2018 (12) TMI 482 - HC - VAT and Sales Tax

High Court upholds Tribunal's decision on taxable turnover assessment for sawing job works, emphasizing proper record examination

The High Court upheld the Tribunal's decision to reverse the first appellate authority's order regarding the assessment of taxable turnover for sawing job ... Levy of Turnover tax - turnover of saw mill - Section 2(xliv) of the Kerala Value Added Tax Act, 2003 - amounts shown as labour charges were deleted - Held that:- No examination of records or facts by the first appellate authority. The first appellate authority merely stated that “the further case of the appellant that he deals only with timber like pincoda etc is also found correct as per his books of accounts. Since the sawing charges collected is not related to the timber sold by the appellant, the receipt cannot be classified as one coming under section 2(xliv) and hence cannot be taxed” (sic). Obviously this finding has been rendered without looking into the records and the finding is belied by the specific invoice pointed out from the records by the learned Government Pleader - answered against the assessee and in favour of the Revenue. Inclusion of separate job works u/s 2(xliv) - contention of the assessee was that the job works did not relate to the goods manufactured and sold by the assessee - any mandate in Rule 58(1)(x) of the Kerala Value Added Tax Rules, 2005 for showing the complete name and address of the person from whom such job work was taken especially in view of Section 40A(2) specifying the requirement of complete address only in case of invoices issued in respect of a taxable sale or not. Held that:- A register was maintained, but it did not contain the entire particulars - also, the AO had issued notices to many of the persons shown in the register, which notices could not be served for reason of there being insufficient address. The assessee had also not sought for summoning any particular person as revealed from the register for the purpose of giving evidence, nor was such contention taken at any of the higher levels of appeal provided by the statute. The Assessing Officer cannot be faulted for having added back the sawing charges, in the context of no proof of job-works having been effectively adduced before him. The Assessing Officer was perfectly right in having treated the actual charges levied for sawing; an essential activity in the process of manufacture of furniture to be part of consideration of the goods sold - decided against the assessee and in favour of the Revenue. Revision dismissed. Issues:Assessment of taxable turnover for sawing job works, Reversal of first appellate authority's order by Tribunal, Inclusion of job works under Section 2(xliv) of KVAT Act, Requirement of complete name and address in job work invoices.Analysis:1. Assessment of Taxable Turnover: The assessee, engaged in timber and furniture business with a saw mill, disputed the taxability of turnover from sawing job works. The AO initially proposed to tax the entire turnover but later reduced the added amounts after verifying the books. The first appellate authority deleted the additions based on the nature of job works. However, the Tribunal reversed this decision, upholding the AO's assessment. The High Court found that the first appellate authority did not examine the records properly, leading to a judgment against the assessee.2. Inclusion of Job Works: The Tribunal considered whether separate job works could be included under Section 2(xliv) of the KVAT Act. The definition of 'sale price' includes charges for services related to goods. The burden of proof was on the assessee to show that the sawing charges were only for job works, which they failed to do. The Court upheld the Tribunal's decision, stating that the charges were part of the consideration for goods sold.3. Requirement of Complete Name and Address: The Court addressed the requirement of maintaining accounts for job works under Rule 58(1)(x) of the KVAT Rules. The assessee argued against the need for complete name and address of the supplier for job works, citing Section 40A(2) on complete address in taxable sale invoices. The Court clarified that while there may not be a statutory violation for not obtaining complete address, it hinders the assessee's ability to prove job works effectively. Lack of complete details in the register led to the AO's decision to add back sawing charges.4. Final Decision: The Court dismissed the revisions, upholding the Tribunal's order. The assessee failed to provide sufficient evidence to support their claim regarding the nature of job works and the invoicing practices. The AO's assessment of taxable turnover for sawing charges was deemed valid, and the Tribunal's decision was sustained. No costs were awarded in the case.