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2013 (4) TMI 586 - HC - VAT and Sales TaxReassessment orders - sale or works contract - bifurcation of order - petitioner was a partnership firm and engaged in the business of execution of works contract - Held that - A bare perusal of the assessment order would show that the assessing authority has noticed only this much that the copies of certain documents such as contract and tender agreement etc. were produced which show that the work of supply, installation, commissioning, loading and unloading were included therein. But the assessing authority failed to take note of the fact that the supply of generators and commissioning expenses were shown at ₹ 10,82,101. While the petitioner has shown the purchase of generator for ₹ 5,89,93,249.96, which gives the commissioning expenses to 1.77% of the total amount of supply ₹ 6,11,01,227/-. The attention of the assessing authority escaped this aspect of the case which is vital and goes to the root of the matter. As in the case of M/s. Kone Elevator (India) Ltd. (2005 (2) TMI 519 - SUPREME COURT OF INDIA) 0Apex Court has laid down test to find out as to whether a particular transaction is supply of goods or of work contract & held that the assessee therein divided the execution of the contract into two parts namely work to be initially done in accordance with the specifications laid down by the assessee and the supply of lift by the assessee . The work part in the contract was assigned to the customer and the supply part was assigned to the assessee. Here, the work part as well as supply part were assigned to the petitioner. It is not necessary to dwell upon the issue any further as it may prejudice the case of either party. Suffice it to say that there is material before the respondents to form a belief that the turnover of the petitioner has escaped the assessment. The assessing authority while framing the assessment order has overlooked the judgment of the Apex Court on the issue given in the case of M/s. Hindustan Shipyard Limited Vs. State of Andhra Pradesh 2000 (7) TMI 864 - SUPREME COURT OF INDIA and the principle laid down therein has been reiterated in M/s. Kone Elevator (India) Ltd. (supra). Thus it is a case of escaped assessment. In view of the different provisions provided under the Act, even if the contract of the petitioner is taken as a work contract, then also trade tax was payable on the sale of the movable goods supplied under the contract.
Issues Involved:
1. Validity of reassessment proceedings under Section 21 (2) of the U.P. Trade Tax Act, 1948. 2. Classification of the petitioner's business activities as a works contract or sale. 3. Applicability of the judgment in State of Andhra Pradesh vs. M/S Kone Elevator (India) Ltd. Issue-wise Detailed Analysis: 1. Validity of Reassessment Proceedings: The petitioner challenged the notice dated 08.12.2005 issued by the Deputy Commissioner Trade Tax for reassessment for the Assessment Year 2001-02, arguing that all necessary facts had been disclosed and considered in the original assessment order dated 16.10.2004. The petitioner contended that the reassessment proceedings were merely a change of opinion by the Assessing Officer and were therefore illegal. However, the court referenced Section 21 of the U.P. Trade Tax Act, which allows for reassessment if the Assessing Authority has reason to believe that any part of the turnover has escaped assessment. The court cited the Division Bench decision in General D Confiteria India Ltd. vs. State of U.P., which upheld the validity of reassessment notwithstanding a change of opinion. Consequently, the court found the reassessment proceedings to be valid. 2. Classification of Business Activities: The petitioner, a partnership firm engaged in the business of executing works contracts, argued that the original assessment correctly classified its activities as a works contract, excluding the price of generator sets and spare parts from the trade tax liability. However, the respondents asserted that the dominant object of the contract was the supply of generator sets, making the installation incidental. The court examined the definitions under the Act, including "sale" and "works contract," and noted that the price of the generator sets should have been included in the total turnover under Section 3-F (1) (b) of the Act. The court found that the original assessment had erroneously deducted the price of the generator sets, leading to escaped assessment. 3. Applicability of State of Andhra Pradesh vs. M/S Kone Elevator (India) Ltd.: The petitioner argued that the judgment in State of Andhra Pradesh vs. M/S Kone Elevator (India) Ltd. was not applicable to its case. The court noted that although the notice for reassessment referred to this judgment, the reassessment was justified under Section 3-F (1) (b) of the Act, which mandates the inclusion of the price of generator sets in the total turnover. The court also referenced the principle laid down in M/S Hindustan Shipyard Limited vs. State of Andhra Pradesh, which was reiterated in the Kone Elevator case, affirming that the interpretation of law by the courts is retrospective and applicable from the date of the enactment of the law. Conclusion: The court concluded that the reassessment proceedings were valid, the business activities of the petitioner should be classified as a sale rather than a works contract, and the judgment in State of Andhra Pradesh vs. M/S Kone Elevator (India) Ltd. was applicable. Thus, the writ petitions were dismissed, affirming the reassessment proceedings and the inclusion of the price of generator sets in the total turnover for tax liability.
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