2008 (11) TMI 648 - HC - VAT and Sales Tax

Tax on civil construction works - whether the petitioner are not liable for payment of tax and that levy and collection of sales tax is in violation of article 265 of the Constitution and the provisions of the Uttaranchal Value Added Tax Act, 2005? Held that - The nature of work like the one undertaken by the petitioner in the present case is nothing but works contract and he is under agreement with SIDCUL to do said work. Apart from this, what is important in this case is that the petitioner himself by filing an application for compounding under the compounding scheme under section 7(2) of the VAT Act, 2005, has admitted that the nature of his work is works contract as is apparent from annexure CA 1 to the counter-affidavit filed on behalf of the respondents. The said fact also gets corroborated from annexure 7 to the writ petition. The last page of annexure 7 to the writ petition is a copy of the application filed by the petitioner himself for claiming the benefit of the compounding scheme to avoid four per cent tax and instead thereof agreed to pay one per cent tax. This court is unable to agree with learned counsel for the petitioner for the reason that once it is found that the work undertaken by the petitioner is works contract which is defined under section 2(55) of the VAT Act, 2005, it cannot be said that the respondents have imposed any tax without authority of law. As such, the provision contained in article 265 of the Constitution of India, referred to by the petitioner is of no help to him. W.P. dismissed.

Issues Involved:
1. Legality of the orders dated April 17, 2007, and March 16, 2007, issued by the Deputy Commissioner, Commercial Tax, Rudrapur.
2. Liability of the petitioner to pay tax on civil construction works.
3. Applicability of the Uttaranchal Value Added Tax Act, 2005 (VAT Act, 2005) to the petitioner's activities.
4. Whether the construction work undertaken by the petitioner qualifies as a "works contract."
5. Relevance of the judgment in K. Raheja Development Corporation v. State of Karnataka.
6. Reference to the Allahabad High Court judgment in Assotech Realty Private Limited v. State of Uttar Pradesh.

Issue-wise Detailed Analysis:

1. Legality of the Orders Dated April 17, 2007, and March 16, 2007:
The petitioner sought a writ of certiorari to quash the orders dated April 17, 2007, and March 16, 2007, issued by the Deputy Commissioner, Commercial Tax, Rudrapur. The court examined the legality of these orders, which directed the petitioner to furnish details of sale/purchase of flats for tax purposes and imposed a one percent trade tax under the compounding scheme. The respondents defended the orders, stating that the petitioner had applied for the compounding scheme, making the orders lawful.

2. Liability of the Petitioner to Pay Tax on Civil Construction Works:
The petitioner argued that the civil construction works undertaken were not liable for tax under the VAT Act, 2005, as they were not "works contracts." The court examined the nature of the petitioner's activities, including the construction of residential flats and the collection of payments from prospective buyers. The court found that the petitioner was indeed liable for tax as the activities constituted a "works contract."

3. Applicability of the Uttaranchal Value Added Tax Act, 2005 (VAT Act, 2005):
The court analyzed whether the VAT Act, 2005, applied to the petitioner's activities. The petitioner was registered under the VAT Act, 2005, and had applied for compounding under the scheme. The court concluded that the VAT Act, 2005, was applicable, and the petitioner was subject to its provisions, including the payment of trade tax on "works contracts."

4. Whether the Construction Work Undertaken by the Petitioner Qualifies as a "Works Contract":
The court examined the definition of "works contract" under the VAT Act, 2005, and the nature of the petitioner's activities. The petitioner argued that the construction was undertaken on its own behalf and not for others. However, the court found that the petitioner was constructing flats for prospective buyers, making it a "works contract." The court referenced the lease deed and the terms of the agreement with SIDCUL to support this conclusion.

5. Relevance of the Judgment in K. Raheja Development Corporation v. State of Karnataka:
The court considered the judgment in K. Raheja Development Corporation v. State of Karnataka, where similar construction activities were deemed "works contracts." The court found the principles laid down in this case applicable to the petitioner's activities, reinforcing the conclusion that the petitioner's construction work was a "works contract."

6. Reference to the Allahabad High Court Judgment in Assotech Realty Private Limited v. State of Uttar Pradesh:
The petitioner referenced a judgment by the Allahabad High Court, which was later set aside by the Supreme Court. The Supreme Court emphasized the need for thorough adjudication and directed the respondent to file an appeal before the appellate authority. The court in the present case noted that the Allahabad High Court judgment was not applicable as it had been set aside, and the petitioner should have pursued statutory appeals instead of a writ petition.

Conclusion:
The court dismissed the writ petition, concluding that the petitioner's construction activities qualified as "works contracts" under the VAT Act, 2005, and were subject to trade tax. The orders issued by the Deputy Commissioner, Commercial Tax, were found to be lawful, and the petitioner was liable to pay the tax as per the compounding scheme. The court emphasized that the petitioner should have sought remedy through statutory appeals rather than a writ petition.

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