2016 (2) TMI 962 - HC - VAT and Sales Tax

Works contract - real estate project developer who is engaged in the construction and sale of residential flats, buildings and infrastructure facilities all across the country - Whether on the facts and circumstances of the case, the Ld. Tribunal was justified in holding that the appellant is engaged in the works contract and is thus liable to be registered under the provisions of the Punjab VAT Act, 2005? - Whether the appellant is liable to be registered under the provisions of the Act or not? - Held that - the appellant who is a works contractor is required to pay VAT on the material used for carrying out the works contract in respect of the sale of flats on the amount of material incorporated therein after the date of sale of the flat. Accordingly, it was also not disputed that as a consequence, the appellant would be required to be registered under the provisions of the Act - the issue involved herein stands already concluded against the appellant in the case of K. Raheja Development Corporation Vs. State of Karnataka 2005 (5) TMI 7 - Supreme Court where it was held that Activity of construction / development by a Builder would constitute Work Contract in certain circumstances - the substantial questions of law are answered against the assessee - appeal is dismissed.

Summary

Issues:
1. Whether the appellant is engaged in works contract and liable to be registered under Punjab VAT Act, 2005?
2. Whether the appellant is liable to be registered under Punjab VAT Act, 2005 as a taxable person and pay tax on sale of flats?

Analysis:
1. The appellant, a real estate developer, filed an appeal against the order of the Value Added Tax Tribunal. The main issue was whether the appellant should be registered under the Punjab VAT Act. It was acknowledged that the appellant, as a works contractor, must pay VAT on materials used for works contracts related to the sale of flats. The appellant's liability to be registered under the Act was not disputed, based on the material incorporated in the works contract after the flat sale.

2. The parties agreed that previous legal decisions, including the Supreme Court's ruling in K. Raheja Development Corporation case, had already settled the issue against the appellant. The court highlighted clauses from the agreement to show that the construction was on behalf of the purchaser, making it a works contract. The court clarified that if the agreement is made after construction, it would not be a works contract. However, as long as the agreement is before completion, it qualifies as a works contract. Consequently, the substantial legal questions were answered against the appellant, leading to the dismissal of the appeal.