2024 (10) TMI 1248 - HC - VAT / Sales Tax

Benefit of the concessional rate of tax under Section 8 (a) (ii) of the Kerala Value Added Tax Act (KVAT Act), 2003 - import of any goods into the State or Country 'for incorporation in the works contract' - goods imported were not incorporated in the works contract for the year 2015-16 and the goods were returned to the supplier. HELD THAT - While it may be a fact that in the absence of any material to suggest the actual return of the imported goods, the revenue may have been justified in presuming that the goods imported were in fact for incorporation in the works contract, and in such a situation would have been justified in insisting on the assessee discharging the tax liability @ of 7% on the contract value in accordance with Section 8 (a) (i) of the KVAT Act, we find that when the Appellate Tribunal was satisfied on facts regarding proof of return of the imported goods without incorporation of the same in the works contracts undertaken by the assessee for the assessment year in question, the assessee cannot be denied the benefit of the concessional rate of tax of 4% in terms of Section 8 (a) (ii) of the KVAT Act. The pre-condition for attracting the higher rate of tax under Section 8 (a) (i) cannot be seen as attracted on the facts of the instant case where the assessee did not hold a CST registration during the assessment year in question, and further, had returned the imported goods to the supplier without incorporating any part of it in the works contracts undertaken during the said year. There are no reason to interfere with the impugned order of the Appellate Tribunal - OT. Revision petitions are thus dismissed by answering the questions of law raised against the revenue and in favour of the assessee.

Summary

Issues:
Eligibility for concessional tax rate under Section 8(a)(ii) of the Kerala Value Added Tax Act in 2015-2016.

Analysis:
The judgment involves multiple OT Revision petitions that address the common issue of the respondent's eligibility for the concessional tax rate under Section 8(a)(ii) of the Kerala Value Added Tax Act in the four quarters of 2015-2016. The respondent, a works contractor, had opted to pay tax at a compounded rate of 4% of the contract value. However, the assessing authority determined that the respondent had made interstate purchases of goods, which disqualified them from claiming the 4% rate under Section 8(a)(ii) and instead required them to pay tax at 7% under Section 8(a)(i). The First Appellate Authority and the Appellate Tribunal subsequently considered the case, with the Tribunal ultimately ruling in favor of the respondent after verifying that the imported goods were not incorporated into the works contracts for the relevant assessment year and were returned to the supplier.

The revenue challenged the Tribunal's decision through OT Revision petitions, raising questions of law regarding the import of goods for incorporation into works contracts and whether the imported goods were indeed returned to the supplier. The High Court, after hearing arguments from both parties, analyzed the situation. The Court acknowledged that in the absence of evidence proving the return of imported goods, the revenue could presume the goods were intended for incorporation into works contracts, justifying a 7% tax rate. However, since the Appellate Tribunal was satisfied with the evidence showing the return of goods without incorporation, the Court held that the respondent should not be denied the benefit of the 4% tax rate under Section 8(a)(ii). The Court emphasized that the conditions for the higher tax rate under Section 8(a)(i) were not met in this case, especially considering the lack of CST registration and the actual return of goods to the supplier without being used in works contracts. Consequently, the High Court dismissed the OT Revision petitions, ruling in favor of the respondent and upholding the decision of the Appellate Tribunal.