2006 (11) TMI 324 - SC - VAT and Sales Tax

Whether the amount which has been deducted at source by the Corporation is required to be deposited with the Commercial Tax Department? Held that - Appeal allowed. In the circular of the Deputy Commissioner it has been clearly stated that the tax is to be deducted at source wherever tax is leviable. In the Commissioner s circular dated July 7, 1999, it has been clearly stated that in the meeting held on March 27, 1999, it was decided to deduct tax at source in respect of all purchases made by the Corporation and to deposit the said amount with the Commissioner. In view of the aforesaid factual position, we direct that the Corporation should deposit the amounts which have not yet been deposited in respect of amounts deducted at source as tax. The deposit shall be made within one month from today.

Summary

Issues:
Dispute over tax deduction at source by Corporation for payments to the appellant, validity of circulars issued by tax authorities, obligation of Corporation to deposit deducted amounts with Commercial Tax Department.

Analysis:
The judgment concerns a dispute involving a dealer registered under the Andhra Pradesh General Sales Tax Act and the Central Sales Tax Act for the assessment years 1998-1999 and 1999-2000. The State Government directed the Andhra Pradesh Backward Classes Co-operative Finance Corporation to deduct taxes at source on payments made to the dealer. An agreement was made between the dealer and the Corporation for the supply of various articles, with certain amounts deducted at source for sales tax. The dealer notified the Corporation that it was the Corporation's responsibility to discharge the sales tax liability under the Acts. Despite a circular instructing the Corporation to deposit the deducted amounts, a dispute arose regarding the remaining balance to be paid by the Corporation. Arbitration proceedings were initiated, and the Commercial Tax Officer issued notices to attach the dealer's bank account for the outstanding amount.

The High Court dismissed the dealer's writ petition, stating there was no valid circular in place. The court emphasized that the Deputy Commissioner's letter did not equate to a circular issued by the Commissioner. The dealer argued that despite both parties acknowledging the requirement to deposit the deducted amounts, they were being asked to pay again. The State Government accepted that the Corporation was obligated to deposit the deducted amounts. The core issue revolved around whether the Corporation was required to deposit the deducted amounts with the Commercial Tax Department, a point undisputed by all parties involved.

The Supreme Court ruled that the Corporation must deposit the outstanding amounts deducted at source within one month. The judgment clarified that the decision did not address the dispute regarding the dealer's entitlement or any alleged over-payment by the Corporation. The Court upheld the appeals to the extent of directing the Corporation to fulfill its obligation to deposit the outstanding amounts, without expressing an opinion on the underlying payment dispute.