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2014 (7) TMI 622 - HC - VAT and Sales TaxRate of tax (TDS) on works contract - respondents collected tax at source from the monthly work bills due to the petitioner at the rate of 2.8 per cent instead of 0.36 per cent - estimated value came into existence after the tenderers submitting their respective tenders. In other words, there was no way tenderers knowing the estimated value and the components of the estimated value prior to opening of the tenders - Held that - Petitioner s case squarely fall under section 22(3) of the A.P. VAT Act and the excess amounts deducted by the second respondent is contrary to the scheme of the Act and unauthorised and hence required to be returned to the petitioner. As a matter of fact, the unauthorised deduction and retention of the monies without making it over to the Tax Department is contrary under section 57(1) of the A.P. VAT Act. Therefore, the respondents are directed to refund the excess amount to the petitioner within four weeks from the date of receipt of this order. - Decided in favour of petitioner.
Issues Involved:
1. Legality of the tax deduction at source (TDS) rate applied by the respondents. 2. Applicability of Section 22(3A) of the Andhra Pradesh Value Added Tax (A.P. VAT) Act. 3. Compliance with the A.P. VAT Act and Rules by the respondents. 4. Refund of the excess amount deducted. Detailed Analysis: 1. Legality of the Tax Deduction at Source (TDS) Rate Applied by the Respondents: The petitioner, a public listed company, contended that the respondents' action of collecting tax at source from the monthly work bills at the rate of 2.8% instead of 0.36% was illegal, arbitrary, and without jurisdiction. Initially, the sixth respondent issued a certificate specifying the TDS rate at 0.36% of the gross value. However, from April 2012 onwards, TDS was deducted at 2.8% of the gross value, based on instructions from the third respondent. The court found that the petitioner had been paying TDS at the rate of 0.36% up to March 2012, and there was no objection from the respondents until then. 2. Applicability of Section 22(3A) of the Andhra Pradesh Value Added Tax (A.P. VAT) Act: The court examined whether Section 22(3A) of the A.P. VAT Act, which was inserted on September 24, 2008, applied to the petitioner's contract. The petitioner argued that Section 22(3) was the relevant provision, as the contract agreement was executed on August 25, 2005, before the insertion of Section 22(3A). The court noted that the notice inviting tender did not specify an estimated contract value, and the bidders were not informed of any estimated value or Internal Benchmark Value (IBM) before submitting their bids. Therefore, the court concluded that Section 22(3A) did not apply to the petitioner's contract. 3. Compliance with the A.P. VAT Act and Rules by the Respondents: The court reviewed the compliance with the A.P. VAT Act and Rules, particularly Section 22 and Rule 18. The petitioner had applied for quantification of taxable turnover under Section 22(3) read with Rule 18(1)(f), and the sixth respondent issued a certificate in Form 501D. The court found that the sixth respondent was competent to decide the quantum of goods incorporated in the execution of the work. The court also noted that the respondents did not raise any objections with the sixth respondent regarding the authorization issued in Form 501D. The deduction of higher amounts by the second respondent without depositing the same with the sixth respondent was deemed contrary to the A.P. VAT Act and Rules. 4. Refund of the Excess Amount Deducted: The court directed the respondents to refund the excess amount deducted to the petitioner within four weeks. The court emphasized that the unauthorized deduction and retention of monies without making it over to the Tax Department was contrary to Section 57(1) of the A.P. VAT Act. Conclusion: The court allowed the writ petition, declaring the respondents' action of deducting TDS at the rate of 2.8% as unauthorized and contrary to the A.P. VAT Act. The respondents were ordered to refund the excess amount deducted to the petitioner within four weeks. The writ petition was allowed with no costs, and any miscellaneous petitions pending in the case were closed.
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