High Court of KeralaSingle Judge2014-04-11Disposed of

Larsen & Toubro Limited v. Assistant Commissioner (WC & LT), Commercial Taxes, Ernakulam

Case / Petition Number:WP(C).No. 10498 of 2014

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: P. R. Ramachandra Menon, J.
Judgment Date: 2014-04-11
Court Decision / Holding: Writ petition disposed of. The court holds that if the discrepancies are errors apparent on the face of the records, they should be corrected under Section 66 KVAT Act; if not, the order must reflect the actual facts and figures. The petitioner is permitted to file a Section 66 petition within two weeks for rectification; the respondent is to consider and pass appropriate orders expeditiously, within one month, after giving hearing. Ext. P14 rectification shall also be considered; coercive proceedings shall be kept in abeyance with respect to the disputed extent until resolution. The petitioner shall furnish a copy of the judgment to the respondent for further steps; the writ petition is disposed of.
Final Disposition: Disposed of

Parties to the Case

Appellants / Petitioners

Larsen & To ubro Limited

Respondents

Assistant Commissioner (WC & LT), Commercial Taxes, Ernakulam

Legal Representation & Advocates

Counsels for Petitioners

• Sri. N. Venkitraman, Senior Advocate
• Adv. Sri. A. Kumar

Counsels for Respondents

• Sri. Shobha Annamma Eapen, Government Pleader

Case Synopsis & Summary

The Kerala High Court entertains a challenge by Larsen & Toubro Limited to Ext. P11, the assessment order under Section 25(1) of the Kerala Value Added Tax (KVAT) Act for the assessment year 2006-07. The petitioner contends that the order incorporates new figures not grounded in the record, particularly with regard to deductions under labour and the so-called “profit related to labour,” and that the resulting taxable turnover is not supported by the material before the court. The order discusses declared goods taxed at 4% and other goods taxed at 12.5%, with a proposed reduction in declared goods from roughly Rs. 39 crore to Rs. 13.09 crore; the reasoning behind these numerical changes is not discernible from Ext. P11. The petitioner invokes the binding rule laid down in Jose K.M & Others v. Assistant Commissioner (Assessment) Vat & Others (2010 KHC 125) that declared goods are to be taxed at 4%, submitting that Ext. P11 consciously varied the applicable rates. The judge notes a discrepancy between Ext. P11 and the actual records and holds that if the discrepancy is an error apparent on the face of records, it can be corrected under Section 66 KVAT; otherwise, the order must reflect the actual facts. The court disposes of the petition by directing the petitioner to seek Section 66 relief within two weeks, to consider Ext. P14 rectification, and to keep coercive proceedings in abeyance for the disputed extent, with expeditious consideration.

Provisions of Law Cited

Section 25(1) of the Kerala Value Added Tax ActSection 66 of the KVAT Act

Legal Doctrines & Maxims

Error apparent on the face of the records
Rectification under Section 66 KVAT Act (power to rectify assessment orders)
Law laid down in Jose K.M & Others v. Assistant Commissioner (Assessment) Vat & Others (2010 KHC 125) regarding 4% rate for declared goods

Submissions & Arguments

Contentions of Appellants / Petitioners

The petitioner contends that Ext. P11 exhibits new figures not supported by the record, notably in the treatment of ‘profit related to labour’ and other deductions, leading to a possible miscalculation of taxable turnover. The petitioner emphasizes that 4% tax on declared goods is settled by the law in Jose K.M & Others v. AC VAT (2010 KHC 125), yet Ext. P11 shows an inconsistent approach with declared goods taxed at 4% while other goods are treated variably. The petitioner seeks correction under Section 66 KVAT Act for errors apparent on the face of the records, or, if the discrepancy is based on the record, a proper reflection of actual facts and figures in the assessment order. They also urge consideration of Ext. P14 rectification and stay of coercive proceedings for the disputed portion, with timely hearing and relief.

Contentions of Respondents

The judgment records the hearing and the petitioner’s submissions; it does not elaborate separate respondent arguments in detail. The court’s analysis focuses on the asserted discrepancies in Ext. P11, the applicability of declared goods at 4% in light of Jose KM, and the potential for correction under Section 66 KVAT, while keeping coercive actions in abeyance pending rectification.

Cited Precedents (1)

Case Name	Citation	Treatment	Explanation
Jose K.M & Others v. Assistant Commissioner (Assessment) Vat & Others	2010 KHC 125	Positive	The court anchors 4% tax rate for declared goods on the law declared by a Division Bench in this cited case.

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Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON** **FRIDAY, THE 11TH DAY OF APRIL 2014/21ST CHAITHRA, 1936** ## **WP(C).No. 10498 of 2014 (J)** **----------------------------** **PETITIONER(S):** **--------------------------** **LARSEN & TOUBRO LIMITED, RAVIPURAM JN, M.G.ROAD, KOCHI-682 016, REPRESENTED BY ITS AUTHORIZED SIGNATORY SRI.ISWARAN A.G.** **BY SRI.N.VENKITARAMAN, SENIOR ADVOCATE ADV. SRI.A.KUMAR** **RESPONDENT(S):** **----------------------------** **ASSISTANT COMMISSIONER (WC & LT), COMMERCIAL TAXES, ERNAKULAM - 682 030.** **BY SR.GOVERNMENT PLEADER SMT.SHOBHA ANNAMMA EAPEN** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 11-04-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **Kss** ## **WP(C).No. 10498 of 2014 (J)** **-----------------------------------------** ## **APPENDIX** ## **PETITIONER(S)' EXHIBITS:** **---------------------------------------** **EXT.P1.TRUE COPY OF THE FORM NO.10 FOR THE ASSESSMENT YEAR 20062007 (1ST APRIL 2006-31ST MARCH 2007) OF THE TRADING AND WORKS CONSTRACT.** **EXT.P2.TRUE COPY OF THE AUDIT REPORT FILED BY THE PETITIONER IN FORM NO. 13/13A DATED 27/12/2007.** **EXT.P3.TRUE COPY OF THE STATEMENT OF PARTICULARS OF THE CONTRACT DATED NIL** **EXT.P4.TRUE COPY OF THE STATEMENT CONTAINING PARTICULARS OF SUBCONTRACTORS TOGETHER WITH THE NATURE OF WORKS CONTRACTED AND REGISTRATION PARTICULARS DATED NIL.** **EXT.P4(A).SCREEN SHOT REFLECTING/CONFIRMING THE REGISTRATION OF SUB-CONTRACTORS DATED NIL.** **EXT.P5.TRUE COPY OF THE NOTICE ISSUED BY THE ASSISTANT COMMISIONER (AUDIT ASSESSMENT) DATED 9/1/2008.** **EXT.P6.TRUE COPY OF PETITIONER'S LETTER DATED 20/2/2008 (WITHOUT ANNEXURES).** **EXT.P6(A).TRUE COPY OF PETITIONER'S LETTER DATED 11/6/2008.** **EXT.P7.TRUE COPY OF THE NOTICE DATED 4/2/2010 ISSUED BY THE ASSISTANT COMMISSIONER (ASSESSMENT) SPECIAL CIRLCE-III, ERNAKULAM.** **EXT.P8.TRUE COPY OF THE REPLY FILED BY THE PETITIONER DATED 17/3/2010.** **EXT.P9.TRUE COPY OF THE NOTICE ISSUED BY THE RESPONDENT DATED 5/12/2013.** **EXT.P10.TRUE COPY OF THE REPLY FILED BY THE PETITIONER DATED 7/1/2014. (RELEVANT PAGES).** **EXT.P11.TRUE COPY OF THE ASSESSMENT ORDER DATED 30/1/2014 (SERVED ON 19/3/2014).** **Kss** **..2/-** **..2....** **WPC.NO.10498/2014 (J)** **EXT.P12.TRUE COPY OF THE STATEMENT CERTIFYING LABOUR AND OTHER LIKE CHARGEA BY THE AUDITOR IN CONFORMITY WITH THE REPORT OF THE AUDITOR IN FORM 13 AND 13A DATED 27/12/2007.** **EXT.P12(A).TRUE COPY OF THE STATEMENT OF CALCUATION OF PROFIT MARGIN AS PER THE ANNUAL REPORT DATED NIL.** **EXT.P13.TRUE COPY OF THE JUDGMENT IS REPORTED IN 2010 KHC 125.** **EXT.P14.TRUE COPY OF THE APPPLICATION FOR RECTIFICATION 19/3/2014 (WITH PARTICULARS OF TDS CERTIFICATES).** **RESPONDENT(S)' EXHIBITS:** **-----------------------------------------** **N I L** **/TRUE COPY/** **P.A.TO JUDGE** **Kss** ## **P.R. RAMACHANDRA MENON, J.** ======================== W.P.(C). No. 10498 of 2014 -------------------------------------------Dated this the 11[th] day of April, 2014 ## **JUDGMENT** The correctness and sustainability of Ext.P11 order passed in respect of the assessment year 2006-07 under Section 25(1) of the Kerala Value Added Tax Act is under challenge in this writ petition. 2. Heard Sri. N. Venkitaraman, the learned Senior Counsel for the petitioner as well as the learned Government Pleader for the respondents at length. 3. The specific case put forth by the petitioner is that, the undisputed facts and figures with regard to the proposal sought to be finalized with reference to the reply submitted by the petitioner have simply vanished from the scene and some new figures have been incorporated while passing Ext.P11 order by the concerned respondent. The sum and substance projected by the petitioner is as follows: Ext. P9 show-cause notice was issued to the petitioner, which has been incorporated with regard to the expenses to be reduced W.P.C. No. 10498 of 2014 -2- from the total figure, to work out the taxable turnover, as reproduced at the page '4' of Ext.P11 in the following terms: Net turnover ` 1,47,59,46,821.00 Less Labour ` 21,82,90,798.00 Profit related to labour ` 74,00,05,775.00 Consumables ` 2,65,92,899.00 Hire charges ` 74,96,675.00 -----------------` 99,23,86,147.00 -------------------Taxable turnover proposed ` 48,35,60,674.00 Subtracting the net turnover of ` 99,23,86,147.00 from the the taxable turnover proposed ` 48,35,60,674.00, this will be assessed at the rate of 12.5%. ## 4. When the assessment order was passed by the respondent, the figures retained are in the following terms. Net turnover ` 1,47,59,46,821.00 ## Less - 1) Labour ` 21,82,90,798.00 2) Labour charges towards sub-contract not proved ` 2,69,27,565.00 3) Consumables ` 2,65,92,899.00 4) Hire charges ` 74,96,675.00 5) Profit related to labour ` 48,79,45,420.00 --------------------- - ` 76,72,53,357.00 ----------------------` 70,86,93,464.00 The glaring discrepancy is with regard to “profit related to labour”, which came to be substituted as ` 48,79,45,420.00. The reason for the reduction is not discernible from Ext.P11 order. W.P.C. No. 10498 of 2014 -3- 5. Similarly, coming to the case of declared goods, the value of the declared goods as it appears on page '9' of Ext.P11 is in the following terms. (giving split up figures under the head rate of tax) ## “ **D) Rate of Tax** We have declared the goods used in the execution of works contract but taxed @ 12.5% instead of 4% for iron & Steel being declared goods to the tune of Rs.23,00,68,101/and balance goods also @ 4% of Rs. 7,25,96,058/- being other goods like Sand, bricks etc., balance goods like Cement, blue metals etc., @ 12.5% on Rs. 9,77,42,911/- respectively based on the description of goods which is incorporated as such for execution of respective contract. We also enclosed herewith the rate of tax wise, commodity wise details for your ready reference.” The said amount coming to a total of nearly 39 crores came to₹ be reduced as 13,09,56,250/- as seen from the split up figures₹ in page '13' of Ext.P11 in the following terms: “This is assessed as under: Tax due @ 4% on Rs.13,09,56,250.00(declared goods) Rs. 52,38,250.00 Tax due @ 4% on Rs. 59,87,282.00 Rs. 2,39,491.00 Tax due @ 12.5% on Rs. 57,17,49,928.00 Rs. 7,14,68,741.00 ” 6. The learned Senior Counsel for the petitioner submits that, there is no dispute with regard to the actual rate of tax, which shall be only @ 4% in view of the law declared by a Division Bench of this Court in **Jose K.M & Others v. Assistant Commissioner (Assessment) Vat & Others** (2010 KHC 125) W.P.C. No. 10498 of 2014 -4- (to which I was also a party), a copy of which is produced as Ext.P13. It was accordingly that the respondent, though initially sought to fix the tax uniformly @ 12.5% on the entire taxable turn over of 48,79,45,420/-, consciously varied it, fixing the₹ same at '4%' for the declared goods while passing Ext.P11 order. But how the figure of nearly 39 crores came to be reduced as ₹ ₹ 13,09,56,250/- is not discernible from the said order. 7. After hearing both the sides, this Court finds that, if it is actually a mistake/error apparent on the face of the records, it is liable to be corrected by virtue of the power conferred under Section 66 of the KVAT Act. On the other hand, if it is based on the actual materials on record, then, it should have been reflected in the assessment order, referring to the actual facts and figures. In any view of the matter, there is discrepancy, in so far as the factual position is not discernible from Ext.P11. Hence, at the first instance, the petitioner is set at liberty to file a proper petition under Section 66 of the KVAT Act before the respondent and it is for the respondent to have it considered and passed appropriate orders in accordance with law. If any such proceedings are filed within 'two weeks' from the date of receipt of a copy of this judgment, the same shall be considered and W.P.C. No. 10498 of 2014 -5- appropriate orders shall be passed in accordance with law, of course, after giving an opportunity of hearing to the petitioner, at the earliest, at any rate, within 'one month' thereafter. Ext.P14 application for rectification with regard to the claim for input tax credit and such other aspects shall also be considered by the respondent and appropriate orders shall be passed in accordance with law, as expeditiously as possible, at any rate, within the aforesaid time limit. Coercive proceedings shall be kept in abeyance 'in respect of the disputed extent' till such time. The petitioner shall produce a copy of the judgment along with a copy of the writ petition before the respondent for further steps. The writ petition is disposed of. ## **P.R. RAMACHANDRA MENON, JUDGE.** kp/-