2006 (4) TMI 479 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of sales tax on contract payments for construction of drain and culvert under section 7(7A) of the Kerala General Sales Tax Act, 1963. Interpretation of whether construction of drain and culvert constitutes part of the construction work of roads under section 7(7) of the Act. Determination of whether the assessee can revert back to general assessment under section 5(1) after opting for compounded rate under section 7(7A).

Analysis:
The petitioner, a Public Works Department contractor and registered dealer under the Kerala General Sales Tax Act, challenged the assessment of sales tax on contract payments for construction of drain and culvert at a compounded rate of five percent under section 7(7A). The Appellate Tribunal upheld the levy, prompting the revision. The petitioner argued that construction of drain and culvert is civil work related to road construction and should be assessed under section 7(7) instead. Reference was made to relevant case law and dictionary definitions of "road" to support this contention. Additionally, it was argued that if not assessed under section 7(7), the petitioner should have the option for regular assessment under section 5(1) rather than the compounded rate under section 7(7A).

The Special Government Pleader contended that section 7(7) specifically includes civil works like bridges, roads, etc., and does not mention drains or culverts. It was emphasized that the petitioner cannot insist on the inclusion of items not specified in the section. Furthermore, it was argued that once the petitioner opted for the compounded rate under sections 7 and 7(7A), they cannot revert back to general assessment under section 5(1).

Upon review of the application submitted by the petitioner and relevant rules, the court found that the construction of drain and culvert falls under section 7(7A) and should be taxed at five percent. The court noted that the items listed under section 7(7) are specific and do not include drains or culverts. The court also observed that the petitioner had opted for the compounded rate under section 7(7A) based on the submitted form and the lack of objections raised when notified about the proposed tax rate.

Ultimately, the court upheld the assessing authority and Tribunal's decisions, affirming the levy of tax at five percent under section 7(7A for the construction of drain and culvert. The court concluded that drains and culverts do not fall under the civil works covered by section 7(7) of the Sales Tax Act. The revision was deemed lacking in merit and dismissed accordingly.