2011 (11) TMI 593 - HC - VAT and Sales Tax

Summary

Issues:
1. Recovery of proportionate amount of contract due to shortfall of instalment payment.
2. Interpretation of clause 12 of the contract and rule 44 of the Rajasthan Value Added Tax Rules, 2006.
3. Justifiability of demand by the respondent-authority.
4. Breach of contract and legal empowerment for recovery.

Issue 1: Recovery of proportionate amount of contract due to shortfall of instalment payment:
The petitioner, a contractor, approached the court aggrieved by an order demanding a proportionate amount of the contract due to a shortfall in the installment payment. The respondent-CTO sought to recover an amount of Rs. 67,56,546 due to the petitioner's failure to pay the full contractual amount for a specific period. The petitioner argued that the contract period was cut short by the respondent-Department, leading to the reduced collection of tax and subsequent shortfall in payment.

Issue 2: Interpretation of clause 12 of the contract and rule 44 of the Rajasthan Value Added Tax Rules, 2006:
The petitioner contended that the clause 12 of the contract, aligned with rule 44, required the contractor to deposit the entire collected tax or a specified part of the annual tax revenue weekly. The respondent-authority invoked this clause to recover the shortfall in payment. The petitioner argued that the enforcement of this clause was unjustified due to the premature termination of the contract and the off-season nature of the business during the period in question.

Issue 3: Justifiability of demand by the respondent-authority:
The respondent-authority defended the demand, stating that there was no breach of contract and that they were legally empowered to recover the difference amount with interest as per rule 44 and clause 12 of the contract. The authority argued that the demand was justified under the provisions of the Act and that the contract period could be reduced due to the exemption of certain commodities from tax payment.

Issue 4: Breach of contract and legal empowerment for recovery:
The court, after hearing arguments from both parties, concluded that no interference in the impugned order was warranted. The court opined that the recovery of the difference amount was permissible under clause 12, rule 44, and section 77 of the Act. The court emphasized that the representation made by the petitioner to the assessing authority should be objectively and fairly decided, and any further representations should be addressed within three months. The court disposed of the writ petition without interference, granting liberty for the petitioner to pursue the representation process further.

In conclusion, the court upheld the authority's right to recover the shortfall in payment from the contractor as per the contractual terms and legal provisions, while also emphasizing the importance of fair consideration of the petitioner's representations by the competent authorities.