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2015 (2) TMI 472 - HC - VAT and Sales TaxDemand of tax deducted at source along with interest in terms of Section 22(2) read with Section 22(4) of the Andhra Pradesh Value Added Tax Act, 2005 - violation of principles of natural justice - Works contract - Running Account Bills - Exemption from payment of Sales tax - Suppression of facts - Held that:- As NECL was liable to pay tax under the AP VAT Act, for execution of the works contract of construction of the Krishnapatnam Port, KPCL was statutorily obligated, under Section 22(3) of the AP VAT Act, to deduct tax at source from the running account bills of NECL, and remit the deducted tax amount to the Government. The fact that NECL could seek refund of the tax paid, in view of G.O.Ms. No.609 dated 29.05.2006, did not absolve KPCL of their statutory obligation to deduct tax at source. Even on a notification being issued under Section 15(1) of the AP VAT Act, the contractee is statutorily obligated, under Section 22(3) thereof, to deduct tax at source from the running account bills of the contractor, and the contractor is entitled, thereafter, to claim refund. If a statute has conferred a power to do an act, and has laid down the method in which that power has to be exercised, it necessarily prohibits the doing of the act in any manner other than the one prescribed. Likewise KPCL/NECL cannot claim a legitimate expectation to be continued to be exempt from payment of sales tax, as the revised concession agreement itself provides for a change of law, and the steps required to be taken by the parties to the agreement in this regard. As grant of exemption is contrary to law (ie the A.P.VAT Act), KPCL cannot claim to have a legitimate expectation that GoAP would continue to grant it exemption. If a denial of legitimate expectation, in a given case, amounts to denial of a right guaranteed or is arbitrary, discriminatory, unfair or biased, gross abuse of power or violation of principles of natural justice, the same can be questioned on the well-known grounds attracting Article 14 but a claim based on mere legitimate expectation, without anything more, cannot ipso facto give a right to invoke these principles. It can be one of the grounds to consider but the court must lift the veil and see whether the decision is violative of these principles warranting interference. - the revised concession agreement provides for a situation where there is a change in law. It requires the agreement to be suitably amended to bring it in conformity with the change in law. Having failed to do so, it is not now open to KPCL to contend that exemption from payment of sales tax should be continued, notwithstanding that it would then fall foul of the provisions of the A.P. VAT Act, on the application of the doctrine of legitimate expectation. The contention that the doctrine of legitimate expectation and promissory estoppel are attracted does not, therefore, merit acceptance. The petitioner has not only suppressed relevant facts regarding their having deducted tax at source from the running account bills of NECL, they have made false statements on oath before this Court that there is no deduction of tax at source from NECL. - They have, by resort to such dishonest means, secured interim stay of all further proceedings and have thereby avoided remitting the tax deducted at source, from the running account bills of NECL, to the Government. The undeserved benefit and advantage obtained by KPCL, by abusing the judicial process, must be neutralized. As they have suppressed facts, made false statements on oath, and have thereby abused the process of Court, KPCL shall pay exemplary costs of ₹ 75,000/- to the Commissioner, Commercial Taxes within three weeks from the date of receipt of a copy of this Order, failing which it shall be open to the Commissioner, Commercial Taxes to recover the said amount from them in accordance with law. - Decided against assessee.
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