2014 (12) TMI 1281 - HC - VAT and Sales Tax

Sub-contract - levy of tax - The case of the petitioners is that only exemption was extended insofar as entry tax is concerned for a period of three years, but not in the case of VAT - Held that - It is for the petitioners to appear before the Government and the Government to take policy decision and pass orders in accordance with law. Petitioners shall be called up on by the Government to hear on the issues and take policy decision depending on various facts and circumstances in the case on hand. However, so far as payment of arrears of tax is concerned it is for the petitioner to exhaust the remedy available under law - petition dismissed.

Summary

Issues:
1. Mandamus sought for issuance of notifications superseding previous government orders exempting tax.
2. Quashing of assessment orders under the Karnataka Value Added Tax Act.
3. Exemption extension requests under the framework agreement.
4. Completion status of the project and tax imposition.
5. Policy decision on maintenance and exemption period.

Analysis:
1. The petitioners requested a mandamus to direct the issuance of notifications superseding a previous government order exempting tax for works in the Bangalore-Mysore Infrastructure Corridor Project. They sought to quash assessment orders under the Karnataka Value Added Tax Act for various tax periods, challenging the imposition of tax by the Assessing Authority.

2. The petitioners argued that the project was not completed as per the framework agreement, and tax imposition should be based on notifications issued under the KVAT Act until project completion. They also sought to quash assessment orders made from 2005 onwards due to the absence of an exemption certificate. Reference was made to a Supreme Court decision in a similar context.

3. The Additional Government Advocate contended that the maintenance policy decision would be taken by the Government, and the project was operational, questioning the quashing of assessment orders. The Government's policy decision on exemption from 2005 onwards was crucial, and independent decisions by the Department regarding assessment orders were limited until a policy decision was made.

4. It was emphasized that the application of mind in calculating Value Added Tax and other taxes was essential. The Government was advised to consider the case of the petitioners, make a policy decision, and pass appropriate orders in accordance with the law regarding tax exemption. The petitioners were directed to present their case before the Government for a policy decision, while the remedy for arrears of tax was to be pursued by the petitioners as per the available legal options.

5. The Government was instructed to review the petitioners' case by the end of February 2015 concerning the exemption/holiday period. The petitions were disposed of, indicating that the resolution of the issues would involve further consideration by the Government based on the facts and circumstances presented by the petitioners.