2018 (4) TMI 1221 - HC - VAT and Sales Tax

Court overturns VAT reassessment for 2009-2011 due to lack of vouchers, remands for reexamination.

The Court set aside the reassessment based on VAT filings for tax periods April'2009 to March'2011, as the petitioner faced practical difficulties in ... Works Contract - Deduction u/r 3(2)(l) of the KVAT Rules 2005 - labour and like charges - whether respondent No.1 i.e., the Prescribed Authority is justified in concluding the reassessment proceedings rejecting the claim of the petitioner to deduct the labour and other like charges under Section-3(2)(l) of the KVAT Rules? - Held that: - It is only for the reason that no books of accounts were produced before the Prescribed Authority, the reassessment proceedings are concluded under Rule-3(2)(m) of the KVAT Rules - It is the contention of the petitioner that notwithstanding the voluminous size of the books of accounts maintained by the petitioner, they are willing to place the same before respondent No.1-Prescribed Authority and to that effect the rectification application has already been filed relating to the tax period April’2009 to March’2010, which is pending consideration. It cannot be said that the petitioner has not maintained the books of accounts or not willing to produce the books of accounts. As such, relegating the petitioner to avail the alternative remedy by filing an appeal cannot be justified - Matter is remanded to the Prescribed Authority, respondent No.1 to reconsider the matter afresh after providing an opportunity to the petitioner to produce the books of accounts - petition allowed by way of remand. Issues Involved:Reassessment based on VAT filings, deduction of labour and like charges under KVAT Rules, denial of natural justice, burden of proof on the petitioner, opportunity to produce books of accounts.Analysis:Reassessment based on VAT filings:The petitioner maintained books of accounts and filed Monthly Returns in Form VAT-100 and Annual Returns in Form VAT-240 as per the KVAT Act. The Enforcement Wing conducted an inspection, leading to a reassessment for tax periods April'2009 to March'2011 based on VAT filings.Deduction of labour and like charges under KVAT Rules:The petitioner claimed deduction under Rule-3(2)(l) of the KVAT Rules for labour and like charges incurred during the relevant tax periods. However, the Prescribed Authority allowed a deduction of 30% of the works contract under Rule-3(2)(m) instead, leading to demand notices.Denial of natural justice and burden of proof:The petitioner argued that they were willing to provide vouchers for verification of expenses but faced practical difficulties due to the voluminous nature of the documents. A rectification application was pending, challenging the reassessment that created a significant tax liability.Opportunity to produce books of accounts:The Prescribed Authority concluded the reassessment without the books of accounts, leading to a dispute on the deduction of labour and like charges. The Court emphasized that the burden of proof lies on the petitioner to substantiate their claim under Rule-3(2)(l) of the KVAT Rules.Judgment and Order:After considering arguments from both sides, the Court found that the petitioner was willing to produce books of accounts but faced practical challenges due to the volume of documents. The Court set aside the impugned orders and remanded the matter to the Prescribed Authority to reexamine after providing an opportunity for the petitioner to present the books of accounts. The petitioner was directed to appear before the Prescribed Authority with the books of accounts for further review.This detailed analysis of the judgment highlights the key issues involved, arguments presented by both parties, legal principles applied, and the final decision rendered by the Court.