2009 (4) TMI 880 - HC - VAT and Sales Tax

Summary

Issues:
1. Taxability of supply of bitumen for construction of road by the contractor.
2. Validity of exemption certificate granted to the contractor.
3. Imposition of tax on the value of bitumen supplied by the contractor.
4. Remand of the matter to the assessing authority for fresh assessment.

Analysis:
1. The revision petition challenged the order of the Tax Board, which upheld the Deputy Commissioner's decision regarding the taxability of the supply of bitumen for road construction by the contractor. The appellate authorities concluded that the supply of bitumen was not taxable in the hands of the contractor. However, the Supreme Court's judgments clarified that material supplied by the contractor for works contract amounts to supply or sale to the Department, making it taxable under the Rajasthan Sales Tax Act, 1994.

2. The contractor had obtained an exemption certificate for the entire works contract, subject to the payment of a fixed exemption fee. The assessing authority imposed tax on the value of bitumen supplied by the contractor, despite the exemption certificate. This action was deemed impermissible as the contractor availed the exemption certificate to cover the entire tax liability under the works contract, including the value of bitumen supplied.

3. The revision petition resulted in setting aside all previous orders and remanding the matter to the assessing authority for a fresh assessment. The assessing authority was instructed to impose tax on the value of bitumen supplied by the contractor to the Department, limited to the exemption fee leviable for that specific works contract. No interest or penalty could be charged from the contractor in this regard, and only an exemption fee of 1.5% on the value of bitumen supplied was permissible.

4. The decision concluded by disposing of the revision petition without any costs, emphasizing the proper application of tax laws and exemption provisions in works contracts. The assessing authority was directed to follow the guidelines provided in the judgment for a fair and accurate assessment of tax liability related to the supply of bitumen for road construction.