2013 (6) TMI 668 - HC - VAT and Sales Tax

Reopening of assessment - Non acceptance of return - Held that - Though ground is raised before the first appellate authority that turnover included pure labour contract it is not made specific nor a claim for deduction of annual maintenance charges is made by the assessee, but only a ground. In the absence of any specific issue made in respect of annual maintenance charges and proper foundation having been laid by the assessee to claim the same, we cannot merely because the assessee had contended that the turnover included value of labour which was purely in the context of the earlier stand that it was only a works contract and not a sale and therefore we cannot permit the assessee to come up with such grounds in these revision petitions on the premise that the authorities have committed an error on this aspect. The main question of law sought to be raised in these revision petitions being the question as to the transaction is a sale or a works contract and in almost identical circumstances, the Supreme Court having held that it is a sale in Kone Elevators' case 2005 (2) TMI 519 - SUPREME COURT OF INDIA , this question is now covered by the judgment of the Supreme Court and therefore the revision petitions are only to be dismissed. - Decided against assessee.

Summary

Issues:
1. Classification of transaction as sale or works contract under the Karnataka Value Added Tax Act, 2003.
2. Reopening of deemed assessments under section 38(1) of the Act.
3. Disputed turnover components including annual maintenance charges.
4. Applicability of the Supreme Court judgment in Kone Elevators' case.
5. Levy of penalty following reassessment.

Analysis:
1. The petitioner, a dealer engaged in the manufacture, sale, and installation of lifts/elevators, contested the classification of its activities as a sale rather than a works contract under the Karnataka Value Added Tax Act, 2003. The assessing officer reopened deemed assessments due to disagreement on the nature of the transaction, ultimately determining it to be a sale based on the delivery and installation processes. The appellate authorities upheld this view, emphasizing that the petitioner's role was limited to supplying, installing, and commissioning the elevators, while the civil works were carried out by the building owners. The Appellate Tribunal concurred, concluding that the transaction constituted a sale rather than a works contract, in line with the Supreme Court's decision in the Kone Elevators' case.

2. The reopening of deemed assessments under section 38(1) of the Act stemmed from the assessing authority's rejection of the petitioner's claim that the transactions were works contracts. This led to a reassessment based on the premise that the activities constituted sales, triggering further appeals by the petitioner. The authorities consistently maintained the position that the transactions were sales, resulting in the petitioner's dissatisfaction and subsequent legal challenge.

3. The petitioner raised concerns regarding the turnover components, particularly the inclusion of annual maintenance charges in the assessed value. The petitioner argued that these charges, being labor contracts subsequent to installation, should not be part of the turnover subject to taxation. However, the authorities did not find merit in this argument, noting that the petitioner had not specifically claimed deductions for annual maintenance charges during the proceedings.

4. The pivotal issue revolved around the applicability of the Supreme Court's judgment in the Kone Elevators' case to the present dispute. The authorities and the Additional Government Advocate contended that the transaction in question aligned with the Supreme Court's classification as a sale, citing the Kone Elevators' case as a precedent. The petitioner's counsel challenged this interpretation, highlighting doubts cast on the judgment and the potential for a larger Bench review. Ultimately, the court dismissed the revision petitions based on the binding nature of the Supreme Court's decision until any subsequent alteration.

5. Regarding the levy of penalties following reassessment, the court found no justification to interfere, given the procedural sequence following the reopening of assessments. The court upheld the penalty imposition, emphasizing the need for proportionate adjustments in case of any modifications to the tax liability based on potential future developments in the Supreme Court's stance on similar matters.