2016 (9) TMI 971 - HC - VAT and Sales Tax

Assessment - taxable turnover - purchase value of material - proviso to Rule 10 (2) (a) of the KVAT Rules - sale of apartment - agreement to sell the apartment - works contract - non-consideration of relevant material by Assessing Officer amounting to an error apparent on the face of the record - whether there is any error apparent on the face of the record to enable the officer concerned to reconsider the matter? - Held that - the decision in the case Larsen and Toubro Limited and another v. State of Karnataka and another 2013 (9) TMI 853 - SUPREME COURT is considered where it was held that the petitioner does not become works contractor unless there are materials to indicate that the petitioner had already entered into a contract with potential purchasers. The Assessing Officer is bound to consider a matter when the same is brought before him especially when a rectification application was filed. Perusal of Ext.P6 order would show that the assessing officer had merely rejected the same by forming an opinion that all the points raised had been considered. When questions are specifically raised by the petitioner the same cannot be ignored by the officer while considering rectification application - the matter requires a re-consideration - petition disposed off - decided in favor of petitioner.

Summary

Issues:
Challenge to order passed in a rectification application regarding assessment under the Kerala Value Added Tax Act, 2003.

Analysis:
The petitioner, a works contractor, challenged an order (Ext.P6) related to the assessment year 2010-2011, arguing against the assessment based on total purchases without considering unsold units. The petitioner contended that out of 624 apartments, only 151 were sold during the relevant year, and there was no contract for the remaining 306 units. The assessment order (Ext.P3) did not address this objection, leading to a rectification application under Section 66 of the KVAT Act, which was rejected by Ext.P6 without considering the petitioner's contentions. The petitioner argued that the rejection was erroneous as the assessing officer failed to address the crucial issue of unsold units.

The Government Pleader supported Ext.P6, stating that since the assessment was based on purchase value as per the KVAT Rules, there was no apparent error to warrant rectification. Referring to a Supreme Court judgment, it was emphasized that rectification is not for debatable legal or factual issues but for clear mistakes on the face of the record. The main question was whether there was an error apparent on record justifying reconsideration.

The Court noted that while the assessment was based on purchase value, the crucial issue of unsold units affecting the works contractor status was not addressed. Citing the Larsen and Toubro case, it was highlighted that a works contract requires a contract with purchasers, which was missing for the unsold units. The Court held that the failure to consider such crucial aspects amounted to an error apparent on the face of the record, necessitating a fresh assessment. Ext.P6 was set aside, directing a re-consideration of the rectification application within two months, with recovery steps to be on hold until then.