Basavaraj B Areshankar vs. State Of Karnataka And Ors
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Before: DR. AMBEDKAR VEEDHI,
Heard together (2 matters)
Read from the judgment's own cause title. This page is filed under one of them.
Heard Sri Naveen Gudikote S., learned counsel for petitioner and Sri Mallikarjun C. Basareddy, Government Advocate for respondent Nos.1 to 4 and 7, Sri. Krupa Sagar Patil, learned counsel for respondent Nos.5 and 6. 2. The writ petitions are filed with the following prayer: NC: 2024:KHC-K:2840 In W.P.No.200206/2024 “(i) issue a writ or such other order in the nature of mandamus directing the respondents to pay the differential GST amount (being the difference between GST and VAT) for each the works contract / composite supply executed by the petitioner and tabulated at annexure-A, as per the representations dated 1-9-2023 and 04-09-2023 produced at annexure-B to B4 given by the petitioner to respective respondent-employers. (ii) issue a writ or such other order directing the respondent no.1 state govt. to issue a circular/policy to address the issue of payment of GST on works contract which are executed under VAT regime wherein, GST is not paid by the respondent employers but is levied and paid by the petitioner- contractors to the GST department. (iii) issue a writ or such other order directing the 2nd respondent to keep in abeyance the execution of the order passed under section 73(1) of the GST Act, pursuant to show cause notice bearing no. ACCT(A)- 1/VJP/Audit/DRC-01/No.22/2023-24/b-208, dated 15.09.2023 issued by the 2nd respondent and produced as annexure-K, till such time the respondents 3 to 7 considers the representation and NC: 2024:KHC-K:2840 makes payment of the differential amount towards GST to the petitioner.” In WP No.200204/2024204
(i) issue a writ or such other order in the nature of mandamus directing the respondent-2 to pay the differential GST amount (being the difference between GST and VAT) for the works contract / composite supply at Annexure-A and A-1 as per the representation dated 06.10.2023 produced at annexure-e given by the petitioner to respective respondent-employers. (ii) issue a writ or such other order directing the respondent no.1-State Govt. to issue a circular/policy to address the issue of payment of GST on works contract which are executed under VAT regime or under old schedule of rates (SR) wherein, GST is not paid by the respondent employers but is levied and paid by the petitioner- contractors to the GST Department. (iii) issue a writ or such other order directing the 2nd respondent to keep in abeyance the execution of the order passed under Section 73(9) of the GST Act, being no. ACCT/AUDIT-1/KLB/2023-24/429 dated 06.09.2023 by the 2nd respondent and produced as annexure-D till such time the respondent 2 NC: 2024:KHC-K:2840 considers the representation and makes payment of the differential amount towards GST to the petitioner.”
The writ petitioners are class I civil contractors who have entered into agreement with Public Works Department and other governmental agencies. Number of agreements entered into by the writ petitioners are detailed out in Annexure-A in both the writ petitions. Agreements were admittedly entered into post amendment to Goods and Service Tax Act, 2017, (‘GST Act’ for short). But the schedule rates fixed under agreements were pre amendment to GST Act when Karnataka Value Added Tax, 2003 (‘KVAT regime’ for short) was in force.
A show cause notice came to be issued vide Annexure-K in W.P.No.200206/2024 and an order came to be passed vide Annexure-D in W.P.No.200204/2024. 5. The writ petitioners contended that schedule rates were fixed in the agreements in KVAT regime and therefore, show cause notice and orders at Annexures-K and D are incorrect.
In support of the said submission, writ petitioners placed reliance on the Order of co-ordinate Bench of this Court in NC: 2024:KHC-K:2840 W.P.No.9721/2019 and connected matters dated 11.04.2023. In paragraph- 18 of the said Order, the learned Judge of the co-ordinate Bench has held as under:
“18. I find considerable force in the submission made by the learned Senior counsel for the petitioners that the tax component is an independent component which the petitioners do not retain as a profit and is a statutory payment to be made; that looking into the nature of such payment of GST, the respondents/employers are required to honour the same after determining the differential tax burden, especially for the petitioners who are before this Court where ”works contract” were entered prior to 01.07.2017 during KVAT regime and works are completed pre-GST but payments are made post-GST or Contracts entered prior to 01.07.2017 but partly executed pre-GST and balance work executed post-GST or Contracts for which tenders were invited during KVAT regime and finalized after 01.07.2017 under GST regime or contracts which were invited during KVAT regime under old schedule of rates (SR) but finalized under GST regime and that a certain procedure is required to be followed to determine the amount payable by or to the works contractors/petitioners.” NC: 2024:KHC-K:2840
Learned counsel for the petitioners, therefore sought for quashing of show cause notice and the Order passed by the Assistant Commissioner.
Per contra, Sri Mallikarjun Basareddy and Sri. Krupa Sagar Patil, learned advocates, support the show cause and the Order passed by the Assistant Commissioner by contending that after amendment came into force in respect of GST Act, petitioners are bound to pay the tax as is prescribed under the amended provisions and not as per the rate fixed in respective agreements.
They also contended that fiscal statutes must be adhered to by the citizens in stricto sensu and therefore, writ petitions are to be rejected.
Sri Mallikarjun Basareddy, learned counsel further contended that there is a provision for appeal and therefore, writ petitioners are to be relegated to the appellate forum for redressal of their grievance, if any, and writ petition in W.P.No.200206/2024 is bound to answer the show cause notice, and sought for dismissal of the writ petitions. NC: 2024:KHC-K:2840
Having heard the learned counsel for the parties, this Court perused the material on record, meticulously.
On such perusal, it is clear that the issue involved in the present writ petitions would fall under category KVAT regime as is enunciated in the Order passed in WP No.9721/2019 and connected matters dated 11.04.2023 at paragraph 18, supra.
When there is a concluded contract and rate has been fixed in KVAT regime for the work contract as per schedule rate, petitioners cannot be directed to pay the Goods and Service Tax for the work that they have completed and received payment.
Therefore, show cause notice and Orders at Annexures-K and D supra in respect of the writ petitioners are without any basis.
As such, Annexures-K and D, supra needs to be quashed.
Accordingly, the following: ORDER (i) Writ Petitions are allowed. NC: 2024:KHC-K:2840 (ii) Show cause notice vide Annexure-K in W.P.No.200206/2024 and an order vide Annexure-D in W.P.No. 200204/2024 are hereby quashed. JUDGE kcm LIST NO.: 1 SL NO.: 96
Reproduced from the public record of the Karnataka High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.