M/S. Ideal Developers and Builders Pazhery Plaza v. State of Kerala

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: S. V. Bhatti
Basant Balaji
Judgment Date: 2022-09-27
Court Decision / Holding: For the above reasons, the revision petitions fail and are dismissed. No order as to costs. The remaining connected revisions are also dismissed.
Final Disposition: Dismissed, including OT.Rev Nos.160/2020, 165/2020, 164/2020, 163/2020

Parties to the Case

Appellants / Petitioners

M/S. Ideal Developers and Builders Pazhery Plaza, Pazhery Plaza, 2nd Floor, Kodathippady, Mannarkkad, Palakkad District, represented by its Managing Partner, Anil P.

Respondents

State of Kerala represented by its Secretary, Taxes Department, Government Secretariat, Thiruvananthapuram

Legal Representation & Advocates

Counsels for Petitioners

• Harisankar V. Menon
• Smt. Meera V. Menon

Counsels for Respondents

• Sr GP. V.K. Shamsudheen

Case Synopsis & Summary

These revision petitions under the Kerala Value Added Tax Act relate to credit for tax deducted at source on a works contract. The petitioner, M/S Ideal Developers and Builders Pazhery Plaza, challenged an order of the Kerala VAT Appellate Tribunal concerning returns for the year 2010-11. The awarder deducted tax at source under Section 10 and issued Form 20F showing the deduction. The petitioner claimed adjustment of the TDS against its tax liability, arguing that where tax has been deducted and the awarder has issued a certificate, the credit should be allowed even if the deduction has not been remitted to the Treasury. The petitioner relied on Section 10 and the corresponding rules in Rule 42(2) and Rule 42(8), contending that the awarder’s failure to remit should not defeat the petitioner’s right to adjust. The State opposed, arguing that the obligation to deduct is on the awarder and must be realized through remittance to the assessing authority; the adjustment can only be made when remittance has been established. The court examined the cited Harsha Constructions case, noting it arose under a different statute and distinguishing it; it held that the ratio could not be applied. After considering the provisions, the court dismissed the revisions, holding that without proof of remittance, adjustment cannot be granted. The batch of four revisions is disposed of accordingly.

Provisions of Law Cited

KVAT Act, Section 6KVAT Act, Section 10KVAT Rules, Rule 42(2)KVAT Rules, Rule 42(8)

Submissions & Arguments

Contentions of Appellants / Petitioners

The petitioner's counsel argued that the Form 20F certificate evidencing deduction of tax at source by the awarder establishes withholding of tax. If the awarder did not deposit the deducted amount to the Treasury, the credit claimed by the petitioner cannot be denied. Section 10 of the KVAT Act imposes an obligation on the awarder to deduct and remit, and non-compliance cannot penalize the petitioner. The deduction must be supported by Rule 42(2) and 42(8) of the KVAT Rules; adjustment is permissible only when remittance is proven; Harsha Constructions (SC) is distinguishable and cannot be applied as a blanket directive; the revision should be allowed and the impugned orders set aside.

Contentions of Respondents

The respondent argued that the obligation under Section 10 is independent and must be read with Rule 42. Without proof of remittance, adjustments cannot be granted; the State's revenue interest must be protected; the petitioner’s claim cannot be upheld merely by presenting a Form 20F; Harsha Constructions is distinguishable.

Cited Precedents (1)

Case Name	Citation	Treatment	Explanation
Harsha Constructions v. Commercial Tax Officer and Others	[2007] 10 VST 216 (SC)	Distinguished	The court distinguished the Harsha Constructions decision as dealing with a different statutory framework (Andhra Pradesh General Sales Tax Act) and KVAT Rules differ, thus the ratio could not be applied to the present case.

Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** # **PRESENT** **THE HONOURABLE MR.JUSTICE S.V.BHATTI** **&** ## **THE HONOURABLE MR.JUSTICE BASANT BALAJI** **TUESDAY, THE 27[TH] DAY OF SEPTEMBER 2022 / 5TH ASWINA, 1944** **OT.REV NO. 160 OF 2020** **AGAINST THE ORDER IN TAVAT 1184/2018 OF KVAT APPELLATE TRIBUNAL,** **KOZHIKODE** ## **REVISION PETITIONER:** **M/S. IDEAL DEVELOPERS AND BUILDERS PAZHERY PLAZA, 2ND FLOOR, KODATHIPPADY, MANNARKKAD, PALAKKAD DISTRICT, REPRESENTED BY ITS MANAGING PARTNER, ANIL.P.** **BY ADVS. HARISANKAR V. MENON SMT.MEERA V.MENON** **RESPONDENT:** **STATE OF KERALA REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT, GOVT. SECRETARIAT, THIRUVANANTHAPURAM-695001.** **BY ADV GOVERNMENT PLEADER** **SR GP. V.K. SHAMSUDHEEN** **THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR ADMISSION ON 27.09.2022, ALONG WITH OT.Rev.165/2020, 164/2020 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **OT.REV NO. 160 OF 2020 & Con.cases** **-2-** ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE S.V.BHATTI** **&** **THE HONOURABLE MR.JUSTICE BASANT BALAJI** **TUESDAY, THE 27[TH] DAY OF SEPTEMBER 2022 / 5TH ASWINA, 1944** **OT.REV NO. 165 OF 2020** **AGAINST THE ORDER IN TAVAT 676/2018 OF KVAT APPELLATE TRIBUNAL,** **KOZHIKODE** ## **REVISION PETITIONER:** **M/S. IDEAL DEVELOPERS AND BUILDERS PAZHERY PLAZA, 2ND FLOOR, KODATHIPPADY, MANNARKKAD, PALAKKAD DISTRICT, REPRESENTED BY ITS MANAGING PARTNER, ANIL P.** **BY ADVS. HARISANKAR V. MENON SMT.MEERA V.MENON** **RESPONDENT:** **STATE OF KERALA REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT, GOVT. SECRETARIAT, THIRUVANANTHAPURAM.** **BY ADV GOVERNMENT PLEADER, SR GP. V.K. SHAMSUDHEEN** **THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR ADMISSION ON 27.09.2022, ALONG WITH OT.Rev.160/2020 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **OT.REV NO. 160 OF 2020 & Con.cases** **-3-** ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** # **PRESENT** **THE HONOURABLE MR.JUSTICE S.V.BHATTI** **&** **THE HONOURABLE MR.JUSTICE BASANT BALAJI** **TUESDAY, THE 27[TH] DAY OF SEPTEMBER 2022 / 5TH ASWINA, 1944** **OT.REV NO. 164 OF 2020** **AGAINST THE ORDER IN TAVAT 677/2018 OF KVAT APPELLATE TRIBUNAL,** **KOZHIKODE** ## **REVISION PETITIONER:** **M/S. IDEAL DEVELOPERS AND BUILDERS PAZHERY PLAZA 2ND FLOOR, KODATHIPPADY, MANNARKKAD, PALAKKAD DISTRICT, REPRESENTED BY ITS MANAGING PARTNER ANIL.P.** **BY ADVS. HARISANKAR V. MENON SMT.MEERA V.MENON** **RESPONDENT:** **STATE OF KERALA REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT GOVT. SECRETARIAT, THIRUVANANTHAPURAM 695 001.** **BY ADV GOVERNMENT PLEADER, SR GP. V.K. SHAMSUDHEEN** **THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR ADMISSION ON 27.09.2022, ALONG WITH OT.Rev.160/2020 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **OT.REV NO. 160 OF 2020 & Con.cases** **-4-** ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE S.V.BHATTI** **&** **THE HONOURABLE MR.JUSTICE BASANT BALAJI** **TUESDAY, THE 27[TH] DAY OF SEPTEMBER 2022 / 5TH ASWINA, 1944** **OT.REV NO. 163 OF 2020** **AGAINST THE ORDER IN TAVAT 1185/2018 OF KVAT APPELLATE TRIBUNAL,** **KOZHIKODE** ## **REVISION PETITIONER:** **M/S. IDEAL DEVELOPERS AND BUILDERS PAZHERY PLAZA, 2ND FLOOR, KODATHIPPADY, MANNARKKAD, PALAKKAD DISTRICT, REPRESENTED BY ITS MANAGING PARTNER, ANIL P.** **BY ADVS. HARISANKAR V. MENON SMT.MEERA V.MENON** **RESPONDENT:** **STATE OF KERALA REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT, GOVT. SECRETARIAT, THIRUVANANTHAPURAM.** **SR GP. V.K. SHAMSUDHEEN** **THIS OTHER TAX REVISION (VAT) HAVING COME UP FOR ADMISSION ON 27.09.2022, ALONG WITH OT.Rev.160/2020 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **OT.REV NO. 160 OF 2020 & Con.cases** **-5-** ## **O R D E R** [OT.Rev Nos.160/2020, 165/2020, 164/2020, 163/2020] ## S.V.Bhatti, J. We have heard Adv. Harishankar V. Menon for the petitioner and Mr. V.K Shamsudheen learned Senior Government Pleader for the respondent. 2. The parties in these four revisions are same and the counsel appearing for the parties would suggest that O.T. Revision No.160/2020 could be treated as lead case for disposing of the batch of cases. ## O.T.Rev. 160/2020 3. The petitioner/dealer registered under the Kerala Value Added Tax Act, 2003 (for short, ‘the KVAT Act’) is in revision, assailing the order dated 22.10.2019 in TA(VAT) No.1184/2018 of the Kerala Value Added Tax Appellate Tribunal, Kozhikode (for short, **OT.REV NO. 160 OF 2020 & Con.cases** **-6-** ‘the Tribunal’). The O.T.Revision relates to the returns filed for the year 2010-11. The circumstances relevant for disposing of the revision are stated thus: 3.1 The petitioner executed a works contract for M/s. Pazheri Properties and Developers Pvt. Ltd. The awarder deducted tax at source payable under the KVAT Act while making payments for the works executed by the petitioner. The awarder issued the Form 20F certificate evidencing deduction of tax at source. The petitioner filed returns claiming adjustment of Tax Deducted at Source by the awarder from the tax payable by the petitioner. The adjustment/credit claimed by the petitioner was rejected by all the three authorities. Hence the revisions. 4. Adv. Harishankar V. Menon appearing for the petitioner argues that the certificate filed by the petitioner in proof of deduction of tax at source by the awarder demonstrates withholding of tax by the awarder and the awarder if has not deposited the amount to the Treasury account, the credit or the adjustment **OT.REV NO. 160 OF 2020 & Con.cases** **-7-** claimed by the petitioner shall not be denied. Filing the certificate suffices for claiming adjustment from tax payable by the petitioner. He places reliance on Section 10 of the KVAT Act and argues that an obligation is fastened on the awarder by Section 10 of the KVAT Act. The failure to perform such obligation by the awarder is not a reason to deny the adjustment claimed by the petitioner. He prays for setting aside the order impugned in the revision. 5. Mr. V. K Shamsudheen, argues that the obligation fastened on the awarder under Section 10 of the KVAT Act and breach thereof by the awarder by itself is not a circumstance to allow the adjustment claimed by the petitioner. According to him, the obligation fastened by Section 10 is independent and will have to be appreciated with Rule 42 (2) and (8) of the KVAT Rules for claiming adjustment. In the case on hand, it is not the case of petitioner as well that in spite of the petitioner placing proof of deposit of the tax deducted by the awarder still the adjustment is denied. On the other hand, it is appreciated that the adjustment is **OT.REV NO. 160 OF 2020 & Con.cases** **-8-** claimed in spite of the State having not received any revenue from the petitioner or the awarder of the contract. 5.1 He commends to us the findings recorded by the Tribunal and prays for dismissing the revision. He distinguishes the judgment reported in **Harsha Constructions v. Commercial Tax Officer and Others**[1] as not dealing with the scheme of provisions under which obligation on the awarder and the dealer would arise. 6. We have taken note of the rival contentions and we would like to first take up the contention urged by referring to the judgment of the Supreme Court reported in **Harsha Constructions** case (supra). In the case on hand, the issues arise in the return filed for the assessment year 2010-11 and also under the KVAT Act. The reported judgment is dealing with the provisions under Andhra Pradesh General Sales Tax Act, 1957 and the requirement of KVAT Rules are different. 1 [2007] 10 VST 216 (SC) **OT.REV NO. 160 OF 2020 & Con.cases** **-9-** 6.1 After perusing the circumstances considered by the Apex Court and the directions issued by the Apex Court to the Authorities under General Sales Tax Act, we are of the view that the said ratio cannot be applied to the case as a dictum to direct the respondent to allow the adjustment now claimed by the petitioner. Therefore, the said judgment is distinguishable and hence, not relied upon. 6.2 The next argument is on the obligation of the awarder under Section 10 of the KVAT Act and whether the failure on the part of the awarder would enable the Revenue to proceed against the petitioner for realising the said amount. 6.3 For appreciating the rival contentions, we find it convenient to excerpt the following provisions: ## KVAT Act **10. Deduction of tax at source** -(1) Every awarder shall deduct from every payment, including advance payment, made by him to any works contractor liable to pay tax under section 6, in relation to any works contract awarded, the tax payable by the contractor in respect of such contract under that section, whether the transfer of goods involved in the execution of works contract is in the form of goods or not, and remit it to Government, in the prescribed manner, on or before the twentieth day of the month succeeding the month in which **OT.REV NO. 160 OF 2020 & Con.cases** **-10-** such deduction is made. Every such awarder shall also file such return as may be prescribed. ## - KVAT Rules Sub Rule (2) & (8) of Rule 42: (2) Every awarder making deduction from the payments made to a contractor under sub-section (1) of Section 10 shall pay the amount so deducted to the assessing authority, with whom the contractor is registered as a dealer, and if he is not so registered, to the assessing authority having jurisdiction over the area where the works contract is executed, by means of cheque or by a crossed demand draft in favour of the assessing authority or by remitting the amount in the treasury in the name of the contractor and producing the Chelan before such authority, along with a statement in Form No. 20C, within the time limit specified under section 10: *** (8) The amount deducted by the awarder from the payments due to the contractor and remitted under sub-rule (2) shall be adjusted against the tax or other amount due from the contractor for the return period during which such deduction is made. 6.4 ‘Deduction of tax by awarder’ is covered by rule 42 of the KVAT Rules. Under sub-rule (8), the awarder if has deducted the amount from the payment due to the awardee (contractor) and remitted the said amount under sub-rule (2) only such amount remitted shall be adjusted against the tax payable by the awardee/petitioner. In the scheme of things, the adjustment cannot be accepted unless and until proof of remittance is established in **OT.REV NO. 160 OF 2020 & Con.cases** **-11-** accordance with Rule 42 and sub-rules (2) and (8). As already noted, it is not the case of the petitioner that the awarder has remitted the amount to the treasury and adjustment in not given by the Department. The grounds argued are untenable in law and fact. For the above reasons, revision fails, dismissed. No order as to costs. ## **O.T.Rev. Nos.165/2020, 164/2020, 163/2020** For view and conclusion recorded in O.T.Rev. No.160/2020, the O.T.Rev. Nos.165/2020, 164/2020, 163/2020 stand dismissed. **S.V.BHATTI** **JUDGE** **BASANT BALAJI JUDGE** JS **OT.REV NO. 160 OF 2020 & Con.cases** **-12-** ## **APPENDIX OF OT.REV 165/2020** **PETITIONER ANNEXURES** **ANNEXURE A** **COPY OF ORDER ISSUED BY THE COMMERCIAL TAX OFFICER (WC), PALAKKAD FOR THE YEAR 2013-14.** **ANNEXURE B COPY OF ORDER ISSUED BY THE DY.COMMISSIONER (APPEALS), PALAKKAD.** **ANNEXURE C** **COPY OF ORDER IN TA (VAT) NO.676/2018 OF THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, KOZHIKODE.** **OT.REV NO. 160 OF 2020 & Con.cases** **-13-** ## **APPENDIX OF OT.REV 164/2020** **PETITIONER ANNEXURES** ## **ANNEXURE A** **COPY OF ORDER ISSUED BY THE COMMERCIAL TAX OFFICER (WC), PALAKKAD FOR THE YEAR 2014-15 DATED 31.03.2016.** **ANNEXURE B COPY OF ORDER ISSUED BY THE DY. COMMISSIONER (APPEALS), PALAKKAD. 17.08.2017.** ## **ANNEXURE C** **COPY OF ORDER IN TA (VAT) NO. 677/2018 OF THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, KOZHIKODE DATED 22.10.2019.** **OT.REV NO. 160 OF 2020 & Con.cases** **-14-** ## **APPENDIX OF OT.REV 163/2020** **PETITIONER ANNEXURES** ## **ANNEXURE A** **COPY OF ORDER ISSUED BY THE COMMERCIAL TAX OFFICER (WC), PALAKKAD FOR THE YEAR 2011-12 DATED 30.1.2016.** **ANNEXURE B COPY OF ORDER ISSUED BY THE DY. COMMISSIONER (APPEALS), PALAKKAD DSTED 14.6.2018.** ## **ANNEXURE C** **COPY OF ORDER IN TA (VAT) NO.1185/2018 OF THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, KOZHIKODE DATED 22.10.2019.** **OT.REV NO. 160 OF 2020 & Con.cases** **-15-** ## **APPENDIX OF OT.REV 160/2020** **PETITIONER ANNEXURES** ## **ANNEXURE A** **COPY OF ORDER ISSUED BY THE COMMERCIAL TAX OFFICER(WC), PALAKKAD FOR THE YEAR 2010-2011 DATED 30.01.2016.** **ANNEXURE B COPY OF ORDER ISSUED BY THE DY.COMMISSIONER (APPEALS), PALAKKAD DATED 14.06.2018.** ## **ANNEXURE C** **COPY OF ORDER IN TA(VAT)NO.1184/2018 OF THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, KOZHIKODE DATED 22.10.2019.**