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2013 DIGILAW 690 (HP)

Gammon India Ltd. v. STATE OF H. P.

2013-07-25

A.M.KHANWILKAR, KULDIP SINGH

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Judgment : A.M. Khanwilkar, J. - 1. Heard counsel for the parties. 2. By these petitions, it is prayed that Section 17 of the H.P. VAT Act, 2005 read with Rule 38 of the H.P. VAT Rules, 2005 be declared ultra vires to Article 366 (29A)(b) read with Articles 14 and 19 (1)(g) of the Constitution and Item 97 of the Union List read with Article 265 of the Constitution. This declaration is sought on the assertion that the State Legislation provides for levy of tax even on items which should not be included in the taxable turnover, not pertaining to transfer of property. Almost similar argument has been recently considered by us in the case of Nokh Ram versus State of H.P. and others, in CWP No. 2058 of 2013- F, decided on 9th July, 2013. We have held that the provisions of the H.P. VAT Act and the Rules framed thereunder are qualitatively different than the provisions in the Punjab VAT Act. Even the decision of the Apex Court in the case of Nathpa Jhakri Joint Venture v. State of H.P. and others; (2000) 3 SCC 319 has been duly considered. We have also considered the decision of the Punjab and Haryana High Court in the case of Larsen and Toubro Limited v. State of Haryana and others; (2011) 37 VST 428 (P&H). 3. Whilst examining that grievance, we accepted the argument of the learned Additional Advocate General, which was the stand of the Department before us, that the provisions of the H.P. VAT Act explicitly provide for deduction from gross turnover of items referred to in Rule 17 read with Section 6 (3) of the H.P. VAT Act. We have also taken the view that there is adequate mechanism provided under the scheme of the H.P. VAT Act read with Rules framed thereunder not only about the method of deduction from the total turnover, but also in respect of items which are permissible deductions referred to in Section 6(3) read with Rule 17 of the Rules. Rule 17(4)(b) permits the Department to examine the amounts deductible so as to determine the liability of the assessee on the facts of each case depending on the material to be produced by the contractor. 4. Notably, Rule 17 (4)(a) refers to items which are permissible deductions, as noted in Section 6(3), which, however, is an inclusive provision. Rule 17(4)(b) permits the Department to examine the amounts deductible so as to determine the liability of the assessee on the facts of each case depending on the material to be produced by the contractor. 4. Notably, Rule 17 (4)(a) refers to items which are permissible deductions, as noted in Section 6(3), which, however, is an inclusive provision. In other words, it is not an exhaustive provision coupled with the power given to the Department to examine facts of each case, as predicated in Rule 17(4)(b). The petitioners have approached this Court, essentially, on the basis of some communications received, which are indicative of rejection of petitioners' claim. However, in the light of the latest judgment on the point rendered by us in the case of Nokh Ram (supra) upholding the stand taken by the Department, it is but appropriate that the Department considers the claim of the petitioners afresh keeping in view the exposition in the said decision. If the Appropriate Authority of the Department were to accept the stand taken by the petitioners that in addition to the items referred to in Rule 17(4)(a) of the Rules, some more items, which are or would be part of the bill reflecting total turnover, are also permissible deductions not involving transfer of property, in that case the grievance of the petitioners would stand redressed. Indeed, if the Department were to reject the further claim of the petitioners and were to take the view that even the said items pressed into service by the petitioners were in the nature of transfer of property, that would be a different matter and against which the petitioners may have to resort to appropriate remedy, as may be permissible in law, if so advised. Suffice it to observe that the claim of the petitioners has not been considered by the Department in the spirit of the dictum in the recent decision of this Court in the case of Nokh Ram (supra). If the claim of the petitioners is to be accepted, no further issue would survive for consideration. 5. We may, however, place on record the stand taken by the petitioners before us that since the mechanism for collection of VAT involves levy and recovery of tax at multiple levels, the question of resorting to tax deductible at source (TDS) is completely ill-advised and impermissible. 5. We may, however, place on record the stand taken by the petitioners before us that since the mechanism for collection of VAT involves levy and recovery of tax at multiple levels, the question of resorting to tax deductible at source (TDS) is completely ill-advised and impermissible. However, for the reasons already recorded, if the Department were to permit deduction of items which are not in the nature of transfer of property, even this apprehension of the petitioners may not survive for consideration. 6. As regards the deduction of TDS in respect of items which are in the nature of transfer of property, that can be legitimately collected by the State Government. We fail to understand as to how this argument will be available to the petitioners in that situation. We do not intend to express any final opinion on this aspect, as we are relegating the petitioners for reconsideration of their claim by the Department afresh. In view of the above, petitions are disposed of with liberty to the petitioners to make representation(s) to the Appropriate Authority of the Department within four weeks from today, which may be considered, on its own merits, in accordance with law, expeditiously. 7. Petitions stand disposed of accordingly, so also the pending application(s), if any.