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Judgment
Anand Byrareddy, J.—1. The petition coming on for preliminary hearing, the learned Government Advocate is directed to take notice and the petition is considered for final disposal having regard to the facts and circumstances.
The petitioner is said to be a private limited company having its head office at Chennai. It is engaged in execution of civil works contracts and registered as a dealer under the provisions of the Karnataka Value Added Tax Act, 2003 (herein after referred to as VAT Act for brevity).
The petitioner company has filed its monthly returns in VAT 100 for the period April 2013 to March 2014 and the returns have been deemed to be accepted as per Section 38 of the VAT Act. It is stated that as per the assignment note issued by the Commissioner of Commercial Taxes, the respondent has issued notice in VAT - 275 for production of books of account for reassessment proceedings. In response to the notice, the petitioner''s authorized person appeared and produced Audited Balance Sheet, VAT - 240, and details of purchases, Contract Receipts and Labour charges collected for verification. Upon verification of the books of accounts, the respondent found and accepted that the purchases declared are supported by bills and duly accounted. On further verification of the books of accounts, the respondent authority has raised certain omissions and discrepancies. A notice was issued under Section 39(1) of the VAT Act and objections were called for. The petitioner has filed his objections and the authority accepted the petitioner''s contention that in so far as labour and like charges are concerned and also granted input tax deduction in respect of purchases made from M/s. Shrishti Power Technologies Pvt. Ltd., The respondent also accepted the reply with regard to sale of assets and other income as the said transactions pertains to Chennai office and proposals to levy tax in this regard has been dropped. The respondent however had not taken into consideration the objections in respect of levy of tax on iron and steel used as it is in the execution of works contract at the rate of 5%, as the iron and steel are declared commodities liable to be taxed at the rate of 5% under Section 4(1) (c) of the VAT Act.
It is submitted that there was a dispute as regards rate of tax on declared commodities i.e., iron and steel and the matters were pending before this Court. Therefore, the petitioner by way of abundant caution and to avoid penalty and levy of interest, has discharged the tax at the rate of 14.5% on iron and steel used in the execution of works contract. It is latter that this Court decided the question in Nagarjuna Construction Company Limited v. State of Karnataka and others (45 VST 390) where it was held that -
"though tax at 12.5% is applicable under serial No. 23 of the sixth schedule to the Act in respect of composite works contracts involving transfer of property in goods, an exception is provided in Section 4(1)(c) of the KVAT Act itself, that in respect of declared goods involved in the execution of works contract, the rate of tax shall be as provided in Section 14 of the CST Act at rate of four per cent."
The Division Bench of this Court had confirmed the view of the Single Judge as per judgment dated 10.12.2013 in the case of State of Karnataka v. Reddy Structures Pvt. Ltd., Bangalore (, 2014 (80) Kar.L.J.-152) and has held that -
"The State Legislature has no competence to levy tax at more than 5% on iron and steel used in the same form in the execution of works contract which falls under Section 14 of the CST Act."
Having regard to this view taken by this Court which holds the filed the respondent is required to apply the said legal aspect in so far as the petitioner having been taxed at 14.5% in respect of iron and steel used in the execution of works contract. Accordingly, the petition is summarily allowed. The impugned order is set at naught. The matter is remanded to the respondent authority for a fresh consideration in terms as above.