TMI Blog2018 (7) TMI 1705X X X X Extracts X X X X X X X X Extracts X X X X ..... ot available to the officer proceeding for imposition of penalty under Section 67 of the KVAT Act - In the present case, there is no best judgment assessment made and the Intelligence Officer has merely taken the total contract receipts including the deduction made by the awarder for supply of goods, which the assessee disclosed in the returns as a mere sale. Hence, there is no best judgment or estimation carried out by the Intelligence Officer and the turnover found to have been suppressed is from the total contract amount received by the awardee-assessee. Whether in computing the tax evaded there has to be deduction of the input tax credit which could be claimed by the assessee? - Held that:- When the awarder purchases goods and supplies it to the awardee, and then deducts the purchase price from the total contract amounts, the purchase made is on behalf of the awardee. There would hence be 'zero' tax liability on the awarder at the time of supply to the awardee. But, the subsequent sale in the present case is by accretion of goods into the works contract and the value addition insofar as the execution of the works contract is concerned, has to be taxed at the rate of 12.5% af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .T.R.Nos.100, 104 113 of 2012 and 2, 6 8 of 2013). The finding of the Tribunal was that in having computed the turnover in the works contract, the Intelligence Officer had resorted to estimation, which power of best judgment is not available in penalty proceedings. It was also alleged that the Intelligence Officer did not look at the actual revenue loss caused for reason of the assessee being entitled to input tax credit and liable to pay tax only on the value addition, even on the goods supplied by the awarder. 4. The order of the Tribunal is challenged in the Revisions on the following substantial questions of law as re-framed by us: i) Whether the Tribunal was correct in having relied upon U.K.Monu Timber's case when there was no estimation made by the Intelligence Officer and the computation of tax due was on the basis of the contract receipts as available in the books of accounts ? ii) Whether in the context of the suppression and the consequential attempt to evade tax; in computing the tax sought to be evaded, is it permissible to take into account the component of input tax credit? 5. The proceedings were initiated by the Intelligence Officer and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 364. In such circumstance, we find that there is definitely a reason for initiation of penalty proceedings. 8. Cooch-Behar Contractors' Association considered the specific issue of supply by the awarder to the awardee for the purpose of accretion in the works contract awarded to the awardee. The Hon'ble Supreme Court held that the transaction would indicate a sale having taken place. Though there is no payment made by the awardee at the time of supply, the awarder eventually when settling the payment for the entire work, deducts the price for the goods supplied from the total contract dues. Hence there occurs a sale from the awardee to the awarder on incorporation or accretion of such goods to the works contract. Such sale when involved in a works contract, the tax liability would be different from the liability imposed by the Schedule on the separate goods. The works contract is liable to tax at a uniform rate for the transfer of goods by way of accretion in the works contract; on the total contract receipts after exemptions provided under Rule 10 Hence, there is a suppression in the return leading to tax evasion. 9. We do not think that the Tribunal was corr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Krishna Electricals, wherein the assessee was selling wet grinders. In the return, the assessee did not disclose the sales, since the assessee erroneously held a belief that the exemption available to spare parts of wet grinders would be available to a wet grinder itself. The Hon'ble Supreme Court found that the exemption would not be so available especially since the wet grinder sold by the assessee is a different product. However, on the question of penalty it was held that the assessee having disclosed the sale in its books of accounts, the Assessing Officer could have very well ferreted out the liability from the books of accounts and levied tax. We are of the opinion that the said decisions are in the context of a tax regime where there was contemplated a regular assessment after filing of a return; which requires production of books of accounts before the Assessing Officer. Under the VAT regime, Section 21 contemplates a self assessment on the basis of a return filed by the assessee subject only to the provisions of Sections 22, 24 and 25. Hence, there is no regular assessment contemplated as was available under the KGST regime or the tax regime as seen from Sree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There could also be no input tax credit claimed for deduction from the suppression determined. We make it clear that this would not inhibit the assessee from claiming such input tax credit in assessment proceedings. We, hence, answer the questions of law against the assessee and in favour of the Revenue; setting aside the order of the Tribunal and affirming that of the Assessing Officer. All the same, we notice the submission made by the respondent-assessee that only on misapprehension the goods supplied by the awarder, was failed to be included in the contract receipt. Giving the benefit of doubt, we hence reduce the penalty to the equal amount of suppression detected. We are told that already the input tax credit has been allowed by the Assessing Officer in assessment proceedings. In such circumstance, especially since we have given the benefit of doubt in reducing the penalty, we are of the opinion that there need be no re-opening of the assessment solely on the basis of the instant penalty imposed; especially if there is no allegation of any other contract having not been disclosed. The O.T. Revisions stand allowed with the modifications in the penalty as herein above. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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