TMI Blog2014 (7) TMI 622X X X X Extracts X X X X X X X X Extracts X X X X ..... t of this order. - Decided in favour of petitioner. - Writ Petition No. 35628 of 2012 - - - Dated:- 11-10-2013 - MS. ROHINI G. AND CHALLA KODANDA RAM, JJ. ORDER:- The order of the court was made by CHALLA KODANDA RAM J.- The petitioner, a public listed company, engaged in the business of executing civil, mechanical and other infrastructure works, filed the writ petition for issuance of a writ, more particularly a writ of mandamus declaring the action of the respondents in collecting tax at source from the monthly work bills due to the petitioner at the rate of 2.8 per cent instead of 0.36 per cent as illegal, arbitrary and without jurisdiction and consequently seeks a direction to the respondents to collect the tax at the rate of 0.36 per cent and return the excess amount recovered. As per the averments in the writ affidavit, the fifth respondent issued a notice inviting tenders from the eligible contractors for execution of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceding, the second respondent may deduct TDS on account of VAT, in view of section 22, section 57 and rule 18 of the A.P. VAT Act and Rules, they are mandatorily required to deposit the same with the sixth respondent, they cannot keep the said amount. The sixth respondent in turn would make necessary adjustments while completing the assessment proceedings. As a matter of fact, the petitioner pleads the action of the respondent Nos. 2 and 3 in deducting higher amounts and not depositing the same in the account of sixth respondent as contrary to the A.P. VAT Act and Rules and thus the writ petition. Separate counter-affidavits have been filed on behalf of respondent Nos. 2 and 3. So far as second respondent is concerned, in its counter had practically put the entire burden on third respondent and in no uncertain terms had stated that it is solely on account of the objections raised by the third respondent and on their instructions TDS is being deducted 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 respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. He points out that the documents relied on by the third respondent are all the documents of the year 2006 and bearing dates ranging from March 1, 2006 to March 25, 2006. He would also submit, by drawing the attention to the various rates quoted by the qualified bidders ranging from ₹ 1,925 crores to ₹ 5,229 crores, that if the bidders were aware of the estimated value, the rates quoted would not have been as quoted by the bidder on account of four bids with amount exceeding five per cent of the estimated value are liable to be rejected summarily. He would submit the very fact that the bidders had submitted their bids ranging from ₹ 1,925 crores to ₹ 5,229 crores would go to show that the bidders were never notified of any estimated value or the IBM value. He would further submit that the very contents of the invitation to the tender and the nature of work involved in which the contractor was required to survey, investigate the subsoil, exploration and fix adjustment 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ast date for sub mission of the tender and April 16, 2005 was the date of price bid opening. As per the document made available by the third respondent, it is only by G.O. Ms. No. 147, dated August 11, 2005, Government had accorded administrative approval for an amount of ₹ 2,813 crores. As per the docu ments under the head Report accompanying the estimate for the work of investigation, design and execution of tunnels 1 and 2 including head regu lator at the entrance portal of tunnel-1 of Srisailam Left Bank Canal Tunnel Scheme of AMR Project at page No. 2 in third para it is recorded as While inviting EPC tenders, the Departmental estimate value was not notified to the agencies and they were expected to do preliminary investigation, design, etc., and quote the tender value. After receipt of the tenders, the value of work arrived based on the SS rates of the relevant year, i.e., 2004-05 and quotations obtained from M/s. NHPC Limited and M/s. Konkan Railway, viz., the Internal Bench Mark Value (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 ₹ 2,13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of such collection in the manner as may be prescribed. The corresponding rule is 18 of the A.P. VAT Rules (up to September 1, 13 2006) which reads as under: R. 18. Tax deduction at source. (1)(a) Where a works contract is awarded to a VAT dealer by any contractee other than Government or local authority, the tax shall be deducted from the payment made to the contractor at the rate of four per cent of the amount paid or payable to the contractor at the time of each payment as specified in sub-section (4) of section 22; (b) 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 contractor, VAT dealer shall send the form VAT 501A to the authority prescribed together with proof of payment within fifteen days from the date of each payment made to the contractor. 14 By G.O. Ms. No. 88, dated January 27, 2007, rule 18 was substituted with effect from September 1, 2006, which reads as under: R. 18. Tax deduction 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess of the liability shall be deemed to have been payable by the contractor and shall be liable to be forfeited. In the agreement, clause 105, is the relevant clause dealing with the 16 sales tax aspect which reads as under: 105. Sales tax: 105.1 Sales tax during the currency of the contract deduction towards Andhra Pradesh sales tax under section 5H of the APGST Act, 1957 according to which tax at four per cent. has to be deducted at source, while making payments to the contractor. As per Act 22 of 1955 the connected rules 17(1) has been amended and substituted as follows: The tax to be deducted at source under section 5H shall be at the rate prescribed below: (i) All the categories of contracts not falling under sub-clause (ii) mentioned below: 4% of turnover determined as per clause (ii) of sub-rule (3) of rule 6. (ii) Exclusive civil contracts, namely, contracts for laying repairing or roads and contracts for canal digging, lining and repairing 2% of turnover determined as per sub-clause (ii) of sub-rule (3) of rule 6 105.2 The contractor should produce a valid sales tax clearance certificate before the payment of the final bill, otherwise p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted and the approval in form 501D is in much variance. Further, on overall appreciation of the material on record and in particular the notice inviting tender which would reveal, the respondent not having notified estimated contract value, we have no hesitation in accepting the contention of the petitioner that at no point of time the bidders were put on notice either of the estimated value of the contract or about the components which were included in the said estimate. In the absence of itemwise works to be executed being specified in the contract and where a contractor was required to quote a lump sum amount, it is left to the choice of the con tractor to be assessed under the A.P. VAT Act either under section 4(7)(a) or (7)(b) of the A.P. VAT Act. 20 In the present case, the petitioner had exercised the option to pay VAT under section 4(7)(b) of the A.P. VAT Act and made an application under section 22(3) read with rule 18(1)(f) of the A.P. VAT Act and Rules for quantification of the taxable turnover, which was accepted by the sixth respondent. We should bear in mind that the function of respondent Nos. 2 and 3 is only to make deduction from the running bills of the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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