2024 (10) TMI 140 - HC - VAT / Sales Tax

Challenge to assessment order on the ground of time limitation - assessment orders passed by the Assessing Officer for the Assessment years 2007-2008 to 2009-2010 were passed within the period of limitation prescribed for completion of the Assessment under the provisions of Pondicherry Value Added Tax Act, 2007 or not - work of powder coating undertaken by the Assessee amounts to execution of works contract or not - powder coating work involves transfer of property or not? HELD THAT - The definition of work-contract in Section 2(zp) is very wide. It includes any improvement modification, repair or commissioning or any movable or immovable property. Thus, without doubt the work undertaken by the Respondent Assessee for 'powder coating' the products like yokes, links and tubes etc amounts to works contract. Since the activity of powder coating is in the nature of works contract, it is to be construed that there is a transfer of property in the execution of works contract. Therefore, the Respondent-Assessee is liable to pay tax under Section 15(1) of the PVAT Act, 2007. Therefore, both the substantial questions of law answered in favour of the Petitioner-CTO and against the Respondent-Assessee. As per Section 24(1) of the Puducherry Value Added Tax Act, 2007, the Respondent Assessee was required to file a tax return within a period of 15 days after end of the period in such manner as may be prescribed. A return submitted by the dealer along with tax due is to be accepted as self-assessed. As per proviso to Section 24(2) of the Act, the Assessing Authority may select either at discretion or as directed by the Commissioner any dealer for detailed assessment - As per Section 24(4), the Assessing Authority has to serve a notice, on completion of the Assessment and the dealer is required to pay balance of tax in accordance with terms of that notice. As per sub-section (5) to Section 24, no Assessment under Section 24 shall be made after a lapse of three years from the end of the year to which, the returns filed under the Act relates. Admittedly, return pertains to the Assessment year 2007-08 to 2009-2010 as mentioned above. An earlier notice was issued on 05.03.2011 calling upon the Respondent-Assessee to show cause as to the basis on which exemption was claimed for issuance of C-Form for purchases made under Inter-State purchase and was followed by pre- Assessment notice dated 25.09.2014. As far as the present case is concerned, a limitation is prescribed under Section 24(5) of PVAT Act, 2007 for completing assessment. As per Section 24(5), no assessment shall be made after a period of three years from the end of the year to which the return under the Act relates - the test to be applied is whether the notice for completing the assessment was issued within limitation i.e., three years to which the returns relates to. If so, even if the Assessment Order is passed beyond the period of three years, it will be in time. In the present case, since notices were issued on 05.03.2011 i.e., within three years contemplated under Section 24(5) of the PVAT Act, 2007, the assessment orders passed on 12.12.2014, 22.12.2014 and 31.12.2014 are held to have been passed in time. The substantial questions of law framed are answered in favour of the Petitioner- Commercial Tax Department - tax cases allowed.

Summary

Issues Involved:

1. Whether the assessment orders for the years 2007-2008 to 2009-2010 were time-barred under the PVAT Act, 2007.
2. Whether the powder coating work undertaken by the Respondent-Assessee constitutes a works contract involving transfer of property.
3. Applicability of penalty under Section 24(3) of the PVAT Act, 2007.

Detailed Analysis:

1. Limitation for Assessment Orders:

The primary issue was whether the assessment orders for the years 2007-2008 to 2009-2010 were passed within the limitation period prescribed under Section 24(5) of the PVAT Act, 2007. The Act stipulates that no assessment shall be made after three years from the end of the year to which the return relates. In this case, the assessment orders were passed on various dates in December 2014, while the notice for assessment was issued on 05.03.2011. The court referred to precedents, including Ghanshyam Das vs. Regional Assistant Commissioner of Sales Tax and others, to conclude that as long as the notice for assessment was issued within the prescribed time, the assessment order could be finalized later. Therefore, the assessment orders were deemed to be within time, as the notice was issued within the three-year limitation period.

2. Nature of Powder Coating Work:

The second issue was whether the powder coating work performed by the Respondent-Assessee amounted to a works contract involving the transfer of property. The court examined the definition of "works contract" under Section 2(zp) of the PVAT Act, 2007, which includes any agreement for building, construction, manufacture, processing, and other similar activities. The court also referred to the Supreme Court's interpretation in cases like Larsen and Toubro Ltd vs. State of Karnataka, which clarified that works contracts could involve both service and transfer of property. The court concluded that the powder coating process involved the transfer of property in goods and thus constituted a works contract. Consequently, the Respondent-Assessee was liable to pay tax under Section 15(1) of the PVAT Act, 2007.

3. Imposition of Penalty:

The court also addressed the issue of penalty under Section 24(3) of the PVAT Act, 2007. The Respondent-Assessee had filed Nil returns, claiming the activity was exempt from tax. However, the Commercial Tax Department determined that the powder coating involved a transfer of property, making it taxable. The court upheld the imposition of penalty, as the Respondent-Assessee had incorrectly reported Nil returns and failed to disclose taxable turnover.

Conclusion:

The court allowed the tax cases, answering the substantial questions of law in favor of the Petitioner-Commercial Tax Department. The assessment orders were not time-barred, and the powder coating work was deemed a taxable works contract involving the transfer of property. The penalty imposed under Section 24(3) of the PVAT Act, 2007, was also upheld. Consequently, the appeals filed by the Respondent-Assessee were dismissed, and the assessment orders were reinstated.