TMI Blog2018 (7) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... registered dealers are used for development of their own property in the course of the business of the registered dealer, liability to pay tax u/s 3(2) of the Act arises. The decision of the Revisional Authority that the activity of formation of layout is a ‘business’ is in conformity with the provisions of the Act, merely for the reason that no input tax credit can be claimed by the dealer, on this transaction, no liability u/s 3(2) arises, is only a misconceived notion of the Assessee and cannot be acceptable - the subsequent transactions of the URD purchased goods is immaterial for the purpose of levy of tax under Section 3(2) of the Act - demand of tax upheld. Jurisdiction - validity of proceedings by the Addl. Commissioner U/s 64(1) of the Act - Held that:- The order of the Appellate Authority is not only erroneous but prejudicial to the interest of the revenue as discussed above. The twin test i.e., [i] the appellate order being erroneous and [ii] prejudicial to the interest of the revenue, being satisfied, the proceedings initiated by the Addl. Commissioner of Commercial Taxes is well within the scope and ambit of Section 64(1) of the Act. The action of the Revisional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness relating to the transfer of property in goods. The appellant is a developer of properties and has purchased the materials like sand, jelly, bricks, etc from the unregistered dealers and used the same for construction of roads, drainage, sewage, etc. i.e. in the process of formation of the layout, no such goods purchased from the unregistered dealers are sold. It is the immovable property/sites which has been finally sold to the purchasers. There being no resale of the goods, no input tax benefit is available to the assessee. In such circumstances, levy of tax U/s 3(2) of the Act is not attracted. The First Appellate Authority on analyzing the facts of the case in the light of the Judgment of the Karnataka Appellate Tribunal in M/s Alliance Infrastructure Project Pvt. Ltd., -v- State of Karnataka (STA No.461 to 465/2009 DD 26.09.2010) as well as the Full Bench Judgment of the Karnataka Appellate Tribunal, Bangalore reported in 2009 (67) Kar.L.J. 359 (Tri.) (FB) in the case of Continental Builders and Developers, Bangalore v- State of Karnataka had rightly set-aside the levy of tax U/s 3(2) of the Act and the consequential penalty and interest holding that no tax U/s 3(2) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced reliance on the Judgment of the Co-ordinate Bench of this court in the case of State of Karnataka v- M/s Shyamaraju Company (India) Pvt. Ltd. in STRP Nos.32 103-105/2010. 8. Heard the rival submissions of the learned counsel appearing for the parties and perused the material on record. 9. The Appellate Authority in its order dated 29.11.2010 at paragraph 5 has observed that the appellant is engaged in execution of civil works contract and is also a developer of properties; the appellant has filed return of turnover in Form VAT-100 for the tax period in question disclosing the total turnover and has claimed exemption of levy of tax on the entire turnover on the ground that the appellant has sold only sites by formation of layout. Thus, it is not in dispute that Appellant-M/s Dhammanagi Property Developers, Bangalore is a partnership concern registered under the KVAT Act with effect from 1.9.2005. Registration of the concern under the provisions of the Act indicates the business activity carried on by it. In this backdrop, adverting to the arguments of the learned counsel for the parties, Section 3(2) of the Act is examined which reads thus: 3. Levy Of tax [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided the same facilities to the residents of the layout. It is also not in dispute that the sites carved out in the layout are sold to the prospective purchasers. The price of sites collected includes the developmental charges to be incurred for providing the above civic amenities. Therefore, the stand of the assessee was rightly rejected by the assessing authority and the appellate authorities that the developmental charges agreement is only for the easementary right and there is no transfer of property by way of sale such as road and park in terms of section 2[1][t] of the KST Act and the TP Act to the residents of the layout. The contention urged by the learned counsel for the assessee that the assessee is not liable to pay tax under section 5B read with section 17[6] of the KST Act is wholly untenable in law and therefore we cannot accept the same. 6. No material is produced by the assessee before the assessing authority to show that the expenditure incurred for the formation of layout and providing common facilities to the respondents is not part of the sale consideration. In the absence of common facilities in a layout nobody will buy the sites. Therefore, there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistered under this Act. In other words, if a registered dealer purchases taxable goods from a person who is not registered under the Act, and uses it for his own consumption personally, then there is no liability to pay tax under sub-section (2). But once he uses those taxable goods in the course of his business, he is liable to pay tax which is known as purchase tax. In fact, this Court had an occasion to consider the aforesaid question in the case of M/S. CONCORDE HITECH CITY (P) LIMITED, vs. STATE OF KARNATAKA in S.T.A.No.27/2009 disposed off on 16.07.2010, where it was held as under: Sub-section (1) of Section 3 expressly provides that, every sale of goods in the State by a registered dealer or a dealer liable to be registered, attracts levy of tax. The person who sells such goods has to pay the tax after levying the same and collecting from the purchasers. Sub-section (2) of Section 3 deals with a case where the person who sells the goods is not a dealer who is not registered under the Act. When such a person sells the goods, the tax is leviable and payable if the purchaser of goods is a registered dealer or a dealer liable to be registered. In other words, if taxable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical to M/s Shyamaraju Company (supra). We have no reasons to differ from the same. 15. As regards the Judgment cited by the learned counsel for the appellant in Concorde Hitech City (P) Limited (supra), the same has been considered by the Co-ordinate Bench of this Court in the case of M/s Shyamaraju Company (supra). Even in Concorde Hitech City (P) Ltd., [Supra], levy of tax u/s 3[2] is upheld. 16. Canara Overseas Limited s case (supra) referred to by the learned counsel for the appellant was rendered in a different context whereunder the assessee was 100% export oriented unit engaged in exporting iron ore from the place of extraction and processing to other countries, in order to transport the iron ore, chassis was purchased and thereafter body was built on it, in order to treat it as a truck or lorry, thereafter claim was made by the assessee for refund of input tax on the ground that the investment made was for the purpose of its business of manufacturing and processing. In such circumstances, it was held that purchase of chassis was not for the purpose of manufacturing of the goods or for processing; it was used only for transportation. Hence, the ratio enunciated by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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