TMI Blog2013 (3) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... nts is that the petitioner was required to deduct tax at the rate of 2% from the payments made to the sub- contractors, but failed to do so. The question is whether this can hold good as the reason to believe that taxable turnover had escaped assessment. It must be remembered that the petitioner does not effect any sales to its sub-contractors, all it does – and this fact has also been accepted by the respondents – is to pass on the monies received from DMRC to the sub-contractors, acting as a conduit. The question of turnover in the hands of petitioner would arise only if it indulges in sale of goods. The petitioner merely transfers the monies received from DMRC to the member-companies. Section 2(t) of the WC Act defines “turnover of sale” . Since the expression “turnover of sale” is defined in the WC Act, it is not permissible to look at the definition of “turnover” in Section 2(o) of the DST Act, because Section 16(1) of the WC Act does not incorporate the definition sections of the DST Act into the WC Act. It is not in dispute that the petitioner, who is a dealer registered under the WC Act has not received any amount of sale price from the sub-contractors in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.VI filed by the petitioner, being declarations of the sub-contractors that they have paid the tax.The refund claims had also been made in the prescribed form by the petitioner on 13.1.2008. Despite all this and without finding any fault in the certificates or pointing out any lack of compliance on the part of the petitioner, the respondents have refused to grant the refund, for the only apparent reason that verification has to be done from DMRC. That verification has been pending since March, 2006 when letters were purportedly written by the respondents to DMRC. Such circumstances, coupled with the fact that in May, 2009 steps were taken to reopen the assessments of the petitioner to raise demands of not only tax and interest but also of penalty, and that too without affording any hearing to the petitioner, make it clear that the conduct of the respondents in withholding the refund was unwarranted and contrary to law. A writ of mandamus is accordingly issued in terms of prayer (i) - all the writ petitions are allowed - respondents to pay costs to the petitioner at ₹ 40,000/- - W.P.(C) 8620/2009, C.M. APPL. 5744/2009, W.P.(C) 10287/2009,W.P.(C) 10311/2009 ,W.P.(C) 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) OF THE DELHI SALES TAX ACT, 1975 WARD-62 1. Name Address of the dealer: M/s Persys Punj Lloyd Joint Venture 1/4 Sunder Vihar, NewDelhi-87 2. Nature of business: Construction 3. Registration certificate No. WC/62/213000534/1003 4. Periodof Assessment 2003-04 5. Section Sub-section under which assessment made 16 r/w 23(3) ASSESSMENT ORDER The L V has been fixed w.e.f. 22.10.73. The dealer deals in the above business. Returns have been filed in time except for 3rd and 4th qrs hence penalty of ₹ 1000/- is imposed. Sale figures differ and the same is allowed. In response to notice, Shri Rajneesh Goyal CA with POA appeared before me and filed trading account, sales summary, affidavit, audited balance sheet and details of payment. The dealer has filed 2 TDS certificate and the credit of the tax deposited is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... side the State under section 4 or a sale in the course of import or export under section 5 of the Central Sales Tax Act, 1956. (5) No tax shall be payable under this section on the turnover of sales relating to the amount paid to a sub-contractor as consideration for the execution of works contract whether wholly or partly subject to the production of proof, as may be prescribed, that such sub-contractor is a registered dealer liable to tax under the Act and that the turnover of such amount is included in the return of turnover filed by such sub-contractor and tax thereupon has been paid. (6) No tax shall be payable under this section on the amount representing the value of the goods supplied to the contractor by the contractee, provided that the ownership of such goods remains with the contractee under the terms of the contract. (7) Where in respect of sale price referred to in clause (q) of sub- section (1) of section 2, the contractor does not maintain proper accounts or the accounts maintained by him are not found by the assessing authority to be worthy of credence and the amount actually incurred towards charges for labour and other services and profit relating to sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent or discharge, in cash or by cheque or draft or any other mode, deduct an amount equal to two per cent. of such payment or discharge, purporting to be part or full amount of the tax payable under this Act. (3A) (i) A contractor with respect to the contracts other than the private contracts, may make an application to the contractee authorising him to deduct tax at the rate of four per cent. towards the tax payable under this Act instead of two per cent. as provided in sub-section (1) of this section. (ii) Where an application is made by the contractor under clause (i) of this sub-section, and a copy thereof is forwarded to the appropriate assessing authority by the contractor, the contractor shall be deemed to have opted for composition under section 6 of this Act. (iii) A contractor, to whom the provision of clause (i) of this sub-section applies, may be assessed in a summary manner on the basis of the annual return filed by him without being called upon to produce the books of accounts and other records relating to his business.] (4) The amount deducted under sub-section (1) or sub-section (2) or sub-section (3) shall be deposited into the Government treasury by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er within the prescribed time and in the prescribed form and shall also furnish an annual return in the prescribed form within the prescribed period. Explanation.--Nothing contained in this section shall apply to works contract executed in the course of inter-State trade or commerce or outside the State, or in the course of import or export out of India.] 5. Section 5 of the WC Act provides for the levy of tax on works contract. Sub-section (2) provides for the rate of four paise on every rupee of the net turnover of the dealer as tax. Section 2(r) of the WC Act defines taxable turnover to mean such turnover as is arrived at after deducting from the turnover of sales such amounts as may be prescribed . Section 2(t) defines turnover of sales to mean the aggregate of the amount of sale price received or receivable by a dealer in respect of the execution of any works contract whether executed fully or partly during any period . Rule 5 of the Delhi Sales tax on Works Contract Rules, 1999 provides for the computation of taxable turnover of sales. This has to be read with sub-section (5) of Section 5 of the WC Act which we have quoted above. Clause (b) of sub-rule (1) of rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It will be seen from the assessment order that a refund of ₹ 85,06,203/- was determined as payable to the petitioner. DMRC paid ₹ 29,32,34,912/- to the petitioner in respect of the tax period 2003-04 out of which tax of ₹ 86,97,203/- was deducted. Since the petitioner was only a joint venture of two companies and was to act merely as a conduit for passing on the monies to the member- companies who were sub-contractors who were to actually carry out the work, the assessment order refers to the sub-contract to show that the entire amount received by the petitioner from DMRC was paid to the sub-contractors i.e. the members of the joint venture. Accordingly, a refund of ₹ 85,06,203/- was determined as payable to the petitioner after deduction of penalty of ₹ 1,000/- for delay in filing the return. There is some difference between the figure of TDS and the figure of the refund but that should not detain us because it is common ground that the refund due to petitioner is ₹ 85,07,203/- as per prayer (i) of the writ petition. 7. On 08.06.2006 an assessment order under Section 23(6) of the DST Act read with Section 16 of the WC Act was passed for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om DMRC (distributed among subcontractors) with TDS, WCT and other details), Two Form-IX 26(6) proceedings have been taken separately. Dealer submitted No. books of accounts are maintained. Only Form IX and Form VI returns is the basis of assessment. The receipt of payment which are further distributed among two of his associates sub contractors, who have issued Form VI for executing works contracts and has thus claimed refund of TDS Since dealer has not executed any job work and is claimed 100% exemptions only on account of sub contract. Filed affidavit dated 31.03.2006 stating the assessee dealer named as joint venture consists of two equal constituents (1) Persys Sdn Bhd and (2) Punj Lloyd Ltd. Both of which are separate companies registered under DST WC Act, 1999. The Joint Venture simply acts as a conduit between both the constituents and DMRC Ltd. and does not execute any work on its own. The taxable turnover in the hands of joint venture is Nil. Further DMRC had deducted ₹ 85,07,203/- as per Form IX issued by DMRC from the payment made to joint venture, which becomes refundable. Further submitted tax has been deducted at source by DMRC Ltd. from all payments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fact that the taxable turnover in the hands of the joint venture is nil. The reassessment order further refers to a detailed letter dated 31.03.2006 sent to DMRC for verification and that the said letter was part of the assessment. In addition, the reassessment order notes the fact that the petitioner did not deduct tax when the amounts were paid to the sub-contractors i.e. the two member-companies and accordingly was liable to pay a penalty of ₹ 10,000/-. Ultimately no tax demand was raised against the petitioner in the reassessment because the amount of ₹ 29,32,34,912/- received from the DMRC was paid to the sub-contractors fully. Thus except for reiterating the petitioner‟s claim for refund and stating that it would be granted after verification and imposing a penalty of ₹ 10,000/- for not deducting tax on the amounts paid by the petitioner to the member-companies, no taxable turnover has been determined to have escaped assessment. In other words, in the reassessment order also there was no tax demand. 9. In respect of the tax year 2004-05, an order of assessment was passed on 31.03.2006 under Section 23(3) of the DST Act read with Section 16 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applications dated 23.06.2006. These applications sought rectification of the mistake allegedly committed by the assessing authority while passing the orders determining the refund and mentioning that the letters have been issued to DMRC for verification of the tax deducted at source by them from the payments made to the petitioner. The letters have been filed as Annexure P-III to the writ petition. We consider it necessary to reproduce one of these letters: - Rajnish Goyal Associates ADVOCATES ATTORNEYS E-mail: The D.V.A.T.O. Ward No.62 New Delhi Resi.:22371556, 22376332 Mob.: 9811078700 I-1/16, Shanti Mohan House (Behind Shiv Mandir) Ansari Road, Darya Ganj New Delhi 110002.Dated: 23.06.2006 Sub: M/S PERSYS PUNJLLOYD JOINT VENTURE , Sunder Vihar, Paschim Vihar, New Delhi Rectification of Mistake in Re-Assessment under Delhi Sales Tax on Works Contract Act for Asst. Year 2003-04 Issuance of Refund regarding. Dear Sir, This is with reference to the reassessment for the Asst. Year 2003-04 completed in the case of the captioned assessee by your learned predecessor under the Delhi Sales Tax on Works Contract Act, 1999 (hereinafter r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he year 2006, that the TDS certificate in Form- IX issued by DMRC and the payment which was duly certified by the DMRC were also submitted by the petitioner and were part of the record and that the verification part should not take such a long and unreasonable time and in these circumstances it was prayed that the refunds may be issued as early as possible. Formal applications for refund in the prescribed form (Form ST-21 prescribed by Rule 29) were also submitted on 13.01.2008 seeking refund of ₹ 85,07,203/- for the assessment year 2003-04 and ₹ 2,20,60,306/- for the assessment year 2004-05. Despite these applications and reminders, the assessing authority did not refund the amounts. Instead of refunding the amounts, the assessing authority in fact started reassessment proceedings which culminated in reassessment orders being passed under Section 24 of the DST Act on 11.05.2009 raising demands of tax, interest and penalty which virtually nullified the refunds. 13. The contention of the petitioner, predictably, is that the refunds have been determined by the assessing authority under orders validly passed and there being no dispute regarding the authenticity/ genuine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the earlier assessment/re-assessment orders, the petitioner had submitted Form No. VI issued by the sub-contractors and that in those forms, the sub-contractors i.e. the member-companies of the joint venture have certified that they have undertaken the work from the petitioner and that the sales tax on the turnover in executing the contract was paid by them. It was pointed out that all the particulars relating to the total value of the works contract undertaken by the sub-contractors, the turnover of sales, and the details of payments of tax such as challan number, date, relevant period etc. were furnished in those forms which were part of the record. It was thus pointed out, inter alia, that there was no such failure on the part of the petitioner as would attract the penalty provisions of Section 7(7) and a prayer was accordingly made that the proceedings may be dropped. It is not known as to what happened to those proceedings. 17. However, on 27.04.2009 i.e. two days prior to the date on which the petitioner submitted its detailed reply to the show cause notice, the assessing authority issued notices under Section 24 of the DST Act read with Section 16 of the WC Act in Form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03 and he was liable to deduct TDS from the payment made to M/s Persys SDM BHD and M/s Punj Lloyd Ltd. as per section 7(3) of DST on work contract Act, 1999. But he failed to deduct the TDS @2% on payment of ₹ 242553806/-made to above sub-contractors. The dealer was asked to explain the reason for sales tax on Contract Act, 1999 vide notice no. 13425-13426 dated 17.04.2009. In this connection the reply received from the dealer on 29.04.2009 is not found satisfactory. Thereafter ST 15 was issued to dealer on 27.04.2009 for 11.05.2009 but no body has appeared on behalf of the dealer. Therefore, the Re-assessment Order is framed as under:- GTO/Receipts : 242553806.00 Tax/TDS @ 2% : 4851076.00 Penalty : 9702152.00 Interest : 5821291.00 Total Tax Due : 20374519.00 The dealer is directed to deposit tax ₹ 20374519/-. Copy to the dealer Sd/- AA WARD 21. The following chart sets out the relevant details with regard to all the three writ petitions, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. On behalf of the respondents, a preliminary objection was taken to the effect that the orders of re-assessment which are challenged in WP(C) Nos. 10311/2009, 10312/2009 and 10287/2009 can be appealed against under the relevant provisions of DST Act read with Section 16 of the WC Act and since that alternative remedy was available to the petitioner, the writ petitions should be dismissed as not maintainable. So far as WP(C) No.8620/2009 is concerned, the contention of the respondents is that no refunds can be granted since there were huge demands raised against the petitioner under the re-assessment orders for the same period. 24. The preliminary objection of the respondents that writ petitions against the re-assessment orders passed on 11th May, 2009 are not maintainable since those orders were appealable need not detain us since it is well settled that where the action of an executive authority acting without jurisdiction is likely to subject a person to dilatory proceedings and undue harassment, the High Courts will issue appropriate writs to prevent such consequences. The following observations of the Supreme Court in the case of Calcutta Discount Co. Ltd. vs. Income Tax O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r a rule of law. The High Court should ensure that the petitioner has made out a strong case to invoke the extraordinary jurisdiction despite the existence of alternative remedies. Where there has been a serious breach of the principles of natural justice or procedure, where the order or the proceedings are wholly without jurisdiction, where the vires of a statute is challenged or where there has been an abuse of the process of law, the High Court may exercise its discretion to permit the petitioner to invoke article 226. In Ram and Shyam Company v. State of Haryana, (1985) 3 SCC 267, it was opined that if the alternative remedy is an appeal from Caesar to Caesar s wife the existence of such a remedy would be a mirage and an exercise in futility. In Godrej Sara Lee Limited vs. Asst.Commissioner and Anr. (2009) 14 SCC 338 the Supreme Court observed as under: - ..the question as to whether the said Notification could have a retrospective effect or retro-active operation being a jurisdictional fact, should have been determined by the High Court in exercise of its writ jurisdiction under Article 226 of the Constitution of India as it is well known that when an order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate lower than the rate at which it is assessable, or any deduction has been wrongly made therefrom, the Commissioner may (a)within six years from the date of final order of assessment, in a case where the dealer has concealed, omitted or failed to disclose fully the particulars of such turnover; and (b)within four years from the date of final order of assessment, in any other case, serve a notice on the dealer and after giving the dealer an opportunity of being heard and making such inquiry as he considers necessary, proceed to determine to the best judgment, the amount of tax due from the dealer in respect of such turnover, and the provisions of this Act shall, so far as may be, apply accordingly. 28. In order that proceedings can be taken under Section 24, the first condition is that the Commissioner should have reason to believe that the whole or any part of the turnover of the dealer has escaped assessment to tax or has been under-assessed or has been assessed at a rate lower than the appropriate rate or any deduction was wrongly made from the turnover. 29. In the reason mentioned at the bottom of Form ST-15 which is the notice of re-assessment, what has been st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax. 31. It is a highly debatable question whether the failure to deduct tax by the petitioner in accordance with Section 7(3) of the WC Act can amount to turnover of sale escaping assessment. Tax deducted at source is only a mode of collecting the tax payable by the recipient of the money; the deductor of the tax acts as the agent of the Revenue. There is, therefore, no basis to reopen the assessment on the ground of the whole or part of the turnover having escaped assessment. The reason given for reopening the assessment does not establish any escapement of turnover. It only refers to the alleged failure on the part of the petitioner to deduct tax from the payments made to the sub-contractors. Even assuming for the sake of argument that there was such a failure, it does not amount to turnover escaping assessment in the petitioner‟s hands. The reassessment notices appear to us to have been issued without any application of mind and without having regard to any of the statutory provisions. This becomes more pronounced if one looks at the cryptic manner in which the reassessment orders have been framed. Moreover, even the penalty which is to be imposed, if at all, is un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without finding any fault in the certificates or pointing out any lack of compliance on the part of the petitioner, the respondents have refused to grant the refund, for the only apparent reason that verification has to be done from DMRC. That verification has been pending since March, 2006 when letters were purportedly written by the respondents to DMRC. Such circumstances, coupled with the fact that in May, 2009 steps were taken to reopen the assessments of the petitioner to raise demands of not only tax and interest but also of penalty, and that too without affording any hearing to the petitioner, make it clear that the conduct of the respondents in withholding the refund was unwarranted and contrary to law. A writ of mandamus is accordingly issued in terms of prayer (i). The refunds have been withheld for several years without any justification. The respondents are, therefore, directed to issue the refunds forthwith, and at any rate within four weeks from today with interest as applicable under the relevant provisions of the WC Act read with DST Act. 34. In view of the foregoing discussion, all the writ petitions are allowed. The respondents to pay costs to the petitioner wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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