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2017 (9) TMI 1733 - AAR - VAT and Sales TaxLiability of VAT - process of setting up the power station - Sub-contract - Applicant submits that the sub-contractors are registered dealers under the provisions of MVAT Act, 2002 and are discharging the applicable VAT on the aforesaid work carried out under the sub-contract. Since the VAT is discharged on the works contract by the sub-contractor, the Applicant does not charge VAT in its invoices raised on the customer for the same sub-contract work. Whether the Applicant would be liable to pay VAT on the invoice raised to its customer i.e. PGCIL for the work undertaken by sub-contractors on its behalf - The clarification is being sought especially in light of the decision of the Hon. Andhra Pradesh High Court in the case of Larsen & Toubro [2006 (10) TMI 377 - ANDHRA PRADESH HIGH COURT] as upheld by the Hon. Supreme Court in STATE OF ANDHRA PRADESH & ORS. VERSUS LARSEN & TOURBO LTD. & ORS. [2008 (8) TMI 21 - SUPREME COURT]? Held that:- The applicant would be liable to pay tax on the entire value of the contract, subject of course to discharge of liability by the sub-contractor to the extent of the amount forming part of the contract value in terms of section 45 of the MVAT Act, 2002 - As regards amount retained by the principal contractor, the same is also a part of the same transaction and is liable to tax subject to the deduction as provided in law. Prospective effect of order - Held that:- In the present case there is no ambiguity in the provision of Act. The total contract value is taxable in the works contract. The rule 58 is clearly laid dawn for the eligible deductions the principle contractor and subcontractor are held jointly and several responsible for tax liability. The rule 58 has taken due care to avoid double taxation as it provides the deduction of turnover related to subcontractor from total contract value. There is no scope, for any doubt arising out of the provisions. There is no ambiguity in language provided in the Sections and Rules - The applicant cannot prove existence of circumstances which warrant us to use the discretionary power. In fact use of such discretionary powers in the absence of compelling circumstances would be detrimental to legitimate government revenue and would wipe out the legitimate tax liability In these circumstances, we do not allow the use of prospective effect as a tool to protect or to wipe of legitimate tax liability - the pray for granting prospective effect to this order is hereby rejected. Ruling:- The applicant is liable to pay tax on the entire value of the contract, subject of course to discharge of liability by the sub-contractor to the extent of the amount forming part of the contract value in terms of section 45 of the MVAT Act, 2002 and rule 58 of MVAT Rules, 2005. Amount retained by the principal contractor is also a part of the same transaction and is liable to tax subject to the deduction as provided in law. The prayer for prospective effect is rejected.
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