2021 (4) TMI 965 - HC - VAT and Sales Tax

Court sets aside orders, remands for reconsideration, allows additional contentions. Parties to appear without fresh notices.

M/s. Silicon Estates Versus The Additional Commissioner Of Commercial Taxes, Zone-II, Bengaluru

M/s. Silicon Estates Versus The Additional Commissioner Of Commercial Taxes, Zone-II, Bengaluru - TMI Issues Involved:1. Eligibility of the appellant/assessee to claim deductions for payments made to sub-contractors under the KVAT Rules.2. Validity of the suo moto revision by the respondent authority under Section 64 of the KVAT Act.3. Compliance with principles of natural justice and procedural propriety in passing the rectification and reassessment orders.Issue-wise Detailed Analysis:1. Eligibility of the Appellant/Assessee to Claim Deductions for Payments Made to Sub-Contractors under the KVAT Rules:The appellant, a partnership firm registered under the KVAT Act and CST Act, claimed deductions under Rule 3(2)(i-1) of the KVAT Rules for payments made to sub-contractors during the assessment years 2008-09 to 2011-12. The appellant subcontracted construction work to registered dealers and provided necessary materials like cement and steel. The sub-contractors had filed their returns and discharged their tax liabilities. The appellant produced certificates from sub-contractors declaring the amounts paid and confirming tax discharge on the taxable turnover. The Prescribed Authority initially accepted these deductions but later issued a rectification order for 2008-09, reducing the expenditure to be carried forward and restricting the deduction claimed towards sub-contracts. The appellant contended that this rectification was on flimsy grounds and without a show-cause notice.2. Validity of the Suo Moto Revision by the Respondent Authority under Section 64 of the KVAT Act:The first appellate authority accepted the appellant's contentions and granted relief based on the Supreme Court judgment in Larsen & Toubro, holding that the deductions claimed were valid. However, the respondent issued notices under Section 64 of the KVAT Act for suo moto revision of the orders passed by the first appellate authority and the Prescribed Authority. The appellant argued that the suo moto revision was unjustified as the first appellate authority had relied on a Supreme Court judgment. The appellant contended that the revisional authority did not provide a categorical finding on the entitlement to deductions and merely remanded the matter for reassessment, which was unwarranted.3. Compliance with Principles of Natural Justice and Procedural Propriety in Passing the Rectification and Reassessment Orders:The appellant argued that the rectification order for 2008-09 was passed without issuing a show-cause notice, violating principles of natural justice. The suo moto revision was also challenged on the grounds that it lacked a clear finding on the erroneous nature of the original assessment and its prejudicial impact on revenue. The appellant emphasized that both criteria must be met for valid exercise of revisional power under Section 64 of the KVAT Act. The respondent's order was deemed arbitrary as it did not conclusively determine whether the deductions were justified, instead remanding the matter for a fresh assessment.Judgment:The court found that the respondent authority did not provide a categorical finding on the appellant's entitlement to deductions and merely remanded the matter for reassessment. This approach was deemed improper. The court set aside the impugned orders and remanded the matters to the respondent authority for reconsideration, instructing them to provide a clear finding on the appellant's entitlement to deductions. The court also allowed the appellant to raise additional contentions and present further material. The parties were directed to appear before the respondent authority on a specified date without expecting fresh notices. The appeals were allowed, and all pending applications were disposed of.