2025-VIL-317-KAR
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VAT High Court Cases

Karnataka Value Added Tax Act, 2003 - Suo motu revision, Change of opinion, Finality of assessment under Karasamadhana Scheme - Appellant is engaged in the business of executing civil works, building residential & commercial complexes - Respondents issued reassessment notices raising demands on various grounds such as mismatch in declared turnover, disallowance of deduction for sub-contractor payments, and non-declaration of unregistered dealer (URD) purchases - Whether the respondents were justified in invoking the suo motu revision powers under Section 64 of the KVAT Act, in the absence of satisfying the twin conditions of the order being erroneous and prejudicial to the interest of the revenue – HELD - The reassessment orders were not demonstrably erroneous, either in law or on facts, nor were they prejudicial to the interest of the revenue. The mere change of opinion by the revisional authority cannot be a ground to invoke suo motu revision powers. The revisional authority had erroneously disallowed the deduction claimed towards land cost, as the immovable property cannot be subjected to VAT taxation under the scheme of the KVAT Act – The impugned orders are set aside and the appeals are allowed - Whether the levy of tax on the consideration received towards land cost, which does not constitute a works contract under the Composition Scheme of KVAT, is sustainable – HELD - The levy of tax on the land cost is not sustainable as the VAT scheme of taxation, more particularly in view of Article 366(29A)(b) of the Constitution, provides for tax on the sale or purchase of goods, and the immovable properties cannot be directly or indirectly roped in. The court observed that the impugned orders, which take into account the land cost, are apparently wrong and unsustainable - Whether the assessment proceedings for the periods 2014-15 and 2015-16, which have attained finality under the Karasamadhana Scheme, 2019, can be reopened by invoking the revisional powers under Section 64 of the Act – HELD - Once the issue is settled and closed under the Karasamadhana Scheme, no fresh proceedings can be initiated by invoking the revisional powers under Section 64 of the Act. The Commissioner's clarificatory order, which provided for reopening of such settled cases, undermines the legislative scheme and should be considered non est in law.
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