TMI Blog2014 (9) TMI 227X X X X Extracts X X X X X X X X Extracts X X X X ..... ions are provided under the Gujarat Sales Tax Act and its successor VAT Act, we are not inclined to examine these questions of complex factual and legal aspects in the present petition and thereby give a complete go-bye to such machinery under the Act. We have also noticed the statutory provisions contained in the Gujarat Sales Tax Act as well as the VAT Act which provide for such appeals and also for revision at the hands of the Commissioner either suo motu or on an application made by the aggrieved party. Under section 45 of the VAT Act, such order of attachment can have a maximum life of one year. Such period of one year has passed long back. In the meantime, there was no stay against the assessing authority from proceeding further with the assessment. This court in the interim order dated November 29, 2006 only prevented the authority from passing the final order without the permission of the court but permitted to proceed further with the assessment. No such permission was sought. It appears that the assessment is not yet undertaken in full earnest. No further hearing took place after the court's interim order. The court had stayed the attachment subject to the petitioners' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own finance. Upon completion of such work of gauge conversion, petitioner No. 1 company had to permit access to the railways to such infrastructure so created for which purpose the railways had to pay agreed charges for a period of 12 years. Upon completion of such period or sooner if the contract was terminated, the railways would get what according to the petitioners was full ownership over such infrastructural facilities. In the meantime, since the land belonged to the railways, the petitioner was granted use of such land on payment of nominal lease amount of ₹ 1,000 per annum. This contract has become the centre of controversy for the purpose of sales tax under the Gujarat Sales Tax Act as was applicable in the State of Gujarat till the same was substituted by the VAT Act and thereafter, under such successor Act. 2.2. In brief stand of the petitioners is that in absence of any sale of goods, they are not exigible to sales tax or value added tax (vat). The State Government however, holds a belief that looking to the various terms and conditions of the contract, sales tax/vat is payable. 2.3. On September 3, 2005, respondent No. 4 issued a show-cause notice to petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioners having fulfilled such conditions, the issue with respect to non-deduction of tax at source stands concluded. However, it is equally undisputed that the second issue raised by the Assistant Commissioner in the show-cause notice dated September 3, 2005 regarding the petitioners' liability to pay sales tax, remained open. Notices were issued calling upon the petitioner to participate before the authorities in this respect. Since however, no headway was made respondent No. 4 passed impugned order of attachment under section 45 of the VAT Act. Being convinced that the petitioners have no property in the State of Gujarat, he attached the bank account of the petitioner in UTI Bank, Greenpark branch, covering the possible sales tax dues of ₹ 4.80 crores. At that stage, the petitioners filed this petition and have prayed for prayers noted above. 5. While admitting the petition, by an order dated November 29, 2006, the Division Bench of this court passed the following interim order: Considering the facts brought to our notice, we direct the petitioners to deposit ₹ 1,92,00,000 against tax with the Registrar, High Court of Gujarat, within a week and payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... railway (accordance with article 4.1.3(g) Term maintenance period and liability was defined as under: 'Maintenance period and liability' means the period of 12 months from the date of issue of performance certificate during which the Concessionaire's liability is to rectify the defects that may arise in the works due to defective material and poor workmanship (not normal wear and fear) executed by him for the project railway in accordance with railway's requirements in Schedule A . Term project assets was defined as under: 'Project assets' means all physical and other assets relating to and forming part of the project railway including but not limited to (i) rights over the project area in the form of licences, right of way or otherwise, (ii) tangible assets such as civil works including the foundation, formation, track, interchange, bridges, approaches to bridges, lighting facilities, signals, sign boards, electric works, telephonic and other communication systems and equipment for the project stations, administration and maintenance, equipment, depots, relief centers, service facilities, etc. Agreement envisages grant of conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be handed over as under: (i) Upon achieving COD, the concessionaire shall give railways access to project assets and project facilities on exclusive basis for operation and maintenance. (ii) All project assets and project facilities including the formation works, tracks, structure and equipment shall have been renewed and cured of all defects and deficiencies as necessary so that the project railway is complete with the specifications and standards set forth in this agreement. (iii) The concessionaire delivers relevant records pertaining to the project railway and its design, engineering and construction pertaining thereto and complete as build drawings on the project completion date prior to issue of completion certificate. 14.3 Divestment to termination after COD or at the end of concession period: (i) The land, project assets and project facilities created and owned by the concessionaire as a result of the concession under this agreement shall deemed to have been transferred to railways. procedure and the concessionaire shall have no right whatsoever to require the railway to alter/strengthen the maintenance procedures and practices in vogue. Clause 12.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilities free from all encumbrances absolutely and free of any charge or tax to railway. 7. At this stage we may take note of relevant statutory provisions. Section 2(12) of the Gujarat Sales Tax Act, 1969 ( the Act , for short) defines the term goods as under: (12) 'goods' means all kinds of movable property (not being news-papers or actionable claims or stocks, shares or securities) and all materials, articles and commodities, including standing timber and things attached to or forming part of the land, which are agreed to be severed before sale or under the contract of sale. Section 2(28) of the Act defines the term sale . The relevant portion of which reads as under: (28) 'Sale' means a sale of goods made within the State for cash or deferred payment or other valuable consideration and includes, (a) and (b) . . . (c) transfer of property in goods (whether as goods or in some other form) involved in execution of a works contract. (d) to (f) . . . Explanation I. For the purposes of this clause except sub-clauses (c) and (d), 'sale' within the State includes a sale determined to be inside the State in accordance with the pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se involves a substantial question of law. 9. On the basis of the above documents on record, learned senior counsel Shri Manish Bhatt for the petitioners vehemently contended that the sales tax authority have no right to collect any tax from the petitioners. He submitted that there was no sale of goods as envisaged under the Sales Tax Act. The counsel further submitted that this was also not a case of execution of works contract by the petitioners. Application of section 2(28)(c) of the Act was therefore, ruled out. The counsel further submitted that the sales tax authorities therefore, were not entitled to assess any tax in the hands of the petitioners. Notice issued for the purpose of assessment and collection of tax was therefore, without jurisdiction. 9.1. On the basis of such contentions, the counsel also questioned the legality of the impugned order of provisional attachment issued by respondent No. 4 in purported exercise of powers under section 45 of the VAT Act. The counsel submitted that when the petitioners' tax liability did not arise, there was no question of attachment of the petitioners' property for collection of such tax. 9.2. In support of his con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or a statement there should not be seen in isolation. He further submitted that the intention of the parties was that the conversion of existing railway line from meter gauge to broad gauge would be undertaken by the petitioners at their cost through their investment. Upon completion of the conversion work, the same would be handed over to the railway authorities who would pay periodic charges for a span of 12 years. He pointed out that at the completion of the above 12 years envisaged under the agreement, the petitioners were not to receive any further payments for infrastructure created by them at their cost. According to the learned Advocate-General therefore, this was a clear case of the works contract. He drew our attention to Explanation II of section 2(28)(c) of the Act which provides that for the purpose of sub-clause (c), the expression works contract means a contract for execution of works and includes such works contract as the State Government may, by notification in the Official Gazette, specify. He drew our attention to Appendix 1A to the Act which contains a list of contracts for execution of works specified as a works contracts for the purpose of section 2(28)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) In the case of Sundaram Finance Ltd. v. State of Kerala reported in [1966] 17 STC 489 (SC), wherein the apex court considered the question as to when the sale of goods can be stated to have taken place in a hirepurchase agreement between the finance company and the last purchaser of the motor vehicle. (4) In the case of Gannon Dunkerley Co. v. State of Rajasthan reported in [1993] 88 STC 204 (SC); [1993] 1 SCC 364, wherein the apex court expressed the opinion that in a works contract which is divisible into one for sale of goods and the other for supply of labour and services, the labour charges for execution of works would not be exigible to sales tax, but the former would. (5) In the case of State of Andhra Pradesh v. Kone Elevators (India) Ltd. reported in [2005] 140 STC 22 (SC); [2005] 3 SCC 389, wherein the apex court in para 5 of the decision observed that it is well-settled that there is no standard formula by which one can distinguish a contract for sale from a works contract and it must depend largely on facts depending upon the terms. (6) In the case of Hindustan Shipyard Ltd. v. State of Andhra Pradesh reported in [2000] 119 STC 533 (SC), wherein the apex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C 22 (SC); [2005] 3 SCC 389, there is no standard formula by which one can distinguish a contract for sale from a works contract. The question is largely one of facts depending upon the terms and conditions of the contract. The apex court in the case of State of Andhra Pradesh v. Kone Elevators (India) Ltd. [2005] 140 STC 22 (SC); [2005] 3 SCC 389 held as under (pages 26 and 27 in 140 STC): 5. It can be treated as well-settled that there is no standard formula by which one can distinguish a 'contract for sale' from a 'works contract'. The question is largely one of fact depending upon the terms of the contract including the nature of the obligations to be discharged thereunder and the surrounding circumstances. If the intention is to transfer for a price a chattel in which the transferee had no previous property, then the contract is a contract for sale. Ultimately, the true effect of an accretion made pursuant to a contract has to be judged not by artificial rules but from the intention of the parties to the contract. In a 'contract of sale', the main object is the transfer of property and delivery of possession of the property, whereas the main object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l advised in not doing so directly at first instance before this court in exercise of writ jurisdiction. It is by now well-settled that when particularly in revenue matters, the statute provides for detailed mechanism for assessment, adjudication, appeals and revisions and thereafter collection of tax, a writ petition should normally be not entertained unless of course the case on hand falls under any of the well recognised exceptions to this rule of the alternative remedy normally debarring the entertainment of a direct writ petition. Decisions on the point are numerous. We may however, notice some of them rendered by the apex court in different taxation statutes. (1) In the case of C.A. Abraham v. Income-tax Officer, Kottayam reported in [1961] 41 ITR 425 (SC); AIR 1961 SC 609, the apex court in the background of Income-tax Act, 1922, observed that the Act provides a complete machinery for assessment of tax and imposition of penalty and for obtaining relief in respect of any improper orders passed by the income-tax authorities. A person who is aggrieved by an order of the Appellate Assistant Commissioner imposing a penalty, cannot be permitted to abandon resort to that machine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t lacking jurisdiction and that section 67 of the Income-tax Act, 1922, operated as a bar to the maintainability of such a suit. In dealing with the question whether section 67 operated as a bar to a suit to set aside or modify an assessment made under a provision of the Act which is ultra vires, the Privy Council observed: 'In construing the section it is pertinent, in their Lordships' opinion, to ascertain whether the Act contains machinery which enables an assessee effectively to raise in the courts the question whether a particular provision of the Income-tax Act bearing on the assessment made is or is not ultra vires. The presence of such machinery, though by no means conclusive, marches with a construction of the section which denies an alternative jurisdiction to inquire into the same subject-matter.' ... 11. Under the scheme of the Act, there is a hierarchy of authorities before which the petitioners can get adequate redress against the wrongful acts complained of. The petitioners have the right to prefer an appeal before the prescribed authority under sub-section (1) of section 23 of the Act. If the petitioners are dissatisfied with the decision in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ): 27. At the outset, we intend to remark that in these type of cases, the High Court ought not to have entertained the writ petition(s)/writ appeal(s) filed under articles 226/227 of the Constitution. We say so for the reason, that, particularly a transaction is under the Central Sales Act, inter-State sales or inter-State sales are mixed questions of fact and law. Those facts requires to be brought to the notice of the assessing authority by the appellants and it is for the assessing authority to come to a conclusion, based on those facts whether a particular transaction is intra-State sales which is exigible to the taxes under the VAT Act or inter-State sales, as envisaged under section 3 of the Central Sales Tax Act read with section 6 of the charging provisions therein. It is after such adjudication the matter can travel from one stage to the other as provided under the Act. 28. In the instant case, as we have already stated, the relevant factors were not before the court nor the finding of the assessing authority to decide whether the transactions in question are intraState sales or inter-State which are exigible to taxes under the VAT Act or taxes under the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exigible to sales tax in view of the nature of the contract and execution of work done by them under such contract. The sales tax authorities are bound to take into consideration and take a view and only thereafter, would be able to frame any assessment even if ultimately the authorities rule against the petitioners. In such a case against the assessment first appeal would be available before the Departmental appellate authority and thereafter before the Sales Tax Tribunal. The Commissioner and the Tribunal also have revisional powers. Even the decision of the Tribunal is amenable to appellate jurisdiction of the High Court on a substantial question of law. When such elaborate machinery of appeals and revisions are provided under the Gujarat Sales Tax Act and its successor VAT Act, we are not inclined to examine these questions of complex factual and legal aspects in the present petition and thereby give a complete go-bye to such machinery under the Act. We have also noticed the statutory provisions contained in the Gujarat Sales Tax Act as well as the VAT Act which provide for such appeals and also for revision at the hands of the Commissioner either suo motu or on an application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... struction of New Delhi has already been subjected to sales tax assessment and sales tax authorities are demanding sales tax from such agency. It was therefore, contended that the State cannot now independently tax the petitioners for the same amount again. We also notice that in the impugned order the Assistant Commissioner of Commercial Tax had recorded as under: 18. Thus, the dealer was granted opportunity of hearing on many occasions but he has failed to make out his case before this office. The dealer has paid ₹ 1.63 crores under section 57B of the Gujarat Sales Tax Act, 1969, which is likely to be adjusted towards tax liability of M/s. D.S Constructions Limited, New Delhi amounting to ₹ 5,87,53,322 (rupees five crores eighty seven lacs fifty tree thousand three hundred and twenty two) as this is the payment made against the order under section 57B. M/s. D.S. Construction, New Delhi has been assessed by Assistant Commissioner, Surendranagar on December 29, 2004. 18. In this context we may also take note of the decision of the apex court in the case of State of Andhra Pradesh v. Larsen Tourbo Ltd. reported in [2008] 17 VST 1 (SC); [2008] 9 SCC 191. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated November 29, 2006, the court had provided that if the petitioners receive any further access charges, they shall deposit the tax at the rate of 12.5 per cent on that amount with the registry of this court till further orders. The petitioners have been depositing such periodic amounts also. 21. In view of the above developments, when we are of the opinion that attachment order cannot survive and it has in any case outlived its life well beyond the statutory period envisaged under section 45 of the VAT Act, such attachment order is therefore, quashed. 22. The question of the amount of ₹ 1,92,00,000 and further amounts deposited by the petitioners under the interim order dated November 29, 2006 remains. 23. The learned Advocate-General vehemently contended that such amounts should be held back to be adjusted only after assessment order is passed. We however, are of the opinion that such request cannot be accepted. Firstly, as already noted, section 45 of the VAT Act provides for attachment before assessment which order can be passed having a life of not more than one year. Secondly, under the interim order dated November 29, 2006 this court had specifically ..... X X X X Extracts X X X X X X X X Extracts X X X X
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