2017 (5) TMI 996 - HC - VAT and Sales Tax

Maintainability of petition - Validity of reassessment order - KVAT Act - sub-contract - deductions under the provisions of Rule 3(2) of KVAT rules - Form VAT 180 - demand of tax, interest and penalty - there is a reassessment order after notice to the petitioner. The petitioner appeared before the Assessing Authority produced registers maintained by it and raised similar contentions that all goods, which were procured or purchased were consumable goods, consumed in the service contract, and therefore no VAT is payable by it - Whether the writ petitions filed by the petitioner is maintainable in view of alternative remedy provided in Section 62 of the Act? Held that - when an alternative remedy is available and petition is entertained by this Court, the petitioner later cannot approach the appellate authority by way of appeal or revision as the case may and thus petitioner would be to its disadvantage. For this reason also, entertaining this writ petition without allowing the petitioner to avail the alternative remedy, is not in the best interest of the petitioner. The constitutional issues have to be decided exclusively by the High Court. This is a case where alternative remedy has to be availed by the petitioner and accordingly, the writ petitions are not maintainable - petition dismissed being not maintainable.

Summary

Issues Involved:
1. Reassessment order under Section 39(1) of the Karnataka Value Added Tax Act (KVAT Act).
2. Demand notice in Form VAT 180.
3. Endorsement issued under Section 69 of KVAT Act.
4. Classification of the contract as service or works contract.
5. Applicability of VAT on the turnover declared as exempt.
6. Alternative remedy of appeal under Section 62 of KVAT Act.
7. Principles of natural justice and procedural fairness.
8. Constitutional validity and jurisdictional issues.

Detailed Analysis:

1. Reassessment Order and Demand Notice:
The petitioner challenged the reassessment order and consequent demand notice issued by the first respondent under Section 39(1) of the KVAT Act for the year 2011-12. The petitioner argued that the reassessment was erroneous as the turnover declared was exempt, claiming no transfer of property in goods and thus no VAT liability. The reassessment determined the total turnover at ?115,33,16,933/- and taxable turnover at ?80,73,21,853/-.

2. Nature of the Contract:
The petitioner contended that the contract was purely a service contract, not amenable to VAT, as it involved negligible transfer of property in goods. The materials provided by the petitioner were incidental and consumables, not subject to VAT. The petitioner had paid service tax on the entire contract value under the Finance Act, 1994.

3. Endorsement under Section 69 of KVAT Act:
The petitioner's application for rectification under Section 69 of the KVAT Act was rejected. The petitioner argued that the reassessment contained apparent mistakes and that the value of goods transported via e-Sugam forms did not reflect taxable transactions but were for temporary usage or machinery/tools not liable to VAT.

4. Alternative Remedy of Appeal:
The respondents argued that the writ petition was not maintainable due to the availability of an alternative remedy of appeal under Section 62 of the KVAT Act. The court agreed, emphasizing the principle that writ petitions should not be entertained when an efficacious alternative remedy exists unless exceptional circumstances are present.

5. Principles of Natural Justice:
The petitioner claimed that the reassessment order violated principles of natural justice as sufficient opportunity was not provided to reconcile the transactions and present detailed accounts. The court noted that the petitioner had participated in the reassessment process and that any procedural lapses could be addressed by the appellate authority.

6. Constitutional and Jurisdictional Issues:
The court observed that the case did not involve constitutional validity or jurisdictional issues that would warrant bypassing the alternative remedy. The dispute was primarily factual, concerning the classification of the contract and the applicability of VAT, which could be adequately addressed by the appellate authority.

Conclusion:
The court dismissed the writ petition, directing the petitioner to avail the alternative remedy of appeal before the Joint Commissioner of Commercial Taxes (Appeals). The court noted that the appellate authority should consider the pendency of the matter before the court when addressing any delay in filing the appeal.