Full Judgment Text
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CASE NO.:
Appeal (civil) 584 of 2008
PETITIONER:
Indian Dairy Machinery Co. Ltd.
RESPONDENT:
Assistant Commissioner of Commercial Taxes
DATE OF JUDGMENT: 22/01/2008
BENCH:
Dr. ARIJIT PASAYAT & P. SATHASIVAM
JUDGMENT:
J U D G M E N T
(Arising out of S.L.P (C) No.12791 of 2006)
(With Civil Appeal No. 585/08 @ SLP (C) No. 12792/2006
With Civil Appeal No. 586/08 @ SLP (C) No. 12793/2006
With Civil Appeal No.589/08 @ SLP (C) No. 12794/2006)
Dr. ARIJIT PASAYAT, J.
1. Leave granted in SLP (C) Nos. 12791-12794 of 2006
2. Challenge in these appeals is to the judgment of a
Division Bench of the Karnataka High Court dismissing the
Revision Petition filed under Section 23(1) of the Karnataka
Sales Tax Act, 1957 (in short the \021Act\022).
3. The controversy relates to assessment year 2002-2003.
The appellant had filed the Revision Petitions questioning
correctness of the order passed by the Karnataka Appellate
Tribunal (in short the \021Tribunal\022) in STA Nos798-801 of 2003.
The appeals were filed before the Tribunal under Section 22(1)
of the Act against the order passed by the Joint Commissioner
of Commercial Taxes (Appeals), Bangalore Division, Bangalore
(hereinafter referred to as the \021Appellate Authority\022). The said
authority confirmed the provisional assessment orders of the
Assistant Commissioner of Commercial Taxes, Bangalore
(hereinafter referred to as the \021Assessing Authority\022) for the
months of May, June, July and September, 2002.
4. Factual position is almost undisputed and is as follows:
The appellant is a limited company and has its registered
office at Gujarat and branch office at Bangalore, Karnataka. It
is a sub-contractor for M/s Larsen and Toubro Ltd. for
execution of works contract. It is registered as a dealer under
the Act as well as Central Sales Tax Act, 1956 (in short the
\021Central Act\022). It had opted for composition under Section 17(6)
of the Act. But the benefit of composition was denied in view of
the amendment to sub-section (7) of Section 17. The appellant
undisputedly had received goods from the head office situated
at Gujarat for execution of the work in Karnataka.
5. Stand of the appellant before the departmental
authorities and the Tribunal was that the receipt of goods from
the head office does not amount to receiving of goods. The
Tribunal referred to sub-section (7) of Section 17 as amended
by Act No.5 of 2002 w.e.f. 1.4.2002 and held that in fact the
provision clearly applied to the case of the appellant.
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6. The following questions were raised before the High Court
in the Revision Petition:
\023I. Whether the Karnataka Appellate
Tribunal was right in concluding that the
amendment to Section 17(7) of the KST Act
effective from 1.4.2002 would apply to
agreements entered into prior to 1.4.2002.
II. Whether the Karnataka Appellate
Tribunal was right in holding that even
transfers to stock would be hit by the
amendment to Section 17(7) of the Karnataka
Sales Tax Act effective 1.4.2002?\024
7. Section 17(7) of the Act which has been introduced by
the Karnataka Amendment Act 5 of 2002, with effect from
1.4.2002 reads as under:
"Nothing contained in sub-section (6)
shall apply to a dealer who purchases or
receives goods from outside the State for
the purpose of using such goods in the
execution of works contract"
8. The legislature by introducing the above amendment to
sub-Section (7) of Section 17 of the Act has restricted the
benefit of composition amount for a dealer liable to tax under
Section 5-B of the Act. By this amended provision, the
Legislature mandates that a dealer who purchases or receives
goods from outside the State for the purpose of using such
goods in the execution of works contract is not eligible for
benefit of composition amount for the works contract executed
by him in that year in the State in respect of works specified in
the Sixth Schedule to the Act.
9. Rule 8-B of the Karnataka Sales Tax Rules, 1957 (for
short the ‘Rules’) provides the procedure for composition of tax
in the case of dealers executing works contract. Sub-rule (1) of
Rule 8-B of the Rules envisages that the assessee/dealer shall
submit an application in Form 8-AA to the assessing authority
each year seeking composition benefit within One hundred
and twenty days from the date of commencement of the
assessment year or of the business, if he has commenced the
business during the course of the year.
10. Sub-Rule (2) of Rule 8-B of the Rules mandates that the
Assessing Authority after receipt of such application from the
dealer/assessee, and after verifying the same, may permit the
dealer, subject to the conditions specified in Sub-rule (1), to
pay in lieu of the amount of tax payable by him during the
year an amount by way of composition as provided in sub-
section (6) of Section 17 of the Act.
11. Clause (ii) of sub-rule (2) of Rule 8-B of the Rules
envisages that the Assessing Authority shall give permission
for composition within thirty days from the date of receipt of
the application by the dealer/assesses under Sub-rule (1) of
Rule 8-B of the Rules.
12. The High Court dismissed the Revision Petition holding
that sub-section (7) of Section 17 has clear application. The
stand taken before the Tribunal and the High Court was re-
iterated in these appeals.
13. Learned counsel for the respondent-State on the other
hand supported the impugned judgment.
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14. It is to be noted that if the dealer wanted the benefit of
sub-section (6) of Section 17, it was required to submit an
application within one hundred twenty days from the date of
commencement of the assessment year. The amended
provision of sub-section (7) of Section 17 came into effect from
1.4.2002. The amended provision clearly excludes the dealer
from the benefit of sub-section (6) of Section 17 of the Act if he
purchases or receives goods from outside the State for the
purposes of using such goods in the execution of the works
contract. If for any reason, the assessee had intended to opt
for composition of tax under Section 17 (6) of the Act,
necessarily he had to submit the application within one
hundred and twenty days from the date of commencement of
such year before the assessing authority to accept in lieu of
tax payable under Section 5-B of the Act on the total value of
the works contract being executed by him. The key words
under Section 17 (6) of the Act are the tax payable during the
year by way of composition an amount on the total
consideration for the works executed by the contractor in that
year in the year in the State. Option to be exercised for
composition benefit is not dependent on the dates of the
agreements entered into by the parties for execution of the
works contract Under Rule 8B(1) of the Rules, the
dealer/assessee is required to submit the application seeking
composition benefit for each assessment year within the time
prescribed from the date of commencement of such year or of
the business, if he has commenced the business during the
course of the year. That again means, it is irrelevant, when the
parties had entered into an agreement for the execution of
works contract in the State. As already noticed, the relevant
assessment year in question is 2002-2003 (ending on
31.3.2003) and the assessee if it elected to compound the tax
for this year, it was required to submit the application as
provided under rule 8-B (1) of the rules. The amended
provisions of sub-section (7) of Section 17 were given effect to
from 1.4.2002. In view of the restriction imposed under the
amended provision, the assessing authority could not have
permitted the appellant company to elect to pay the tax under
Section 17(6) of the Act, since admittedly the appellant
received the goods by way of stock transfers from outside the
State for the purpose of using such goods in the execution of
works contract. Therefore, the first question of law raised by
the appellant has been rightly answered against the assessee.
15. The language used in sub-section (7) of Section 17 is very
clear. It is to the effect that if a dealer purchases or receives
goods from outside the State for execution of works contract
within the State it is not entitled to the benefit of composition
in terms of sub-section (6) of Section17 and undisputedly, the
appellant has received the goods by way of stock transfer. In
view of the language employed in the amended provision, the
appellant was clearly disentitled from composition for availing
the benefit under sub-section (6) of Section 17. The expression
\023receives\024 would encompass receipt in any manner. Receipt by
branch transfer is covered by the said expression. The High
Court was, therefore, justified in dismissing the Revision
Petition. We find no scope for taking a different view in view of
the clear language of sub-section (7) of Section 17 as amended
w.e.f. 1.4.2002.
16. The appeals fail and are dismissed with no order as to
costs.