2014 (9) TMI 776 - HC - VAT and Sales Tax

Recovery proceedings initiated as per assessment order - stay was granted on condition of payment of 30% of the outstanding dues - Held that - though a remand was made, the first appellate authority has specifically found that only if verification of books and accounts and invoice copies issued to various persons and institutions, revealed that the turnover is not relating to testing fees, service charges, service tax, education cess etc.; the authority could deem it to be turnover includable in the works contract of the petitioner. It is submitted by the learned Government Pleader that in Exhibit P4 the said finding was taken note of. However, that is a matter which has to be decided in appeal and going by the facts and circumstances noticed above, this Court is of the opinion that the appeal is to be disposed of and till such time, recovery proceedings shall be kept in abeyance. In such circumstance, Exhibit P6 is set aside - Decided in favour of assessee.

Summary

Issues:
1. Challenge to recovery proceedings based on assessment order pending appeal.
2. Dispute over addition on flimsy grounds and non-payment of determined penalty amount.

Issue 1: Challenge to Recovery Proceedings
The petitioner, a works contractor registered under the Kerala Value Added Tax Act, was aggrieved by recovery proceedings initiated based on an assessment order pending appeal. A stay order was issued conditionally requiring payment of 30% of outstanding dues. The petitioner contested the order on the grounds that the addition was unjustified and that a previous appeal, which had been allowed and remanded, required payment of a penalty amount that the Department still held.

Issue 2: Dispute Over Addition and Penalty Amount
The petitioner, engaged in works contract activities and certification work, disclosed turnover in their accounts but only reported contract work turnover in their returns under the KVAT Act. The Intelligence Officer initiated penalty proceedings for a difference in turnover, estimating and imposing a penalty at twice the tax evaded. An appeal regarding the penalty order concluded with a finding that the turnover in question related to certification procedures for which the petitioner had paid service tax, not sales. Despite the penalty order being set aside, a remand was made. Subsequently, the same issue was addressed in the assessment order, where the turnover was included as assessable, leading to additions for suppression. The court directed the appellate authority to consider the appeal on its merits and ordered the recovery proceedings to be halted until the appeal was resolved.

In conclusion, the High Court allowed the writ petition, setting aside the stay order and directing the appellate authority to decide the appeal. The recovery proceedings for the assessment year were to be put on hold until the appeal was resolved.