Allahabad High Court
S/S Odean Builders Pvt. Ltd. vs The Commissioner Commercial Tax on 4 April, 2023
Bench: Rohit Ranjan Agarwal
HIGH COURT OF JUDICATURE AT ALLAHABAD
Reserved
Court No. - 9
Case :- SALES/TRADE TAX REVISION No. - 346 of 2022
Revisionist :- S/S Odean Builders Pvt. Ltd.
Opposite Party :- The Commissioner Commercial Tax
Counsel for Revisionist :- Aditya Pandey,Bipin Kumar Pandey
Counsel for Opposite Party :- C.S.C.
with
Case :- SALES/TRADE TAX REVISION No. - 345 of 2022
Revisionist :- S/S Odean Builders Pvt. Ltd.
Opposite Party :- The Commissioner Commercial Tax
Counsel for Revisionist :- Aditya Pandey,Bipin Kumar Pandey
Counsel for Opposite Party :- C.S.C.
with
Case :- SALES/TRADE TAX REVISION No. - 347 of 2022
Revisionist :- S/S Odean Builders Pvt. Ltd.
Opposite Party :- The Commissioner Commercial Tax
Counsel for Revisionist :- Aditya Pandey,Bipin Kumar Pandey
Counsel for Opposite Party :- C.S.C.
with
Case :- SALES/TRADE TAX REVISION No. - 348 of 2022
Revisionist :- S/S Odean Builders Pvt. Ltd.
Opposite Party :- The Commissioner Commercial Tax
Counsel for Revisionist :- Aditya Pandey,Bipin Kumar Pandey
Counsel for Opposite Party :- C.S.C.
with
Case :- SALES/TRADE TAX REVISION No. - 349 of 2022
Revisionist :- S/S Odean Builders Pvt. Ltd.
Opposite Party :- The Commissioner Commercial Tax
Counsel for Revisionist :- Aditya Pandey,Bipin Kumar Pandey
Counsel for Opposite Party :- C.S.C.
with
Case :- SALES/TRADE TAX REVISION No. - 3 of 2023
Revisionist :- The Commissioner Commercial Tax
Opposite Party :- M/S Odean Builders Pvt. Ltd.
Counsel for Revisionist :- Ravi Shanker Pandey
Counsel for Opposite Party :- Bipin Kumar Pandey,Aditya Pandey
with
Case :- SALES/TRADE TAX REVISION No. - 4 of 2023
Revisionist :- The Commissioner Commercial Tax
Opposite Party :- M/S Odean Builders Pvt. Ltd.
Counsel for Revisionist :- Ravi Shanker Pandey
Counsel for Opposite Party :- Aditya Pandey,Bipin Kumar Pandey
with
Case :- SALES/TRADE TAX REVISION No. - 5 of 2023
Revisionist :- The Commissioner Commercial Tax
Opposite Party :- M/S Odean Builders Pvt. Ltd.
Counsel for Revisionist :- Ravi Shanker Pandey
with
Case :- SALES/TRADE TAX REVISION No. - 6 of 2023
Revisionist :- The Commissioner Commercial Tax
Opposite Party :- M/S Odean Builders Pvt. Ltd.
Counsel for Revisionist :- Ravi Shanker Pandey
Counsel for Opposite Party :- Aditya Pandey,Bipin Kumar Pandey
with
Case :- SALES/TRADE TAX REVISION No. - 7 of 2023
Revisionist :- The Commissioner Commercial Tax
Opposite Party :- M/S Odean Builders Pvt. Ltd.
Counsel for Revisionist :- Ravi Shanker Pandey
Counsel for Opposite Party :- Aditya Pandey,Bipin Kumar Pandey
Hon'ble Rohit Ranjan Agarwal,J.
1. These are two sets of connected revisions. The first set of revisions arise out of judgment and order of the Commercial Tax Tribunal, Ghaziabad dated 07.07.2022 passed in Second Appeal No. 101 of 2022 (AY- 2013-14), Second Appeal No. 102 of 2022 (AY- 2014-15), Second Appeal No. 82 of 2022 (AY- 2012-13), Second Appeal No. 81 of 2022 (AY- 2015-16) and Second Appeal No. 212 of 2021 (AY- 2011-12) filed by assessee-revisionist, partly allowing the second appeal.
2. The other set of revisions being Revision No. 3 of 2023, 4 of 2023, 5 of 2023, 6 of 2023 and 7 of 2023 have been filed by the State challenging the judgment dated 07.07.2022 partly allowing five appeals of the assessee for the relevant period.
3. The revisions filed by assessee-revisionist being Revision No. 345, 346, 347, 348 and 349 of 2022 were admitted on 14.10.2022 on the following question of law:-
"A. Whether on the facts and circumstances of the case the Commercial Tax Tribunal was legally justified in holding that the turnover of the applicant will not have to be assessed as per Section 4(3) of the Value Added Tax Act but at the same time turnover has to be assessed as per Rule 9 of the Value Added tax Rules?
B. Whether in the facts and circumstances of the case the Commercial Tax Tribunal was legally justified in holding that the provision of Section 4(3) of the VAT Act will not apply in the case of work contract?"
4. Similarly, in revisions filed by the State, following question of law arises:-
"1. Whether on the facts and circumstances of the case, the Commercial Tax Tribunal was legally justified in estimating the value of goods imported out of State amounting to Rs.11,48,85,172/- on the basis of pro-rata basis against the actual import of Rs.8,97,18,323/- provided under Rule 9(1) and Clause (e) of the U.P. VAT Act Rules, 2008 and the law laid down in various decisions of the Court?"
5. As in all the revisions filed by the assessee and the State common question of law arises and the matter though pertaining to different assessment years raised identical question of law, the cases were heard together and are being decided together with the consent of the parties. The only difference is of the figure of the amount for the five assessment years in question.
6. The assessee before this Court is a civil contractor, the dispute relates to the Assessment Years 2011-12, 2012-2013, 2013-2014, 2014-2015 and 2015-16. The question through these two sets of revisions raised by the assessee and the revenue are that whether the turnover of the assessee has to be assessed as per Section 4(3) of the Value Added Tax Act, 2008 (hereinafter called as ''VAT Act'), but at the same time it has to be assessed as per Rule 9 of the Value Added Tax Rules.
7. The assessee on the basis of work contract for the five different assessment years had carried out contract and was assessed by the assessing authority and an assessment order was passed under Section 28(2)(i) for the various assessment years wherein a tax liability was created and the assessing authority after granting 30% rebate as provided under Rule 9(3) from the total turnover declined to give benefit for the goods brought through Form 38 into the State of U.P. by contractor and levied the tax. The first appellate authority proceeded to hold that the levy of tax on turnover of sale in case of a dealer, selling any goods, not entitled to realise or has not realised if entitled amount of tax was liable to pay tax after calculating as per Section 4(3) of the Act of 2008. However, the first appellate authority declined to give any benefit to the dealer in deducting the amount from the gross amount received of the value of goods which has been transferred in execution of work contract as a result of sale in course of inter-State trade, denying benefit of Rule 9 (1)(e).
8. Against the order of first appellate authority, both the revenue and the assessee filed second appeal for all the relevant five years before the Commercial Tax Tribunal which was decided by order impugned dated 07.07.2022 whereby the benefit of Rule 9(1)(e) was granted by the Tribunal to the assessee while the appeal filed by the Revenue was also partly allowed and the benefit granted by the first appellate authority under Section 4(3) was set aside.
9. Hence, these two sets of appeal one by assessee and the other by the Revenue have been filed for all the five assessment years. Revision No. 346 of 2022 is being taken up as the leading case as the question raised in all the connected appeals is one and the same and only difference is of the turnover of sale and the liability of tax.
10. For the assessment year 2014-15, dealer executed work contract for which total payment of Rs.116,43,08,297/- was made to him. For getting the work contract executed, the dealer had made purchase within the State and also brought goods into the State of U.P. He declared purchases made in U.P. at Rs.31,69,22,453/-, while the ex-U.P. purchase was declared at Rs.21,97,71,050/-. The assessing authority granted a rebate of 30% of labour and profit as per Rule 9(3) and found the total value of goods in the execution of the work contract at Rs.81,50,15,807/-. The claim of Rs.21,97,71,050/- of the ex-U.P. purchase was not given as claimed under Section 3, 4, 5 of the Central Sales Tax Act read with Rule 9(1)(e).
11. Against the assessment order, the first appellate authority refused to grant the benefit under Rule 9(1)(e), however, it held that after giving the benefit of Rule 9(3), the turnover part which was left included the tax component also, thus, it proceeded to hold that the levy of tax on turnover of sale shall be computed using the formula given in Section 4(3) of the Act. Against the order of first appellate authority, two appeals were filed before the Tribunal one by the Revenue and the other by the assessee. The Tribunal found that the ex-U.P. purchase made by the dealer was to be given benefit under Rule 9(1)(e) and allowed the appeal of the dealer to that extent while it also allowed the appeal of the Revenue holding that the computation of turnover of sale cannot be done under Section 4(3) of the Act and can only be done under Rule 9. Hence, the present revision.
12. Before adverting to decide the issue in hand, a cursory glance of Section 4(3) of the Act and Rule 8(ix) Rule 9(1)(e) and 9(3) is necessary and are extracted hereasunder:-
"Section 4(3). Where a dealer, selling any goods, is not entitled to realize or has not realized if entitled amount of tax, payable by him on the turnover of sale of such goods, separately on tax invoice, sale invoice, cash memo or bill from the purchaser of the goods, amount of tax payable by him on the turnover of such sale shall be computed using the formula-
Amount of tax payable = Rate of tax X Aggregate of sale prices
100 + Rate of tax
Rule 8 (ix)- In the case of a dealer other than a dealer to whom section 6 applies, where tax is payable in respect of a sale and the dealer is not entitled to realize or has not realized if entitled amount of tax from the purchaser separately, amount of tax computed using the formula:
Amount of tax = (Turnover x Rate of tax) ÷ (100+rate of tax) :
Provided that turnover of sales in cases of transfer of property in goods involved in the execution of a works contract and taxable turnover of sale of such goods; and turnover of sale and taxable turnover of sale in cases of transfer of right to use any goods, shall be determined in the manner provided under rule 9 and rule 10.
Rule 9(1)(e)- all amounts representing the value of goods in which property has been transferred in the execution of the works contract as a result of sale in the course of inter-state trade or commerce;
Rule 9(3)- Where accounts maintained by the contractor do not show separately the value of labour and services and amount of profit accrued on such labour and services, or accounts maintained by the dealer are not worthy of credence or if the dealer has not maintained accounts, for the purpose of determining turnover of goods in which transfer of property in goods has taken place, in cases other than those mentioned in the table below, an amount, representing twenty percent of gross amount received or receivable, shall be deducted towards labour and services and amount of profit accrued thereon and in the cases described or mentioned in column 2 of the table given below, amount of deduction towards such labour and services and amount of profit accrued thereon shall be computed at the rate percentages, given in column 3 against the entry in column 2 of the table, of the amount received or receivable.
SI. No.
Description of works contracts
Rate
1.
Fabrication and installation of plant and machinery
10%
2.
Fabrication and erection of structural works including fabrication, supply and erection of iron trusses, purline.
10%
3.
Fabrication and installation of cranes and hoists
10%
4.
Fabrication and installation of elevator(lifts) and escalators
10%
5.
Supply and installation of air conditioning equipment including deep freezers, cold storage plants, humidification plants and dehumidifier
10%
6.
Supply and installation of air conditioners and air coolers
10%
7.
Supply and fitting of electrical goods, Supply and installation of electrical equipment including transformers
10%
8.
Supply and fixing of furnitures and fixtures, partitions, including contracts of interior decorations
10%
9.
Construction of railway coaches and wagons on under carriages supplied by railways
10%
10.
Construction of bodies of motor vehicle and construction of trailers
10%
11.
Fabrication and installation of rolling shutters and collapsible gates
30%
12.
Civil works like construction of building, bridge, roads, dams, barrages, spillways and diversions, sewages and drainage system
30%
13.
Installation of doors, doors frames, windows, window frames and grills
30%
14.
Supply and fixing of tiles, slabs, stone and sheets
30%
15.
Sanitary fitting for plumbing, for drainage or sewerage system
30%
16.
Whitewashing, painting, and polishing
30%
13. Section 4 is the charging section for the levy of tax on turnover of sale. Sub-Section (3) of Section 4 prescribes the formula for calculating the amount of tax payable by a dealer on the turnover of sale, where the dealer selling any goods, is not entitled to realise or has not realised if entitled amount of tax, payable by him on the turnover of sale of such goods, separately on tax invoice, sale invoice, cash memo or bill from purchaser of the goods.
14. Similarly, Chapter (ii) of U.P. Value Added Tax Rules provides for the incidence and levy of tax. Rule 8 provides for determination of taxable turnover of sale. Sub-Rule (ix) of Rule 8 provides the formula for the computation of tax, and the proviso attached to it provides that turnover of sales in cases of transfer of property in goods involved in the execution of works contract and taxable turnover of sale of such goods shall be determined in the manner provided under Rule 9 and 10.
15. Similarly, Rule 9 provides for determination of turnover of sale of goods involved in the execution of a works contract. It provides that for the purpose of determining the taxable turnover of sale of goods where such sale is affected by way of transfer of property in goods, the amounts specified in the Sub-clause provided in Sub-Rule (1) of Rule (9) shall be deducted if included in the gross amount received or receivable in respect of works contract.
16. Clause (e) of Sub-Rule (1) of Rule (9) provides for the deduction of all amounts representing the value of goods in which property has been transferred in the execution of works contract as a result of sale in the course of inter-State trade or commerce. Thus, all the goods brought by a dealer used in the works contract through ex-U.P. purchase has to be deducted from the gross amount received.
17. Rule 9(3) provides for deducting the value of labour and service and amount of profit from the accounts maintained by the contractor which do not show separately the same, and through this rule the Legislature has provided a deduction of 30% from such amount received or receivable.
18. The dealer before this Court who is a civil contractor and admittedly he received an amount of Rs.116,43,08,297/- for the assessment year 2014-15 for the contract executed by him. The said amount not only included the labour and service charge, profit but also the cost of goods and the VAT. As per the agreement executed between the parties, the dealer could not realise tax thus the payment which was made included cost of the goods and the tax component (VAT).
19. Thus, after the deduction given by the assessing authority under Rule 9(3) for the labour and service charge and profit the remaining amount left included tax. The amount which was received by the dealer during the relevant year included tax, profit and labour. The labour and profit component amounting to Rs.34,97,92,490/- was deducted, but the VAT amount which was included in the remaining amount of Rs.81,50,15,807/- was subjected to levy of tax thus the levy of tax on turnover of sale could not have been made again on the tax.
20. Section 2(ad) defines ''sale price' which means the amount payable to a dealer as consideration for sale of any goods, less any sum allowed as cash discount according to the practice normally prevailing in the trade, but inclusive of any sum charged for anything done by the dealer in respect of goods at the time of or before delivery of such goods, other than cost of outward freight or delivery or cost of installation in cases where such cost is separately charged. Explanation (v) provides, "tax charged or chargeable shall not form the part of sale price." It is thus clear that tax component is not part of the ''sale price'.
21. The first appellate authority after considering the documents on record such as bill of quantity, bill and payment received found that as per the agreement, the dealer had not charged tax separately. Once, such finding was recorded by the first appellate authority it rightly proceeded to hold that the levy of tax on turnover of sale was to be made in view of formula provided under Sub-Section (3) of Section 4 read with Sub-Rule (ix) of Rule 8 of Rules and benefit was rightly extended to the dealer.
22. As far as Rule 9(1)(e) is concerned, it is clear that while determining the turnover of sale of goods involved in execution of works contract deductions of amount which had been included in the gross amount received for the value of goods in which property has been transferred in the execution of works contract as a result of sale in course of inter-State trade has to be given. This rule is clear in case a dealer brings into State any goods from outside the State for the execution of the works contract. The said amount has to be deducted if included in the gross amount received or receivable in respect of works contract.
23. The transactions of the dealer of bringing the goods from outside the U.P. are covered under Section 3, 4, 5 of the Central Sales Tax Act, 1956 read with Rule 9(1)(e) of the Rules.
24. In M/s. Comfort Systems vs. Commissioner Commercial Tax, U.P., Sales/Trade Tax Revision No. - 346 of 2018, decided on 01.02.2019, this Court had also taken a view that, "as a result of sale in the course of inter-state trade or commerce" appearing in Rule 9(1)(e) of the Rules has to be read to include in its cover all transactions covered under section 3 of the Central Sales Tax Act, 1956. Thus, from the conjoint reading of Section 4 of the VAT Act, Rule 8 and 9 of the Rules, it is clear that Section 4 being the charging section and the only section under the VAT Act which prescribes levy of tax on turnover of sales.
25. Moreover, Sub-Section (3) of Section (4) prescribes the formula for computation of tax payable by dealer on the turnover of sale. While Rule 8 prescribes for the determination of taxable turnover of sales and Sub-Rule (ix) of Rule 8 prescribes for amount of tax leviable for the dealer who is not entitled to realise or has not realised the amount of tax if entitled to realise in the invoice from purchaser separately, the tax has to be calculated in accordance with formula provided therein. Proviso to Sub-Rule (ix) of Rule 8 provides that a turnover of sale in case of transfer of property in goods involved in the execution of works contract shall be determined in the manner prescribed under Rule 9 and 10.
26. Though, Rule 9 provides for the determination of turnover of sale of goods involved in the execution of a works contract, Sub-Rule (1) of Rule (9) from Clause (a) to Clause (l) provides for the deduction in determining the taxable turnover of sale of goods where such sale is affected by way of transfer of property in goods in execution of works contract, from the gross amount received or receivable in respect of work contract.
27. Thus, the combined reading of Rule 8 and 9 establishes that Rule 8 prescribes the methodology for computation of taxable turnover for all classes of dealer while Rule 9 is applicable for determination of taxable turnover of sales of tax involved in execution of works contract and specifies deductions only for the dealers who are involved in execution of works contract, thus, provisions of Rule 9 are considered to be grant of deductions. This leads to an inevitable conclusion that levy of tax on turnover of sale has to be done in the manner provided in Section 4(3) of the Act and Rules 8 and 9 do not restrict the power of the assessing authority in doing so. Section 4(3) read in harmony with Rule 8 and 9 and the interpretation given by the Tribunal while extending the benefit of Rule 9(1)(e) to the dealer and denying the benefit of computation of tax as per the formula provided under Section 4(3) of the Act does not hold good.
28. Thus, in view of discussion made above, the finding recorded by the Tribunal to the extent of non-applicability of Section 4(3) of the Act is hereby set aside and the revisions filed by the assessee/dealer challenging the order passed by the Tribunal are hereby allowed.
29. The revisions filed by the Revenue challenging the benefit extended to the dealer/assessee under Rule 9(1)(e) stand dismissed.
30. The matter is remitted back to the Tribunal to compute the tax component as per Section 4(3) of the Act giving the benefit to the dealer/assessee under Rule 9(1)(e). In view of above, the question of law raised through these revisions stands answered i.e. in favour of the assessee and against the revenue.
Order Date :- 04.04.2023
V.S.Singh
