2007 (8) TMI 662 - HC - VAT and Sales Tax

Summary

Issues involved: Challenge to order u/s 28(6) of Karnataka Sales Tax Act for turnover tax for years 2000-01 to 2004-05 based on works contract definition.

The judgment of the Karnataka High Court in this case dealt with the challenge to an order passed u/s 28(6) of the Karnataka Sales Tax Act, levying turnover tax for the years 2000-01 to 2004-05. The dispute arose from an agreement between the petitioner and another party for the construction of a multistoried apartment on land owned by the latter. The agreement stipulated that the landowner would contribute the land, and the petitioner would provide materials and manpower, with a division of built-up space. The petitioner marketed the built-up area to purchasers, comprising two components: a portion of undivided interest in the land and the constructed flats.

The main contention raised was regarding the definition of "works contract" and the transfer of property. It was argued that as per the definition, property passes for accretion to the landowner, and therefore, a non-owner cannot be a transferee effecting a purchase and should not be liable to pay turnover tax. The petitioner disputed the applicability of the judgment in the case of K. Raheja Development Corporation v. State of Karnataka [2005] 141 STC 298, cited by the learned single judge, and relied on earlier decisions by the apex court and Allahabad High Court to support their case.

The High Court, after considering the arguments, upheld the decision of the learned single judge based on the precedent set by the Supreme Court in the case of K. Raheja Development Corporation [2005] 141 STC 298. The court noted that the facts and circumstances were similar to the present case, making the application of the precedent just and proper. It was emphasized that the judgment in K. Raheja's case is binding on all courts in the country u/s article 141 of the Constitution of India. The court also highlighted that if the appellant wished to challenge the precedent, they could approach the apex court for a review, as the High Court could not substitute its findings on the matter already decided by the Supreme Court.

Ultimately, the High Court found no merit in the case and rejected the appeal, affirming the order for levying turnover tax based on the works contract definition and the precedent established in K. Raheja's case.