Works contract turnover must follow statutory valuation rules; improper deemed sale assessment was set aside and remanded.

Works contract turnover under the Tamil Nadu VAT framework must be computed strictly in accordance with Rule 8(5), by excluding amounts relatable to exempt goods, sub-contract payments, and labour or other non-transfer charges. An assessment that adopts a deemed sale value for the entire contract at the first stage, rather than the statutory method for arriving at taxable turnover, is not sustainable. The impugned assessments were set aside and the matter was remanded for fresh assessment de novo in accordance with Rule 8(5).

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Issues: Whether the turnover from works contract under Section 5 of the Tamil Nadu Value Added Tax Act, 2006 was correctly computed, and whether the assessments had to be redone by applying Rule 8(5) of the Tamil Nadu Value Added Tax Rules, 2007.

Analysis: The assessments for the relevant years were made by adopting a deemed sale value for the entire contract at the first stage, influenced by the petitioner's availment of input tax credit. The governing framework for works contract turnover required the taxable turnover to be arrived at by deducting the specified exclusions, including amounts relatable to exempt goods, sub-contract payments, and labour or other non-transfer charges, as laid down in Rule 8(5). The respondent accepted that the impugned assessments did not follow the statutory method prescribed for works contract valuation.

Conclusion: The impugned assessments were set aside and the matter was remanded to the assessing authority for fresh assessment de novo in accordance with Rule 8(5).

Ratio Decidendi: In assessing works contract turnover, the taxable turnover must be computed strictly in the manner prescribed by the statutory rules, and an assessment based on an impermissible methodology cannot be sustained.

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