Monnaie Interior Designers Pvt. Ltd. v. The Commercial Tax Officer (WC), Department of Commercial Taxes, Palakkad; The Commissioner of Commercial Taxes, Tax Towers, Killippalam, Karamana, Thiruvananthapuram; Authority for Clarification U/S 94 KVAT Act

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR** **FRIDAY, THE 13TH DAY OF MARCH 2020 / 23RD PHALGUNA, 1941** ## **WP(C).No.37572 OF 2016(V)** ## **PETITIONER/S:** **M/S. MONNAIE INTERIOR DESIGNERS PVT. LTD. 12/7 (11 & 12) HI CENTRE, OPP.INDIRA GANDHI MUNICIPAL STADIUM, COIMBATORE ROAD, PALAKKAD, REPRESENTED BY ITS DIRECTOR, PRAGABHALDAS.K.V** **BY ADVS. SRI.HARISANKAR V. MENON SMT.MEERA V.MENON** ## **RESPONDENT/S:** - **1 THE COMMERCIAL TAX OFFICER (WC) DEPARTMENT OF COMMERCIAL TAXES, PALAKKAD-678001** - **2 THE COMMISSIONER OF COMMERCIAL TAXES TAX TOWERS, KILLIPPALAM, KARAMANA, THIRUVANANTHAPURAM-695002** - **3 AUTHORITY FOR CLARIFICATION U/S 94 OF THE KVAT ACT TAX TOWERS, KILLIPPALAM, KARAMANA, THIRUVANTHAPURAM695002, REPRESENTED BY JOINT COMMISSIONER (LAW)695002** **R1-3 BY SR.GOVERNMENT PLEADER SRI.M.SHAMSUDHEEN** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 13-032020, ALONG WITH WP(C).19082/2019(I), THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** WP(C).No.37572 OF 2016(V) & 19082 OF 2019(I) 2 ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR** **FRIDAY, THE 13TH DAY OF MARCH 2020 / 23RD PHALGUNA, 1941** **WP(C).No.19082 OF 2019(I)** ## **PETITIONER/S:** **M/S MONNAIE INTERIOR DESIGNERS (P) LTD. 12/7(11 AND 12) HI CENTRE, OPP.INDIRA GANDHI MUNICIPAL STADIUM, COIMBATORE ROAD, PALAKKAD, REPRESENTED BY ITS DIRECTOR, PRAGABHALDAS K.V.** **BY ADVS. SRI.HARISANKAR V. MENON SMT.MEERA V.MENON** ## **RESPONDENT/S:** - **1 THE STATE TAX OFFICER (WC) DEPARTMENT OF COMMERCIAL TAXES, PALAKKAD-678 001.** - **2 THE COMMISSIONER OF COMMERCIAL TAXES, TAX TOWERS, KILLIPPALAM, KARAMANA, THIRUVANANTHAPURAM-695 002.** **R1-2 BY SR. GOVERNMENT PLEADER SRI.V.M.SHAMSUDHEEN** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 1303-2020, ALONG WITH WP(C).37572/2016(V, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** WP(C).No.37572 OF 2016(V) & 19082 OF 2019(I) 3 ## **JUDGMENT** ## **[ WP(C).37572/2016, WP(C).19082/2019 ]** As both these writ petitions involve a common issue, they are taken up for consideration together and disposed by this common judgment. 2. W.P.(C)No.37572/2016 is preferred by the common petitioner impugning pre-assessment notices that have been issued for the assessment years 2011-12 to 2014-15 under the KVAT Act. The pre-assessment notices issued to the petitioner proceed on the basis that, while the petitioner had opted to pay tax in terms of Section 8 of the KVAT Act for the work of supply and installation of kitchen cabinets/furniture articles together with interior works like painting, flooring, gypsum ceiling etc. undertaken in respect of various customers, and declared the receipts for the said years in the return filed for the said years, the petitioner assessee cannot treat the works as works contracts for the purposes of discharge of tax liability under the Act. In the pre-assessment notices it is the case of the respondent that the work undertaken by the petitioner assessee would have to be seen as supply of independent articles and not as work contracts and that the assessee would, therefore, have to pay tax on the individual items supplied to the customer. The respondents also have a case that in respect of the assessment year 2014-15 the petitioner assessee had not filed any application seeking permission to pay tax on compounded basis under Section 8 of the KVAT Act. 3. In W.P.(C)No.19082/2019 the petitioner impugns Ext.P6 order of the 1[st] respondent assessing authority, that completed the assessment of the petitioner to tax under the KVAT Act for the assessment year 2015-16 by denying the petitioner the benefit of reduced rate of tax as applicable to works contract under WP(C).No.37572 OF 2016(V) & 19082 OF 2019(I) 4 Section 8 of the KVAT Act. In the said writ petition, the stand of the respondents is essentially that the benefit of treating the works as works contract for the purpose of Section 8 of the KVAT Act was not available to the petitioner in the year since the work of installation of kitchen cabinets was included in the negative list of works that stood excluded from the ambit of works contract for the purposes of Section 8(a) of the KVAT Act. The contention of the petitioner in the writ petition, however, is with regard to the inclusion, in the turnover assessed to tax in the said year, of turnover pertaining to works contracts that had been declared in the previous year and had obtained the benefit of the reduced rate of tax as applicable to works contract under Section 8 of the KVAT Act. 4. Counter affidavits have been filed in both the writ petitions wherein the proposal of the respondents to deny the benefit of low rate of tax as applicable to works contract to the petitioner is premised on the decision of the Supreme Court in **State of Andhra Pradesh v. Kone Elevators (India) Ltd.[2005] 140** **STC 22 (SC)** . It is stated, by relying on the said decision, that the works undertaken by the petitioner cannot be seen as works contracts but rather as supplies by the petitioner of individual items, liable to tax at the rates applicable to said items in the schedule to the KVAT Act. With regard to the assessment year 2015-16, it is the case of the respondents that for the said year, at any rate, the petitioner was not entitled to treat the works as works contract in view of the negative list to Section 8 of the KVAT Act, and the exclusion of the works done by the petitioner therefrom, and hence there is no justification for interfering with the assessment order passed for the said year. 5. I have heard Sri.Harisankar V.Menon, the learned counsel for the petitioner in both these writ petitions and Sri.V.A.Shamsudeen, the learned Senior WP(C).No.37572 OF 2016(V) & 19082 OF 2019(I) 5 Government Pleader for the respondents in both these writ petitions. 6. On a consideration of the facts and circumstances of the case and the submissions made across the Bar, I find that subsequent to the decision of the Supreme Court in **[2005] 140 STC 22 (SC) (supra)** , a Larger Bench of the Supreme Court has since taken a contrary view as seen in **Kone Elevator India Pvt.Ltd. v. State of Tamil Nadu [2014] 71 VST 1 (SC).** The said decision of the Supreme Court has also been followed by this Court in **State of Kerala v. P.C.Kurian [2019] 65 GSTR 338 (Ker)** . The said decision would necessitate a fresh consideration of the factual issues by the assessing authority for the assessment years covered by W.P.(C)No.37572/2016. This is more so because, the works for installation of kitchen cabinets can vary from customer to customer and the assessing officer has to necessarily examine whether the contract in each case is one for the supply of standard items of which the tax is to be paid at a scheduled rate or whether work is a divisible work, one for supply for specified items at agreed rate and the balance for execution of works like site fabrication, installation of kitchen top, etc. The assessing officer would have to keep in mind the tests formulated by the Supreme Court in the decision **[2014] 71 VST 1 (SC) (supra)** and take a decision in the matter after ascertaining whether the petitioner assessee had in fact opted for payment of tax on compounded basis for the assessment year in question. I, therefore, dispose W.P.(C)No. 37572/2016 by directing the 1[st] respondent assessing authority to take note of the objections of the petitioner to the pre-assessment notices issued to him for the various assessment years up to 2014-15, and pass orders of assessment taking note of the decisions referred above and the tests laid down therein and after hearing the petitioner. The said exercise shall be completed by the 1[st] respondent assessing authority within a period of two months from the date of receipt of a copy of this WP(C).No.37572 OF 2016(V) & 19082 OF 2019(I) 6 judgment, after hearing the petitioner. It will be open to the petitioner to file additional objections, including supplementary material, to fortify his contentions on the merits of the case before the 1[st] respondent at the time of personal hearing in connection with the assessment. 7. As regards W.P.(C)No.19082/2019, as already noticed, the matter pertains to the assessment year 2015-16, when the work undertaken by the petitioner stood excluded from the ambit of works contract for the purposes of payment of reduced rate of tax under Section 8 of the KVAT Act. The contention of the petitioner, however, is with regard to the inclusion of turnover pertaining to the works contracts that were covered by the declaration given by the petitioner in terms of Section 8 of the KVAT Act for the previous years. If it is found, as a matter of fact, that there is a portion of the turnover included in the return for the assessment year 2015-16, that is attributable to works undertaken in the previous years and in respect of which declarations have been filed in terms of Section 8 of the KVAT Act during the said years, then the assessing authority would necessarily have to exclude the said turnover from assessment to tax in the said assessment year. In other words, the said turn over would have to be treated as eligible for the concessional rate of tax under Section 8 of the KVAT Act, provided the petitioner is shown to have filed the necessary application seeking permission to pay tax on compounded basis for the previous year. The tests to be applied for determining whether the work undertaken, and pertaining to the said turn over, is one that is covered by the definition of works contract for the purposes of Section 8 would also have to be undertaken by the assessing officer for the said year. To enable the 1[st] respondent assessing officer to redo the assessment on the basis of the aforesaid directions, I quash Ext.P6 order in W.P.(C)No.19082/2019 and direct the 1[st] respondent to redo the assessment for the said year in the light of the WP(C).No.37572 OF 2016(V) & 19082 OF 2019(I) 7 directions given above, within a period of two months from the date of receipt of a copy of this judgment. As already permitted in the case of W.P.(C)No.37572/2016, it will be open to the petitioner to file additional objections, including supplementary material, to fortify his contentions on the merits of the case before the 1[st] respondent at the time of personal hearing in connection with the assessment. Sd/- **A.K.JAYASANKARAN NAMBIAR JUDGE** sd WP(C).No.37572 OF 2016(V) & 19082 OF 2019(I) 8 ## **APPENDIX OF WP(C) 37572/2016** ## **PETITIONER'S/S EXHIBITS:** |**P1**|**COPY OF NOTICE ISSUED BY THE 1ST RESPONDENT**| |---|---| ||**FOR THE YEAR 2011-12**| |**P1(A)**|**COPY OF NOTICE ISSUED BY THE 1ST RESPONDENT**| ||**FOR THE YEAR 2012-13**| |**P1(B)**|**COPY OF NOTICE ISSUED BY THE 1ST RESPONDENT**| ||**FOR THE YEAR 2013-14**| |**P1(C)**|**COPY OF NOTICE ISSUED BY THE 1ST RESPONDENT**| ||**FOR THE YEAR 2014-15**| |**P2**|**COPY OF ORDER ISSUED BY THE 2ND RESPONDENT**| |**P2(A)**|**COPY OF ORDER ISSUED BY THE 3RD RESPONDENT**| |**P3**|**COPY OF APPLICATION FILED BY THE PEITITONER**| ||**BEFORE THE 3RD RESPONDENT**| |**P3(A)**|**COPY OF AGREMENT**| |**P4**|**COPY OF REPLY FILED BY THE PETITIONER**| ||**BEFORE THE 1ST RESPONDENT**| sd WP(C).No.37572 OF 2016(V) & 19082 OF 2019(I) 9 ## **APPENDIX OF WP(C) 19082/2019** ## **PETITIONER'S/S EXHIBITS:** **EXHIBIT P1 COPY OF NOTICE ISSUED BY THE 1ST RESPONDENT FOR THE YEAR 2011-12 DATED 15.3.2016** **EXHIBIT P1 A COPY OF NOTICE ISSUED BY THE 1ST RESPONDENT FOR THE YEAR 2012-13 DATED 15.3.2016** **EXHIBIT P1 B COPY OF NOTICE ISSUED BY THE 1ST RESPONDENT FOR THE YEAR 2013-14 DATED 15.3.2016** **EXHIBIT P1 C COPY OF NOTICE ISSUED BY THE 1ST RESPONDENT FOR THE YEAR 2014-15 DATED 9.8.2016** **EXHIBIT P2 COPY OF ORDER ISSUED ISSUED BY THE 2ND RESPONDENT DATED 3.7.2007** **EXHIBIT P2 A COPY OF ORDER ISSUED BY THE JOINT COMMISSIONER DATED 27.11.2013** **EXHIBIT P3 COPY OF ORDER IN WPC NO 37572/16 OF THIS HON'BLE COURT DATED 19.1.2017** **EXHIBIT P4 COPY OF NOTICE ISSUED BY THE 1ST RESPONDENT DATED 12.1.2018** **EXHIBIT P5 COPY OF REPLY FILED BY THE PETITIONER BEFORE THE 1ST RESPONDENT DATED 27.2.2018 EXHIBIT P6 COPY OF ORDER ISSUED BY THE 1ST RESPONDENT DATED 18.5.2019** ## **RESPONDENT'S/S EXHIBITS:** **EXHIBIT R1(a): TRUE COPY OF THE AGREEMENT.** sd