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176 Goods & Services Tax Cases - Reports [Vol. 1 under section 60 of the KVAT Act read with rules 163 to 165 of KVAT Rules, 2005 as to whether the works entrusted to sub-contractors would also come within the total turnover of the appellant. 2. The abovesaid authority after hearing the appellant herein held as follows :— (a) In the absence of specific provisions for deduction on the turnover of the sub-contractor, up to 31-3-2006 the activity of the works contract is exigible to tax at the rate applicable to goods involved in the transfer of property under KVAT Act, 2003 and section 4(c) of the KVAT Act with effect from 1-4-2006; (b) The payments made to the sub-contractors are not eligible for deduction up to 31-3-2006, and (c) The sub-contractor turnover is eligible for deduction with effect from 1-4-2006 by virtue of Notification dated 27-5-2006. 3. We have heard Sri V. Srinivasa Raghavan appearing for the appellant and Smt. Geetha Menon, learned Government Advocate appearing for the respondents and perused the order dated 29-7-2006 passed by the Authority for Clarification & Advance Rulings. 4. It is the contention of the learned counsel for the appellant that the activity of works contract up to 31-3-2006 is exigible to the KVAT Act, 2003 as ruled by the Authority is erroneous for the following reasons :— (i) Works executed by sub-contractor in the Course of execution of Works Contract awarded to the appellant cannot be treated as consideration received by the appellant and it is to be treated as consideration received by the sub-contractors. (ii) There would be double taxation on the transaction since the subcontractors are also registered under the KVAT Act and that portion of the sub-contract the sale takes place in respect of those portions directly in favour of the owner of the land or the person and hence there is no sale in favour of the principal contractor and contends that the said payments made to sub-contractor in a work executed by them cannot be included in the total consideration received by the principal contractor. (iii) There is only one deemed sale involving the transfer of property in the goods which are employed in the works as it constitutes the single deemed sale and those in respect of part works awarded to the subcontractor by the main contractor does not exclude those parts, therefore there is no deemed sale at the hands of the main contractor i.e., appellant herein. 5. In support of the above raised contentions, the learned counsel for the appellant would rely upon the decision of the Hon’ble Supreme Court in the case of State of Andhra Pradesh v. Larsen & Toubro Ltd. [2008] 9 SCC 191. GOODS & SERVICES TAX CASES ❑ JANUARY 20 - FEBRUARY 4, 2010 ◆ 52 A B C D E F G
2010] Skyline Constructions & Housing (P.) Ltd. v. AC&AR (Kar.) 177 A B C D E F G 6. Per contra the learned Government Advocate would submit that the issue which was under consideration before the Hon’ble Supreme Court was prior to the amendment of rule 17 of APVA Rules, 2005 and as such the amendment brought to the Karnataka Value Added Tax subsequently which is in pari materia with rule 17 of the Andhra Pradesh Value Added Tax Act, 2005 is applicable only from 1-4-2006 including and the Rules made thereunder and hence said judgment would not be applicable to the facts of the present case. 7. At the time of admission of this appeal the following substantial questions of law were formulated :— 1. Whether under 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 subcontractors 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 sub-contractors 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. 8. As per section 3(1) of the KVAT Act on every sale of goods in the State by registered dealer or a dealer is leviable to tax in accordance with the provisions of the Act. The works contract having defined under section 2(37) is also leviable to tax where there is transfer of property involved. 9. The Karnataka Value Added Tax Act, 2003 came to be amended by Act No. 4/2006 where in clause (c) to sub-section (1) of section 4 was amended which reads as follows :— “In respect of transfer of property in goods (where as goods or in some other form) involved in the execution of works contract specified in column (2) of the Sixth Schedule, subject to sections 14 and 15 of the Central Sales Tax Act, 1956 (Central Act 74 of 1956), at the rates specified in the corresponding entries in column (3) of the said Schedule.” Thus, section 4 is the charging section insofar as transfer of property of goods involved in the execution of the works contract. 10. The appellant has elected for composition in terms of provision under section 15 of the KVAT Act, 2003 read with Notification No. FD 54 CSL 5(7), GOODS & SERVICES TAX CASES ❑ JANUARY 20 - FEBRUARY 4, 2010 ◆ 53
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