In a significant ruling, the Kerala High Court has provided a relief of Rs. 1.2 Crore to M/s Hi-Lite Projects Pvt. Ltd., a works contractor, by allowing them to avail a lower 4% tax rate under the Kerala Value Added Tax (KVAT) Act instead of the higher 6% rate, imposed along with Penalty.
The case revolved around the assessment year 2014-2015, during which Hi-Lite Projects had opted to pay tax under the compounding scheme at a concessional rate of 3% under Section 8(a)(ii) of the KVAT Act. The petitioner was represented by Advocates M P Shameem Ahamed and Cyriac Tom.
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The company had canceled its CST registration effective from March 31, 2014, and argued that it had not imported any goods from other states or countries for incorporation in its works contracts. However, the intelligence officer found that certain consignments of taxable goods had reached the company through interstate transactions, leading to the imposition of a higher tax rate of 6% and a penalty.
Hi-Lite Projects contested the penalty, producing documents to show that the local supplier had already paid the applicable 4% KVAT on the goods. The revisional authority remitted the matter back to the original authority for further examination, but the intelligence officer again imposed the penalty, citing the presence of the company’s name and TIN number in the 8F Forms generated for interstate sales.
The first appellate authority ruled in favor of Hi-Lite Projects, noting that the transactions had suffered tax under the KVAT Act and that the company was entitled to the concessional rate. However, the appellate tribunal reversed this decision, holding that the interstate nature of the transactions required the higher tax rate.
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The Kerala High Court, however, found that the tax due under the KVAT Act had been discharged by the supplier, and there was no revenue loss to the state. The court held that merely showing the company’s name as consignee in the 8F Forms did not change the nature of the transactions to interstate sales.
Consequently, the Kerala High Court Bench of Justice A K Jayasankaran Nambiar and Justice Easwaran S set aside the tribunal’s order and restored the first appellate authority’s decision, allowing Hi-Lite Projects to avail the lower tax rate at 4% instead of the higher 6% rate.
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