TMI Blog2016 (4) TMI 1205X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings under article 226, is limited? - Held that: - A writ of mandamus is not a writ of course or a writ of right but is, as a rule, discretionary - The statutory obligation cast on the assessing authority is to pass an order in accordance with the provisions of the Act and the Rules. As long as the assessment order accords with the provisions of the Act and the rules made thereunder, this Court would neither sit on appeal over the findings recorded by the assessing authority nor re-appreciate the evidence on record to substitute its views for that of the assessing authority. It is only within these self-imposed restrictions would the validity of the assessment orders be examined in proceedings under Article 226 of the Constitution of India. Effect of instructions issued by Government u/s 76(2) of the act and its effect - Held that: - the power conferred on the Government, by section 76(2) of the Act, is only to remove difficulties, and cannot be exercised to make a provision which is inconsistent with the purposes of the Act - for effective implementation of the Act, the contractee was directed to effect tax collection at source when payment of the respective bills are ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er certain turnover relating to supply/deemed supply of goods to the Transmission Corporation is liable to be taxed at five per cent. or 14.5 per cent. is a question of fact, we see no reason to take upon ourselves the task of elaborately examining the sales which were brought to tax at 14.5 per cent., and whether it included goods which do not fall within the ambit of entry 116 such as cement, etc. Was the assessing authority justified in forfeiting the tax collected at source without notice to the petitioner? - Held that: - The impugned assessment orders, to the extent the assessing authority forfeited certain amounts on the premise that they constitute excess tax collected beyond the tax liability of the petitioner-contractor, are set aside. It is made clear that this order shall not preclude the second respondent from putting the petitioner on notice regarding his proposal to forfeit certain excess tax collection, give them an opportunity of being heard, and thereafter pass orders afresh in accordance with law. Can the petitioner be subjected to tax, on the same transactions, twice? - Held that: - Till assessment orders are passed as aforesaid, for the financial years 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra Pradesh VAT Act, 2005 (now called the Telangana Value Added Tax Act, for short, the Act ). The relief sought in W. P. No. 17932 of 2015 is to declare the assessment order dated May 16, 2015, issued by the second respondent for the tax period 2012-13, and the notice for penalty in form VAT 203-A dated May 26, 2015, as illegal, unlawful, contrary to the provisions of the Act, and without jurisdiction. The petitioner, a registered dealer under the Act with its registered office at Hyderabad, is engaged in the business of undertaking works contracts. In their monthly returns from the year 2009-10 onwards, including during the tax periods April 1, 2011 to March 31, 2012 and April 1, 2012 to March 31, 2013, the petitioner claims to have reported their turnover on receipt basis, and to have paid VAT thereon. It is their case that, while filing their VAT returns, they have consistently followed the practice of taking into account the amounts actually received from the contractees; the amounts receivable were deducted and were offered to tax in the succeeding tax periods; for instance a sum of ₹ 26,57,72,028 received, pertaining to the tax period 2010-11, was included in the ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment years 2011-12, 2012-13, 2013-14 and 2014-15 duly examining their claim in the light of the documentary evidence produced by them, and in the light of the provisions of the Act, and the Rules made thereunder. In the writ affidavit it is stated that the second respondent issued a revised show-cause notice in form 305A dated April 28, 2015 giving details of the project-wise tax liability; they submitted their objections thereto vide letter dated May 6, 2015 explaining the project-wise receipts, the tax on these receipts, and the deductions, etc.; the only variation, for which the petitioner was made liable to pay differential tax, was on the receivables, and the contract receipts, for the work executed during the tax period; they had submitted that these were ongoing contracts, and certain bills for the tax period 2011-12 were not received as on March 31, 2012; they were taxable as and when the amounts were received; hence they had carried forward the same to the next tax period, and had paid tax thereon as and when they received the amounts during that year; they had submitted the RA bills for verification of the work done by them; they had classified various contracts, execu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,10,31,309 as undue enrichment; the petitioner has disclosed the very turnovers in the subsequent years as and when the amounts were received; this is evident from a chart annexed to the writ petition; the method adopted by the assessing officer completely disturbs the method followed by him earlier for assessing the turnover; the Commissioner of Commercial Taxes had addressed letters dated February 19, 2015 and February 25, 2015 to the Chairman Managing Director of respondent Nos. 3 and 4 to deduct TDS not only on the erection, but also on the entire amounts paid to the petitioner; thereafter the second respondent addressed letter dated April 29, 2015 to the Chairman Managing Director of the third respondent to stop TDS payment to the petitioner as the tax demand, due to the Government, had increased; this action of the second respondent was not only without jurisdiction, but also caused grave prejudice to the petitioner; soon after an assessment order was passed, the second respondent issued notice to respondents 3 and 4 to withhold ₹ 3,94,67,240 and ₹ 14,21,41,166; as a result thereof payments to the petitioner has been stopped which had caused them undue hardsh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt erred in drawing a different conclusion in respect of four contracts from the same books of accounts, having accepted that books were maintained in respect of eight contracts; the action of the second respondent in taxing the petitioner following the principle of accretion, without taking into consideration the facts and circumstances of the case, is arbitrary and illegal; respondents 3 and 4, who are the contractees for whom the petitioner undertakes works, failed to make the payment due to the petitioner and remitted the same to the first respondent; tax at source is deducted when the payment is made, and not when the bills are raised; there is complete matching between the payments received, and the tax deducted at source, which is available to the credit of the petitioner; this also supports the petitioner's contention that, in cases where the contracts are spread over several years, it is more appropriate to tax the receipts, as this would also facilitate claiming deduction of tax; and the second respondent had adopted a wrong method of bringing to tax the receivables, which had resulted in forfeiture of tax. In his counter-affidavit, the second respondent states tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xecution of a works contract, the consideration received or receivable, whichever is earlier, would be required to be offered to tax by the contractor; use of the word receivable in the rule makes it clear that, even if the contractor has not received payment for the goods incorporated in the works, he would still be liable to pay tax under law; title to the goods is transferred, from the contractor to the contractee, on incorporation of the goods in the works; the statement submitted by the dealer shows that the sale consideration, receivable as on March 31, 2012, was brought into the books of accounts; the taxable turnover, which has been subjected to tax, is inclusive of both (a) sale proceeds receivable as on March 31, 2011, (i.e., tax period 2010-11), but was received during the tax period 2011-12, and (b) sale proceeds which were receivable as on March 31, 2012, (i.e., tax period 2011-12); each assessment is independent of the other; the stand taken, in the previous assessment order, does not bind the authorities for subsequent years; res judicata does not apply to tax proceedings; accepting the petitioner's contention would lead to postponement of revenue to the Depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner nor would they suffer any loss or prejudice as they have already passed on the tax burden to their customers; tax, under section 4(7)(a) of the Act, is payable by a dealer if he chooses not to exercise the option of composition under section 4(7)(b) and (d) of the Act; and the liability to pay tax under section 4(7)(a) is on the value of the goods at the time of incorporation of such goods in the works executed by him. In the reply affidavit filed by the petitioner, it is stated that the counteraffidavit makes no reference to the clarification issued under section 76(2) of the Act; the assessing authority is bound by the clarification issued by the Government, and should have excluded the receivable component from the turnover of the assessee; the assessment order results in levy of tax twice on the very same turnover; the objections raised by the petitioner were not properly considered by the assessing authority; during the course of personal hearing, the petitioner has repeatedly explained that the turnover, on which tax was proposed to be levied, has been subsequently reported by them in their VAT-200 returns; this vital fact was overlooked; the jurisdiction of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tenance of accounts is different from reporting of turnover; the vital fact that the petitioner had subsequently paid tax on the same turnover, and to that extent relief ought to have been granted by the respondents as it was granted for the earlier assessment years, has been ignored; the petitioner has been consistently following a particular procedure for making payment of tax, and such procedure was accepted earlier; the respondents have not denied payment of tax by the petitioner in the subsequent years; the petitioner is not denying contractual receipts, and has been paying tax on receipt of the consideration; this procedure has been followed from 2005 till 2011-12; for the years preceding 2011-12, even according to the respondents, tax has been levied only on a receipt basis; the assessment procedure, being consistently followed, should not be disturbed; the petitioner has maintained accounts for all the projects; they have been paying tax, and complying with the Rules, as and when consideration has been received by them; the petitioners have not postponed payment of tax as there is no provision requiring payment of tax on receivables; the question of loss of interest does no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g on the issues involved in the matter, could not be placed on record through the writ affidavit filed earlier; the petitioner has been executing various civil contracts, some of which pertain to Government Departments such as irrigation, panchayat raj, rural development, etc.; the petitioner is also executing certain works for respondents 3 and 4; these works contracts are indivisible works contracts and, since the petitioner has not opted to pay tax under composition, they are liable to pay tax under section 4(7)(a) of the VAT Act on the turnover of works contracts, and are entitled to claim input-tax credit in terms of section 13 of the Act read with rule 20 of the Rules, apart from the claim of eligible deductions in terms of rule 17 of the Rules; since tenders were invited for the works in question on engineering, procurement and construction on a turnkey basis, everything is required to be done by the contractor himself; the petitioner has been filing their monthly returns on the turnover scored by them on receipt basis, since the Government Departments are issuing TDS certificates, only when the amounts are paid to the petitioner, without reference to the invoices raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cuted in favour of Government Departments, involve less material component, and more labour component; this resulted in excess payment of tax; it cannot be said that excess payment is due to reimbursement of the tax component, over and above the liability of the petitioner, warranting forfeiture; under rule 23(6)(a) of the Rules revised returns, if any, can be filed only within six months; at this juncture the petitioner cannot seek adjustment of the tax paid on the receivable portion in the subsequent years; the assessment orders may need revision to set right the levy for the assessment years 2009-10 to 2012-13; the Department would then be required to suo motu transfer credit of the tax paid on the receivable portion in the years 2013-14 and 2014-15, to the respective years, without reference to the limitation prescribed under rule 23(6)(a) of the Rules; since the petitioner has offered tax, on the receivable portion, in the year in which it was actually received, they did not claim deduction towards labour on such turnover; they have claimed input-tax credit, on such turnover, in the year to which it relates; since TDS certificates were issued by the contractee Departments, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... October 31, 2015, from the third respondent; the petitioner has therefore filed a contempt case; the fifth respondent issued another notice dated December 2, 2015, which was served on the petitioner on December 7, 2015 at 4.40 p.m., demanding payment of the balance disputed tax of ₹ 12,88,31,298; the petitioner was directed to remit the same within three days and was threatened with coercive action in case of non-payment within the stipulated period of three days; the fifth respondent has placed reliance on G. O. Rt. No. 3225, dated October 19, 2015 for demanding the balance disputed tax contrary to the undertaking; respondents 2 and 5 appear to have made up their mind to somehow recover the entire disputed demand, through coercive measures, even during the pendency of the writ petition without answering how they would adjust the taxes paid in the subsequent years, on the same turnover, in view of the accepted practice of assessing the petitioner on receipt basis; these works are mostly common and are running contracts; ever since 2009, the Department never treated them as divisible contracts and, for the first time, the second respondent treated them as divisible contracts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not standard goods which can be purchased across the counter; the petitioner is entitled to receive consideration only after supply, erection, and subsequent completion of the project to the satisfaction of the contractee-Corporation; and the turnover cannot be bifurcated into supply portion and erection portion. In the affidavit filed on December 22, 2015, it is stated that the petitioner has been advised to file this additional affidavit bringing to the notice of the court certain important facts which missed the attention of the petitioner earlier, and also to raise additional questions of law involved in the matter; the petitioner has been executing various civil contracts, some of which pertain to the Government Departments such as irrigation, panchayat raj, rural development, etc.; the petitioner is executing certain works contracts for respondents 3 and 4 also during the period in question; the works contracts, executed by the petitioner with the Government Departments as well as the respective Transmission Corporations, are indivisible works contracts; since the petitioner has not opted to pay tax under composition, it is liable to pay tax under section 4(7)(a) on the tu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and have a bearing on the decision that would be taken by the court, they may be permitted to file the additional affidavit; and this court may be pleased to consider the same as part and parcel of the main affidavit filed in support of the writ petition. Elaborate submissions were put forth by Sri S. Ravi, learned senior counsel appearing on behalf of the petitioners. Sri Pushyam Kiran, learned counsel for the petitioner, has filed written arguments. Detailed oral and written submissions were submitted by Sri K. Vivek Reddy, learned special counsel appearing on behalf of the learned Advocate-General. It is convenient to examine the rival submissions, urged by learned counsel on either side, under different heads. I. Should the petitioner be relegated to the alternative remedy of appeal under the Act ? Sri K. Vivek Reddy, learned special counsel appearing on behalf of the learned Advocate-General, would submit that the writ petition is not maintainable in view of the alternate remedy; the present writ petition was filed challenging the assessment order; in both the writ petitions there is no allegation of lack of jurisdiction or violation of principles of natural justice; wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e; a policy decision was being taken with respect to such cases as, in the ultimate analysis, the amounts were payable by the State to the State; and as certain policy decisions need to be taken, the matter may be adjourned by four weeks. The Division Bench also recorded the submission of the learned Advocate-General that, pending decision being taken by the Government in the matter, there would be no coercive steps, in the meanwhile, for collection of VAT to the extent of bills receivable, i.e., for bills received but for which payment had not been made. Recording the submission of the learned Advocate-General, both the writ petitions were adjourned by four weeks. Thereafter, on September 22, 2015, the Division Bench adjourned the matter, at the request of the learned Advocate-General, by two more weeks and deleted the matter from the caption of part heard . Both these writ petitions suffered several adjournments thereafter till orders were eventually reserved on January 5, 2016. While reserving orders, in both these writ petitions, we directed the respondents not to take any coercive steps, for recovery of the tax dues, pending disposal of the writ petitions. While it is true ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court to deal with the matter itself if it is in a position to do so on the basis of the affidavits filed. (S. J. S. Business Enterprises (P.) Ltd. v. State of Bihar [2004] 121 Comp Cas 99 (SC); [2004] 7 SCC 166). When, on undisputed facts, the taxing authorities are shown to have assumed jurisdiction which they do not possess, a writ petition can be entertained. (Gujarat Ambuja Cement Ltd [2005] 142 STC 1 (SC); [2005] 6 SCC 499). Some exceptions to the rule of alternative remedy have been recognized, i.e., where the statutory authority has not acted in accordance with the provisions of the enactment or in defiance of the fundamental principles of judicial procedure, etc. (Commissioner of Incometax v. Chhabil Dass Agarwal [2013] 357 ITR 357 (SC); [2014] 1 SCC 603). If the High Court has entertained a petition, despite availability of an alternative remedy, and has heard the parties on merits it would, ordinarily, not be justified in dismissing the writ petition on the ground of non-exhaustion of the statutory remedies unless it finds that factual disputes are involved, and it would not be desirable to deal with them in a writ petition. (L. Hirday Narain v. Income-tax Officer, Bare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; in a writ of mandamus, the petitioners can only seek enforcement of a legal duty which the respondent has failed to discharge; if the assessment order is in accordance with law, the petitioners are not entitled for a writ of mandamus seeking deferment of collection of tax; the petitioners have sought deferment of tax collection under the impugned assessment order, pending completion of assessment for the subsequent assessment years (financial years 2013-14 and 201415); under the VAT Act, the petitioners are obligated to report the turnovers with respect to bills received and receivable in the relevant year in which the material is incorporated; having failed to comply with this mandatory requirement of the law, the petitioners cannot seek a writ of mandamus to direct the assessing officer to ignore the requirement of the law, and defer collection of tax; if the assessment order is valid, a writ of mandamus would not be issued not to collect tax; a writ of mandamus cannot be issued contrary to the provisions of the Act, or to defeat the provisions of the Act; it cannot be issued to compel the assessing authority to pass an order in violation of a statutory provision; and the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC 964). The duty that may be enjoined by a mandamus may be one imposed by the Constitution, a statute, common law or by rules or orders having the force of law. (M. R. Apparao [2002] 4 SCC 638, Kalyan Singh v. State of Uttar Pradesh, AIR 1962 SC 1183). A writ of mandamus is not a writ of course or a writ of right but is, as a rule, discretionary. (C.R. Reddy Law College Employees' Association, Eluru, W.G. District v. Bar Council of India, New Delhi ). While a writ of mandamus is equitable in nature, its issuance is governed by equitable principles and the prime consideration, for issuance of the writ, is whether or not substantial justice will be promoted (Rajasthan State Industrial Development Investment Corpn. v. Diamond Gem Development Corpn. Ltd., ; Commissioner of Police, Bombay v. Govardhandas Bhanji ; Praga Tools Corporation v. Shri C.V Imanual ; Punjab Financial Corporation v. Garg Steel ; Union of India v. Arulmozhi Iniarasu ; and Khela Banerjee v. City Montessori School ), it is however not for the Court to dictate what decision should be taken by the statutory authority, in the exercise of its discretion, in a given case. The Court cannot direct the statut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e material incorporated in the works; the said G.O. has now been clarified by G.O.Rt. No.3225 dated 19.10.2015 wherein it was held that the tax liability of the assessee will always be determined under the Act and the Rules; and any Government Order, issued under Section 76 of the Act, cannot be contrary or inconsistent with the provisions of the Act. Section 76 of the Act is the power to remove difficulties and, under subsection (2) thereof, if any difficulty arises in giving effect to the provisions of the Act, the Government may, by order, make such provisions as are not inconsistent with the purposes of the Act, as appears to it to be necessary or expedient for removing the difficulty. In order to obviate the necessity of approaching the Legislature for removal of every difficulty, howsoever trivial, encountered in the enforcement of a statute by going through the time-consuming amendatory process, the Legislature sometimes thinks it expedient to invest the executive with a very limited power to make minor adaptations and peripheral adjustment in the statute, for making its implementation effective, without touching its substance. That is why the removal of difficulty clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the bills are paid. The words for implementation of VAT , in clause (5) of G. O. Ms. No. 11, cannot be read out of context to mean that a dealer is required to pay VAT only when payment, for the running account bills, are received by him. As noted hereinabove, the power conferred on the Government, by section 76(2) of the Act, is only to remove difficulties, and cannot be exercised to make a provision which is inconsistent with the purposes of the Act. As shall be referred to in greater detail later, section 22 of the Act, read with rule 24 of the Rules, requires tax to be paid before the 20th of the month succeeding the tax period of one month. The complex demands on modern legislation necessitates the plenary legislating body to discharge its legislative function by laying down broad guidelines and standards, to lead and guide as it were, leaving it to the subordinate legislating body to fill up the details by making necessary rules and to amend the rules from time to time to meet unforeseen and unpredictable situations, and within the framework of the power entrusted to it by the plenary legislating body. (State of Tamil Nadu v. Hind Stone, AIR 1981 SC 711). A statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . No. 11, merely require tax to be collected at source when payment is made to a dealer. It is evident therefore that, for effective implementation of the Act, the contractee was directed to effect tax collection at source when payment of the respective bills are made. In any event the State Government subsequently amended clause (5) of G. O. Ms. No. 11 dated July 29, 2005 by G. O. Rt. No. 3225, dated October 19, 2015. After its amendment clause (5) reads thus: for implementation of tax collections at source as well as effecting TCS, date of payment of the respective bill only is the criterion. As and when bills are paid, five per cent. should be collected, wherever applicable. The said G. O. specifies that the liability of a dealer should always to be 2 determined as per the provisions of the Telangana VAT Act, and the Rules made thereunder. In view of the subsequent clarification in G. O. Rt. No. 3225, dated October 19, 2015 ambiguity, if any, in the earlier circular, i.e., G. O. Ms. No. 11, dated July 29, 2005, has now been put to rest. IV. Was the assessing authority justified in refusing the petitioner's claim to be subjected to tax under the Act only when they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incorporation, and not when the bills are actually paid; and similarly, in a sale, tax is liable to be paid the moment sale is made, and not when the consideration is received. Learned counsel would rely on A. P. Aksh Broad Band Ltd. v. Commercial Tax Officer [2011] 41 VST 129 (AP); [2011] 6 ALD 628 (DB), Builders Association of India v. Union of India [1989] 73 STC 370 (SC), Gannon Dunkerley Co. v. State of Rajasthan [1993] 88 STC 204 (SC); [1993] 1 SCC 364 and Aluminium Industries Ltd. v. State of Kerala [1978] 42 STC 72 (Ker). Section 4 of the Act is the charging provision, and sub-section (1) thereof stipulates that, save as otherwise provided in the Act, every dealer registered as a VAT dealer shall be liable to pay tax on every sale of goods in the State at the rates specified in the Schedules. Section 4(3) requires every VAT dealer to pay tax on every sale of goods taxable under the Act on the sale price at the rates specified in the Schedules III, IV and V, subject to the provisions of section 13. The charge to tax, under section 4(1) of the Act, is on the sale of goods in the State. The word sale is defined, in section 2(28) of the Act, to mean every transfer of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... customer has not issued an invoice but if the amount is reflected in the balance sheet, it is liable to tax. To quote (page 75 in 42 STC): . . . The Tribunal, in our opinion, rightly pointed out that although the bills might not have been issued, the assessee had included the amount in the balance sheet and, therefore, that will form part of the sale price, and the fact that bills had not been issued to the customers is immaterial for the purpose of assessment. The Tribunal observed that what was material was not actual collection of the sale price but the receivability of the amount. We are in agreement with this reasoning and conclusion of the Tribunal. We dismiss these revision cases but in the circumstances without costs. and in the present case, dealer has reflected bills receivable for works contract and sales in their balance-sheet; and, therefore they are liable to pay tax thereon. The consideration for the sale of goods, i.e., the sale price, includes the value of the goods used or supplied by the dealer in the course of execution of a works contract. Section 4(7)(a) of the Act stipulates that, notwithstanding anything contained in the Act, every dealer executin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transfer and a purchase of those goods by the person to whom such transfer is made. (Builders Association of India [1989] 73 STC 370 (SC); [1989] 2 SCC 645). The measure for the levy of the tax, contemplated by article 366(29A)(b), is the value of the goods involved in the execution of a works contract. Article 366(29A)(b) emphasises on the transfer of property in goods (whether as goods or in some other form). This indicates that, though the tax is imposed on the transfer of property in goods involved in the execution of a works contract, the measure for levy of such imposition is the value of the goods involved in the execution of a works contract. It cannot be said that the value of such goods, for levying tax, can be assessed only on the basis of the cost of acquisition of the goods by the contractor. Since the taxable event is the transfer of property in the goods involved in the execution of a works contract, and the said transfer of property in such goods takes place when the goods are incorporated in the works, the value of the goods which can constitute the measure for the levy of the tax has to be the value of the goods at the time of incorporation of the goods in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over, and in providing deductions thereto. Section 11 of the Act relates to calculation of tax payable and under subsection (1) thereof, subject to sub-section (2), the VAT payable on a sale liable to VAT shall be calculated by applying the rate of tax, specified in the Schedules, on the sale price of goods. Section 20(1) of the Act requires every dealer, registered under section 17 of the Act, to submit such return or returns, along with proof of payment of tax in such manner, within such time, and to such authority as may be prescribed. Rule 23(1) of the Rules requires the return to be filed by the VAT dealer, under section 20 of the Act, in form VAT 200 within twenty days after the end of the tax period. Section 2(36) defines tax period to mean a calendar month or any other period as may be prescribed. As no other period has been prescribed under the Rules, the tax period continues to be a calendar month. Consequently rule 23(1) requires a return to be filed for each month, before the 20th of the succeeding month. Rule 24 relates to tax payment and under sub-rule (1) thereof, in the case of a VAT dealer, the tax declared to be due in form VAT 200 shall be paid not later tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 24, to the uncertain and varying date of receipt of sale consideration. Unlike cash sales, wherein receipt of consideration and the sale of goods are more or less simultaneous, sale of goods, wherein payment of consideration is deferred to a later date mutually agreed to by the parties, are called credit sales. As section 2(28) defines sale to include transfer of property in goods, by one person to another in the course of trade or business, for deferred payment also, credit sales also fall within the definition of sale under section 2(28) of the Act. On a conjoint reading of section 22 of the Act and rule 24 of the Rules, the tax declared in the return for a particular month is required to be paid, and proof of payment filed along with the return before the 20th of the succeeding month, and the obligation to pay VAT cannot be postponed to the indefinite date of receipt of sale consideration. Section 4(7)(d) of the Act gives an option to a dealer, engaged in construction and sale of residential apartments, houses, buildings, etc., to pay tax by way of composition at 1.25 per cent. of the amount received or receivable towards the composite value of both land and building, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entire turnover of RA bills is nonetheless without authority of law, and is contrary to the second proviso to rule 17(e) of Rules; although the petitioner had sought a larger relief, for exclusion of the receivable sum, it is open to them to contend that the assessment order was not passed in accordance with the Rules, and was required to be set aside; the petitioner had also availed of the benefit of deductions, in terms of rule 17(e), in the year in which payment was received by them, and not in the year in which RA bills were raised; the earlier practice of assessing the petitioner to VAT on receipt basis was arbitrarily given a go-bye; having regard to rule 17(1)(d) read with the second proviso to rule 17(1)(e) of the Rules, the sum taxable in the first instance is the cost of the goods incorporated in the works; and the element of profit has to await the finalization of accounts. On the other hand, Sri K. Vivek Reddy, learned special counsel appearing on behalf of the learned Advocate-General, would submit that the assessment order is in accordance with rule 17(1) (d) and 17(1)(e); in the writ petition, the petitioners have not contended that the assessment was not ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of rule 17(1)(d), then the value of the goods, as determined under rule 17(1)(d), shall be the value of the goods liable to tax under section 4(7)(a) of the Act. The second proviso qualifies rule 17(1)(e) of the Rules. A proviso qualifies the generality of the main enactment by providing an exception and taking out from the main provision a portion which, but for the proviso, would be a part of the main provision. (J. K. Industries Ltd. v. Chief Inspector of Factories Boilers [1997] 88 Comp Cas 285 (SC); [1996] 6 SCC 665, Commissioner of Income-tax v. Indo-Mercantile Bank Ltd. [1959] 36 ITR 1 (SC); AIR 1959 SC 713). A proviso cannot be used to nullify or set at naught the real object of the main provision, (S. Sundaram Pillai v. V. R. Pattabiraman [1985] 1 SCC 591, Craies: Statute Law Seventh Edition), and must be construed harmoniously with the latter. (Abdul Jabar Butt v. State of Jammu Kashmir AIR 1957 SC 281, Indo-Mercantile Bank Ltd. [1959] 36 ITR 1 (SC); AIR 1959 SC 713, Ram Narain Sons Ltd. v. Assistant Commissioner of Sales Tax [1955] 6 STC 627 (SC); [1955] 2 SCR 483, and State of Punjab v. Kailash Nath [1989] 1 SCC 321). A proviso is a qualification of the preceding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completion of the entire work. The second limb, of the second proviso, emphasises that such additional taxable turnover and the taxes payable, (i.e., the difference between the tax computed under rule 17(1)(d) and rule 17(1)(e)), shall be declared in the return for the month in which the accounts are finalized . The requirement of the second proviso is for payment of the balance tax at the time of finalization of the accounts, and not after the entire work is completed. Rule 31(1) of the Rules requires every dealer, executing works contracts, to keep separate accounts for each contract. Rule 31(3), which requires every dealer executing works contract and not opting to pay tax by way of composition to keep the records specified thereunder, makes it clear that the dealer is required to maintain records project-wise. The records required to be maintained, in terms of items (i) to (viii) of rule 31(3)(d), are the very same items (i) to (viii) which, under rule 17(1)(e), are required to be allowed as deductions, from the total consideration received or receivable, for arriving at the value of goods at the time of incorporation. The statutory requirement under rule 31(3), more partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the entire work), for it also provides for arriving at the value of the goods after deducting certain items from the total consideration receivable . Accepting the construction, that the balance tax is required to be paid only when the entire work is completed, would require the words finalization of accounts relating to the particular work to be read as finalization of accounts relating to the particular work on its completion . The intention of the legislation must be found in the words used in the legislation. (Unique Butyle Tube Industries Pvt. Ltd. v. U. P. Financial Corporation [2003] 113 Comp Cas 374 (SC); [2003] 2 SCC 455). Courts should not, ordinarily, add words to a statute or read words into it which are not there, especially when a literal reading thereof produces an intelligible result. (Delhi Financial Corporation v. Rajiv Anand [2006] 131 Comp Cas 285 (SC); [2004] 11 SCC 625). The line, which separates adjudication from legislation, should not be crossed or erased as courts expound the law and do not legislate. (State of Kerala v. Mathai Verghese [1987] 62 Comp Cas 857 (SC); [1986] 4 SCC 746, Union of India v. Deoki Nandan Aggarwal AIR 1992 SC 96). A judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and order passed by this court, and the order passed by the assessing authority. In Review Petition (Civil) No. 2715-2721 of 2015 in SLP [C] No. 1619-1625 of 2015, the Supreme Court set aside the judgment and order passed by this court in W. P. No. 7561 of 2014 and batch dated December 3, 2014, and the impugned assessment orders reserving liberty to the assessing authority to complete assessment, for the said periods, after disposal of W. P. No. 31525 of 2013. The law declared by the Division Bench of this court in Navayuga Engineering Company [2015] 83 VST 129 (T AP) was not examined by the Supreme Court, and it is only because W. P. No. 31525 of 2013 was pending on the file of this court was the judgment and order of the Division Bench, and the assessment orders, set aside reserving liberty to the assessing authority to complete the assessment after disposal of W. P. No. 31525 of 2013. A decision, which does not proceed on a consideration of an issue, cannot be deemed to be a law declared to have a binding effect. That which escapes in the judgment without any occasion is not the ratio decidendi. A decision is binding not because of its conclusions but in regard to its ratio, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing precedent. (N. Bhargavan Pillai v. State of Kerala [2004] 13 SCC 217). While we find considerable force in the submission of Sri K. Vivek Reddy, learned special counsel, that the Supreme Court has not overruled the law declared by the Division Bench of this court, in Navayuga Engineering Company [2015] 83 VST 129 (T AP), it is wholly unnecessary for us to dwell on this aspect any further, as we have independently examined rule 17(1)(e), and both its two provisos, and are satisfied that the construction placed thereon by Sri S. Ravi, learned senior counsel appearing on behalf of the petitioner, necessitates rejection. VI. Is bifurcation of the turnover, into supply and works contracts portions in the assessment order justified ? Sri S. Ravi, learned senior counsel appearing on behalf of the petitioner, would submit that the second respondent had artificially bifurcated the turnover into supply portion and works contract portion, and had raised a huge demand of ₹ 18,13,69,785 for both the years put together; though the agreements are composite in nature, the second respondent presumed some independent supplies relying on some bills raised by the petitioner in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oice dated April 27, 2012 whereby the petitioner had sold ACSR MOOSE conductor for ₹ 12,25,81,365, to the Government, and another invoice also dated April 27, 2012 whereby the petitioner had sold 120 KN Antifog Zinc Sleeve Disc. Insulators (460 mm creepage) and 160 KN Antifog Zinc Sleeve Disc. Insulators (470 mm creepage) for a total sum of ₹ 6,18,24,619. In the light of the aforesaid admissions in the affidavits filed in support of the writ petitions, and the tax invoices placed for our perusal, it does appear that the petitioner has, in addition to executing works contracts, also supplied goods to the contractees. It would be difficult for us, therefore, to hold that the finding recorded by the assessing authority, of the petitioner having supplied goods to the contractees, is perverse or that all the contracts executed by the petitioner are indivisible works contracts, and not separate contracts for the sale of goods and for execution of works. This contention, urged on behalf of the petitioner, necessitates rejection. VII. Were even purely labour contracts subjected to VAT under the impugned assessment orders ? Sri S. Ravi, learned senior counsel appearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Project, from the total work done bill of ₹ 21.31 crores, a deduction of ₹ 19.10 crores was given solely on account of sub-contract labour expenses; in addition other deductions, on account of labour charges, cess, vehicle maintenance and site expenses, were also given; and this clearly demonstrated that appropriate deduction, for the labour component, was made. It is in the second additional affidavit filed by them in W. P. M. P. No. 52641 of 2015 in W. P. No. 17911 of 2015, dated December 8, 2015 and in W. P. M. P. No. 52768 of 2015 in W. P. No. 17932 of 2015, dated December 8, 2015, that the petitioner has contended that some of the works executed by them were purely earth works, and did not involve supply/deemed sale of goods. It is no doubt true that it is only sale of goods/deemed sale of goods which are liable to tax under the Act, and no tax can be levied on purely labour contracts which do not involve supply of material/sale of goods. However the question, whether the subject contracts are pure labour contracts or involve both supply of material/sale of goods and supply of labour, are again questions of fact which, save perversity, would not be examined ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... juna Sagar Project. In the said assessment order, the assessing authority has recorded that the project of NSP-APWSIP-Resectioning of Darsi Branch Canal and Pamidipadu Branch Canal in Block Nos. 19 and 20 of NSJC (package No. 23) (Nagarjuna Sagar) was awarded to the petitioner; the petitioner had submitted that the said work was irrigation work and the total contract receipts during the tax period was ₹ 21,31,62,102; most of the work involved digging and excavation of the canal, and the material involvement was very nominal which was below 10 per cent. of the contract value; the petitioner had further submitted that the labour component, claimed under rule 17(1)(e), was ₹ 20,28,87,396; but, while levying tax, the assessing authority had not considered the sub-contract expenses as the same was purely earth work for which work orders, along with payments made for labour, had already been provided for verification; and the petitioner itself had executed the work engaging the required labour. The table, given thereunder, shows that, as against the work done bills of ₹ 21,31,62,102, deduction was given for sub-contract labour expenses of ₹ 19,10,86,480. It doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said ground by way of a counter-affidavit; in particular the assessee's contention that, notwithstanding their letter, the assessing officer should have mentioned the precise provision under which sales, attracting tax at 14.5 per cent., was made, has no basis in the pleadings; even on merits, levy of 14.5 per cent. tax was justified, as entry 116 of Schedule IV of the TVAT Act carves out an exception for certain goods including cement; during the course of assessment, the assessee itself categorically stated, in their letter dated February 23, 2015, that, in the course of execution of contracts, it had incorporated material which would attract 14.5 per cent. tax; the assessment order, whereby tax at 14.5 per cent. was levied, was passed after due application of mind, and the finding recorded therein cannot be considered a perverse finding; in the showcause notice, the assessing officer proposed to levy tax at 14.5 per cent. even on sales; however, after considering the petitioner's reply to the show-cause notice, the assessing officer dropped the proposal to levy tax at 14.5 per cent., and taxed the subject goods at five per cent.; and this shows application of mind by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, the burden of proving that any sale or purchase, effected by a dealer, is not liable to tax, or is liable to be taxed at a reduced rate or eligible for input-tax credit, is on the dealer. As this contention was raised for the first time in the additional affidavit filed by the petitioner, after a counter-affidavit was filed by the respon dents, the latter cannot be faulted for not dealing with these contentions in detail. The assessment order dated May 22, 2015 records (at page 5 thereof) that, in respect of supplies made to contractee, i.e., A. P. TRANSCO, the petitioner had submitted that, except Nagari Project, the supplies were totally made to A. P. TRANSCO; and the goods supplied to them fall under item No. 116 of the IV Schedule to the A. P. VAT Act, and is liable to be taxed at five per cent. only. The assessment order records that, in support of the said contention, the dealer had submitted the circular memo issued by Commissioner of Commercial Taxes clarifying that the goods supplied to A. P. TRANSCO are to be taxed at five per cent. After going through the said circular, the assessing authority accepted the contention of the petitioner that supplies, referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be granted time of seven days to issue notice, and a period of three weeks thereafter to decide the petitioner's claim that the amount not be forfeited. Rule 18(3)(b) of the Rules stipulates that where tax, collected at source, is in excess of the liability of the contractor, who have not opted for payment of tax by way of composition, such amount of tax, collected in excess of the liability, shall be deemed to have been payable by the contractor and shall be liable to be forfeited. It is only to the extent that the tax collected at source exceeds the contractor's liability can the excess amount be forfeited in terms of the aforesaid rule. Notwithstanding the assessing authority's premise, that the tax collected at source was in excess of the tax liability of the petitioner, it was always open to the petitioner-assessee to show that it was not so. The assessing authority was, therefore, required to put the petitioner on notice of his intention to forfeit the excess tax collected at source, and give them an opportunity to show-cause against such a proposal. We find no merit in the submission of Sri K. Vivek Reddy, learned special counsel, that it is purely a conseq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inancial year 2011-12, was passed only on May 22, 2015; the assessment orders are subject to revision under section 32 of the TVAT Act; the time period for revision has not yet expired; in the previous assessment orders, there is no specific finding that the bills receivable are not subject to tax in the said year; there is no application of mind by the assessing officer with respect to chargeability of tax on bills receivable; res-judicata does not apply to assessment proceedings; any observation made by the assessing officer would not bind him in passing an assessment order for another year; the ruling cited by the petitioner, in Glimmer Exports [1990] 76 STC 208 (AP); 8 APSTJ 102, is not applicable to the present case; in the said case, the High Court pointed out that the assessment for the subsequent years had become final as they had not been revised by the Deputy Commissioner; in the present case, the assessments have yet to become final; the assessment order, for the previous years (2010-11), is subject to revision under section 32 of the TVAT Act; there is no legal duty cast on the assessing officer to undertake a block assessment; there is no provision for a block assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, allowed the said claim; the petitioner has also not denied, and has not pleaded, that they have not availed of input-tax credit on bills receivable; having availed of ITC, on bills receivable in the assessment year, the petitioners cannot rely on the input-tax credit of the subsequent years, i.e., 2013-14 to offset the tax liability of the assessment years 2011-12 and 2012-13; the computation given by the assessee also includes TDS payments in the subsequent year; the TDS payments, for the subsequent year, may not be taken into account as the petitioner has neither pleaded nor produced any material before this court that the said TDS payments, in the subsequent years (2013-14 and 2014-15), relate to bills receivable under the impugned assessment orders (2011-12 and 2012-13); consequently, in the absence of any pleading or proof, the assessing officer cannot verify the petitioner's claim; after assessment, for the subsequent years 2013-14 and 2014-15, is completed and if the assessing officer finds that the petitioner has paid tax, on the bills receivable for the present years, on receipt basis in the subsequent years, they are always entitled to seek refund in the subseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at be so, subjecting them to tax on the value of the goods at the stage of its incorporation in the works, for the financial years 2011-12 and 2012-13, and their having paid tax on the same transaction when they received payment, in the financial years 2013-14 and 2014-15, may well result in the same transaction of sale/deemed sale of goods being subjected to tax twice, i.e., in double taxation. It is true that the principles of res judicata have no application in matters of taxation, as each year's assessment is final only for that year. It does not govern later years, since it determines the tax only for a particular period. (Instalment Supply (Private) Limited [1961] 12 STC 489 (SC); AIR 1962 SC 53, Society of Medical Officers of Health v. Hope (Valuation Officer) 1960 AC 551; [1960] 2 WLR 404, Broken Hill Proprietary Company Limited v. Municipal Council of Broken Hill [1926] AC 94). An assessment is final and conclusive between the parties only in relation to the assessment for the particular year for which it is made. No doubt a decision reached in one year would be a cogent factor in the determination of a similar point in a following year, but it is not to be treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s decision will not only govern the assessment for the year in question, but in subsequent years also. Even if the question has not been expressly decided but the decision is by implication, either because the point was not raised or was conceded, the same result will follow. (Kamlapat Motilal [1950] 18 ITR 812 (All)). If any question of right or title which is not peculiar to the year of assessment has been decided by a competent court, the decision may be treated as res judicata in subsequent years but, if the decision is of the assessing authorities, that decision cannot operate as res judicata. The assessing authorities cannot be treated as courts deciding a disputed point, there is no other party before them, and there are no pleadings. (Kamlapat Motilal [1950] 18 ITR 812 (All)). There is, in truth, no lis, no controversy inter parties, and no decision in favour of one of them and against the other unless, indeed, the entire public are regarded as the other party. (Boulter v. Kent Justices [1897] A. C. 556; 66 L. J. Q. B. 787, Kamlapat Motilal [1950] 18 ITR 812 (All)). With regards decision of courts in tax matters, a distinction has to be drawn between decisions which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2014-15, and exercise of the option by him, not to make assessment, may well result in the same transaction being subjected to tax twice, i.e, in double taxation. As the petitioner is in no position to file revised returns for the financial years 2013-14 and 2014-15, as the time stipulated therefor expired long ago, they would suffer substantial prejudice if no assessment order is passed for the financial years 2013-14 and 2014-15 and tax is collected from them pursuant to the assessment orders passed for financial years 2011-12 and 2012-13. In Glimmer Exports [1990] 76 STC 208 (AP); 8 APSTJ 102, the order of the Deputy Commercial Tax Officer was revised by the Deputy Commissioner, under section 20(2) of the APGST Act, on the ground that the former did not take the opening and closing stock into consideration while arriving at the net turnover; and neither the assessment order nor the assessment record showed the details for arriving at the last purchase turnover. Against the order in revision the dealer filed an appeal, before the Sales Tax Appellate Tribunal, contending that the Deputy Commissioner had erred in altering the mode of computation of turnover followed by the Depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the statute does not obligate him to do. As collection of tax must also be in accordance with law, we consider it appropriate, while refusing to interfere with the assessment orders passed for the financial years 2011-12 and 2012-13 except to the extent the excess tax collected was forfeited, to direct the assessing authority to pass an assessment order for the financial years 2013-14 and 2014-15, after giving the petitioner an opportunity of being heard, with utmost expedition and, in any event, within four months from the date of receipt of a copy of this order. It is made clear that, on their being so assessed, it is open to the petitioners to place evidence before the assessing authority to show that payment of tax by them, in the financial years 2013-14 and 2014-15, related to transactions which had suffered tax as a result of the assessment orders passed for the financial years 2011-12 and 2012-13. Till assessment orders are passed as aforesaid, for the financial years 2013-14 and 2014-15, the respondents shall not take any coercive steps for collection of the tax determined in terms of the assessment orders passed for the financial years 2011-12 and 2012-13. The intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ago; in the event this court were to hold that the entire turnover is taxable in the manner in which the second respondent has adjudicated, liberty be reserved to the petitioner to claim refund of the taxes paid, on the very same turnover, to the State of Andhra Pradesh in the subsequent tax period. On the other hand Sri K. Vivek Reddy, learned special counsel appearing on behalf of the learned Advocate-General, would submit that, in the writ petitions, the petitioners have not pleaded that a portion of the receivable turnover was offered to tax in the subsequent years in the successorState of Andhra Pradesh; there is no way the assessing officer can verify the same; and, even if the same is correct, the only remedy for the petitioner is to seek appropriate legal remedies against the State of Andhra Pradesh and claim refund. The jurisdiction conferred on the assessing authority is to levy and collect tax in accordance with the provisions of the Telangana Value Added Tax Act and the Rules made thereunder. Consequent upon the bifurcation of the State, any tax paid by the petitioner to the Government of Andhra Pradesh cannot be adjusted against the tax due to the Government of T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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