2014 (9) TMI 227 - HC - VAT and Sales Tax

Taxes on the access charges received by the petitioners from railway authorities - provisional attachment order - petitioners liability to pay sales tax - Held that - where the petitioners have approached this court when the sales tax authorities have merely issued a notice why a certain tax should not be collected. The petitioners have full liberty to produce all materials at their command and raise all legal contentions to canvas that they are not exigible to sales tax in view of the nature of the contract and execution of work done by them under such contract. The sales tax authorities are bound to take into consideration and take a view and only thereafter, would be able to frame any assessment even if ultimately the authorities rule against the petitioners. In such a case against the assessment first appeal would be available before the Departmental appellate authority and thereafter before the Sales Tax Tribunal. The Commissioner and the Tribunal also have revisional powers. When such elaborate machinery of appeals and revisions are provided under the Gujarat Sales Tax Act and its successor VAT Act, we are not inclined to examine these questions of complex factual and legal aspects in the present petition and thereby give a complete go-bye to such machinery under the Act. We have also noticed the statutory provisions contained in the Gujarat Sales Tax Act as well as the VAT Act which provide for such appeals and also for revision at the hands of the Commissioner either suo motu or on an application made by the aggrieved party. Under section 45 of the VAT Act, such order of attachment can have a maximum life of one year. Such period of one year has passed long back. In the meantime, there was no stay against the assessing authority from proceeding further with the assessment. This court in the interim order dated November 29, 2006 only prevented the authority from passing the final order without the permission of the court but permitted to proceed further with the assessment. No such permission was sought. It appears that the assessment is not yet undertaken in full earnest. No further hearing took place after the court s interim order. The court had stayed the attachment subject to the petitioners depositing a sum of ₹ 1,92,00,000 before this court. It is stated that such amount was deposited. In the last part of the interim order dated November 29, 2006, the court had provided that if the petitioners receive any further access charges, they shall deposit the tax at the rate of 12.5 per cent on that amount with the registry of this court till further orders. The petitioners have been depositing such periodic amounts also. Attachment order cannot survive and it has in any case outlived its life well beyond the statutory period envisaged under section 45 of the VAT Act, such attachment order is therefore, quashed - Decided in favour of assessee.

Issues Involved:
1. Demand of taxes on "access charges" received by the petitioners from railway authorities.
2. Provisional attachment order dated June 2, 2006, issued under section 45 of the Gujarat Value Added Tax Act, 2003.
3. Petitioners' liability to deduct tax at source and deposit the same with the State Government.
4. Petitioners' liability to pay sales tax under the Gujarat Sales Tax Act.
5. Jurisdiction of the sales tax authorities to assess and collect tax from the petitioners.

Issue-wise Detailed Analysis:

1. Demand of Taxes on "Access Charges":
The petitioners argued that they should not be liable for sales tax or VAT on the "access charges" received from railway authorities, as there was no sale of goods involved. The State Government contended that the contract terms indicated that sales tax/VAT was payable. The court examined the concession agreement, which involved the conversion of a meter gauge railway line to broad gauge, financed by the petitioners, who would receive access charges from the railways for 12 years. The court noted that the nature of the contract and the terms and conditions would determine whether it was a sale of goods or a works contract.

2. Provisional Attachment Order:
The Assistant Commissioner of Commercial Tax issued a provisional attachment order under section 45 of the VAT Act, attaching the petitioners' bank account for potential sales tax dues. The court observed that the attachment order, which can have a maximum life of one year, had outlived its statutory period. Since the assessment was not completed in full earnest, the court quashed the attachment order.

3. Petitioners' Liability to Deduct Tax at Source:
The petitioners were initially required to collect tax at source and deposit it with the State authorities for payments made to M/s. D.S. Construction for gauge conversion work. The Assistant Commissioner of Sales Tax ordered the petitioners to pay a substantial amount, including tax, penalty, and interest. The petitioners approached the Settlement Commissioner, and the issue was settled upon fulfilling certain conditions. The court noted that this issue was concluded, but the liability to pay sales tax remained open.

4. Petitioners' Liability to Pay Sales Tax:
The State argued that the petitioners' contract with the railways was a works contract under section 2(28)(c) of the Gujarat Sales Tax Act, making them liable for sales tax. The petitioners contended that there was no sale of movable property and that the contract was not a works contract. The court emphasized that whether the contract was a sale or works contract depended on the terms and conditions and the intention of the parties. The court decided not to directly adjudicate this complex issue in the writ petition and left it to the sales tax authorities to complete the assessment.

5. Jurisdiction of Sales Tax Authorities:
The court reiterated that when a statute provides a detailed mechanism for assessment, adjudication, appeals, and revisions, a writ petition should not be entertained unless it falls under recognized exceptions. The petitioners were advised to present their case before the sales tax authorities, who would assess the tax liability based on the contract's terms and conditions. The court highlighted that the petitioners had the right to appeal and seek revisions under the Gujarat Sales Tax Act and the VAT Act.

Conclusion:
The court quashed the provisional attachment order dated June 2, 2006, and directed the sales tax authorities to complete the assessment in accordance with the law after giving the petitioners an opportunity to present their case. The amounts deposited by the petitioners under the interim order were to be returned with accrued interest. The petitioners were relegated to the authorities under the VAT Act for assessment, and the petition was disposed of accordingly.

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