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IN THE HIGH COURT OF KERALA AT ERNAKULAM
A.K. JAYASANKARAN NAMBIAR, SYAM KUMAR V.M., JJ.
M/s. DLF Home Developers Limited & Ors. - Appellants
Versus
State of Kerala, Rep. by Its State Representatives, Commercial Taxes Department, Kochi & Ors. - Respondents
O.T. Rev. Nos. 105, 106, 107 of 2019, 3 of 2020
Decided On : 10-06-2024
KVAT Act - Assessment of works contracts - Sections 2(xliii), 2(li), 2(lv), 6, and KVAT Rules 10 - The court considered the issue of determining the taxable turnover for works contracts under the Kerala Value Added Tax Act and Rules. The court rejected the contention that the absence of a provision for deduction of the value of land from the total turnover rendered the machinery provision unworkable, emphasizing that the statutory scheme did not contemplate inclusion of land value in the works contract turnover. The court also found fault with the arbitrary computation of land value for exclusion from the total turnover by the Assessing Authority and remanded the case for a fresh determination of taxable turnover.
Fact of the Case:
The case involved Limited Companies engaged in developing residential projects and selling fully constructed flats. The companies engaged independent contractors/sub-contractors for construction activities and believed they were only engaged in the sale of finished apartments, not liable to pay tax on works contracts under the KVAT Act. Show cause notices were issued proposing to reject their returns and levy VAT on the consideration received from customers as works contracts. The companies appealed against the assessment orders, leading to the current revisions before the court.
Finding of the Court:
The court rejected the contention that the absence of a provision for deduction of the value of land from the total turnover rendered the machinery provision unworkable. It also found fault with the arbitrary computation of land value for exclusion from the total turnover by the Assessing Authority and remanded the case for a fresh determination of taxable turnover.
Issues: The issues raised by the petitioners included the disregard of statutory provisions, decisions of higher courts, and the mode of valuation of works contracts under the KVAT Rules. The court considered these issues in the context of determining the taxable turnover for works contracts under the KVAT Act and Rules.
Ratio Decidendi: The court held that the absence of a provision for deduction of the value of land from the total turnover did not render the machinery provision unworkable. It also found fault with the arbitrary computation of land value for exclusion from the total turnover by the Assessing Authority and remanded the case for a fresh determination of taxable turnover.
Final Decision: The court upheld the impugned orders of the Tribunal for all other purposes and remanded the case for a fresh determination of the taxable turnover of the respective petitioners for the assessment years in question.
ORDER :
A.K. Jayasankaran Nambiar, J.
As all these revisions involve a common issue, they are taken up for consideration together and disposed by this common judgment. O.T.Rev.No.105 of 2019 pertains to M/s. DLF Home Developers Limited for the assessment year 2009-10 under the Kerala Value Added Tax Act [hereinafter referred to as the 'KVAT Act']. O.T.Rev.Nos.106 of 2019 and 107 of 2019 pertain to M/s. DLF Southern Towns (P) Limited for the assessment year 2008-09 and 2009-10 respectively under the KVAT Act. The aforesaid three O.T.Revisions have been preferred against a common order of the Kerala Value Added Tax Appellate Tribunal dated 10.07.2019. O.T.Rev.No.3 of 2020 pertains the M/s. DLF Home Developers Limited for the assessment year 2007-08 and impugns the order dated 25.09.2019 of the KVAT Appellate Tribunal.
2. The brief facts necessary for disposal of the O.T. Revisions are as follows:
The petitioners are Limited Companies engaged in the activity of developing residential projects and selling fully constructed flats. In the Apartment Buyer's Agreement that they entered into with various customers, they stipulated a price for the work undertaken by them which included a component representing the value of the undivided share in the land and building. For undertaking the construction activities for the customers, the petitioners engaged the services of independent contractors/sub-contractors. These contractors in turn procured goods/materials on their own and duly discharged the applicable VAT on the payments received by them from the petitioners for the work undertaken by them. The petitioners in turn deducted the applicable tax under the KVAT Act from the payments made to their contractors.
3. To maintain the quality of construction, the petitioners used to supply major components such as steel, cement etc. to the contractors on free of cost basis. The petitioners were therefore under the belief that they were merely engaged in the sale of finished apartments and had not entered into any agreement for construction with the prospective customers, and that therefore, they would not be liable to pay any tax on works contract under the KVAT Act. They therefore did not charge any VAT on the advances received by them from their customers and also filed nil returns with their respective Assessing Authorities under the KVAT Act.
4. Show cause notices were therefore issued to the petitioners proposing to reject their returns and to determine their taxable turnover on best judgment basis and to levy VAT at the applicable rates on the consideration received by the petitioners from their customers by treating the transactions as works contracts. After considering the replies preferred by the petitioners against the proposals in the show cause notice, the Assessing Authority confirmed the demand of tax as applicable to works contract on the petitioners. In the appeals preferred by the petitioners against the said assessment orders, the petitioners did not get any relief, and hence, it is that the petitioners are before this Court through these Revision Petitions, impugning the order of the Appellate Tribunal that confirmed the demand of VAT against them.
5. In the Revision Petitions before us, the petitioners raise the following questions of law :
(B) Whether the Hon'ble Tribunal was right in disregarding the decision of the Hon'ble Supreme Court in the case of CCE vs. Larsen and Toubro, 2015 (39) STR 913 (SC) and the decision of High Court in case of Suresh Kumar Bansal vs. UOI, 2016 (43) STR 3 (Del) which categorically held that in absence of statutory mechanism to as
The absence of a provision for deduction of the value of land from the total turnover did not render the machinery provision unworkable under the Kerala Value Added Tax Act and Rules.
The court established that the turnover of sub-contractors does not add to the main contractor's turnover, affirming the single deemed sale principle and preventing double taxation under the Andhra P....
The taxable turnover and the applicability of deductions under the Uttarakhand Value Added Tax Act, 2005 were central to the Court's decision.
The petitioner's appeal against the Assessment Order under sec. 23(4) of the MVAT Act was dismissed by the Court on the grounds of the availability of an alternative remedy and the presence of disput....
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