2020 (9) TMI 45 - HC - VAT and Sales Tax

Nature of transaction - Sales or works contract - Remittal of assessment order - Rectification of error - Section 84 of the Tamil Nadu Value Added Tax Act, 2006 - HELD THAT - Clearly what has been done is a remittal of the assessment to the file of the Assessing Officer with a direction to redo the assessment in the light of the guidelines set out by the Supreme Court in M/S. KONE ELEVATOR INDIA PVT. LTD. VERSUS STATE OF TAMIL NADU AND OTHERS 2014 (5) TMI 265 - SUPREME COURT , the contract and other documentation inter se the parties and the terms of the contracts that governed the transactions - In compliance thereof, a pre-assessment was issued to the petitioner wherein the Assessing Authority proposed to complete the assessment based on the findings of the minority judgment in M/S. KONE ELEVATOR INDIA PVT. LTD. VERSUS STATE OF TAMIL NADU AND OTHERS 2014 (5) TMI 265 - SUPREME COURT . Since the Officer referred specifically to paragraph 140 of the judgment, the petitioner objected to the notice, pointing out that what had been referred to in the notice was the minority view and not the majority view. It is relevant to note that no evidence was produced, by way of contracts or other documentation to support the petitioners case that the transactions constituted works contract only. The issue canvassed before me relates to the interpretation of the contract as well as other documents entered into inter se the petitioner and its customers which do not appear to even be part of the record of the assessing officer. It is only upon such examination that one could conclude as to whether the transaction is question would constitute a works contract or a direct sale. The Assessing Authority, in the present case, has come to the conclusion that the transaction is a sale and the sole argument advanced by learned counsel for the petitioner is that, in coming to this conclusion, what has been applied is the minority view in the Kone Elevator (India) Pvt. Ltd and not the majority view. The only point repeatedly canvassed both before the Authorities as well as before this Court is that the judgment of the Hon ble Supreme Court (majority view) must be applied to the transaction in issue. This cannot be accepted for the mere asking. It is for the petitioner to establish its case and produce enough factual particulars to support the conclusion that the nature of the transaction is a works contract and not a sale. This exercise has not been undertaken. In the absence of any supporting material (contracts, invoices etc.), the conclusion of the authority was that the transactions in issue cannot simply be compared to, or equated with the transaction of supply of lifts by Kone Elevators. The petitioner may not agree with the conclusion that the Assessing Authority has arrived at. However, it is not for this Court sitting in writ jurisdiction to review the materials relating to the transactions engaged in by the petitioner and come to its own view and it is thus only appropriate that the petitioner approach the appellate authority by way of appeal. While expressing no view whatsoever on merits, that is, whether the transactions in issue are liable to be classified as works contract or sale , I am not of the view that this is a fit matter for interference under Article 226 of the Constitution of India and permit the petitioner to file a statutory appeal. An appeal, if filed within a period of four weeks from today, will be entertained by the first Appellate Authority without reference to any limitation, but subject to all other statutory conditions - Petition disposed off.

Summary

Issues Involved:
1. Whether the transaction made by the petitioner should be treated as a Works Contract or Direct Sale.
2. Whether the Assessing Authority applied the correct judicial precedent in determining the nature of the transaction.
3. Whether the petitioner provided sufficient evidence to classify the transaction as a works contract.

Detailed Analysis:

Issue 1: Treatment of Transaction as Works Contract or Direct Sale
The petitioner, a dealer in modular kitchens, was initially assessed under the Tamil Nadu General Sales Tax Act, 1959. The assessment for the period 2005-06 was completed based on the Supreme Court's judgment in State of Andhra Pradesh V. Kone Elevators (India) Limited, classifying the transactions as sales. This assessment was challenged and remanded for reassessment in light of the Supreme Court's majority view in Kone Elevator (India) Pvt. Ltd. V. State of Tamil Nadu, which set parameters for distinguishing works contracts from sales. The core issue was whether the petitioner's transactions, involving the design, supply, and installation of modular kitchens, should be classified as works contracts or direct sales.

Issue 2: Application of Judicial Precedent
The Assessing Authority, upon reassessment, relied on the minority judgment in Kone Elevator (India) Pvt. Ltd. V. State of Tamil Nadu, concluding that the transactions constituted a sale. The petitioner objected, arguing that the majority view, which emphasized the composite nature of contracts involving both goods and services, should have been applied. The court noted that the Assessing Authority's reliance on the minority view was incorrect, but emphasized that the determination of whether the transactions were works contracts or sales required a thorough examination of the contracts and other relevant documentation, which was not provided by the petitioner.

Issue 3: Sufficiency of Evidence Provided by the Petitioner
The petitioner failed to produce sufficient evidence, such as contracts and invoices, to support the claim that the transactions were works contracts. The court highlighted that the petitioner needed to establish the nature of the transactions with factual particulars. The absence of supporting material led the Assessing Authority to conclude that the transactions could not be equated with the supply of lifts by Kone Elevators, which involved a clear composite contract for both goods and services.

Conclusion:
The court concluded that the determination of whether the transactions were works contracts or sales required a detailed examination of the contracts and other relevant documentation, which was beyond the scope of the writ jurisdiction. The court directed the petitioner to file a statutory appeal, where the Appellate Authority would examine the contracts and other relevant information in light of the principles laid down by the Supreme Court in Kone Elevator (India) Pvt. Ltd. V. State of Tamil Nadu. The writ petition was disposed of with the direction that the appeal, if filed within four weeks, would be entertained without reference to any limitation but subject to other statutory conditions.