Jurisdictional fact in works contract taxation: writ interference was allowed and the assessment premise was rejected.

Under the Kerala Value Added Tax framework, a levy based on a works contract required proof of transfer of property in goods involved in execution, not merely the existence of a supply arrangement. The court noted that the authorities proceeded on an incorrect jurisdictional premise by treating fixed monthly charges and the plant arrangement as consideration for a works contract, even though the plant remained the appellant's property during the contract term and could be acquired only on termination. On that basis, writ interference was permitted despite the alternate remedy. The assessment and penalty orders were set aside in substantial part, while the input tax credit dispute on capital goods was remitted for fresh consideration.

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Issues: (i) Whether the writ petitions challenging the assessment and penalty orders under the Kerala Value Added Tax Act could be entertained notwithstanding the alternate statutory remedy, where the authorities proceeded on the basis that the transaction was a works contract and thereby assumed the existence of the taxable event; (ii) Whether the assessments and penalty orders treating the fixed monthly charges and the plant arrangement as consideration for a works contract were sustainable, and how the challenge relating to input tax credit on capital goods was to be dealt with.

Issue (i): Whether the writ petitions challenging the assessment and penalty orders under the Kerala Value Added Tax Act could be entertained notwithstanding the alternate statutory remedy, where the authorities proceeded on the basis that the transaction was a works contract and thereby assumed the existence of the taxable event.

Analysis: The taxable event under the KVAT framework is the transfer of property in goods involved in the execution of a works contract, not the mere execution of a works contract. The assessment and penalty orders proceeded on the assumption that the plant arrangement and the fixed monthly charges reflected such a transfer, although the agreement showed that the plant remained the property of the appellant during the contract term and that BPCL's right was only an option to acquire it on termination. The authorities, therefore, determined the jurisdictional fact incorrectly. In such a situation, the existence of an alternate remedy did not bar writ interference, because a statutory authority cannot confer jurisdiction on itself by wrongly deciding the jurisdictional fact on which the levy depends.

Conclusion: The writ court was justified in entertaining the challenge, and the objection based on alternate remedy failed against the assessee.

Issue (ii): Whether the assessments and penalty orders treating the fixed monthly charges and the plant arrangement as consideration for a works contract were sustainable, and how the challenge relating to input tax credit on capital goods was to be dealt with.

Analysis: The agreement was one for building, owning, operating and supplying industrial gases, while the plant and allied systems remained with the appellant during the contractual period. The manner in which the price was structured, including fixed monthly charges intended to recoup investment, did not convert a supply contract into a works contract. Since there was no transfer of property in the plant or in goods involved in a works contract, the assessments and penalty orders resting on that premise could not stand. As regards the input tax credit dispute, the issue was severed and required reconsideration by the adjudicating authority, and the appellant was also permitted to pursue the assessment-year-specific challenge before the appellate authority where applicable.

Conclusion: The impugned assessments and penalty orders were set aside in substantial part, while the input tax credit issue was remitted for fresh consideration and limited appellate recourse.

Final Conclusion: The common judgment declined to treat the arrangement as a taxable works contract, intervened under writ jurisdiction because the authorities had proceeded on an erroneous jurisdictional premise, and granted only limited further consideration in respect of the input tax credit controversy.

Ratio Decidendi: Where the levy depends on the existence of a jurisdictional fact or taxable event, a writ court may interfere notwithstanding an alternate remedy if the authority has wrongly assumed that fact and thereby asserted jurisdiction it does not possess.

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