Writ jurisdiction and works contract taxability: binding circulars can make appeal futile, and tax follows the main contractor's transfer of goods.

A writ petition was held maintainable despite the statutory appeal because the reassessment and demand were based on a circular binding subordinate departmental authorities, making the alternative remedy ineffective. In the works contract dispute, taxability was found to follow the transfer of property in goods during execution, and on the admitted facts the contract, billing, payment, and tax deduction were all in the main contractor's hands. The sub-contractor's execution of the work did not shift the taxable event to it for the disputed turnover. The challenge therefore succeeded to the extent that the demand was set aside for reconsideration in light of these findings.

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Issues: (i) Whether the writ petition was maintainable despite the statutory appellate remedy under Section 62 of the Karnataka Value Added Tax Act, 2003. (ii) Whether the taxable event in respect of the works contract occurred in the hands of the main contractor or the sub-contractor.

Issue (i): Whether the writ petition was maintainable despite the statutory appellate remedy under Section 62 of the Karnataka Value Added Tax Act, 2003.

Analysis: The impugned demand and reassessment were founded on a circular issued by the Commissioner of Commercial Taxes that bound the departmental authorities. The appellate authority under the Act was itself a departmental authority subordinate in rank to the Commissioner. In those circumstances, an appeal would not provide an effective adjudicatory remedy because the subordinate authority would remain bound by the circular and the controversy would be reduced to a futile formality.

Conclusion: The writ petition was maintainable and the objection based on alternative remedy failed.

Issue (ii): Whether the taxable event in respect of the works contract occurred in the hands of the main contractor or the sub-contractor.

Analysis: Liability under the taxing scheme turns on the transfer of property in goods in the execution of a works contract. On the admitted facts, the contract was awarded to the joint venture main contractor, the running bills were raised by the main contractor, payments were made to it, and tax was deducted in its hands. The work was executed by the sub-contractor, but the transfer and accretion of goods took place in the course of the main contractor's dealings with the employer. The statutory scheme did not support treating the sub-contractor as the person in whom the taxable event occurred for the disputed turnover.

Conclusion: The taxable event occurred in the hands of the main contractor and not in the hands of the sub-contractor for the disputed works contract turnover.

Final Conclusion: The challenge succeeded to the extent that the writ appeal was entertained and the demand arising from the disputed works contract was set aside for reconsideration in accordance with the Court's findings, while the challenge to the circular itself was not accepted.

Ratio Decidendi: Where a departmental circular binding on subordinate authorities renders the statutory appellate remedy illusory, writ jurisdiction may be invoked; and in a works contract, taxability follows the location of the transfer or accretion of property in goods, not the mere fact of subcontracted execution.

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