DURGA PROJECTS INC Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) The appellant is a Partnership Firm registered under the provisions of Karnataka Value Added Tax Act, 2003 (hereinafter referred to as KVAT Act) engaged in the business of civil works contract, purchase of necessary building materials, hardware, the goods falling under III schedule, the declared goods under Section 15 of the CST Act and other non-scheduled goods within and outside the State as well as from the unregistered dealers.

(2.) The appellant made an application under Section 60 of the KVAT Act before the Authority for Clarifications and Advance Rulings (ACAR for short) seeking for clarification in respect of :

(3.) The ACAR after examining the matter in detail, by its order dated 2-8-2006 came to the conclusion that there is no specific entry providing rate of tax on works contract under the KVAT Act, up to 31-3-2006 and therefore, tax should be levied as per the rate applicable on the value of each class of goods involved in the execution of works contract i.e. if the goods involved are taxable at the rate of 4%, then works contract rate would be at 4% and if the rate is 12.5%, the works contract rate would also be at 12.5%. With regard to the clarification of input tax credit is concerned, no finding has been given. The appellant subsequently sought for rectification of the order dated 2-8-2006 before the ACAR. The ACAR further clarified on 7-12-2006 stating that iron and steel is one of the commodities specified under Section 14 of the CST Act 1956, as goods of special importance and therefore, the iron and steel are to be subjected to works contract tax at 4%, when it was used in the same form and if they are used in manufacture or fabrication of product, it would no longer qualify as iron and steel and would have to be subjected to works contract tax at 12.5%.