2017 (1) TMI 1564 - HC - VAT and Sales Tax

Penalty u/s 54(1)(7) of the VAT Act - registration under Section 18(1) of the Act not secured - the revisionist was performing works contract w.e.f. May, 2013 onwards - Held that - Once it is found that revisionist was engaged in the construction activity pursuant to works contract, without any valid registration, the imposition of penalty cannot be said to be bad in law - reliance placed in the case of K. Raheja Development Corporation Vs. State of Karnataka 2005 (5) TMI 7 - Supreme Court , where it was held that the transaction undertaken by the revisionist comes within the ambit of a works contract, and as such, the assessee was required to have got itself registered, and the transaction was also liable to payment of tax - revision dismissed.

Issues Involved:
1. Imposition of penalty under Section 54(1)(7) of the U.P. VAT Act, 2008.
2. Requirement of registration under Section 18(1) of the U.P. VAT Act, 2008.
3. Classification of the transaction as a works contract.
4. Applicability of the Uttar Pradesh Apartment (Promotion of Construction, Ownership and Maintenance) Act, 2010.

Detailed Analysis:

1. Imposition of Penalty under Section 54(1)(7) of the U.P. VAT Act, 2008:
The revisionist, a builder and promoter, was penalized under Section 54(1)(7) of the VAT Act for not securing registration under Section 18(1) while performing works contract from May 2013 onwards. The authorities concluded that the revisionist was liable to pay tax on the building materials used in the construction and imposed a penalty of ?31,900 for the period of 11 months before registration was obtained on March 15, 2014. The penalty order was affirmed in appeal and revision, leading to the current revision.

2. Requirement of Registration under Section 18(1) of the U.P. VAT Act, 2008:
Section 18(1) of the U.P. VAT Act, 2008, mandates that a dealer who carries on or intends to carry on business must apply for registration. The authorities found that the revisionist was carrying on business pursuant to a works contract since May 2013 without valid registration, thereby justifying the penalty. The revisionist argued that the construction was funded by its own resources and not by the prospective purchasers' instalments, but this contention was rejected as it was evident that the dealer had received instalments for the construction.

3. Classification of the Transaction as a Works Contract:
The department and the court classified the transaction as a works contract based on the nature of the agreement and the utilization of received amounts for construction. The Supreme Court's decisions in K. Raheja Development Corporation Vs. State of Karnataka and M/S. Larsen and Toubro Limited and another Vs. State of Karnataka were cited to support this classification. The court noted that the revisionist entered into agreements with prospective purchasers and received instalments, indicating that the construction was undertaken on behalf of the purchasers, fitting the definition of a works contract.

4. Applicability of the Uttar Pradesh Apartment (Promotion of Construction, Ownership and Maintenance) Act, 2010:
The revisionist's reliance on the Uttar Pradesh Apartment (Promotion of Construction, Ownership and Maintenance) Act, 2010, was deemed misplaced. The court clarified that this Act, aimed at protecting apartment owners, does not apply to the tax liability on goods used in works contracts. The argument that the construction was funded by the revisionist's own resources was also dismissed, as the receipt of instalments from purchasers indicated otherwise.

Conclusion:
The court concluded that the revisionist was engaged in construction pursuant to a works contract without valid registration, justifying the imposition of penalty. The revision was found to lack merit and was consigned to records.

← Previous Next →