2023 (8) TMI 115 - HC - VAT and Sales Tax

Composition Scheme - Interpretation of statute - Condition No. 3 of N/N. VAT 1510/CR-65/Taxation-1 dated 09.07.2010 - restriction on set-off only in respect of purchases of those goods involved in the execution of a works contract the property in respect of which (goods) are transferred in the execution of such works contract - non-restriction on set-off in respect of purchases of goods involved in the execution of a works contract the property in respect of which (goods) are not transferred in the execution of such works contract. HELD THAT - Pursuant to the powers vested in it by virtue of the provisions of Section 42(3A) of the MVAT Act, the State Government has notified the Composition Scheme vide the said Notification dated 9th July 2010. As held by this Court in the case of Maharashtra Chamber of Housing Industry and Others (Supra), a dealer has the option as to whether to opt for such a Composition Scheme or not and there is no compulsion or obligation upon a dealer to opt for such a scheme. As per the Composition Scheme notified by the said Notification dated 9th July 2010, the composition amount is one percent of the agreement amount specified in the agreement or the value specified for the purpose of stamp duty in respect of the said agreement under Bombay Stamp Act, 1958, whichever is higher - the Scheme provides for tax at a flat rate of one percent on the aforesaid amount. However, Condition No. 3 provides that a dealer who opts to pay composition under the said Scheme shall not be eligible to claim set-off of taxes paid in respect of the purchases. In the present case, the Appellant s claim of set-off pertains to administrative expenses as well as expenses towards the lease of construction equipment which were used for the purpose of undertaking construction activity. The Appellant could not have executed the contract without the said expenses - On a plain reading of Condition No. 3 of the said Scheme, it is clear that the said condition prohibits a dealer opting for the Scheme from claiming set-off of taxes paid in respect of purchases. There is no merit in the argument of the Appellant that, just because Condition No. 3 refers to the purchases , it applies only in respect of certain kind of purchases and does not apply in respect of certain other purchases. If Condition No. 3 wanted to make an exception in respect of certain kind of purchases, then it would have expressly stated so. In the absence of any such exception made by Condition No. 3, in our view, on the plain language of Condition No. 3, it applies to all purchases. Further, the whole purpose of such a Composition Scheme is to provide for a convenient, hassle-free and simple method of assessment. By opting for the Composition Scheme, the contractor saves himself the bother of book keeping, assessment, appeals and other such things - this being the purpose and object of such a Composition Scheme, this very purpose and object would be totally and completely defeated if the argument of the Appellant is accepted and the AO has to make an enquiry as to what goods have been transferred and in respect of what purchases set-off can be claimed. Thus, no substantial question of law arises in the present Appeal. The Appeal is dismissed.

Summary

Issues Involved:
1. Interpretation of Condition No. 3 of Notification No. VAT 1510/CR-65/Taxation-1 dated 09.07.2010 regarding set-off eligibility.
2. Applicability of set-off for purchases not transferred in execution of works contract.

Summary:

Issue 1: Interpretation of Condition No. 3 of Notification No. VAT 1510/CR-65/Taxation-1 dated 09.07.2010 regarding set-off eligibility.

The Appellant challenged an Order dated 20th October 2021 by the Maharashtra Sales Tax Tribunal concerning VAT Second Appeal No. 240 of 2020 for the period 1st April 2013 to 31st March 2014. The Appellant, registered under the MVAT Act and CST Act, engaged in construction and sale of immovable properties, opted for the Scheme of Composition under Section 42(3A) of the MVAT Act for VAT payment on construction activities. The Appellant disclosed a gross turnover of Rs. 28,67,538/- and paid VAT of Rs. 1,36,551/-, claiming a refund of Rs. 24,65,766/- on purchases. The Assessing Officer rejected the set-off claim, stating that Condition No. 3 of the Notification applied to all purchases, not just those transferred to buyers. The Joint Commissioner and the Tribunal upheld this view.

Issue 2: Applicability of set-off for purchases not transferred in execution of works contract.

The Appellant argued that Condition No. 3 should only restrict set-off for purchases transferred to buyers, not for administrative or construction equipment expenses. The Appellant contended that the term "the purchases" in Condition No. 3 should be interpreted to apply only to goods transferred in the works contract. The Respondent, supported by a previous judgment (Maharashtra Chamber of Housing Industry and Others vs. State of Maharashtra and Others), argued that Condition No. 3 prohibited set-off for all purchases without exception.

The Court held that Condition No. 3's plain language prohibited set-off for all purchases, and no exceptions were stated. The purpose of the Composition Scheme was to provide a simple, hassle-free method of assessment, which would be defeated if the Appellant's interpretation were accepted. The Tribunal correctly rejected the Appellant's claim of set-off, and no substantial question of law arose. The Appeal was dismissed with no order as to costs.