TaxTMI 
TaxTMI 
2010 (2) TMI 1077
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.... in respect of contract work undertaken and the jurisdictional assessing officer, namely, Deputy Commissioner of Commercial Taxes (Assessment), Hassan levied four per cent tax on earthen work under section 17(6) of the Act by order dated April 26, 1999 which is at annexure B. The assessing officer levied tax at four per cent on earthen work which involved labour work of Rs. 1,65,70,899 which amounted to Rs. 15,56,671 rejecting the claim for exemption of receipts relating to labour. (ii) Aggrieved by the order of assessment dated April 29, 1999, the assessee preferred an appeal before the Joint Commissioner of Commercial Taxes in Appeal No. KST.AP.94/1999-2000 who by order dated June 22, 2000 allowed the appeal and set aside the order of the assessing officer on the ground that the works contract receipt of Rs. 1,65,70,899 was purely labour oriented and did not involve any transfer of property. While allowing the appeal, the first appellate authority directed the works contract receipt concerning the execution of the earthen work to the tune of Rs. 1,65,70,899 be reduced from the gross works contract receipts and the rest of the turnover be subjected to tax under section 17(6) of t....
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.... dated April 29, 1999. It was held therein that once the assessee has opted for composition he cannot opt out and accordingly confirmed the order of assessing officer. (v) The appellant-assessee being aggrieved by the said order dated March 14, 2007 passed by the Commissioner of Commercial Taxes, is assailing the same in this appeal. We have heard Sri Chaitanya, learned counsel appearing for the appellant-assessee and Smt. Geetha Menon, learned counsel appearing for the respondent-Revenue. At the time of admission of the appeal, the following two questions have been formulated by this court on July 11, 2008 for being answered: (i) Whether the Commissioner of Commercial Tax was justified in coming to the conclusion that when once the contractor has submitted himself for composition cannot withdraw the same subsequently? and (ii) Whether the amendment made to rule 8B(1) of the KST Rules is prospective and whether the same was in force on the date of withdrawal of the application by the appellant? Sri Chaitanya for the appellant-assessee would contend as follows: (i) The power under section 22A(1) of the Act vested with the Additional Commissioner which is in pari materia with ....
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....case it was a concession given by the State and as such the petitioners therein and similarly placed persons were allowed to opt out of composition and submits that the order passed on concession cannot be a binding precedent. She further elaborates her submission that in B.V. Subba Reddy v. Deputy Commissioner of Commercial Taxes' case reported in [2002] 125 STC 287 (Karn) the benefit to opt out was extended by relying upon Mycon's case [1998] 111 STC 322 (Karn) and both the judgments were rendered by the learned single judge of this court, and she brought to our notice that the said Subba Reddy's case [2002] 125 STC 287 came to be set aside by a Division Bench of this court by its order dated December 10, 2004 passed in W. A. No. 1740 of 2001 and as such contends that neither in Mycon's case [1998] 111 STC 322 (Karn) nor in Subba Reddy's case [2002] 125 STC 287 (Karn) the position of law has been laid down. She further submits that in Karnataka State Construction Corporation case [2004] 138 STC 75 (Karn), the Division Bench of this court has held that once the assessee exercising option for composition of tax would be estopped from going back on the ground tha....
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....erein by any officer who is not above the rank of a Joint Commissioner, is erroneous in so far as it is prejudicial to the interest of the Revenue, he may, if necessary, stay the operation of such order for such period as he deems fit and after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment or directing a fresh assessment. (2) The Commissioner may on his own motion call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by any officer subordinate to him (or the Authority for Clarification and Advance Rulings constituted under section 4) is erroneous in so far as it is prejudicial to the interest of the Revenue, he may, if necessary, stay the operation of such order for such period as he deems fit and after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, i....
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....ax in the case of dealers executing works contracts.-(1) The dealer who elects to compound the tax for any year under sub-section (6) of section 17, shall submit an application in form 8AA to the assessing authority each year, within (one hundred and twenty days) from the date of commencement of such year, or of the business if he has commenced the business during the course of the year (and such application once filed by the dealer electing to compound the tax shall not be permitted to be withdrawn by him): . . . (2)(i) The assessing authority having jurisdiction, after such verification as may be necessary permit such dealer, subject to the conditions specified in sub-rule (1), to pay in lieu of the amount of tax payable by him during the year, in respect of which such permission is granted, an amount by way of composition as provided in sub-section (6) of section 17. (ii) Such permission for composition shall be granted within thirty days from the date of receipt of the application during the year for which the composition is applied for. The permission shall be in form 8AB and shall be valid for the entire year to which it relates. (iii) The (Assistant Commissioner of Comme....
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.... 90 (Karn). It is in reply to this notice it was contended by the appellant, that though the assessee had filed form No. 8 and had sought for the benefit of composition, there was statutory duty cast on the assessing officer to assess the appellant under section 5B in respect of declaration made under section 17(6) of the Act. It was further contended that the assessee had maintained books of accounts duly audited by chartered accountant and the majority of its receipts is labour oriented and only five per cent of the works contract receipts involved transfer of property and hence sought for the turnover being not leviable to tax under section 5B of the Act and in conclusion it sought for withdrawal of composition benefit and hence prayed for being assessed under section 5B of the Act by relying upon Mycon Construction Limited [1998] 111 STC 322 (Karn) by its reply dated May 24, 2003. The Additional Commissioner of Commercial Taxes, Zone II, Gandhinagar, on considering the said reply set aside the order of the first appellate authority and allowed the appellant to opt out of payment of tax by way of composition and ordered for being assessed under section 5B of the Act which in eff....
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.... petitioners and all others, who are not before the court, as provided under section 5B of the Act. This direction is binding on the State and its assessing, revising or appellate authorities wherever an application is made seeking assessment under section 5B of the Act and they are directed to pass appropriate orders suitably modifying the assessments." Subsequently, in Subba Reddy's case [2002] 125 STC 287 (Karn) similar issue, namely, whether revocation of composition is permissible by an assessee came for consideration and on scrutiny the learned judge of this court following the dicta in Mycon's case [1998] 111 STC 322 (Karn) held the issue in favour of the assessee and the relevant paragraph No. 7 in Subba Reddy's case [2002] 125 STC 287 (Karn) reads as follows (at page 289): "7. The assessee in this case had prayed for composition benefits under section 17(6) of the Act. Thereafter, realising that the composition application filed by him may not be beneficial to him, had thought fit to approach the assessing authority to complete the assessments in his case for the assessment year 1997-98 under the provisions of section 5B of the Act. In my opinion, the assessi....
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....could be permitted to seek for assessment under section 5B of the Act, the assessees in those cases were permitted to seek for assessment under section 5B of the Act. It is clear from the observations made by this court [1998] 111 STC 322, at paragraph 13 of the judgment (at page 338 of STC), which reads as hereunder: (emphasis Here italicised. supplied by us). '13. However, in view of the categorical statement made by the State in the statement of objections stating that this court can permit the petitioners to opt for regular assessment under section 5B; and I have taken that factor as one of the factors to come to the conclusion that the impugned provision in no way results in arbitrariness or violation of the right guaranteed to the petitioners either under article 14 or under article 19(1)(g) of the Constitution; it is necessary to reserve liberty to the petitioners to opt for regular assessment under section 5B of the Act notwithstanding the fact that they had opted for composition under section 17(6) of the Act . . .'" In view of the above binding judgment of this court we are of the considered opinion that the argument advanced by the learned counsel for the petiti....
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....n of tax in the case of dealers executing works contracts.-(1) The dealer who elects to compound the tax for any year under sub-section (6) of section 17, shall submit an application in form 8AA to the assessing authority each year, within [one hundred and twenty days] from the date of commencement of such year, or of the business if he has commenced the business during the course of the year (and such application once filed by the dealer electing to compound the tax shall not be permitted to be withdrawn by him): . . . (2)(i) The assessing authority having jurisdiction, after such verification as may be necessary permit such dealer, subject to the conditions specified in sub-rule (1), to pay in lieu of the amount of tax payable by him during the year, in respect of which such permission is granted, an amount by way of composition as provided in subsection (6) of section 17. (ii) Such permission for composition shall be granted within thirty days from the date of receipt of the application during the year for which the composition is applied for. The permission shall be in form 8AB and shall be valid for the entire year to which it relates. (iii) The (Assistant Commissioner of ....
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....us, the dealer has accepted the order passed under section 20 of the Act, dated June 22, 2000. It is only when the Additional Commissioner proposed to initiate revision proceedings under section 22A(1) of the Act suo motu by issue of notice dated September 2, 2002, the assessee in its reply dated May 24, 2005 sought for withdrawal from composition method and sought for being assessed under section 5B of Act. There is no separate or independent application made by the assessee for withdrawing from composition method. It is seen from clause (ii) of sub-section (6) of section 17, that the dealer will have to apply to the assessing authority for permitting to pay the amount under clause (1) and on being so permitted, the assessee is required to pay the tax in advance as provided under section 12B of the Act and all the provisions of section 12B of the Act have been made applicable to sub-section (6) of section 17 mutatis mutandis and the said advance tax paid would necessarily be paid subject to such adjustment as it may arise on completion of final assessment. The provision of section 12B reads as follows: "12B. Payment of tax in advance.-(1) Subject to such rules as may be prescribe....
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....dition to the tax, pay interest calculated at the rate of two per cent per month from the date of such default or short payment to the date of payment of such tax (or up to the date specified for payment of tax assessed under section 12, as the case may be) (3) If no such statement is submitted by a dealer under subsection (1) before the date prescribed or if the statement submitted by him appears to the assessing authority to be incorrect or incomplete, the assessing authority may assess the dealer provisionally for that month to the best of his judgment, recording the reasons for such assessment, and proceed to demand and collect the tax on the basis of such assessment; read with rule 17(2): Provided that before taking action under this sub-section the dealer shall be given a reasonable opportunity of being heard. Explanation.-For the purpose of this section 'quarter' means the period of three months ending on 31st day of May, 31st day of August, 30th day of November and 28th day (or 29th day) of February. (3A) When making assessment under sub-section (3), the assessing authority may also direct the dealer to pay in addition to tax assessed, a penalty- (a) not exceed....
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....t Treasury, a crossed postal order, a crossed cheque or a crossed demand draft in favour of the assessing authority or the registering authority, as the case may be, and encashable at a post office/bank situated in the place of location of the office of the assessing authority or the registering authority, as the case may be, and encashable at a post office/bank situated in the place of local of the office of the assessing authority or the registering authority, as the case may be (. . .) for the full amount of tax payable by him on the basis of his actual taxable turnover during the month to which the statement, or return relates: Provided that the statement to be submitted for the month of April 2001 shall be in form 3 as substituted by the Karnataka Sales Tax (Amendment) Rules, 2001: Provided further that the statement in form 3 and the return in form 3B may also be submitted in the State Bank of India or its associate bank or any other bank approved by the Reserve Bank of India and specified by the Government, accompanied by a challan in form 33B and payment of the tax payable, on or before the twentieth day after the closer of the month to which such statement or return rela....
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....ary choice and it was chosen by the assessee on its own volition. Thus, the assessee being aware of the fact that it had less than five per cent of works contract involving transfer of property would not have chosen for composition under sub-section (6) of section 17 of the Act. The assessee was fully aware of all the features of alternate method of taxation. In fact, a similar proposition now propounded by the learned counsel for the petitioner by raising substantial question of law No. 2 formulated hereinabove was the subject-matter of consideration by a coordinate Bench of this court in T.H. Venkate Gowda v. Commissioner of Commercial Taxes reported in [2007] 5 VST 553; [2006] 61 Kar LJ 289, wherein the said contention of the assessee came to be repelled and held against the assessee by following the dicta of honourable Supreme Court in State of Kerala v. Builders Association of India reported in [1997] 104 STC 134; AIR 1997 SC 3640 and it came to the conclusion as follows (at page 558 of 5 VST): "The said judgment would show that the said option saves the contractor from the botheration of book-keeping, assessment, appeals, etc. It provides a ready solution to the contractor. ....
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....the tax shall not be permitted to be withdrawn by him" which can be held as either amplification or clarificatory in nature. Though, the said amendment has come into effect with effect from 2001, it would not brittle down the effect provided under sub-section (6) of section 17 of the Act. Even otherwise on facts we find that the assessee having taken the benefit of the first appellate authority's order dated June 22, 2000 for the first time on May 24, 2003 (annexure E) sought for opting out from the scheme of composition which it had already elected and reaped the benefits accruing thereunder. As on the date of claim made by the assessee, the rule had already come into effect, namely, the amended/added portion of rule 8B(1) of the Rules. Though Sri Chaitanya Hegde, the learned counsel for the petitioner, would contend that rule having come into effect on June 8, 2001, is to be interpreted as prospective in nature by pressing into service the decision of the honourable apex court in Hitendra Vishnu Thakur v. State of Maharashtra reported in AIR 1994 SC 2623 to contend that law relating to right of action being substantive in nature can only be prospective and cannot be retrospec....
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....the machinery sections in such a manner that a charge to tax is not defeated. The above rule of construction of a taxing statute has been adopted by this court in India United Mills Ltd. v. Commissioner of Excess Profits Tax, Bombay [1955] 27 ITR 20 (SC); [1955] 1 SCR 810; AIR 1955 SC 79 in which section 15 of the Excess Profits Tax Act came up for consideration. The court observed in that case thus (at page 82 of AIR; page 25 of 27 ITR): 'That section is, it should be emphasised, not a charging section, but a machinery section. And a machinery section should be so construed as to effectuate the charging section'." It is no doubt true that sub-rule (1) of rule 8B of the Rules came to be amended whereunder the words "and such application once filed by the dealer electing to compound the tax shall not be permitted to be withdrawn by him" came to be inserted with effect from June 8, 2001 though not was in existence as on the date of the assessment order passed on April 29, 1999, it was very much present as on the date of application made by the assessee seeking to withdraw from composition method and for being assessed under section 5B of the Act by its application dated May....