IN THE HIGH COURT OF KERALA AT ERNAKULAM
ST.Rev..No. 243 of 2005()
1. STATE OF KERALA, REP. BY
... Petitioner
Vs
1. ALEX.V.CHACKO, VEKKEPPALLY MATTATHIL,
... Respondent
For Petitioner :GOVERNMENT PLEADER
For Respondent :SRI.C.C.THOMAS (SR.)
The Hon'ble MR. Justice C.N.RAMACHANDRAN NAIR
The Hon'ble MR. Justice V.K.MOHANAN
Dated :01/01/2009
O R D E R
C.R.
C.N.RAMACHANDRAN NAIR &
V.K.MOHANAN, JJ.
....................................................................
S.T. Rev. No.243 of 2005
....................................................................
Dated this the 1st day of January, 2009.
ORDER
Ramachandran Nair, J.
The question raised is whether sales tax recovered and remitted
by the awarder from the contractor’s bill is to be excluded from the
turnover for the computation of tax at compounded rate as provided
under Section 7(7) of the KGST Act. The assessment involved is for
the year 1998-99. Respondent-assessee was engaged in civil
construction work and he applied for permission to pay tax at
compounded rate under Section 7(7) of the Act. There is no dispute
that the work involved was civil construction work attracting tax at the
compounded rate provided under Section 7(7) of the Act. Special
Government Pleader appearing for the State contended that Section 7
(7) provides for payment of tax at compounded rate on the whole
amount of contract and not on the net amount received by the
respondent after recoveries of tax by the awarder. Counsel for the
2
respondent contended that Tribunal was following their earlier order in
another case against which State has not filed revision. We do not
think the objection of the respondent is tenable because the failure or
omission to file revision in another case does not stand in the way of
the State filing revision in an appropriate case. The Tribunal’s order is
binding on the State only for the assessment pertaining to which
Tribunal has passed the orders. In other words, for other years or in the
case of any other assessee, the State is free to agitate the matter decided
by the Tribunal against it.
Section 7(7) which give rise to this revision case is extracted
hereunder:
“Notwithstanding anything contained in sub-section(1)
of Section 5 every contractor, in civil works of
construction of buildings, bridges, roads, railway
tracks, walls, including sea walls, dams and canals
including any repair or maintenance of such civil work
may at his option instead of paying tax in accordance
with Clause (iv) of that sub-section pay tax at the rate
of two percent, on the whole amount of contract and
which shall be deducted from the payments made by
the awarder at every time including advance payment
and shall remit it to Government in such manner as
may be prescribed.”
It is obvious from the above that the compounded rate of tax is
3
provided on the whole amount of contract and not on the net amount
received by the contractor after recoveries of tax made by the awarder.
In fact, the scheme of deduction and payment of tax by the awarder
does not amount to determination of tax which is a matter of
adjudication by the Assessing Officer wherein assessee is entitled to
plead that recovery does not represent actual tax payable. The scheme
for deduction of tax is only a method of recovery of tax in advance on
an adhoc basis and the amount so recovered and remitted by the
awarder need not be actual tax payable. In other words, the assessee
is entitled to get credit of the entire amount recovered and remitted by
the awarder in the assessment. Consequence is that recoveries and
remittances so made will be treated as payments made by the assessee.
Therefore, until the assessment is completed, tax liability adjudicated
and credits given, the recovered amount remains unadjusted towards
tax. In fact, recovery of tax by the awarder from the contractor is not
similar to collection of tax by the dealer from the customers on sale of
goods. We, therefore, reverse the order of the Tribunal and hold that
the tax recovered and remitted by the awarder from the bills of the
4
contractor should also be reckoned as turnover for the purpose of
determination of tax on contract amount, whether it be at compounded
rate or not. However, if the contract provides for separate
reimbursement of actual tax paid by the contractor over contract
amount, then the same will amount to tax collection under Rule 9(l)
warranting exclusion from taxable turnover. However, this does not
affect tax payable under the compounding scheme which is payable not
on taxable amount but on the whole contract amount which includes
the tax recovered from out of contract payments made by the awarder.
The S.T. Revision is allowed as above.
C.N.RAMACHANDRAN NAIR
Judge
V.K.MOHANAN
Judge
pms