Suzlon Infrastructure Ltd. Vs. State of Karnataka [(2015) 57 taxmann.com 317 (Karnataka)]
Whether segregation of value of goods and services is permissible where the Works contract is a composite contract and the assessee is availing the composition scheme for payment of KVAT liability?
Suzlon Infrastructure Limited (“the Petitioner”) is a registered dealer under the provisions of the Karnataka Value Added Tax Act, 2003 (“the KVAT Act”), carrying out an activity of laying down civil foundations, installation of electrical components for wind turbine generator (“WTG”). The Petitioner opted Composition Scheme in terms of Section 15 of the KVAT Act.
A customer of the Petitioner after purchasing WTGs from a manufacturer placed work orders for following four varieties of activities to be undertaken for the installation, erection and commissioning of the WTGs at a particular place:
a. laying down of civil foundation,
b. supply and installation of electrical line,
c. supply of electrical items, and
d. erection and commissioning of WTGs supplied by customer.
In respect of Contract (a) to (c), the Petitioner had discharged his tax liabilities under Composition Scheme however in respect of Contract (d), the Petitioner claimed that having discharged the Service tax liability on same, was not liable to pay the Composition tax in terms of Section 15(1)(b) of the KVAT Act.
The Assessing Authority levied Composition tax after considering all the four contracts as an integrated single composite contract.
The Hon’ble Court of Karnataka held that:
· In terms of Composition Scheme, tax would be paid on total consideration of Works contract;
· The Petitioner has segregated the activities as per the work orders executed against the offer for erection and installation of WTGs.
· The entire contract should be perused as a whole. All the segregated activities are related to the very same project with the very same customer involving transfer of goods and labour.
Hence segregation of Composite contract is not permissible under Section 15(1)(b) of the KVAT Act.
2 Revisional authority can set aside the Assessment order but cannot proceed to pass fresh Assessment Order, which can only be passed by the Assessing Officer
Solidus Hi Tech Products (P) Ltd. Vs. State of Karnataka [(2015) 57 taxmann.com 203 (Karnataka)]
Whether the revisional authority can pass a fresh Assessment order after setting aside an order passed by assessing officer?
Solidus Hi Tech Products Pvt. Ltd. (“the Petitioner”) filed the VAT Return for the years 2006-07, 2007-08 and 2008-09 in which the tax paid by the Petitioner at the rate of 4% on the sales of parts of UPS. The aforesaid return had been deemed to have been accepted.
In terms of Section 39(1) of the KVAT Act the matter was opened for reassessment proceeding by the Deputy Commissioner and vide an order dated April 5, 2010, confirmed that the Return was in order.
Further the matter was taken up by the Revisional Authority and in terms of Section 63A of the KVAT Act,Notice was issued to the Petitioner on December 16, 2013 and the Revisional Authority vide an Order dated November 12, 2014 set aside the order of Deputy Commissioner and further proceeded to pass Reassessment Order under Section 63A of the KVAT Act.
The Hon’ble High Court of Karnataka held that the Revisional Authority can cancel and set aside the Assessment order and direct the Assessing officer to pass fresh Assessment Order but could not proceed to pass an Assessment Order. Thus, the Revisional Authority has clearly exceeded its jurisdiction in proceeding to reassess the case and to that extent, the Order passed by the Revisional Authority is wholly unjustified in law and liable to be quashed.
Taxability on account of transfer of right to use of goods would arise only where the effective control and possession of the goods are transferred
HariDurga Travels Versus Commissioner of Trade & Taxes, Delhi [2015 (5) TMI 461 – Delhi High Court]
Whethertaxability on account of transfer of right to use of goods would arise only where the effective control and possession of the goods are transferred?
In the instant case,HariDurga Travels (“the Appellant”) entered into an Agreement with Delhi Transport Corporation (“DTC”) in January, 2005 for providing buses on rental basis as per the terms and conditions mutually agreed.
The Appellant was obligated to keep the bus in neat, clean and presentable condition and for purposes of upkeep, make the necessary arrangements with service centres/dealers/repair shops, etc. on the routes. Further the Appellant was not entitled to “withdraw the bus from operation without prior written consent”of DTC nor can it use these vehicles “for any other purpose at any time”, nor “transfer or otherwise alienate (except with prior written permission of DTC) vehicles” during the period of Agreement.
The Assessing Authority treating the aforesaid transaction as Deemed sale on account of transfer of right to use the goods under the provisions of the DVAT Act.
The Hon’ble High Court of Delhi relying upon the following case laws:
· Bharat Sanchar Nigam Limited [2006 (3) TMI 1 – SC]
· Rashtriya Ispat Nigam Limited [2002 (3) TMI 705 – SC]
· International Travel House [2009 (9) TMI 879 - DELHI HIGH COURT]
held that the various terms of the Agreement make it vividly clear that the possession has always remained with the Appellant itself.Undoubtedly, it is the obligation of the Appellant to make the vehicles available, with their respective drivers, for being deployed on routes, and as per schedule, specified by DTC. However, the registration certificate and the permits continue to be in the control and possession of the Appellant who continued to be responsible for all repairs etc. Thus, the transaction has been wrongly treated as “Deemed sale of goods” by the lower authorities.
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