9911796707
TMI Blog2016 (9) TMI 1084X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of flats. The impugned assessment orders pertaining to a project conceived and developed by the petitioner called VBHC Oragadam , in which the petitioner proposed to construct 148 flats. The petitioner is stated to have entered into a Joint Development Agreement with the owner of the land and the construction commenced in January 2012, after obtaining necessary approvals. The manner in which the petitioner transacts business, has been set out in paragraph 3 of the affidavit filed in support of the Writ Petition, stating that when a proposed purchaser intends to purchase a flat, he enters into a construction agreement with the petitioner and the petitioner executes a sale deed for sale of undivided portion of the land and the sale is duly registered. The petitioner deducts the land cost and reports the construction cost as total turnover in its VAT returns as well as the service tax returns. 4. Sofar as the payment of tax under TNVAT Act, the petitioner claims deduction on 30% of the total turnover in terms of Rule 8(5)(d) of the TNVAT Rules and pays tax at appropriate rate on the balance turnover after availing Input Tax Credit of the tax paid on the purchases. The petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut Tax Credit by cross verification of the purchases reported by the petitioner with annexure-1 of the selling dealer, wherein it is alleged that they have reported lesser turnover and the proposal is to reverse Input Tax Credit in respect of the differential turnover. Sofar as the third issue pertaining to computation of the deemed sale value, the learned Senior counsel has drawn the attention of this Court to the decision of the Constitution Bench of the Hon'ble Supreme Court in the case of Gannon Dunkerley & Co., vs. State of Rajasthan reported in (1993) 88 STC 204. The learned counsel by referring to the said decision submitted that the taxable event is the transfer of property in goods involved in the execution of the works contract and the said transfer of property in such goods takes place when the goods are incorporated in the works, 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 the works and not the cost of acquisition of the goods by the contractor. It is submitted that when 50% of the flats remained unsold on the date when the completion certificate was iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Althaf Shoes (P) Ltd., vs. Assistant Commissioner (CT), Valluvarkottam Assessment Circle, Chennai reported in [2012] 50 vst 179 (Mad), it is submitted that the purchasing dealer cannot be mulcted with the liability on account of a fault committed by the selling dealer. Therefore, it is submitted that finding rendered by the Assessing Officer in the impugned orders of assessment under the said three issues are erroneous. 9. The learned Additional Government Pleader submitted that during the course of VAT Audit on the place of business of the petitioner, the following defects were noticed:- (i) Tax liability on deemed sale value in works contract for the years 2011-12 to 2014-15; (ii) Input Tax Credit Reversal on cross verification of buyer and seller as per Annexure-I of buyer and Annexure-II of sellers for the year 2011-12 to 2013-14; (iii) Levy of tax on sale of assets for the years 2012-13 and 2013-14; (iv) Reversal of Input Tax Credit on interstate sales without C Forms; and (v) Penalty under Section 27(3) and 27(4) of the Act on suppression and escapement of turnover. 10. It is submitted that opportunity was granted to the petitioner to submit their objections an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r would contest only three of the issues pertaining to deemed sale value, cross verification and pertaining to the sale of fixed assets, as it is stated that the liability under the other issues have been discharged. This statement is taken on record. It is seen that to the pre-revision notice issued to the petitioner, an elaborate reply has been given, apart from submitting additional written submissions at the time of personal hearing. The Assessing Officer has referred to the contentions raised by the petitioner in their objections taken note of the decisions referred to by them and proposed to discuss all the issues in seriatim. 13. The endeavour of the learned Senior counsel for the petitioner is to convince this Court that the computation of the deemed sale value as done by the Assessing Officer in contra distinction with the procedure adopted by the petitioner is erroneous. The case of the petitioner itself is that the entire construction has been completed and the completion certificate has been issued by the Planning Authority, yet on the date of issuance of such completion certificate, 50% of the flats remained unsold. Therefore, it is their case that sofar as the transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... importance under Section 14 of the Central Sales Tax Act, 1996, the Hon'ble Supreme Court referred to the above mentioned judgments, more particularly, with regard to the point of accretion in a works contract and the following paragraphs would be relevant:- 13. Having heard learned counsel for the parties, we are of the opinion that Shri N. Venkatraman is right. The matter is no longer res integra. Two important propositions emerge on a conjoint reading of Builders Association and M/s. Gannon Dunkerley (supra). First, that works contracts that are liable to be taxed after the 46th Constitution Amendment are subject to the drill ofArticle 286(3) read with Section 15 of the Central Sales Tax Act, namely, that they are chargeable at a single point and at a rate not exceeding 4% at the relevant time. Further, the point at which these iron and steel products are taxable is the point of accretion, that is, the point of incorporation into the building or structure. 14. The relevant paragraphs from these two decisions, therefore, need to be set out. In Builders Association (supra), this Court held: We are of the view that all transfers, deliveries and supplies of goods referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it possible for the States to levy sales tax on the price of goods and materials used in works contracts as if there was a sale of such goods and materials. We do not accept the argument that sub-clause (b) of Article 366(29-A) should be read as being equivalent to a separate entry in List II of the Seventh Schedule to the Constitution enabling the States to levy tax on sales and purchases independent of entry 54 thereof. As the Constitution exists today the power of the States to levy taxes on sales and purchases of goods including the deemed sales and purchases of goods under clause (29-A) of Article 366 is to be found only in entry 54 and not outside it. We may recapitulate here the observations of the Constitution Bench in the case of Bengal Immunity Company Ltd. [AIR 1955 SC 661 : (1955) 2 SCR 603 : (1955) 6 STC 446] in which this Court has held that the operative provisions of the several parts of Article 286 which imposes restrictions on the levy of sales tax by the States are intended to deal with different topics and one could not be projected or read into another and each one of them has to be obeyed while any sale or purchase is taxed under entry 54 of the State List. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ist will have to be exercised subject to the restrictions and conditions prescribed in the said provisions in respect of goods that have been declared to be of special importance in inter-State trade or commerce. So also it is not permissible for the State Legislature to impose a tax on goods declared to be of special importance in inter-State trade or commerce under Section 14 of the Central Sales Tax Act except in accordance with the restrictions and conditions contained in Section 15 of the Central Sales Tax Act. Since the taxable event is the transfer of property in goods involved in the execution of a works contract and the said transfer of property in such goods takes place when the goods are incorporated in the works, 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 the works and not the cost of acquisition of the goods by the contractor. We are also unable to accept the contention urged on behalf of the States that in addition to the value of the goods involved in the execution of the works contract the cost of incorporation of the goods in the works can be inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
