2012 (9) TMI 910 - HC - VAT and Sales Tax

Whether the Commissioner could have opined that the turnover of the assessee relating to laying of steel pipes in the course of execution of work for M/s. BWSSB and could have brought within the scope of entry 44 of the Sixth Schedule to the Karnataka Sales Tax Act, 1957 as composite contract or it should have been gone into entry 20(ii) of the Schedule, as the works contract involving laying of steel pipes other than for either plumbing or drainage facility? Whether suo motu order passed by the Commissioner in exercise of his revisional power under section 22A of the Act, was not barred in terms of sub-section (3) of section 23A of the Act? Held that - On a careful examination of the works contract awarded by the BWSSB, it can be concluded that the contract entered into between the appellant and BWSSB is a composite contract of not only laying of the pipes, but also to do other civil works like construction of the bridges, construction of pipe saddle supports, construction of the valve chambers and RCC overhead tanks, encasing the pipes with the steel mesh, trenching and excavating along the routes. Hence, the works contract entered into by the appellant has to be treated as a composite contract involving two or more of the above categories of works falling under entry 44 of the Sixth Schedule. Accordingly, the first substantial question of law is held against the appellant. The Commissioner has taken suo motu revision under section 22A(2) of the Act and order has been passed on July 2, 2009. The appeal order dated December 12, 2003 merged with the revisional order dated February 24, 2007 and the Commissioner has passed the revisional order within a period of four years as required under section 22A(3) of the Act. There is no merit in the contention of the appellant that the revisional order passed by the Commissioner is barred by limitation. Hence, issue No. 2 is also held against the appellant. Appeal dismissed.

Summary

Issues Involved:
1. Classification of the works contract under the appropriate entry of the Sixth Schedule to the Karnataka Sales Tax Act, 1957.
2. Validity of the suo motu revisional order passed by the Commissioner under section 22A(2) of the Act concerning the limitation period.

Issue-wise Detailed Analysis:

1. Classification of the Works Contract:
The primary issue was whether the works contract undertaken by the appellant for laying steel pipes for the Bangalore Water Supply and Sewerage Board (BWSSB) should be classified under entry 20(ii) or entry 44 of the Sixth Schedule to the Karnataka Sales Tax Act, 1957. The appellant contended that the work predominantly involved laying steel pipes, which should fall under entry 20(ii). The appellant argued that other associated civil works were merely incidental and ancillary to the main contract of laying the clear water transmission mains.

However, upon examining the scope of work, which included fabrication of pipes from steel plates, external coating, jointing, testing, construction of pipe bridges, saddle supports, anchor blocks, valve chambers, and overhead tanks, the court concluded that the contract was a composite one involving multiple categories of work. The court held that the contract fell under entry 44 of the Sixth Schedule, which pertains to composite contracts involving two or more categories of works. Thus, the first substantial question of law was decided against the appellant.

2. Validity of the Suo Motu Revisional Order:
The second issue concerned the validity of the suo motu revisional order passed by the Commissioner under section 22A(2) of the Act, particularly whether it was barred by the limitation period specified in section 22A(3) of the Act. The appellant argued that the revisional proceedings initiated by the Commissioner were beyond the four-year limitation period from the date of the original assessment orders.

The court noted the sequence of events: the original assessment orders were passed on June 10, 2003, and July 10, 2003; the first appellate authority allowed the appeals on December 12, 2003; fresh orders were passed on January 12, 2005; subsequent appeals were disposed of on May 30, 2005; and the revisional authority passed its order on February 24, 2007, which was later rectified on January 28, 2008. The Commissioner took up suo motu revision and passed the order on July 2, 2009.

The court held that the appeal order dated December 12, 2003, merged with the revisional order dated February 24, 2007, and thus, the Commissioner's revisional order was within the four-year period as required under section 22A(3) of the Act. Consequently, the second substantial question of law was also decided against the appellant.

Conclusion:
The court dismissed the appeal, upholding the Commissioner's order that classified the works contract under entry 44 of the Sixth Schedule and found the revisional proceedings to be within the permissible limitation period.