Research › Search › Judgment

J&K High Court · body

2013 DIGILAW 482 (JK)

Bhat Constructions v. State Of J&K

2013-08-26

MUZAFFAR HUSSAIN ATTAR

body2013
1. Notification SRO 117 dated 30.3.2007 is called in question in this petition. It is also prayed that respondents be directed to release the payment in favour of the petitioner without charging service tax imposed w.e.f. 1.4.2007. It is further prayed that respondents be prohibited from imposing and charging service tax on the works executed by the petitioner. 2. On issuance of notice the respondents have filed reply affidavit. 3. Mr. Bhat, learned counsel for the petitioner submitted that section 4 of the J&K General Sales Tax Act 1962 (for short Act of 1962) does not authorize levying of service tax; learned counsel further submitted that the petitioner was to pay service tax at the rate of 4 per cent when NIT was issued and after execution of the allotted work the rate of service tax has been enhanced from 4 per cent to 8 per cent which the petitioner is not liable to pay; learned counsel further submitted that the petitioner has been subjected to double taxation inasmuch as he had already paid sales tax on the raw material which was used in the execution of the contract work and therefore, he could not further be charged with the taxes on these goods. Learned counsel accordingly prayed that writ petition be allowed. 4. Learned counsel further submitted that in terms of 16-C of the Act of 1962 the authority has already deducted the sales tax and in terms of court order same is retained by the said authority and till date has not been paid to the Sales Tax department. 5. Mr. Khawaja, learned counsel for the respondents submitted that there is no bar in law in subjecting a person to double taxation. Learned counsel further submitted that in the facts of this case the petitioner has not been subjected to double taxation inasmuch as he was liable to pay sales tax on the material he purchased from the market for execution of the contract work. Learned counsel submitted in view of the amendments made in the Act of 1962, providing of service in the shape of work contract, has been defined to be "goods" in terms of Section 2 (h) (i-a). Learned counsel further referred to section 2 (l)(v) of the Act of 1962 and submitted that in terms of the amendment of Act no. Learned counsel submitted in view of the amendments made in the Act of 1962, providing of service in the shape of work contract, has been defined to be "goods" in terms of Section 2 (h) (i-a). Learned counsel further referred to section 2 (l)(v) of the Act of 1962 and submitted that in terms of the amendment of Act no. VI of 2005 the aforementioned clause has been inserted in the Act of 1962 which provides that service covered under the definition of "goods" whether involving the transfer of property or not is to be deemed as sale by the person making the sale. Learned counsel also referred to section 2 (n) and submitted that the turnover includes the aggregate of amount of sale and purchase and parts of sale and purchase made by any dealer whether as principal agent or in any other capacity. He further submitted that in view of the aforementioned legal position the petitioner is liable to pay the tax on the service rendered by him in the shape of execution of works contract. Learned counsel submitted that section 4 authorizes the competent authority to impose the tax and in terms of the aforesaid provision the impugned notification has been issued. 6. Learned counsel also submitted that it is within the competence of the competent authority to enhance the rate of tax at any point of time. Learned counsel further submitted that it is not admitted by the respondents that the petitioner had completed the execution of the work on the date the rate of tax was enhanced. 7. Learned counsel prayed for dismissal of the writ petition. 8. Learned counsel further submitted that it is not admitted by the respondents that the petitioner had completed the execution of the work on the date the rate of tax was enhanced. 7. Learned counsel prayed for dismissal of the writ petition. 8. The provisions of law which are relevant for the decision of this petition are take note of:- 2 (h) "Goods" means all kinds of movable property (not being actionable claim, newspapers, stock, shares securities) and includes-- (i) Food or any articles of food or other eatables or any drink (whether or not intoxicating) supplied or served by way of or as part of any service or in any manner whatsoever, with or without any amenity (in a hotel, restaurant or any other place of eating by whatever name called; Provided that where a composite charge is payable in respect of residential accommodation food and drink, the sale price of food and drink included therein shall be determined in such manner as may be notified by the government notification in the government gazette. (i-a) service provided in the shape of works contract, whether divisible or indivisible, involving the transfer of property or not, services in the form of lodging facilities provided by the hotels, services provided by Telecom/Cellular phone agencies by way of transfer of right to use any goods or otherwise, services provided by private nursing homes, beauty saloons, photographers and advertisers rendered by way of or as part of any contract or in any other manner whatsoever involving skill and labour or any other services as may be notified by the government from time to time." 2(l)(v) in case of services covered under the definition of goods, the transaction, whether involving the transfer of property or not, shall be deemed to be a sale by the person making the same. 2(n) "Turnover" includes the aggregate of the amounts of sale and purchase and parts of sale and purchase made by any dealer whether as principal agent or in any other capacity. Sec 4. 2(n) "Turnover" includes the aggregate of the amounts of sale and purchase and parts of sale and purchase made by any dealer whether as principal agent or in any other capacity. Sec 4. Liability to tax under this Act: (1) Subject to the provisions of this Act, every dealer, except the one dealing exclusively in goods declared tax free under section 5 shall pay for each year tax on his (taxable turnover) at a rate (not exceeding forty) of such turnover as may be determined by the Government and notified by the Government in the Government Gazette and such tax shall be charged on the sale of goods once only; Provided that the rate of tax shall not exceed (four) per cent in respect of any goods referred to in section 14 of the Central Sales Tax Act, 1956. 9. In view of the amendments made in section 2 (h) (i-a) the services provided in the shape of works contract have been included in the definition of "goods" and in terms of section 2 (l) the sale has been defined, and in terms of 2 (l) (v) the sale has been defined to mean service covered under definition of "Goods", and "Turnover" includes aggregate amount of sale and purchase and parts of sale and purchase made by a dealer whether as principal agent or in any other capacity. The tax on service is provided in respect of works contract, which is levied under Act of 1962. This provision of the Act has not been challenged. Resultantly, the impugned notification is incapable of challenge in the present petition. 10. The conjoint reading of aforementioned provisions of Act of 1962 do empower the competent authority to impose the tax on the service provided in the shape of works contract. The ground of challenge thus falls to ground lock stock and barrel. 11. The tax imposed on service provided in the shape of works contract is on the aggregate contract value of the work. The contractor in the process of execution of work has to purchase material from the market on which he is liable to pay the sales tax. That is a different transaction and it cannot be said that the petitioner is subjected to double taxation in respect of same goods/contract work. The contractor in the process of execution of work has to purchase material from the market on which he is liable to pay the sales tax. That is a different transaction and it cannot be said that the petitioner is subjected to double taxation in respect of same goods/contract work. The payment of sales tax on goods purchased from the market is levied in terms of Act of 1962 and constitutes a different transaction both in law and fact than the one which is when the same person executes the contract work and consumes the material purchased from the market in execution of that work. The contract value of the allotted work is not same thing as purchase of material from the open market. There is no question of subjecting petitioner to double taxation in the facts of this case. 12. The power of the respondents to enhance the tax on service provided in the shape of works contract has not been specifically challenged in the writ petition. Even no prayer is made in this behalf in the writ petition. The issue is thus left open and it is provided that the petitioner may, if he is advised may file representation before the competent authority in this behalf who in such eventuality will consider the claim of the petitioner and take decision in accordance with law. 13. The writ petition is dismissed. 14. Interim order shall stand vacated.