Concessional VAT rate for goods not incorporated in works contract where return of goods defeated higher-rate application

Concessional tax under Section 8(a)(ii) of the Kerala Value Added Tax Act, 2003 applied where the evidence showed that the imported goods were not incorporated in the relevant works contract. The higher rate under Section 8(a)(i) depended on proof that the goods were imported for incorporation in the contract, but that condition was not established. The Tribunal relied on the delayed supply, the fact that the goods were ordered for an earlier period, their return to the supplier, and the absence of CST registration during the year to conclude that the goods were not used in the assessment year's works execution.

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Issues: Whether the assessee was entitled to the concessional rate of tax under Section 8(a)(ii) of the Kerala Value Added Tax Act, 2003, and whether the higher rate under Section 8(a)(i) was attracted on the footing that the imported goods were for incorporation in the works contract.

Analysis: The assessment proceeded on the premise that interstate purchases of goods brought the case within the higher rate applicable where goods are imported for incorporation in a works contract. The appellate authority accepted that view, but the Tribunal found on the evidence that the items had been ordered for an earlier period, supplied belatedly, and subsequently returned to the supplier without being incorporated in the works executed for the relevant year. On those facts, the condition precedent for applying the higher rate was not established. The absence of CST registration during the year and the proof of return of the goods supported the assessee's claim that the goods were not used in the works contracts for the assessment year in question.

Conclusion: The assessee was entitled to the concessional rate of tax under Section 8(a)(ii) of the Kerala Value Added Tax Act, 2003, and the higher rate under Section 8(a)(i) was not attracted.

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