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2008 DIGILAW 481 (PAT)

GAMMON INDIA LIMITED v. NTPC LIMITED

2008-03-11

ABHIJIT SINHA, BARIN GHOSH

body2008
JUDGMENT No value added tax is recoverable in respect of labour charges in terms of the Bihar Value Added Tax Act, 2005. Section 41 of the said Act imposes an obligation upon the purchaser to recover advance value added tax from the consideration payable in respect of transfer of property in goods, but not on account of labour charges charged by a contractor. Rule 29 of the Bihar Value Added Tax Rules, 2005 makes it abundantly clear that while making such deduction of advance tax no deduction shall be made on account of payment pertaining to labour charges for execution of works contract. The writ petitioner has entered into a works contract with the respondent No. 1, NTPC Ltd. It has raised bills for the work done by it. The bills are composite in nature. They do not indicate separately the value of consideration payable to the writ petitioner by respondent No. 1 in respect of transfer of property in goods made by petitioner in favour of respondent No. 1 in execution of the said works contract and consideration payable on account of labour charges for execution of the work contract. As a result, though not entitled to, respondent No. 1 started recovery of advance value added tax from the payments made in respect of some of such bills not only for the consideration payable in respect of transfer of property in goods but also for labour charges for execution of the works contract. The present writ petition is to restrain respondent No. 1 from doing so. The learned counsel for respondent No. 1 has submitted that no sooner bills are re-submitted segregating the amounts payable by respondent No. 1 to the petitioner on account of consideration payable in respect of transfer of property in goods vested in it in execution of the works contract and payment due by it on account of labour charges for execution of the works contract, than it shall recover advance value added tax only in respect of consideration for transfer of the property in goods and will not charge advance value added tax on the amount payable on account of labour charges. Accordingly, this writ petition is disposed of by directing the petitioner to re-submit bills indicating separately the consideration payable in respect of transfer of property in goods vested in respondent No. 1 in execution of the subject works contract and also to indicate separately payments due to them by respondent No. 1 pertaining to labour charges for execution of the works contract and also all other charges indicated in rule 29 of the said Rules. Respondent No. 1 thereupon shall make payment to the extent it is liable to pay the petitioner in respect of such bills and while doing so shall deduct advance value added tax to the extent the same is deductable only on account of valuable consideration payable in respect of transfer of property in goods which vested in respondent No. 1 on execution of the subject works contract. The petitioner shall be entitled to take recourse to the direction, as above, in respect of only those bills which are yet to be paid and of future bills. In relation to the bills which have been paid after deducting value added tax also from those amounts indicated in rule 29 of the said Rules, the petitioner shall be at liberty to approach the State Government or the appropriate tax authority for the purpose of appropriate adjustment or refund. This disposed of the writ petition.