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2016 DIGILAW 103 (JK)

Rakesh Constructions v. University of Jammu

2016-03-11

TASHI RABSTAN

body2016
JUDGMENT : TASHI RABSTAN, J. OWP No. 1140 of 2003 1. Through the medium of this petition, the petitioner is seeking quashment of Circular dated 07.06.2003 issued by the University of Jammu, whereby, under the orders of the State Government, it has been directed to all the Drawing and Disbursing Officers by the University of Jammu to deduct Service Tax from the Contractors on the gross value of the works executed by them. Petitioner is also seeking a direction to the respondents to finalise and release the admitted claim in so far as allotment of work in respect of building for Department of School of Behavioural Sciences is concerned. 2. The facts-in-brief, as projected in the writ petition, are that the petitioner is a registered Contractor and was allotted contract for construction of building for Department of School of Behavioural Sciences at New Campus, University of Jammu vide No. UWD/2001-02/ 1109-16, dated 31.12.2001. It is averred that the said work commenced on 06.01.2002 and was completed on 06.06.6003, much before the stipulated time. Accordingly, it is averred, a final bill was raised after the liability period was over along with bill deposits amounting to Rs. 5.24 lacs being 10% of the work contract. It is averred that 50% of the bill deposits of the work contract had already been released by the University. Further, it is averred that the respondents did not release the amount-in-question in favour of petitioner despite execution of the work on the ground that under the orders of the State Government the University of Jammu has issued Circular dated 07.06.2003, whereby all the Drawing and Disbursing Officers have been directed to deduct Service Tax from the Contractors on the gross value of the works executed by them. Thus, it is averred that the respondents taking the plea of deducting service tax on the gross value of the work earlier executed by the petitioner in the year 1998 have withheld the payment due to him with respect to the present contract. Hence the present writ petition. 3. The contention of learned counsel for petitioner is that the respondents have not disputed the execution of contract-in-question nor raised any dispute with regard to any liability of any nature against the petitioner. Hence the present writ petition. 3. The contention of learned counsel for petitioner is that the respondents have not disputed the execution of contract-in-question nor raised any dispute with regard to any liability of any nature against the petitioner. It is further contended that the earlier contract pertaining to Directorate of Distance Education was started in December, 1998 and completed in July, 2001 for which the final bill amounting to Rs. 1,57,77060/- was raised and the same has already been paid to the petitioner. Thus, it is contended that the respondents have no legal justification to withhold the balance amount of petitioner with regard to the contract-in-question on account of any alleged outstanding pertaining to earlier contract. 4. The next contention of learned counsel for petitioner is that the respondents in Communication No. UWD/2002-03/222, dated 22.06.2002 have themselves admitted that the service tax was not being charged from the contractors as no such condition was incorporated either in the Notice Inviting Tenders or Contract Agreement. However, it was decided to make deductions on account of Service Tax with effect from 01.02.2002 on all ongoing and future contracts, whereas with regard to pending claims, exemption was sought from the Government. Thus, it is contended that the respondents cannot start recovering the alleged outstanding from the pending claims without there being any positive direction by the Government in this regard. 5. Lastly it was contended by learned counsel for petitioner that in view of Clarification No. 22 of 1999-2000, dated 07.12.1999, service charges are not applicable on the cost of departmental material issued to a contractor however, in the present case, the respondents have calculated the outstanding on account of alleged Service Tax on the cost of entire work without deducting the cost of material or labour component. 6. Objections have been filed on behalf of respondents. It is averred that in the year 1998 the petitioner was allotted contract for the construction of Directorate of Distance Education Building and on completion of the project, payment of Rs. 1.57 crore came to be released in his favour. Thereafter, second contract for construction of PCP-cum- Examination Halls for Directorate of Distance Education was allotted to the petitioner on 29.03.2001 and an amount of Rs. 34,70,867/- was paid to the petitioner on completion of said contract after making deductions @ 4.20% towards service tax. 1.57 crore came to be released in his favour. Thereafter, second contract for construction of PCP-cum- Examination Halls for Directorate of Distance Education was allotted to the petitioner on 29.03.2001 and an amount of Rs. 34,70,867/- was paid to the petitioner on completion of said contract after making deductions @ 4.20% towards service tax. It is averred that the petitioner was allotted another contract on 31.12.2001 for construction of building for School of Behavioural Sciences. It is averred that the total cost of construction was Rs. 1.10 crore and on completion of the project, the petitioner has already been made the whole payment, except some part of the amount which has been withheld towards the liability of service tax for the work executed by the petitioner in the year 1998 for construction of Directorate of Distance Education Building in view of relevant SROs issued by the Government of J&K. It is further averred that Commissioner Sales Tax vide Clarification No. 27, dated 8.02.2000 has specifically clarified that the service tax is to be charged from whole of the contract irrespective of source of procurement of material for the execution of contract. 7. Heard learned counsel appearing for the parties and perused the file. 8. Admittedly, the petitioner was allotted contract for construction of building for School of Behavioural Sciences on 31.12.2001, a total cost whereof was Rs. 1.10 crore. After completion of the project, the respondents did not raise any dispute with regard to its execution, rather they have released a maximum part of the payment, however, they have withheld some part of the payment on the ground that the petitioner was liable to pay service tax for the work executed by him in the year 1998 for construction of Directorate of Distance Education Building. 9. Here, it is to be seen that payment with respect to the earlier contract to the tune of Rs. 1.57 crore had already been released by the respondents without deducting the service tax. Even thereafter the respondents released an amount of Rs. 34,70,867/- in favour of petitioner for execution of second contract for construction of PCP-cum-Examination Halls for Directorate of Distance Education, which was allotted to him on 29.03.2001 after making deductions @ 4.20% towards service tax. 1.57 crore had already been released by the respondents without deducting the service tax. Even thereafter the respondents released an amount of Rs. 34,70,867/- in favour of petitioner for execution of second contract for construction of PCP-cum-Examination Halls for Directorate of Distance Education, which was allotted to him on 29.03.2001 after making deductions @ 4.20% towards service tax. Now, the respondents have withheld some part of the amount with respect to the contract allotted to him on 31.12.2001 on the ground that he was liable to pay service tax for the work which he had executed in the year 1998. 10. It is to be seen here that the respondents in Communication No. UWD/2002-03/222, dated 22.06.2002 have themselves admitted that the service tax was not being charged from the contractors as no such condition was incorporated either in the Notice Inviting Tenders or Contract Agreement. However, it was decided to make deductions on account of Service Tax with effect from 01.02.2002 on all ongoing and future contracts. Once the respondents have themselves admitted that they on their own were not deducting service tax before 01.02.2002, now how they can withhold some part of the payment with regard to the contract-in-question, that too for the contract which had already been completed in the July 2001. Otherwise too, the respondents have no legal justification to withhold the amount of petitioner with regard to the contract-in-question on account of any alleged outstanding pertaining to earlier contract. 11. So far as the contention of respondents that the petitioner cannot directly approach the Court in view of the arbitration clause in the contract agreement relating to the construction of Directorate of Distance Education Building in the year 1998 I am of the view that with the completion of said contract and releasing of whole admitted claims by the University in favour of petitioner, the contract has automatically ceased to exist anymore. Therefore, if the respondents have to recover the amount of service tax from the petitioner with regard to the said earlier contract, they are free to recover the same by following due procedure of law. 12. Therefore, in view of the above, I deem it proper to allow the writ petition. Therefore, if the respondents have to recover the amount of service tax from the petitioner with regard to the said earlier contract, they are free to recover the same by following due procedure of law. 12. Therefore, in view of the above, I deem it proper to allow the writ petition. Accordingly, the writ petition is allowed with a direction to the respondents to release the amount in favour of petitioner withheld by them with respect to the contract for construction of building for Department of School of Behavioural Sciences at New Campus, University of Jammu vide No. UWD/2001-02/1109-16, dated 31.12.2001 within a period of four weeks from the date a certified copy of this order is served upon them Connected miscellaneous applications, if any, accordingly stands disposed of. OWP No. 441 of 2004 13. The challenge in this petition is also to Circular dated 07.06.2003 issued by the University of Jammu. 14. In this case also the petitioner has been held liable to pay Service Tax to the tune of Rs. 6.73 lakhs for the works executing by him during the period 1996 to 2001. 15. The controversy in the present case is similar to the one as discussed in OWP No. 1140/2003. Therefore, in view of the discussion made in the said writ petition, I also deem it proper to allow this writ petition, especially in view of Clause 25(4) of Contract Agreement No. 9 of 2000-01, which provides that "any taxes, duties, levies, increased or decreased by the Government/Statutory Body or any variation in the rates of labour material after submission of the tender by the contractor and during the currency of the contract shall have no bearing on the contractor." Accordingly, the respondents are directed to release the pending admitted claims, if any, of the petitioner for the works executed by him during the period 1996 to 2001, within a period of four weeks from the date a certified copy of this order is served upon them. Connected miscellaneous applications, if any, accordingly stands disposed of. COA No. 15 of 2004 16. In view of the disposal of main petition, the present contempt petition does not survive and the same is, accordingly, disposed of and the contempt proceedings are dropped.