Karnataka High Court
Dodsal Engineering And Constructions ... vs Commissioner Of Commercial Taxes on 27 September, 2012
Bench: K.Sreedhar Rao, B.Manohar
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IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 27TH DAY OF SEPTEMBER 2012
PRESENT
THE HON'BLE MR. JUSTICE K.SREEDHAR RAO
AND
THE HON'BLE MR. JUSTICE B.MANOHAR
STA No.111/2009
BETWEEN:
DODSAL ENGINEERING &
CONSTRUCTIONS PVT LTD,
(FORMERLY M/S.DODSAL LIMITED)
BWSSB PROJRCT, TATAGUNI,
KANAKAPURA ROAD,
BANGALORE,
REP BY ITS DIRECTOR. ...APPELLANT
(BY SMT.VANI.H, ADV)
AND:
COMMISSIONER OF COMMERCIAL TAXES,
I FLOOR, VANIJYA TERIGE KARYALALA-I
I CROSS, GANDHI NAGAR,
BANGALORE - 560 009. ...RESPONDENT
(BY SMT.S.SUJATHA, AGA)
STA FILED U/S. 24(1) OF THE KST ACT, AGAINST THE
REVISION ORDER DATED 02.07.2009 PASSED IN
NO.KST/SMR/CR-4/2008-09 ON THE FILE OF THE
COMMISSIONER OF COMMERCIAL TAXEX, BANGALORE,
THE APPEAL ORDER ARE REVISED AND RESTORING THE
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ASSESSMENT CONCLUDING THE REVISION
PROCEEDINGS.
THIS STA HAVING BEEN HEARD AND RESERVED AND
COMING ON FOR PRONOUNCEMENT OF JUDGEMENT THIS
DAY, B.MANOHAR J., DELIVERED THE FOLLOWING:
J U D G M E NT
The appellant being aggrieved by the order dated 2-7-2009
made in KST/SMR/CR-4/2008-09 passed under Section 22-A of the
Karnataka Sales Tax Act, 1957 by the Commissioner of Commercial
Taxes, wherein the Commissioner has set aside the order passed by
the Revisional Authority as well as the First Appellate Authority and
restored the order passed by the Assessing Authority, has preferred
this appeal for the assessment year 2000-01 and 2001-02
2. The appellant is a Limited Company incorporated under the
Companies Act having its registered office at Bombay. The
Appellant-company registered under the provisions of the Karnataka
Sales Tax Act [hereinafter referred to as 'the Act'] is carrying on
various types of works contract. The appellant, for the assessment
years 2000-01 and 2001-02 had undertaken the works contract from
the Bangalore Water Supply and Sewerage Board ('BWSSB' for
short) for laying of Clear Water Transmission Mains for supply of
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water from Kaveri Water Supply Scheme, IV Stage. The appellant-
company had filed the annual returns of turnover for both the
assessment years and paid the tax at 4% on taxable turnover
claiming that the pipe laying work falls within Entry 20(ii) of the VI
Schedule to the Act. Further, the appellant had claimed certain
deductions including the payment to the Sub-Contractors as per the
Rules. The returns filed by the appellant for the assessment years
2000-01 and 2001-02 were taken for verification and after
verification of the books, the Assessing Authority disallowed certain
deductions claimed by the appellant. In addition, the Assessing
Authority treated the works executed by the appellant as a composite
contract involving two or more of the above categories falling within
Entry 44 of the VI Schedule. Further, the Assessing Authority had
levied turnover tax under Section 6B of the Act. The Assessing
Authority taking into consideration the fact that the assessee is not
only laying the pipes but also undertaken some other civil works
such as, construction of the pipe bridge over the Suvarnamukhi
River, construction of the pedestal supports, anchor block, valve
chambers for the pipe line including construction of the causeway
across the river with approach road. Accordingly, held that the
appellant has carried out composite contract involving two or more
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works. Accordingly assessed the tax as per the assessment orders
dated 10-6-2003 and 10-7-2003 for the assessment years 2000-01
and 2001-02 respectively.
3. Being aggrieved by the assessment order dated 10-6-2003 and
10-7-2003 for the assessment years 2000-01 and 2001-02, the
appellant preferred appeals before the Joint Commissioner of
Commercial Taxes (Appeals) (hereinafter referred to as 'the First
Appellate Authority') in KST.AP.Nos.118 & 149/2003-04
contending that works awarded to the appellant by BWSSB is for
laying Clear Water Transmission Mains and the steel plates are
provided to the appellant by the BWSSB at free of cost and the
appellant has fabricated the steel pipe out of the steel plates supplied
by the BWSSB and laid steel pipes as water transmission mains.
Further excavating work, preparation of the trenches and back filling
of trenches and construction of the bridges were only incidental and
ancillary to the main contract of laying the Clear Water Transmission
Mains. The predominant intention and nature of the contract is to
lay the pipeline and it squarely falls within the Entry 20(ii) of the VI
Schedule to the Act. The First Appellate Authority by its order dated
12-12-2003 allowed the appeal and held that the works contract
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carried on by the appellant clearly falls within the Entry 20(ii) of the
VI Schedule and directed the Assessing Authority to reconsider the
matter afresh. After remand, the Assessing Authority reconsidered
the matter keeping in view the direction issued by the First
Appellate Authority and by its order dated 12-1-2005 levied the sales
tax at 4% on the taxable turnover, treating the works contract carried
on by the assessee falls under Entry 20(ii) of the VI Schedule.
Further, imposed the tax of 1% on the payment made to the sub-
Contractors. Being aggrieved by the order dated 12-1-2005 levying
turnover tax at the rate of 1% once again preferred an appeal before
the First Appellate Authority in KST.Appeal Nos.510-511/2004-
2005. The First Appellate Authority allowed the appeal by its order
dated 30-5-2005 wherein the First Appellate Authority directed the
Assessing Authority to levy turnover tax on a portion of the payment
made to the subcontractors pertaining to the transfer of the property
in goods.
4. The Additional Commissioner of Commercial Taxes, feeling
aggrieved by the order dated 30-5-2005 and also assessment order
dated 12-1-2005 passed by the First Appellate Authority and the
Assessing Authority respectively, taken up Suo-motu revision
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proceedings under Section 22-A(1) of the Act. Notice has been
issued to the assessee and the assessee has filed objections to the
said revision petition. The Revisional Authority accepted the
contentions of the assessee that the works executed by the assessee
falls under Entry 20(ii) of the VI Schedule. However, the Revisional
Authority restored the assessment order to the extent of levy of
turnover tax by its order dated 24-2-2007 for both the assessment
years. Thereafter, the appellant filed an application under Section
25-A of the Act for rectification of the order dated 24-2-2007 passed
by the Revisional Authority. The Revisional Authority considered
the said application and passed rectification order on 28-10-2008.
Subsequent to the order of the Revisional Authority, the Assessing
Authority recomputed the turnover tax on 30-7-2009 for both the
assessment years. The Commissioner for Commercial Taxes on
verification of the order passed by the Revisional Authority found
that the order passed by the Revisional Authority is prejudicial to the
interest of the Revenue and issued notice to the appellant under
Section 22-A(ii) of the Karnataka Sales Tax Act proposing to set
aside the order passed by the First Appellate Authority dated
12-12-2003 as well as the Revisional Authority dated 31-5-2005.
The appellant has filed the detailed objections to the said
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proceedings. The Commissioner for Commercial Taxes after
considering the matter, by its order dated 2-7-2009 set aside the
order passed by the First Appellate Authority as well as the
Revisional Authority thereby restored the orders passed by the
Assessing Authority dated 10-6-2003 and 10-7-2003 for the
assessment years 2000-01 and 2001-02 and held that works contract
undertaken by the appellant falls under Entry 44 of the VI Schedule.
The appellant being aggrieved by the order dated 2-7-2009 passed
by the Commissioner for Commercial Taxes has preferred this
appeal.
5. The above appeal has been admitted to consider the following
substantial questions of law:
i) Whether the Commissioner could have opined
that the turnover of the assessee relating to
laying of steel pipes in the course of execution
of work for M./s.BWSSB and could have
brought within the scope of Entry-44 of
Schedule-VI to the Karnataka Sales Tax Act, as
composite contract or it should have been gone
into Entry-20(ii) of the Schedule, as the works
contract involving laying of steel pipes other
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than for either plumbing or drainage facility?
ii) Whether suo motu order dated 2-7-2009 (copy
at Annexure-A) passed by the Commissioner in
exercise of his revisional power under Section
22-A of the Act, was not barred in terms of sub-
section (3) of Section 23A of the Act, having
regard to the fact that the order dated 2-7-2009
where as the assessment orders of re-
assessment on remand order passed by the
Assessing Authority for the period 2000-01 or
the order of the Appellate Authority remanding
the matter to the original authority for re-
computing the liability for this very period in
terms of his order dated 12-12-2003 (copy at
Annexure-D) are orders without jurisdiction for
the reason tht it is passed four years beyond the
date of order which has sought to be revised."?
6. Smt.Vani, learned counsel appearing for the appellant
contended that the order passed by the Commissioner under Section
22-A(ii) of the Act is contrary to law. The revisional power has to be
exercised within four years from the date of passing of the order
sought to be reviewed. Sub-Section (iii) of Section 22-A provides
for limitation beyond which, the revisional power cannot be
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exercised. In the instant case, the Assessing Authority passed the
orders on 10-6-2003 and 10-7-2003, the Appellate Authority passed
the order dated 12-12-2003, the Additional Commissioner of
Commercial Taxes initiated revisional proceedings and passed the
order on 30-5-2005. However, the Commissioner initiated revisional
proceedings after lapse of four years. Hence, the proceedings
initiated by the respondent is barred by limitation. She further
contended that the appellant had undertaken the works contract
pertaining to providing and laying of steel pipes for the purposes
other than sanitary fittings for plumbing, drainage and the like
falling within Entry-15. Hence, the work executed by the appellant
falls under Entry 20(ii) of the VI Schedule to the Act. The scope of
the work includes fabrication of mild steel pipes especially from
steel plates supplied by BWSSB to the required diameter and
thickness and laying and filling the pipelines from Harohalli to
Bangalore City. The said work associated with civil works including
construction of the pipe bridge, construction of pedestal supports,
anchor block, valve chambers and including construction of the
causeway across the river with approach road. Since the pipes are
of considerably large size and are heavy, construction of structure
involving civil work to give strength to the pipes laid down is more
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of a necessity than the additional work. These civil works are part
and parcel of laying pipe work. In other words, the civil works are
the incidental works carried out by the appellant while laying the
pipelines. The reasoning of the Commissioner that the work carried
by the appellant falls under Entry-44 of the VI Schedule is contrary
to law and sought for allowing the appeal.
7. On the other hand, Smt.S.Sujatha, learned Additional
Government Advocate argued in support of the order passed by the
Commissioner for Commercial Taxes and contended that as per
the works contract, the appellant undertakes the work of not only
laying the pipelines, but also fabrication of pipes from the steel
supplied by the BWSSB, painting and cement mortar lining of
pipes fabricated, trenching and excavating pipe route, encasing the
pipe with the steel mesh, erection of valves with specials,
construction of RCC bridges along the route, construction of pipe
saddle support and construction of the overhead tanks. These works
cannot be treated as incidental for laying the pipes. The works
executed by the appellant is a composite contract involving two or
more of the above categories falling under Entry-44 of the VI
Schedule to the Act. Hence, the appellant is not entitled for any
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relief and sought for dismissal of the appeal.
8. We have carefully considered the arguments addressed by the
learned counsel for the parties and perused the orders passed by the
Assessing Authority, Appellate Authority as well as the Revisional
Authority.
9. The appellant has entered into works contract with BWSSB
for laying Clear Water Transmission Mains from T.K.Halli to
Harohalli and Harohalli to Bangalore City from the Kaveri Water
Supply Scheme, IV Stage. The contract 1.2.2, describes the works
contract as under:
"The scope of work includes fabrication of
the pipes and special from the steel plates at
Jakkasandra site allotted by the BWSSB.
The scope also includes laying, jointing and
testing the pipeline from T.K.Halli to
Harohalli. The scope also covers the
associated civil works including the
construction of pipe bridges over Bhima and
Arkavathi rivers, construction of the
pedestal, ring girder support, anchor blocks
and valve chambers of the pipeline. A
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reinforced concrete overhead tank(one-way
surge tank) is to be constructed at J.K.Doddi
which is 20 Km from T.K.Halli.
The new pipeline is to be laid in the open
strip of land acquired, approximately 11 m.
width-located on the side of the existing
pipeline service road.
The major length of the pipeline is proposed
to be laid underground. The exposed
portion is to be laid above ground supported
on the saddles/ring girders on the pipe
bridges.
The works under this contract shall include
but not to be limited to the following:
a) Fabrication of 1950 mm dia
(clear internal diameter after
lining) from mild steel plates
supplied by BWSSB free of cost;
b) External coating (guniting/epoxy
painting) and in-situ internal
cement mortar lining;
c) Laying, jointing and testing of the
above fabricated pipe
(approximately 44 mm long);
d) Fabrication, laying and jointing
of pipe specials;
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e) Procurement and erection of
valves;
f) Construction of reinforced
concrete pipe bridges over Bhima
and Arkavathi rivers (Bhima
bridge 54 m long and Arkavathi
bridge 189 m long);
g) Construction of pipe saddle
supports, thrust blocks, and
anchor blocks;
h) Construction of one-way surge
tank (reinforced concrete
overhead tank of 20 m diameter
including inlet and outlet
connections);
i) Construction of valve chambers.
10. The reading of description of the works contract makes it
clear that the work carried on by the appellant is a composite
contract. It falls under Entry 44 of the VI Schedule to the Act. The
contention of the appellant is that the work carried out by the
assessee is not a composite contract. It is a single work contract of
fabrication of the pipe out of steel plates supplied by the BWSSB
and all other works are ancillary to it. The predominant intention
and nature of the work is to laying down the pipes. Hence, it falls
under Entry 20(ii) of VI Schedule. On careful examination of the
works contract awarded by the BWSSB, we are of the view that the
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contract entered into between the appellant and BWSSB is a
composite contract of not only laying of the pipes, but also to do
other civil works like construction of the bridges, construction of
pipe saddle supports, construction of the valve chambers and RCC
over-head tanks, encasing the pipes with the steel mesh, trenching
and excavating along the routes. Hence, the works contract entered
into by the appellant has to be treated as a composite contract
involving two or more of the above categories of works falling under
Entry 44 of the VI Schedule. Accordingly, the first substantial
question of law is held against the appellant.
11. Insofar as the second substantial question of law is concerned,
for the assessment years 2000-01 and 2001-02, the Assessing
Authority passed the orders on 10-06-2003 and 10-07-2003. The
appeals filed by the appellant were allowed on 12-12-2003.
Thereafter, the Assessing Authority passed the fresh order on
12-1-2005. Being aggrieved by the said order, once again appeals
were preferred before the First Appellate Authority. Those appeals
were disposed of on 30-5-2005. The Revisional Authority took up
suo-motu revision for both the assessment years and passed the order
on 24-2-2007. Thereafter, the application has been filed under
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Section 25-A of the Act for rectification of the order dated
24-2-2007. The order was rectified on 28-1-2008. The
Commissioner has taken suo-motu revision under Section 22-A(ii)
of the Act and order has been passed on 2-7-2009. The appeal order
dated 12-12-2003 merged with the revisional order dated 24-2-2007
and the Commissioner has passed the revisional order within a
period of four years as required under Section 22-A(iii) of the Act.
There is no merit in the contention of the appellant that the
revisional order passed by the Commissioner is barred by limitation.
Hence, issue No.2 is also held against the appellant.
12. Accordingly, we pass the following:
ORDER
The appeal is dismissed.
Sd/-
JUDGE Sd/-
JUDGE mpk/-*