . The Division Bench upheld the said position since by the appellant's conduct itself, the purchasers had claimed exemption under proviso (b) to Explanation to Section 8(e) of the Act. In this case, no compounding application was ever filed and there is no question of any other person claiming benefit based on the same. In order to invoke Section 8 (a) of the Act, option is to be exercised by the works contractor. Option can be exercised only on compliance of the statutory format. In so far as the petitioner did not comply with such procedure, the Department was justified in acting accordingly as if petitioner had not opted for payment of tax at compounded rate. On facts itself, it is clear that the matter came to be noticed when a crime file was investigated by the officers where penalty had been imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of Article 366(29-A)(b), in a building contract or any contract to do construction, if the developer has received or is entitled to receive valuable consideration, the above three things are fully met. It is so because in the performance of a contract for construction of building, the goods (chattels) like cement, concrete, steel, bricks, etc. are intended to be incorporated in the structure and even though they lost their identity as goods but this factor does not prevent them from being goods. 97.3. Where a contract comprises of both a works contract and a transfer of immovable property, such contract does not denude it of its character as works contract. The term works contract in Article 366(29-A)(b) takes within its fold all genre of works contract and is not restricted to one specie of contract to provide for labour and services alone. Nothing in Article 366(29-A)(b) limits the term works contract . 97.4. Building contracts are a species of the works contract. 97.5. A contract may involve both a contract of work and labour and a contract for sale. In such composite contract, the distinction between contract for sale of goods and contract fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. Taxing the sale of goods element in a works contract under Article 366(29-A)(b) read with Entry 54 List II is permissible even after incorporation of goods provided tax is directed to the value of goods and does not purport to tax the transfer of immovable property. The value of the goods which can constitute the measure for the levy of the tax has to be the value of the goods at the time of incorporation of the goods in works even though property passes as between the developer and the flat purchaser after incorporation of goods. Learned counsel for the petitioner places reliance on the judgment in Assotech Reality Pvt. Ltd (supra). In the said judgment, there is a finding that the right, title and interest in the construction continue to remain with the builder. That is not the situation here. That apart, the assessing authority considered the matter and held as under; The assessee M/s.Federal Housing Construction Co-op Society is originated only for the purpose of constructing villas/apartments for its members and for that purpose the assessee executed agreement with the members for the construction of apartment and received advance for the said purpose. As ..... X X X X Extracts X X X X X X X X Extracts X X X X
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