9911796707
TMI Blog2014 (7) TMI 622X X X X Extracts X X X X X X X X Extracts X X X X ..... f work viz., investigation, design and execution of tunnel-1 and tunnel-2 including head regulator at the entrance portal of tunnel-1 of Srisailam Left Bank Canal Tunnel Scheme of Alimineti Madhava Reddy Project (A.M.R.P.) from Neelam Sanjeeva Reddy Sagar Project Reservoir (Srisailam Reservoir) in Mahaboob Nagar and Nalgonda Districts of Andhra Pradesh, India, and the bidder shall quote for the entire scope of work including O and M for two years. The petitioner emerged as successful bidder and a contract agreement bearing No. 54SE/2005-2006 was entered into on August 25, 2005 between the petitioner and the first respondent, the executing authority. The lump sum amount agreed to be paid for entire contract work was specified as Rs. 1,925 crores. In terms of the contract agreement and also in terms of the Andhra Pradesh Value Added Tax Act and Rules, 2005 (in short, "the A.P. VAT Act and Rules"), the petitioner is liable to pay value added tax (in short, "VAT") and the second respondent-Department is entitled to deduct VAT as tax deduction at source (in short "TDS") and deposit the same to the credit of the sixth respondent, i.e., Commercial Tax Officer, Basheerbag, Hyderabad. The p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the rate of 2.8 per cent from the running bills since April, 2012. A reference was made to clause 105-1 of contract agreement. Along with the counter-affidavit, the correspondence exchanged between the second and third respondents was also placed on record. In the counter-affidavit filed on behalf of the third respondent sworn by Pay and Accounts Officer, Works and Projects, Nalgonda, it was averred that clause 105-1 of the contract agreement provides for deduction of tax on account of sales tax (VAT) at four per cent (presently five per cent) and reference was made to section 22(3A) of the A.P. VAT Act. It was further averred that whatever may be the position prior to September 24, 2008, but with effect from September 24, 2008 on account of insertion of sub-section (3A) in section 22 of the A.P. VAT Act, wherever sales tax/VAT is included in the estimated value of the work, the same is liable to be deducted as TDS. It was asserted that in the case of contract in issue, the contract value was estimated at Rs. 2,259 crores and tenders were called for the work with an Internal Bench Mark (IBM) value of Rs. 2,132 crores, which includes a sum of Rs. 56.77 crores towards VAT at 2.8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment by preparation of designs and further drill the tunnel and carry out the other connected works would go to show that it is the sole responsibility of the bidder to deliver the final result and the contractor is required to quote a lump sum price for the same. He would further submit that section 22(3A) of the A.P. VAT Act, came to be inserted only with effect from September 24, 2008 by Act 28 of 2008, and has no application to petitioner's contract agreement and he would submit that it is section 22(3) of the A.P. VAT Act, which is the relevant provision. He would also submit that the respondents having not raised any objection with the sixth respondent about the authorization issued in form 501D in exercise of sixth respondent's power under rule 18(1) (f) of the VAT Rules, cannot deduct higher amount as TDS and keep the same without making it over to sixth respondent. He would point out, such retention of TDS amount deducted is in violation of section 22, section 57 and rule 18 of the A.P. VAT Act and the Rules. The learned Government Pleader Sri Balaji Varma appearing for the Commercial Tax Department would submit that the certificate issued by the sixth respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue (IBM) approved by the committee was uploaded in the website before opening the price bid. Based on the admi nistrative approval, the IBM value for this work was arrived as Rs. 2,132 crores," which would clearly go to show that the tenderers were not put on notice about the estimated value and the same came into existence after the tenderers submitting their respective tenders. In other words, there was no way tenderers knowing the estimated value and the components of the estimated value prior to opening of the tenders. 11 As on the date of execution of contract, i.e., August 25, 2005, the Andhra Pradesh General Sales Tax Act, 1957 (in short, "the APGST Act") came to be repealed, and in the place of APGST Act, A.P. VAT Act need to be read into. As on the date of contract, sections 22(3) and 22 (4) are the relevant provisions dealing with the TDS, which reads as under: "S. 22(3). In the case of a dealer executing works contract for Government or local authority a tax at the rate of four per cent shall be deducted from the amount payable to him and such contractee deducting tax at source shall remit such amount in the manner as may be prescribed. S. 22(4). In case of a dealer e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at source.-(1) (a) The tax deduction at source shall be in general at the rate of either four per cent or two per cent as prescribed in sub-clause I or II, respectively, of clause (b) below and it shall be based on adoption of 70 per cent of the total consideration payable for the execution of works contract as taxable turnover unless an application has been made by the dealer to the Assistant Commissioner or Commercial Tax Officer concerned for specific quantification or provisional assessment to determine the correct amount of taxable turnover for a specific contract or agree ment. (b) The rate of tax for the purpose of tax deduction at source shall be as prescribed below: I. All the categories of contracts not falling under sub-clause (ii) mentioned below: 4% of 40% of the amount payable as consideration for the exe cution of work. II. Contracts for laying or repairing of roads and contracts for canal digging, lining and repairing. 2% of 70% of the amount payable as consideration for the execution of work. (bb) The contractee shall complete form VAT 501A supplied by the contractor indicating the TIN, the amount of tax deducted and details of the related contract. The co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erwise payment to the contractor will be withheld. 105.3 The tax structure under clause 105 is liable for revision as per the orders of the Government issued from time to time and in such case, the sales tax will be deducted at source at the revised rates only while making payment to the contractor duly modifying the provision made in the estimate according to revised rates of sales tax. 105.4 Excess recovery due to revision in sales tax rates as per orders of Government from time to time will be reimbursed." Section 5H of the APGST Act was in pari materia with section 22 of the 17 A.P. VAT. Likewise, rule 18 of the A.P. VAT Act correspondents to the rule 17-I of the APGST Rules and in pari materia with rule 18 of the A.P. VAT Rules. 18 In the case on hand, as revealed from the record, the petitioner approached the third respondent under section 22(3) read with 18(1)(f) of the A.P. VAT Act and Rules and filed form 501C on March 15, 2007 for the quantification of taxable turnover for the purpose of tax deduction at source. In the application in column No. 6, the petitioner had shown Rs. 6,420 lacs as taxable turnover (3.34 per cent of the value of the contract). A detailed worki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of the applicable provisions of the A.P. VAT Act and make over the same to the Commercial Tax Department. The tax amount, which was deduced by the second respondent to be made over to sixth respon dent, is available for and on behalf of the petitioner-assessee subject to the adjustments to be made in final assessment proceedings in terms of section 22 read with rule 18 of the A.P. VAT Act and Rules. Further, the language of section 22(3A) leaves no manner of doubt that after arriving at the total estimated value of the contract a tax component at the rate of four per cent should have been added "separately". In the present case, on the material available on record, we are unable to accept the contention that four per cent of tax was added separately to the estimated value, inasmuch as, there was no estimated value as on the date of the petitioner's participating in the tender. A close reading of section 22(3A) of the A.P. VAT Act along with rule 18(3)(a) and (3)(b) of the A.P. VAT Rules, would leave no manner of doubt in the cases where four per cent tax has been separately added to the estimated value, the same is liable to be deducted at the time of making payment in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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