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2010 DIGILAW 289 (GAU)

Gautam Construction v. State of Assam

2010-04-27

BIPLAB KUMAR SHARMA

body2010
JUDGMENT B.K. Sharma, J. 1. The Petitioner is aggrieved by annexure I assessment order dated August 27, 2001 affirmed on revision and appeal vide annexures III and v. orders dated July 4, 2002 and December 10, 2003, respectively. 2. As stated in the writ petition, the Petitioner had executed 3 (three) sub-contracts worth Rs.98,12,479 with the principal contractors within Assam and the same were not reflected in the return since according to the Petitioners, there was no liability for payment of tax in respect thereof. However, the Superintendent of Taxes, Dhubri, by his assessment order dated August 27, 2001 held otherwise on the basis of Rule 14(1)(c) of the Assam General Sales Tax Rules, 1993. Dealing with the contentions raised on behalf of the Petitioner that the aforesaid amount of Rs.98,12,479 was not shown by the Petitioner in its annual return as the same was in respect of the sub-contracts, such contention on behalf of the Petitioner was repelled by the assessment order dated August 27, 2001 holding that as per the provisions of Rule 14 of the Rules of 1993, the Petitioner would be liable to pay tax on such sub-contract. 3. Being aggrieved, the Petitioner approached the revisional authority and the said authority by the impugned annexure III assessment order dated July 4, 2002 having affirmed the assessment order upon a reference to Rule 14(1)(c) of the Rules, the Petitioner approached the appellate authority. The appellate authority also by its impugned annexure v. order dated December 10, 2003 having affirmed the impugned orders, the Petitioner filed the instant writ petition. Be it stated here that the appellate authority by its impugned order dated December 10, 2003 disposed of two appeals namely, Case No. 8 STA/2002 and Case No. 9 STA/2002. In the present proceeding, we are concerned with Case No. 9 STA/2002. 4. Mr. R.K. Joshi, learned Counsel for the Petitioners, submits that the assessing authority wrongly passed the impugned order dated August 27, 2001 on a misconception of the matter and so also, the revisional and appellate authority. According to him, the said authorities having not considered the relevant aspects of the matter, the said orders are not sustainable in law. Mr. Joshi submits that the particular turnover being in respect of sub-contracts, the Petitioner was not liable to pay any tax. 5. According to him, the said authorities having not considered the relevant aspects of the matter, the said orders are not sustainable in law. Mr. Joshi submits that the particular turnover being in respect of sub-contracts, the Petitioner was not liable to pay any tax. 5. He has placed reliance on two decisions of the apex court in State of Andhra Pradesh v. Larsen and Toubro Ltd. reported in [2008] 17 VST 1: [2008] 9 SCC 191 and DLF Industries Limited v. State of Haryana [2000] 120 STC 569 (P&H). 6. On the other hand, Mr. R. Dubey, learned standing counsel, finance, upon a reference to the provisions of Section 2(9) of the Act and Rule 14(1)(c) of the Rules, submits that as per the said provisions, the Petitioner is liable to pay tax and the assessing authority rightly passed the impugned order dated August 27, 2001 affirmed by both the revisional and the appellate authority. 7. I have considered the submissions made by the learned Counsel for the parties and the materials on record. Section 2(9) of the Act defines "contractors", which means any person executing a works contract and includes a sub-contractor. Rule 14(1)(c) of the Rules reads as follows: 14. (1) Subject to the provisions of Section 2(34)(a) and Section 8(3) in determining the taxable turnover of a works contract the amounts specified in the following clauses shall be deducted from the gross turnover-- (a) to (b) . . . (c) where the contractor carries out work either in part or full by engaging registered sub-contracts for the execution of the works-contract, the turnover relating to the sub-contractors shall be deduced subject to production of proof of payment of tax by such sub-contractor ; 8. All the three authorities, upon a reference to the aforesaid provisions of Rule 14(1)(c) have held that the Petitioner is liable to pay tax on the turnover in respect of sub-contract. In Larsen & Toubro Ltd. [2008] 17 VST 1 (SC): [2008] 9 SCC 191, the apex court was concerned with the question as to whether the turnover on the particular amount of the sub-contractors is liable to be added to the turnover of the principal contractor. In Larsen & Toubro Ltd. [2008] 17 VST 1 (SC): [2008] 9 SCC 191, the apex court was concerned with the question as to whether the turnover on the particular amount of the sub-contractors is liable to be added to the turnover of the principal contractor. In that case, the dispute was in respect of the addition of the sub-contractors' turnover to the turnover of the Larsen & Toubro Ltd. The question that was raised as to whether the goods employed by the sub-contractors occurred in the form of a single deemed sale or multiple deemed sales. The apex court answered the principle of law, upon a reference to the decision of the apex court in Builders Association of India v. Union of India [1989] 73 STC 370 : [1989] 2 SCC 645 by quoting paragraph 36 of the judgment, which is reproduced below (at page 400 of 73 STC): 36. . . . Ordinarily unless there is a contract to the contrary in the case of a works contract, the property in the goods used in the construction of a building passes to the owner of the land on which the building is constructed, when the goods or materials used are incorporated in the building. 9. In paragraph 20 of the judgment, the apex court noticing the fact that the Department had amended Rule 17 of the A.P. VAT Rules, 2005 observed that the position had been clarified vide Rule 17(1)(c) (as amended). Such clarification was to the effect that where a VAT dealer awards any part of the contract to a registered sub-contractor, no tax shall be payable on the consideration paid for the sub-contract. 10. In DLF Industries Limited [2000] 120 STC 569 (P&H), the challenge was to the proviso to Section 6(1) of the particular Act. Section 6 dealing with incidence of taxation provided as follows (at page 576 of STC): Provided that this Sub-section shall not apply to a dealer who deals exclusively in goods specified in Schedule B or who executes a sub-contract with a contractor who is liable to pay tax in respect of works contract of which the sub-contract is a part: 11. In paragraph 15 of the judgment, the High Court observed thus (at page 578 of STC): 15. ...It is not correct to say that property in goods passed on directly from the sub-contractor to the principal contractee. In paragraph 15 of the judgment, the High Court observed thus (at page 578 of STC): 15. ...It is not correct to say that property in goods passed on directly from the sub-contractor to the principal contractee. The subcontractor was only executing the works contract on behalf of the contractor who was liable for all the activities of the sub-contractor. 12. In the instant case, we are concerned with the question as to whether the Petitioner, a sub-contractor, is liable to pay tax on the particular turnover, which is Rs.98,12,479. As per the aforesaid definition of "contractor", the sub-contractor is also included. Rule 14(1)(c) on determination of taxable turnover in respect of a works contract makes the position clear. The proviso has been quoted above, in terms of which where the contractor carries out work, either in part or full by engaging registered sub-contracts for the execution of the works contract, the turnover relating to the sub-contractors shall be deducted subject to production of proof of payment of tax by such sub-contractor. 13. In this context, Mr. Dubey, learned Counsel for the Respondents submits that the particular turnover being liable to be assessed for payment of tax, the authorities did not do anything wrong in passing the impugned orders. In paragraph 16 of the decision in Larsen & Toubro Ltd. [2008] 17 VST 1: [2008] 9 SCC 191, the apex court observed thus (at page 12 of VST): 16. ...By virtue of Article 366(29A)(b) of the Constitution once the work is assigned by the contractor (L&T), the only transfer of property in goods is by the sub-contractor(s) who is a registered dealer in this case and who claims to have paid taxes under the Act on the goods involved in the execution of the works. Once the work is assigned by L&T to its sub-contractor(s), L&T ceases to execute the works contract in the sense contemplated by Article 366(29A)(b) because property passes by accretion and there is no property in goods with the contractor which is capable of a retransfer, whether as goods or in some other form. 14. In the instant case, the dealer, i.e., the Petitioner did not show sub-contract executed by it in its annual return on the ground that the same was undertaken by it as a sub-contract and as such, was not liable to pay tax in such work. 14. In the instant case, the dealer, i.e., the Petitioner did not show sub-contract executed by it in its annual return on the ground that the same was undertaken by it as a sub-contract and as such, was not liable to pay tax in such work. However, as observed above, Rule 14(1)(c) of the Rules provides that such sub-contract work would be allowed as deduction from the turnover of the main contractor subject to production of proof to such contract. Thus, the Petitioner having done the work as a sub-contractor, in my opinion, is liable to pay tax on the turnover. 15. For all the aforesaid reasons, I do not find any merit in the writ petition and accordingly, it is dismissed affirming the impugned order. Petition dismissed.