2003 (6) TMI 458 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether an assessee who is a works contractor is liable to produce contracts with awarders for permission to pay tax at a compounded rate under the Kerala General Sales Tax Act, 1963.

Analysis:
The judgment in this case revolves around the question of whether an assessee, who is a works contractor, is obligated to present the contracts entered into with awarders to be granted permission to pay tax at a compounded rate under sub-section (7)/(7A) of section 7 of the Kerala General Sales Tax Act, 1963. The assessee had applied for this compounded rate for the assessment years 1991-92 and 1992-93 but faced rejection due to non-compliance with sub-section (11) of section 7, which necessitates the filing of returns displaying all contracts undertaken along with certificates from awarders. The Tribunal upheld the rejection, emphasizing the importance of complying with section 7(11). The petitioner contended that there is no such mandate in the Act or Rules for producing contracts during the compounding application process. The Special Government Pleader argued that the assessing authority can request contracts under sub-section (9) of section 7 to ascertain eligibility for the compounding facility.

The court analyzed the relevant provisions of the Act and Rules, noting that the petitioner, a works contractor, had applied for the compounded tax rate under section 7. It delved into the specifics of sub-sections (7), (7A), (8), and (11) of section 7, along with related rules, emphasizing the application process and requirements for permission to pay tax at compounded rates. The court observed that the authorities and Tribunal wrongly believed that sub-section (11) must be adhered to before granting permission for compounding. It clarified that sub-section (11) applies post-permission grant as per sub-section (9). Considering the scenario where an assessee may not have transactions during the initial period, the court ruled that there is no need to produce agreements at the time of permission grant.

The court concluded that the assessing authority's sole contention of non-production of contracts lacked merit. It held that sub-section (11) does not necessitate contract production for permission under sub-section (7A) of section 7. Consequently, the Tribunal's decision on permission grant was deemed unsustainable, and the petitioner was declared entitled to the compounding facility. The court directed the assessing authority to proceed with the assessment as per section 7 of the Act, thereby allowing the tax revision cases in favor of the petitioner.