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2025 (6) TMI 1955 - HC - VAT / Sales TaxJurisdiction - Question of law versus Question of fact - power of the Board to make reference to the High Court - Failure to grant time to produce Form 3 - nonremanding of the case for fresh assessment so as to allow further time to obtain Form 3 - HELD THAT - A careful perusal of Section 55(1) of the Chhattisgarh Value Added Sales Tax Act 2005 would show that power of the Board (in this case the Tribunal) to make reference to the High Court must arise from the subject order. Reference jurisdiction is consultative / advisory jurisdiction of the High Court which he renders on opinion being asked and it is purely advisory in nature. The High Court in the reference jurisdiction is to extend its advise in its jurisdiction which is advisory in nature and purely consultative in nature to enable the referring Tribunal to dispose of the matter as the case may be on the basis of opinion given by the High Court. The law in this regard is very well settled. Sub-rule (1) of Rule 7 of the Rules of 2006 clearly provides that the burden of proof of payment of tax on the turnover by the sub-contractor can be discharged by the contractor only by producing Form 3. Admittedly the applicant has failed to produce Form 3 for 8 years and has failed to demonstrate any statutory provision or any judgment to demonstrate that the authorities were under an obligation to keep granting the applicant time sine die to produce Form 3. In absence of production of Form 3 the question of double taxation as observed in paragraph 19 of the judgment by the Supreme Court in the matter of State of Andhra Pradesh and others v. Larsen Toubro Limited and others 2008 (8) TMI 21 - SUPREME COURT does not arise. Thus in absence of submission of Form 3 by the applicant payment of tax by the sub-contractor on the turnover of the goods supplied in the course of execution of the works contract remains a disputed question of fact and there is no statutory duty imposed on the Department to grant time for producing Form 3 yet considering the facts leniently Form 3 submitted till second appeal being continuation of original proceedings were accepted. However in absence of statutory duty imposed upon the Department the applicant has no existing legal right that can be enforced that too after lapse of 8 years since the original proceedings. As such no question of law as required under Section 55(2) of the Act of 2005 arises for adjudication by this Court. The payment of tax by the sub-contractor being the disputed question of fact cannot be equated with the question of law as such the disputed question of fact cannot be the question of law falling within the meaning of Section 55(2) of the Act of 2005 - no question of law is required to be called from the Tribunal. The instant application deserves to be and is hereby rejected.
1. ISSUES PRESENTED and CONSIDERED
The Court considered the following core legal questions raised by the applicant under Section 55(2) of the Chhattisgarh Value Added Sales Tax Act, 2005: a) Whether the Tribunal was justified in upholding the appellate authority's order that refused to grant additional time to the applicant to produce Form 3; b) Whether the Tribunal erred in not remanding the case for fresh assessment to allow the applicant further time to obtain Form 3, especially since the tax on the relevant turnover was claimed to have been already paid by the sub-contractor; c) Whether the Tribunal failed to appreciate binding Supreme Court precedent which allegedly supported the applicant's claim that it should not be penalized for the non-action of State authorities, thereby raising a question of law warranting reference to the High Court. 2. ISSUE-WISE DETAILED ANALYSIS Issue (a) and (b): Justification of refusal to grant time to produce Form 3 and remand for fresh assessment Relevant legal framework and precedents: Section 6(1)(b) of the Act imposes a burden on the contractor (applicant) to prove that tax has been paid by the sub-contractor on the turnover of goods supplied in the execution of works contract. Rule 7(1) of the Chhattisgarh Value Added Tax Rules, 2006, mandates that such proof must be supported by a declaration in Form 3 issued by the sub-contractor. The applicant's failure to produce Form 3 undermines its claim for deduction of turnover from taxable sales. Court's interpretation and reasoning: The Court emphasized that the power to grant time to produce Form 3 is not a statutory obligation on the authorities and no provision mandates indefinite or repeated extensions. The applicant failed to produce Form 3 for a substantial period (8 years) and did not demonstrate any legal or procedural entitlement to further time. The Court noted that the Assessing Officer allowed deductions only to the extent supported by Form 3, and for the remaining amount, the applicant was not entitled to deduction. The Tribunal and appellate authority's refusal to grant additional time or remand for fresh assessment was thus justified. Key evidence and findings: The factual record showed that Form 3 was produced only for part of the claimed deduction. The remaining turnover amount lacked documentary proof of tax payment by the sub-contractor. The applicant's appeal was partly allowed for a minimal amount but otherwise dismissed. Application of law to facts: Since the burden of proof lies on the applicant and the statutory mechanism requires Form 3, failure to produce it meant the applicant could not substantiate its claim. The Court held that the issue was factual - whether Form 3 was produced - and not a question of law. Treatment of competing arguments: The applicant argued that the tax was paid by the sub-contractor and that the turnover should not be included in its taxable value. The Court rejected this, observing that without Form 3, the claim could not be accepted. The applicant also contended that the authorities should have granted further time, but the Court found no statutory or legal basis for such an obligation. Conclusions: The refusal to grant time and the denial of remand for fresh assessment were legally sustainable. The issue was factual, not legal, and did not warrant interference. Issue (c): Applicability of Supreme Court precedent and existence of question of law Relevant legal framework and precedents: The applicant relied on the Supreme Court judgment in State of Andhra Pradesh v. Larsen & Toubro Limited, which addressed the principle of avoiding double taxation and the binding nature of promises made by the State. Court's interpretation and reasoning: The Court distinguished the present case on facts, noting that the Supreme Court's observation on double taxation presupposed proof of tax payment by the sub-contractor. In the absence of Form 3, the question of double taxation did not arise. Thus, the precedent was not applicable to the factual scenario here. The Court further held that the Tribunal's role is to decide questions of law, and since the matter was factual, no question of law arose. Key evidence and findings: The absence of Form 3 was pivotal. The applicant's failure to produce it meant the factual dispute remained unresolved, and no legal question for authoritative pronouncement existed. Application of law to facts: The Court applied the statutory provisions and rules mandating Form 3 as proof and found no legal error in the Tribunal's decision. The reliance on the Supreme Court judgment was misplaced as the facts did not match the circumstances considered in that precedent. Treatment of competing arguments: The applicant argued that it should not suffer due to State authorities' inaction and that the precedent mandated relief. The Court rejected this, emphasizing that no legal right accrued to the applicant without statutory compliance and proof, and that factual disputes cannot be converted into questions of law. Conclusions: No question of law arose from the Tribunal's order, and the Supreme Court precedent was not applicable to the facts. Therefore, no reference to the High Court was justified. Additional observations on Section 55 of the Act of 2005 The Court analyzed Section 55(1) and (2) which govern the reference of questions of law from the Tribunal to the High Court. It underscored that the Tribunal's power to refer questions of law must arise from the subject order and that the High Court's jurisdiction in such references is advisory and consultative. The Court reiterated that the Tribunal should refer only genuine questions of law requiring authoritative interpretation, not factual disputes. The present case involved factual issues regarding proof of tax payment and production of Form 3, which do not constitute questions of law under Section 55. 3. SIGNIFICANT HOLDINGS "The payment of tax by the sub-contractor being the disputed question of fact cannot be equated with the question of law, as such, the disputed question of fact cannot be the question of law falling within the meaning of Section 55(2) of the Act of 2005." "In absence of submission of Form 3 by the applicant, payment of tax by the sub-contractor on the turnover of the goods supplied in the course of execution of the works contract, remains a disputed question of fact and there is no statutory duty imposed on the Department to grant time for producing Form 3." "Under Section 55(1) of the Act of 2005, the Tribunal will make reference only when the question of law is involved and question of law for which authoritative pronouncement of this Court is required. The issue raised in this case is only factual and no question of law is involved in the present case." Core principles established include:
Final determinations: The Court rejected the applicant's application for reference of questions of law to the High Court, holding that no question of law arose from the Tribunal's order. The refusal to grant time for producing Form 3 and denial of remand for fresh assessment were legally justified. The application was dismissed without costs.
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