Works-contract VAT on apartment sales must be confined to post-agreement goods value; prior findings were remanded.

In a works-contract setting involving apartment construction, the Karnataka VAT scheme was read together with the Supreme Court's later clarification that tax is payable only on the value of goods incorporated after the purchaser's agreement, not on the immovable property component. Because the Tribunal had sustained levy without applying that binding position, its determination could not stand. The order was quashed and the matter remanded for fresh decision on the assessee's liability in accordance with the law declared by the Supreme Court.

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Issues: Whether the order of the Tribunal sustaining the levy of value added tax on the apartment sales in a works-contract scenario required interference and fresh determination in the light of the law laid down by the Supreme Court.

Analysis: The dispute concerned taxability of apartment transactions undertaken pursuant to agreements entered into before, during and after construction. The Court noted that the statutory scheme under the Karnataka Value Added Tax Act, 2003 and the Karnataka Value Added Tax Rules, 2005 contains provisions defining works contract and prescribing levy and deductions for labour and like charges. It further noted that the Supreme Court had subsequently clarified that, in a developer-purchaser arrangement, tax can be levied only on the value of goods incorporated after the agreement with the purchaser, and not on the immovable property element. Since the Tribunal had decided the matter before that larger-bench clarification, the Court held that the liability had to be reconsidered on the basis of the later binding position.

Conclusion: The Tribunal's order was quashed and the matter was sent back for fresh determination of the assessee's liability in accordance with the law declared by the Supreme Court.

Final Conclusion: The assessment of tax liability on the impugned transactions was reopened for decision under the correct legal framework, and the revision petition resulted in a remand for reconsideration.

Ratio Decidendi: In a works-contract case involving construction of apartments, tax can be levied only on the value of goods incorporated after the agreement with the purchaser, and an earlier determination made without applying that legal position must be reconsidered.

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