Works contract arises only after purchaser agreement; ignoring a material objection can amount to apparent error in rectification.

Rectification rejection was unsustainable where the assessing authority failed to consider the assessee's specific objection that unsold apartment units were not subject to a works contract because no agreement with purchasers existed for those units. The court noted the governing principle that construction activity becomes a works contract only from the stage of a contract with the flat purchaser. Ignoring a relevant objection already on record was not a mere merits dispute but an error apparent on the face of the record. The rectification rejection was set aside, the application was directed to be reconsidered in accordance with law, and recovery was kept in abeyance meanwhile.

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Issues: Whether rejection of the rectification application was sustainable when the assessing authority had not considered the assessee's objection that, in respect of unsold apartment units, no works contract existed in the absence of any contract with purchasers, and whether such omission constituted an error apparent on the face of the record.

Analysis: The assessment was made by applying the purchase value of materials under Rule 10(2)(a) of the Kerala Value Added Tax Rules, but the assessee had specifically contended that a substantial number of apartments remained unsold and that no agreement to sell had been entered into in respect of those units. The legal position on building contracts was taken from the principle that construction activity becomes a works contract only from the stage when the developer enters into a contract with the flat purchaser. If the assessing authority ignores a specific and relevant objection of this nature, the omission is not a mere disagreement on merits but a failure to consider material already on record.

Conclusion: The rejection of rectification could not be sustained. Ext. P6 was set aside and the rectification application was directed to be reconsidered in accordance with law, with recovery kept in abeyance until then.

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