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2018 (1) TMI 1442 - HC - VAT and Sales TaxRate of tax - works contract - grievance of the petitioners is that even though nature of works contract undertaken by the petitioners firm with the local bodies and other departments of the State of Karnataka involved two or more specified categories mentioned at Sl.Nos.1 to 21 and 22 of the Sixth Schedule of KVAT Act and leviable for tax at the rate of 5.5% respondent No.3 has levied tax at the rate of 14.5% by classifying their business as non-specified category mentioned at Sl.No.23 of the Sixth Schedule of KVAT Act - Held that - In the facts and circumstances of the case if the Assessment Order at Annexure-F is set aside and if the Assessing Authority is directed to reconsider the matter no serious prejudice will be caused to the respondents as the petitioners have already paid the admitted tax at the rate of 5.5% and the difference of tax as demanded under Annexure-F may be around 10, 00, 000/- that can be safeguarded if the petitioners are asked to furnish bank guarantee to a tune of 10, 00, 000/- to respondent No.3-Assessing Authority. The Assessment Order passed by respondent No.3 at Annexure-F is set aside - Matter stands remitted to respondent No.3 Assessing Authority with a direction to reconsider the matter afresh after providing opportunity to the petitioners to produce documents on which they want to rely upon and after providing personal hearing - petition allowed.
Issues:
1. Classification of works contract for tax purposes under KVAT Act, 2003 2. Assessment Order passed by respondent No.3 at Annexure-F 3. Maintainability of writ petition instead of appeal 4. Requirement of furnishing work sheet before passing Assessment Order 5. Jurisdiction and procedure under the K-VAT Act 6. Dispute regarding tax rate and specified categories of works contract 7. Details of notice and particulars provided to the petitioners 8. Circumstances surrounding the passing of the Assessment Order 9. Request for setting aside Assessment Order and reconsideration 10. Possibility of furnishing bank guarantee for tax difference Analysis: 1. The petitioners, a registered partnership firm engaged in Civil Works Contract in Karnataka, contested the tax rate levied by respondent No.3 at 14.5% instead of 5.5%, claiming their works contract fell under specified categories for lower taxation. The petitioners sought the Assessment Order at Annexure-F to be set aside for reconsideration based on their submissions and supporting documents. 2. The learned High Court Government Pleader argued the appealability of the Assessment Order, stating the writ petition was not maintainable. Additionally, the Pleader highlighted the absence of a provision to furnish a work sheet before passing the Assessment Order and proposed a bank guarantee if the Order required reconsideration. 3. It was acknowledged that the petitioners' firm was registered under the Indian Partnership Act and had its office in Maharashtra. The firm had undertaken works contracts with Karnataka's local bodies, filing returns timely. The petitioners contended that their contracts qualified for a lower tax rate than assessed by respondent No.3. 4. The Assessing Authority had issued a detailed notice to the petitioners, requesting the production of accounts for verification before passing the Assessment Order. The petitioners, based in Maharashtra, faced challenges securing documents from Karnataka's departments due to the nature and volume of the required paperwork. 5. The Court found that setting aside the Assessment Order for reconsideration would not prejudice the respondents, as the petitioners had paid the admitted tax rate. The petitioners were directed to produce supporting documents within a month for reconsideration by the Assessing Authority, subject to furnishing a bank guarantee for the tax difference. 6. Consequently, the writ petition was allowed, the Assessment Order was set aside, and the matter was remitted to the Assessing Authority for fresh consideration, ensuring an opportunity for the petitioners to present their case with necessary documents and a provision for personal hearing.
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