2017 (1) TMI 912 - HC - VAT and Sales Tax

Works contract - Conditional stay on remittance of 20% of the balance tax and interest demanded for the year 2013-14 - a works contractor, conceded a total contract receipt of ₹ 9,03,36,825/- during the year 2013-14 and claimed exemption under Rule 10 for a turnover of ₹ 7,76,35,006/-. Almost 85% of contract receipt was claimed as deduction - books of accounts of dealer did not substantiate the claim of deduction - Held that - The Appellate Authority, on a prima facie consideration, found that there was no substantiating documents to prove the deduction and the books of accounts did not reveal the entire deduction as claimed by the petitioner. The Appellate Authority had also only directed remittance of 20% of the balance tax and interest demanded; which this Court is not inclined to interfere with. However, the petitioner shall be granted four instalments to make the payment as directed in Exhibit P4, starting from 25.01.2017 and continued on 25th of February, March and April of 2017. Recovery proceedings shall be kept in abeyance on satisfaction of the above conditions - petition disposed off.

Summary

Issues:
1. Grant of conditional stay on remittance of tax and interest demanded.
2. Claim for deduction under Rule 10 of the Kerala Value Added Tax Rules, 2005.
3. Adequacy of opportunity provided to substantiate the claim for deduction.
4. Assessment by the Assessing Officer and findings of the Appellate Authority.

Analysis:

1. The petitioner challenged Exhibit P4 order, which granted conditional stay on remittance of 20% of the balance tax and interest demanded for the year 2013-14. The petitioner contended that a composite notice was issued, contrary to previous decisions, and that there was insufficient opportunity to prove deductions under Rule 10 of the KVAT Rules.

2. The petitioner, a works contractor, claimed exemption under Rule 10 for a significant portion of the total contract receipt during the year 2013-14. However, the Assessing Officer found that the books of accounts did not support the claim of deduction and lacked supporting evidence. The petitioner argued inadequate opportunity, but the Assessing Officer proceeded with the assessment based on available information.

3. The dealer had multiple interactions with the authorities, including filing replies and producing books of accounts. Despite these opportunities, the Assessing Officer concluded that there was no sufficient evidence to substantiate the claim for deduction. The Appellate Authority also found a lack of supporting documents and directed the remittance of 20% of the balance tax and interest demanded.

4. The High Court, while upholding Exhibit P4, modified the order to allow the petitioner to make the payment in four installments, starting from a specified date. The Court declined to interfere with the direction for remittance but granted the petitioner the flexibility of installment payments, with the condition that recovery proceedings would be stayed upon compliance with the payment schedule.

In conclusion, the judgment addressed the issues of conditional stay on tax remittance, adequacy of opportunity for deduction substantiation, and the assessment process by the authorities. The Court upheld the order with a modification regarding installment payments, providing relief to the petitioner while maintaining the essence of the original decision.