2015 (1) TMI 412 - HC - VAT and Sales Tax

Locus Standi of Petitioner to invoke writ jurisdiction - TDS Deduction by revenue u/s 4(3) of the Tripura Value Added Tax Act, 2004 read with rule 7(1) of the Tripura Value Added Tax Rules, 2005 Whether without authority from respondent No. 4 the petitioner has got any locus standi - Held that - The petitioner is neither the contractor nor the person to whom the payment would be made by the dealer on account of the works contract - the dispute is fundamentally confined to performance of the private contract (as distinct from the works contract) as entered into by the petitioner and respondent No. 4 - it is surfaced that the petitioner is not an assessee nor the tax at source is directly deducted by the dealer from the petitioner but by the contractor only by dint of the terms of the turnkey agreements nor that the petitioner by any means comes within the meaning of the dealer or conversely whether any person having been affected by the provisions of the private contract, provisions of which have been agreed to by the petitioner, can approach this court for challenging the constitutionality of the rule. The petitioner as such has no statutory liability to pay tax at source or nor can he be assessed in terms of rule 7(8) of the Tripura Value Added Tax Rules, 2005, which provides all such deductions and deposits into the Government Treasury shall be deemed to be provisional payment of tax and shall be adjusted at the time of assessment under sections 29/30/31 of the Act as the case may be, but by virtue of the turnkey agreements as entered into between respondent No. 4 and the petitioner, the petitioner has been required to pay the amount of such tax to respondent No. 4 and this clause has no relation with the taxing authority nor the petitioner has been directed to deposit tax neither were they subjected to the procedure of determination of tax or assessment - Neither the dealer, the Union of India (not made party in the proceeding) nor respondent No. 4 has canvassed any grievance in this regard - there is no question of public injury that any member of the public may having interest come forward for a judicial redress of the injury on challenging the constitutional or legal validity of any piece of legislation. The petitioner has got no locus standi to invoke the jurisdiction under article 226 of the Constitution of India for calling the validity of rule 7(1) of the Tripura Value Added Tax Rules, 2005 or for praying other consequential reliefs - from the work-orders as awarded by respondent No. 4 it is apparent that the petitioner agreed to pay the category of the tax which includes the works contract tax/VAT - a person who has consented expressly or impliedly to a thing cannot be said to be aggrieved by it - If the petitioner is aggrieved by any action of respondent No. 4, the remedy is definitely not under article 226 of the Constitution of India inasmuch as there is an arbitration clause in each of the work orders as emanated from the agreements thus, the petitioner lacks the locus standi, as the petitioner has got no legal grievance, to set in the writ proceeding and this writ petition does not deserve any further consideration Decided against petitioner.

Issues Involved:
1. Locus standi of the petitioner.
2. Validity of Rule 7(1) of the Tripura Value Added Tax Rules, 2005.
3. Deduction of tax at source under the Tripura Value Added Tax Act, 2004.
4. Petitioner's claim for reimbursement of tax deducted at source.

Issue-wise Detailed Analysis:

1. Locus Standi of the Petitioner:
The court examined whether the petitioner had the legal standing to challenge the validity of Rule 7(1) of the Tripura Value Added Tax Rules, 2005. It was observed that the petitioner was not directly affected by the tax deduction as they were neither the contractor nor the person to whom the payment would be made. The petitioner was required to pay the tax to respondent No. 4 as per the turnkey agreements, but this did not establish a direct relationship with the taxing authority. The court concluded that the petitioner lacked locus standi to invoke jurisdiction under Article 226 of the Constitution of India. The court emphasized that any grievance against respondent No. 4 should be resolved through arbitration as stipulated in the work orders.

2. Validity of Rule 7(1) of the Tripura Value Added Tax Rules, 2005:
The petitioner challenged the constitutionality of Rule 7(1) on the grounds that it allowed for arbitrary deduction of tax at source without a mechanism similar to Section 194C(4) of the Income-tax Act, 1961. The petitioner argued that this rule was outside the purview of Entry 54 List II of the Constitution of India and infringed upon Article 300A by depriving them of property without due process. However, the court did not find merit in these arguments due to the petitioner's lack of locus standi and the contractual obligations agreed upon in the turnkey agreements.

3. Deduction of Tax at Source under the Tripura Value Added Tax Act, 2004:
The petitioner contended that respondent No. 4 had been deducting tax at source from their bills without computing the taxable turnover, which was causing irreparable loss and injury. The court referred to precedents, including Nathpa Jhakri Jt. Venture v. State of Himachal Pradesh and Rapti Commission Agency v. State of U.P., to illustrate that the deduction of tax at source should not be arbitrary and must consider the taxable turnover. However, the court noted that the petitioner was not directly subjected to tax deduction by the dealer but by the contractor as per the turnkey agreements.

4. Petitioner's Claim for Reimbursement of Tax Deducted at Source:
The turnkey agreements included a clause for reimbursement of the works contract tax/VAT paid by the petitioner to the state government, subject to reimbursement from the Ministry of Home Affairs to respondent No. 4. The court highlighted that the petitioner had consented to this arrangement and thus could not claim to be "aggrieved" by it. The court also noted that any disputes regarding reimbursement should be resolved through arbitration as per the agreements.

Conclusion:
The court dismissed the writ petition on the grounds that the petitioner lacked locus standi to challenge the validity of Rule 7(1) of the Tripura Value Added Tax Rules, 2005. The court emphasized that the petitioner had agreed to the tax deduction terms in the turnkey agreements and should seek resolution through arbitration. The petition did not merit further consideration, and no costs were awarded.

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