2002 (4) TMI 932 - HC - VAT and Sales Tax

Summary

Issues:
1. Tax rate applicable to the petitioner
2. Obligations of the awarder in remitting tax
3. Issuance of garnishee order by the department

Analysis:

Issue 1: Tax rate applicable to the petitioner
The petitioner, a contractor supplying and installing generators for B.S.N.L., contested being taxed at 10% instead of the 4% rate specified in S.R.O. No. 1728/93 read with S.R.O. No. 1091/99. The court emphasized that the petitioner can approach the Sales Tax Officer, Works Contract, to request a certificate under rule 22A(3) of the Kerala General Sales Tax Rules, enabling payment without tax deduction or at a lower rate if eligible. The officer may issue the certificate if satisfied with the petitioner's tax remittance regularity. Additionally, the petitioner's claim for a concessional rate of 4% can be challenged in appeal if declined by the officer. The Commissioner of Commercial Taxes can also be consulted for clarifications under section 59A regarding notification benefits for supplies to B.S.N.L.

Issue 2: Obligations of the awarder in remitting tax
The court directed the petitioner to seek certificates from the Sales Tax Officer, Works Contract, for payment without tax deduction if eligible. It was mandated that B.S.N.L. should remit tax to the officer where the petitioner is registered and provide a certificate of payment. Any deductions made by B.S.N.L. should be remitted to the petitioner's account with the officer. The contractor is required to file returns and claim tax credit based on certificates issued by the awarder. Section 7(10) allows for tax recovery from the awarder only in case of the awarder's failure to deduct tax from the contractor's bills.

Issue 3: Issuance of garnishee order by the department
The court rejected the petitioner's contention that tax should be recovered from the awarder, stating that the department has the option to recover from the assessee in case of default. As B.S.N.L. was deducting sales tax from the petitioner's bills, section 7(10) did not apply, and assessments had to be completed in the petitioner's name. The petitioner remained liable under the Act, with B.S.N.L. continuing to deduct tax unless the petitioner obtained a certificate authorizing payment without deduction.

In conclusion, the court disposed of the original petition, instructing the petitioner to obtain necessary certificates from the Sales Tax Officer promptly. The officer was directed to expedite assessments for timely settlement with B.S.N.L., with the provision for appeals if needed. The assessments and appeals would be addressed before the statutory authority, ensuring all issues were considered comprehensively.