TaxTMI 
TaxTMI 
2025 (11) TMI 117
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.... "1. whether under the Karnataka Value Added Taxes Act, 2003 for the period from 1.4.2005 to 31.3.2006, in respect of principal contractors involved in the business of carrying out works contract of construction of buildings for the purpose of computing liability to pay taxes on composition basis under Section 15, whether the consideration for execution of works contract executed refers to consideration received for execution of works contract by the principal contractor by himself or includes any consideration received but paid to sub-contractors as consideration for portions of work executed by subcontractors. 2. Whether under Section 15 of the KVAT Act, 2003 for the period prior to 1.3.2006 the principal contractors involved in the business of carrying out work contract of constructing buildings is entitled for deduction of payment made by them to subcontractors who are registered dealers to whom portions of the work has been subcontracted, as consideration to them for the portions of the work executed by such contractors, from the total consideration received by the principal contractor." 3. The High Court answered the two questions formulated as referred to....
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.... the sub-contractors would be admissible provided such sub-contractors were registered under the VAT Act and they had paid tax. 10. We heard Mr. Aman Panwar, the learned Additional Advocate General appearing for the State of Karnataka and Mr. Chinmay Deshpande, the learned counsel appearing for the respondent. 11. The learned AAG appearing for the State of Karnataka vehemently submitted that the High Court committed an error in disturbing the order passed by the Advance Ruling Committee thereby clarifying that the amount of subcontractor's turnover is not liable to be included in the main contractor's turnover. He further submitted that the reliance placed by the High Court on the decision of this Court in the case of State of Andhra Pradesh V. Larsen & Toubro & Others reported in 2008 (17) VST Page 1 was thoroughly misconceived. 12. The learned counsel would submit that the issue of levy of tax on the consideration received by the main contractor from the contractee which is different from the tax levied on the consideration received by the subcontractor from the main contractor was not considered in the decision of this Court in the case of Larsen & Toubro (supra). 13....
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....ate otherwise than by way of sale." 20. Section 2(36) defines 'turnover' which reads as under: "2(36) 'Turnover' means the aggregate amount for which goods are sold or distributed or delivered or otherwise disposed of in any of the ways referred to in clause (29) by a dealer, either directly or through another, on his own account or on account of others, whether for cash or for deferred payment or other valuable consideration, and includes the aggregate amount for which goods are purchased from a person not registered under the Act and the value of goods transferred or despatched outside the State otherwise than by way of sale, and subject to such conditions and restrictions as may be prescribed the amount for which goods are sold shall include any sums charged for anything done by the dealer in respect of the goods sold at the time of or before the delivery thereof." [Explanation.- The value of the goods transferred or despatched outside the State otherwise than by way of sale, shall be the amount for which the goods are ordinarily sold by the dealer or the prevailing market price of such goods where the dealer does not ordinarily sell the goods.] 21. Secti....
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.... (2) Where goods sold or purchased are contained in containers or are packed in any packing material liable to tax under this Act, the rate of tax applicable to taxable turnover of such containers or packing materials shall, whether the price of the containers or packing materials is charged for separately or not, be the same as the rate of tax applicable to such goods so contained or packed, and where such goods sold or purchased are exempt from tax under this Act, the containers or packing materials shall also be exempt. (3) The State Government may, by notification, reduce the tax payable under subsection (1) in respect of any goods [subject to such restrictions and conditions as may be specified in the notification.] (3-A) Any notification issued under sub-section (3), shall be valid until it is cancelled or varied, notwithstanding that the tax payable in respect of any such goods is modified by amendment to this Act. (4) Notwithstanding anything contained in sub-section (1), subject to such conditions as may be prescribed, a registered dealer, if he so elects, may pay tax on the sale of goods specified in serial number 60 of the Third Schedule, or....
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....rushing unit producing granite or any other metals; may elect to pay in lieu of the net amount of tax payable by him under this Act by way of composition, an amount at such rate not exceeding five per cent on his total turnover or on the total consideration for the works contracts executed or not exceeding two lakh rupees for each crushing machine per annum as may be notified by the Government as may be prescribed. (2) Notwithstanding anything contained in sub-section (1), a dealer whose nature of business is of a type falling under more than one clause of sub-section (1), shall be eligible to opt for composition under the said sub-section in respect of tax payable on his turnover relating to any or all of such types of business subject to the condition that, (a) such dealer maintains separate account of each type of his business; (b) the total turnover in a year in respect of all types of business of such dealer falling under clause (a) of sub-section (1) does not exceed the amount as may be notified under the said clause; (c) the amount payable by way of composition by such dealer on his total turnover or the total consideration in respect of e....
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....aler liable to tax under the Act and that such amounts are included in the return filed by such subcontractor; (c) in the case of a dealer executing works contracts, after opting for composition of tax under sub-section (1), who effects sale of any goods liable to tax under the Act other than by transfer of the property in such goods (whether as goods or in some other form) in any works contract executed by him, the dealer shall be liable to pay tax on the value of such goods at the rate specified in section 4, without any deduction for input tax on purchase of such goods made by him; (d) in the case of a dealer opting for composition of tax under clause (a) or (c) of sub-section (1), the turnover on which tax is leviable under sub-section (2) of section 3 shall be deducted from the total turnover on which an amount as notified is payable under sub-section (1) by way of composition in lieu of the tax payable under the Act; (e) a dealer executing works contracts and opting for composition of tax under subsection (1), shall be liable to pay tax, if any, under sub-section (2) of section 3, in addition to tax by way of composition on the total consideration f....
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....n goods would stand passed to the buyer by the theory of accretion i.e. as and when the building is actually constructed for the buyer. The relevant observations in this regard are as under: "33. Another difficulty in the way of accepting the contention of the appellant as to splitting up a building contract is that the property in materials used therein does not pass to the other party to the contract as movable property. It would so pass if that was the agreement between the parties. But if there was no such agreement and the contract was only to construct a building, then the materials used therein would become the property of the other party to the contract only on the theory of accretion. The position is thus stated by Blackburn, J., at pp. 659-60 in Appleby v. Myres [(1867) LR 2 CP 651] : "It is quite true that materials worked by one into the property of another become part of that property. This is equally true, whether it be fixed or movable property. Bricks built into a wall become part of the house; thread stitched into a coat which is under repair, or planks and nails and pitch worked into a ship under repair, become part of the coat or the ship." ....
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....a sub-contractor. This Court held that since in execution of works contract, sales take place on the principle of accretion, the sales are directly from the sub-contractor to the contractee even though the contract is between the main contractor and the contractee and even if the sub-contractor does not have contractual relationship with the contractee. The following observations are relevant: "16. By virtue of Article 366(29-A)(b) of the Constitution, once the work is assigned by the contractor (L&T), the only transfer of property in goods is by the sub-contractor(s) who is a registered dealer in this case and who claims to have paid taxes under the Act on the goods involved in the execution of the works. Once the work is assigned by L&T to its sub-contractor(s), L&T ceases to execute the works contract in the sense contemplated by Article 366(29-A)(b) because property passes by accretion and there is no property in goods with the contractor which is capable of a retransfer, whether as goods or in some other form." The question which is raised before us is whether the turnover of the sub-contractors (whose names are also given in the original writ petition) is to....