TMI Blog2023 (8) TMI 312X X X X Extracts X X X X X X X X Extracts X X X X ..... on a complete reading of the said show cause notice, it is very clear that the show cause notice was issued only to deny deduction on account of profit on supply of labour and service, amounting to Rs. 9,41,22,626/- which would only fall under Rule 58(1)(h) and therefore, the reference to Rule 58 in the show cause notice although not specifying the sub-rule, should be read to mean that the show cause was only for disallowance of the item under Rule 58(1)(h) of the MVAT Rules and not all the deductions under Rule 58(1)(a) to (h). This is further fortified by the second show cause notice dated 23rd November 2020 which specifically refers to Rule 58(1) (h) only to deny the deduction of Rs. 9,41,22,626/. The figure of Rs. 9,41,22,626/- in the show cause notice is only under Rule 58(1)(h). Therefore, in our view, the show cause notice was only for item to be disallowed under Rule 58(1)(h) and not all the items under Rule 58(1)(a) to (h). However, in the review order dated 8th March 2021 under Section 25 of the MVAT Act, what is disallowed is all the items under Rule 58(1)(a) to (h), amounting to Rs. 30,59,93,405/-. The Respondents have not brought to our notice any document which would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only under these circumstances that the Commissioner may in lieu of the deduction as prescribed under Rule 58(1)(a) to (h) of the MVAT rules on actual basis can apply the percentage specified in the Table to arrive at the sale price of the goods for the purpose of MVAT Act - in the absence of satisfying the pre-condition prescribed under proviso to Rule 58(1) the application of rate specified in Table below Rule 58(1) in the final review order is without jurisdiction. Even otherwise, in the assessment order dated 11th December 2015, the Assistant Commissioner of Sales Tax has recorded a finding that he has verified the books of accounts with respect to the claim of the dealer under Rule 58 on actual basis. Insofar as the GAIL project is concerned, the assessment order records verification of trial balance, expense ledger copies, contract copies, sample invoices, sub-contractors works order, etc. The audit done under Section 22 of the Act by the Deputy Commissioner prior to the passing of the said assessment order also accepts the maintenance of the books of accounts by the Petitioner with respect to the works contract executed by the Petitioner - the jurisdictional condition re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Petitioner claimed deduction under Rule 58(1)(a)-(h) on actual basis aggregating to Rs. 30,59,93,405/-. (iii) On 18th February 2013, Deputy Commissioner of Sales Tax issued a notice to the Petitioner for verification of books of accounts to examine discrepancies found in the course of the business audit conducted by the revenue. The said notice records discrepancies found by the revenue after verification of the books of accounts. The said notice was made returnable on 25th February 2013. (iv) On 28th February 2013, the Petitioner replied to the aforesaid notice and annexed copies of ledger in support of its submission. (v) On 18th March 2013, the Petitioner filed further submission pursuant to the above notice giving its explanation as to why the service tax of Rs. 1,05,41,933/- should be allowed as a deduction under Rule 58. (vii)On 27th April 2013, further submission was made wherein it is recorded that the Deputy Commissioner has verified all the documents filed by the Petitioner. (viii) On 11th December 2015, an assessment order under Section 23 (3) came to be passed by the Assistant Commissioner of Sales Tax, Investigation Branch-A, Mumbai. In the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontention that turnkey project is indivisible. The Petitioner requested Respondent No. 3 to close the proceedings initiated under Section 25 of the MVAT Act pursuant to the said submissions. (xi) On 23rd November 2020, the successor of Respondent No. 3 issued a similar show cause notice to review the assessment order on the ground that deduction under Rule 58 amounting to Rs. 9,41,22,626/- on profit of supply of labour and services has been wrongly allowed. According to Respondent No. 3, under Rule 58(1)(h) deduction in respect of profit earned by the contractor to the extent related to the supply of said labour and service is only allowable, whereas profit of Rs. 9,41,22,626/- was alleged to be the profit earned by the Petitioner for carrying out all the activities of completion of the job work. The said show cause notice, therefore, proposed to withdraw the deduction of Rs. 9,41,22,626/-. (xii) On 26th November 2020, the Petitioner replied to the aforesaid notice and reiterated its detailed submissions made on earlier occasions. The Petitioner stated that the assessing officer has verified the facts in the course of the assessment proceedings and, thereafter, allowed the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quashing of the order dated 8th March 2021 passed under Section 25 of the Maharashtra Value Added Tax Act, 2002 (MVAT Act) and the order rejecting the rectification application dated 6th July 2021 under Section 24 of the MVAT Act. 5. Submissions of the Petitioner :- The Petitioner submitted that they are challenging the very jurisdiction of the Respondents to pass the impugned order which is contrary to the decision of the Supreme Court in case of M/s. Gannon Dunkerley and Co. Ors. Vs. State of Rajasthan Ors. (1993) 1 SCC 364 and contrary to the provisions of the Act and furthermore contrary to the principles of the natural justice and therefore, even though an alternative remedy is provided under the MVAT Act, the present petition is maintainable under Article 226 of the Constitution of India. The Petitioner further contended that show cause notice was issued only to disallow a sum of Rs. 9,41,22,626/- under Rule 58(1)(h) of the MVAT Rules whereas in the impugned order, the Respondents have disallowed all deductions claimed under Ruled 58(1)(a) to (h), amounting to Rs. 30,59,93,405/- and therefore, the impugned order has travelled beyond the show cause notice. The Pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te remedy of an appeal provided under the Act. The Respondents further contended that the order under Section 25 has not exceeded the show cause notice dated 22nd October 2018 since the said show cause notice refers to Rule 58 without specifying the clause of Rule 58 and therefore, dis-allowance of all the deductions under Rule 58(1) (a) to (h) are justified and the same cannot be said to have been passed without giving a show cause notice. The Respondents also relied upon the second notice dated 23rd November 2020 in support of their submission on this account. The Respondents relied upon the assessment order to justify the order passed under Section 25 of the MVAT Act and further submitted that since the deductions on account of profit on supply of labour is calculated on proportionate basis, the same cannot be allowed as deductions under Rule 58(1)(h) of the MVAT Rules. The Respondents relied upon page 11 of the Review Order to contend that the condition laid down in the proviso to Rule 58 before applying the rates prescribed in the table under Rule 58 has been considered and therefore, it cannot be said that the jurisdictional conditions are not satisfied before application of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating to the deduction pertain to the said works contract:- (a) labour [service tax collected separately and service charges] for the execution of the works; (b) amounts paid by way of price for sub-contract, if any, to sub-contractors; (c) charges for planning, designing and architect s fees; (d) charges for obtaining on hire or otherwise, machinery and tools for the execution of the works contract; (e) cost of consumables such as water, electricity, fuel used in the execution of works contract, the property in which is not transferred in the course of execution of the works contract; (f) cost of establishment of the contractor to the extent to which it is relatable to supply of the said labour and services; (g) other similar expenses relatable to the said supply of labour and services, where the labour and services are subsequent to the said transfer of property; (h) profit earned by the contractor to the extent it is relatable to the supply of said labour and services: Provided that where the contractor has not maintained accounts which enable a proper evaluation of the different deductions as above or where the Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er fortified by the second show cause notice dated 23rd November 2020 which specifically refers to Rule 58(1) (h) only to deny the deduction of Rs. 9,41,22,626/. The figure of Rs. 9,41,22,626/- in the show cause notice is only under Rule 58(1)(h). Therefore, in our view, the show cause notice was only for item to be disallowed under Rule 58(1)(h) and not all the items under Rule 58(1)(a) to (h). However, in the review order dated 8th March 2021 under Section 25 of the MVAT Act, what is disallowed is all the items under Rule 58(1)(a) to (h), amounting to Rs. 30,59,93,405/-. The Respondents have not brought to our notice any document which would show that the show cause notice was issued for disallowing all the items specified in Rule 58(1)(a) to (h). It is well settled that any order beyond the show cause notice is bad-in-law. The Supreme Court in case of Commissioner of Customs, Mumbai vs M/s. Toyo Engineering India Limited, 2006 (7) SCC 592 noted that the Department cannot be allowed travel beyond the show cause notice. The Supreme Court further observed that it would be against the principles of natural justice that a person who has not been confronted with any ground is sadd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the instant case, the show cause notice dated 22nd October 2018 and 23rd November 2020 does not allege that the rates prescribed in the table is to be made applicable because the accounts maintained by the Petitioner are not clear or intelligible or the accounts are not maintained for proper evaluation of the different deductions prescribed under Rule 58(1)(a) to (h). Therefore, in the absence of satisfying the pre-condition prescribed under proviso to Rule 58(1) the application of rate specified in Table below Rule 58(1) in the final review order is without jurisdiction. In our view, there was no show cause notice invoking proviso to Rule 58(1) before being made applicable in the review order and, therefore, on this account also, the review order has been passed beyond the show cause notice and without jurisdiction. 13. Even otherwise, in the assessment order dated 11th December 2015, the Assistant Commissioner of Sales Tax has recorded a finding that he has verified the books of accounts with respect to the claim of the dealer under Rule 58 on actual basis. Insofar as the GAIL project is concerned, the assessment order records verification of trial balance, expense ledger cop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the MVAT Act and under Rule 58(1) of the MVAT Rules. The Constitution Bench of the Supreme Court in case of State of Uttar Pradesh Vs. Mohammad Nooh, 1958 SCR 595 observed as under :- 10. In the next place it must be borne in mind that there is no rule, with regard to certiorari as there is with mandamus, that it will lie only where there is no other equally effective remedy. It is well established that, provided the requisite grounds exist, certiorari will lie although a right of appeal has been conferred by statute, (Halsbury s Laws of England, 3rd Edn., Vol. 11, p. 130 and the cases cited there). The fact that the aggrieved party has another and adequate remedy may be taken into consideration by the superior court in arriving at a conclusion as to whether it should, in exercise of its discretion, issue a writ of certiorari to quash the proceedings and decisions of inferior courts subordinate to it and ordinarily the superior court will decline to interfere until the aggrieved party has exhausted his other statutory remedies, if any. But this rule requiring the exhaustion of statutory remedies before the writ will be granted is a rule of policy, convenience and discret ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
