2017 (10) TMI 733 - HC - VAT and Sales Tax

Scope of Entry 54 of List II of the Seventh Schedule to the Constitution of India - imposition of tax contrary to the tax on the sale of the undivided share in the land - works contract - Held that - the petitioner-assessee can very well raise even the said issue raised before this Court in the present writ petition, namely, the taxability of the land cost, in the appeal filed before the said First Appellate Authority itself as the said questions are undoubtedly mixed questions of law and facts and the Authorities created under the Act including the Appellate Authorities are entitled to go into such mixed questions of facts and law and decide the same in accordance with law - petition disposed off.

Summary

Issues:
Challenge against re-assessment order under Section 39(1) of the Karnataka Value Added Tax Act, 2003 based on tax imposition on the sale of undivided share in land beyond the scope of Entry 54 of List II of the Seventh Schedule to the Constitution of India. Applicability of VAT Act, 2003 on the land cost component of the contract price. Appeal filed by assessee petitioner before the Joint Commissioner of Commercial Taxes (Appeals). Validity of Rectification Application rejection by Assessing Authority.

Analysis:

The petitioner challenged the re-assessment order under Section 39(1) of the Karnataka Value Added Tax Act, 2003, arguing that the tax imposed on the sale of the undivided share in land exceeded the scope of constitutional provisions. The petitioner contended that the VAT Act, 2003 did not authorize the Assessing Authority to levy tax on this component of the contract price. It was highlighted that the tax on the sale of Apartments and Flats under the Works Contract was already under appeal before the Joint Commissioner of Commercial Taxes (Appeals).

The petitioner relied on a decision of the Hon'ble Supreme Court in a similar case to support their argument. However, the Respondent pointed out that an interim order in favor of the petitioner had been granted in a related appeal, which was pending before the Joint Commissioner for further proceedings. The petitioner raised concerns that the taxability of the land cost issue was not addressed in the ongoing appeal before the Appellate Authority.

After considering the arguments from both sides, the Court opined that the petitioner could raise the issue of taxability of the land cost before the Appellate Authority as it involved mixed questions of law and facts. The Court emphasized that the Appellate Authorities had the jurisdiction to address such issues and make decisions in accordance with the law. The petitioner was granted permission to file an Additional Memorandum of Appeal or seek an amendment to include the ground related to the taxability of the land cost in the ongoing appeal.

Furthermore, the Court allowed the petitioner to challenge the rejection of the Rectification Application by the Assessing Authority before the Appellate Authority. The judgment concluded by disposing of the writ petitions with the directive for the Appellate Authority to decide on the appeals based on merits without objections on the question of limitation for filing additional appeal documents.

In summary, the judgment addressed the challenges against the re-assessment order, the scope of tax imposition under the VAT Act, 2003, the ongoing appeal process before the Appellate Authority, and the possibility of raising additional grounds related to the taxability of the land cost and Rectification Application rejection before the Appellate Authority.