A division bench of Justice Ujjal Bhuyan and Justice Surepalli Nanda has held that a VAT dealer who has opted for a composition scheme under the Telangana VAT Act, 2005 shall not be subjected to regular assessment under the Act.
The petitioner, Sri Raghavendra, is a special class civil contractor registered with the Government of Telangana. It is carrying on the business of execution of civil work relating to construction of roads etc. Petitioner is a registered dealer under the Telangana Value Added Tax Act, 2005 (TVAT Act) as well as under the Goods and Services Tax (GST).
The petitioner had opted for composition of tax and therefore filed applications under Form VAT 250 on monthly basis covering the aforesaid assessment periods along with the returns filed under Form VAT 200. On July 2019, the petitioner received an urgent payment notice from the Commercial Tax Officer, Bhongir Circle, Bhongir. The petitioner challenged the notice contending that the same is illegal.
The bench observed that as per the relevant provision, any VAT dealer who executes a contract and opts to pay tax by way of composition, must register himself as a VAT dealer and he shall pay tax at the rate of 5% of the total consideration received or receivable. In a case where the VAT dealer opts for composition he shall before commencing execution of the work notify the prescribed authority in Form VAT 250 details of the contract on which composition option has been exercised. On receipt of the payment by the VAT dealer, he shall calculate the tax at 5% of the amount received and shall enter such details in Form VAT 200 whereafter the tax due shall be paid along with the return in Form VAT 200.
“According to the Supreme Court, payment of tax under the composition scheme is a bilateral agreement between the parties. The scheme provides for a bilateral agreement between an assessee and the taxing authority with an object to dispense with the requirement of regular assessment and for the easy purpose of levy and collection of tax. It is the choice of a dealer to opt for compounded payment of tax and if the said choice is in accordance with the scheme and is accepted by the taxing authority, it becomes an agreed amount of tax,” the Tribunal said.
“Once the contract is affected by way of payment of composition tax and acceptance thereof, both the parties are bound by the contract,” the bench held.
Concluding the order, the Court held that “We agree with the submission made by Mr. Srinivas, learned senior counsel for the petitioner that this is a jurisdictional fact which goes to the root of the matter. If there is payment of tax under the composition scheme, question of regular assessment would not arise. In such circumstances receipt or nonreceipt of pre-assessment notices or assessment orders would have no significance or bearing as those are besides the point. When an action is without jurisdiction, the fact that the same has been put to challenge after two years would not be of material consequence.”
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