Correctness and sustainability by way of the condition imposed by the Appellate Authority vide Ext.P10 order dated 25.07.2014, directing the petitioner to satisfy 30% of the disputed penalty cast upon the petitioner as per Ext.P4 series orders, is under challenge in this writ petition.
2. The case of the petitioner is that, the petitioner undertook some work given by the 4th respondent, which was mainly a labour contract. By virtue of Ext.P2 agreement executed between the petitioner and the 4th respondent, the entire 'cement and steel' were to be supplied by the 4th respondent. Admittedly, 'metal and sand' were purchased by the petitioner. Still, the same was sought to be described as a 'labour contract'. The concerned respondent proposed to impose penalty upon the petitioner for the different assessment years ie., 2008-2009, 2009-2010 and 2010-2011. After completing the formalities, the petitioner was slapped with Ext.P4 series orders imposing penalty to the tune of Rs.32,12,200/- (Rupees Thirty two lakhs twelve thousand and two hundred only), Rs.16,66,332/- (Rupees Sixteen lakhs sixty six thousand three hundred and thirty two only) and Rs.8,56,706/- (Rupees Eight lakhs fifty six thousand seven hundred and six only) respectively, thus coming to a total of nearly Rupees Fifty seven lakhs. This was followed by Ext.P5 series demand notices. The petitioner rushed to the Appellate Authority, ie. the 2nd respondent, by filing Ext.P6 series appeals along with Interlocutory Applications for stay. After considering the Interlocutory Applications for stay, the Appellate Authority passed the impugned order by way of Ext.P10, which by itself casts a huge liability of nearly Rs.18,50,000/- (Rupees Eighteen lakhs fifty thousand only) and hence the challenge by way of this writ petition.
3. Heard the learned counsel for the petitioner as well as the learned Government Pleader appearing for the respondents at length.
4. The learned Government Pleader points out that, there was a conscious exercise on the part of the petitioner, so as to defeat the Revenue, attempting to project that the work was a 'labour contract'. On going through the materials produced before the Assessing Authority, it was revealed that, several goods were purchased by the petitioner, particularly 'sand and crushed stones'. Reference is also made to the statement given by the awarder, ie. the 4th respondent, on 26.12.2011 that, he had effected payment of nearly Rs.64,89,661/- (Rupees Sixty four lakhs eighty nine thousand six hundred and sixty one only) towards purchase of materials; namely 'sand and crushed stones'. It is with reference to the said aspect, that a finding was arrived at by the Assessing Authority, holding that it was a 'work contract' and proceeded with further steps, giving deduction of only 30% towards the 'labour cost' and finalising the assessment, as borne by Ext.P5 series notices.
5. The petitioner has conceded in paragraphs 6,7 and 8 that, in respect of the assessment years 2008-2009, 2009-2010 and 2010-2011, he had incurred an expenditure of nearly Rs.39,18,375/- (Rupees Thirty nine lakhs eighteen thousand three hundred and seventy five only), Rs.15,67,000/- (Rupees F ifteen lakhs sixty seven thousand only) and Rupees Eight lakhs in respect of the above three assessment years respectively and that the entire balance amount was towards the labour charges and such other heads, more so when cement and steel were excluded, having undertaken to be supplied by the awarder himself, based on Ext.P2 agreement. On going through the materials on record, it is seen that the very same figure of Rs.64,89,661/- (as the payment effected by the awarder to the petitioner in respect of the sand and metal supplied), is given in Ext.P4 assessment proceedings for the year 2008-2009, Ext.P4 (a) assessment proceedings for the year 2009-2010 and Ext.P4 (b) in respect of the subsequent year, ie. 2010-2011. As a matter of fact, the proceedings reveal that the said amount was the total figure, constituting the payments effected by the awarder to the petitioner for all the three assessment years. If this be the position, the correctness and sustainability of the proceedings finalised by the 2nd respondent will have to be meticulously analysed and considered by the Appellate Authority, while dealing with the issue. This Court does not intend to express any opinion on merits, as the issue is pending consideration before the Appellate Authority. The undisputed fact reveals that, payment to an extent of Rs.64,89,661/- was effected by the awarder to the petitioner and the petitioner is liable to satisfy tax for the said amount, in respect of the goods supplied.
6. The petitioner contends that, the rate of tax in respect of 'sand and crushed stones' can only be 4%, which is sought to be rebutted by the learned Government Pleader with reference to Section 6(1) f of the KVAT Act. On going through the said provision and also the entries at serial No.90 and 97 of the 3rd schedule, this Court is of the prima facie view that, it could attract tax only at the rate of 4%. On computing the tax liability, it may come around to Rs.2,60,000/- (Rupees Two lakhs sixty thousand only) and the maximum penalty could be about Rs.5,20,000/- (Rupees Five lakhs twenty thousand only), thus taking a total to nearly Rs.7,80,000/- (Rupees Seven lakhs eighty thousand only); ie. tax plus probable penalty.
In the above circumstances, the petitioner is directed to satisfy a sum of Rs.4,00,000/- (Rupees Four lakhs only) on or before the 30th of October, 2014 and another sum of Rs.4,00,000/- (Rupees Four lakhs only) within one month thereafter. Subject to this, the petitioner will continue to enjoy the benefit of interim stay during pendency of the appeal. The proceedings shall be finalised by the 2nd respondent by passing appropriate orders on Ext.P5 series appeals, in accordance with law, after giving an opportunity of hearing to the petitioner, enabling him to produce the relevant records, if any, as expeditiously as possible, at the earliest, at any rate, within 'three months' from the date of receipt of a copy of this judgment.
Petitioner shall produce a copy of this judgment, along with a copy of the writ petition, before the 2nd respondent, for further steps.
The writ petition is disposed of.
P.R. RAMACHANDRA MENON, JUDGE sp