2011 (1) TMI 1300 - HC - VAT and Sales Tax

Refund demanded of the sum of Rs. 4, 62, 528 already deducted by the railway and for a relief restraining the railway from deducting any amount from the amounts payable for the goods supplied by the company Held that - According to the railway the company failed to inform the railway in respect of the payment of Central sales tax on the materials in question and that the railway having deposited the amount deducted with the treasury of the State it is the State Government which shall be directed to refund the amount. Whether the company produced the relevant materials before the railway at the relevant time is a disputed question of fact which cannot be resolved in this petition under article 226 of the Constitution. However before us it is not disputed that the company did pay Central sales tax and that it was not liable to pay the value added tax to the State of Bihar. Allow this petition. We direct the respondent-East Central Railway to refund the amount of tax recovered by it from the company for the supply of goods on which the company had paid Central sales tax

Summary

Issues:
- Dispute over refund of tax deducted by respondent-East Central Railway from the contract amount.
- Interpretation of provisions of Bihar Value Added Tax Act, 2005 regarding tax liability on inter-State sales.
- Burden of proof on the assessee regarding tax payment.
- Procedure for refund of wrongfully deducted tax amount by the railway.

Analysis:
The petitioner, a company supplying goods to the respondent-East Central Railway, claimed that despite paying Central sales tax, the railway continued to deduct four percent of the contract amount under section 41 of the Bihar Value Added Tax Act, 2005 (Act of 2005). The company sought a refund of the deducted amount and relief from further deductions. The petitioner argued that it had paid the required tax, supported by documents, and that no tax was payable to Bihar under the Act of 2005.

The railway contended that it had already transferred the deducted amount to the Government Treasury and should not be directed to refund it. The railway relied on a court judgment and section 8 of the Act of 2005 to justify the deduction, stating that the burden of proof lies on the assessee. The railway emphasized that without the State Government present, no refund order should be made against it.

The court examined section 41 of the Act of 2005, which allows advance recovery of tax from works contractors. It highlighted that no tax is payable under the Act for inter-State sales. The court acknowledged the procedural dispute raised by the railway, claiming the company failed to inform about tax payments. However, it was undisputed that the company had paid Central sales tax and was not liable for value-added tax in Bihar.

The court ruled in favor of the petitioner, directing the railway to refund the wrongfully recovered tax amount. The company was instructed to provide a detailed statement and evidence of goods supplied with paid tax, and the railway was given a timeline for refund. Failure to refund would result in interest payment by the railway. The railway was allowed to seek refund from State authorities or adjust the amount against future liabilities. The writ petition was allowed, with each party bearing its own costs.