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2015 (8) TMI 447 - HC - VAT and Sales TaxLevy of sales tax / CST on manufacturing of cine wall posters - nature of activity - sale or works contract - printing the wall poster as per the requirement of the customer - Revision of order by the commissioner Whether Commissioner could have revised order of ADC on ground that appeal should not have been entertained as it was filed belatedly Held that - Commissioner, in his earlier notice, did not propose to revise order of ADC on ground that he could not have entertained appeal after limitation prescribed for preferring appeal had expired Matter was remanded to Commissioner to decide whether activity, undertaken by appellants, amounted to sale and was liable to be taxed or not It was, therefore, not open to Commissioner to revise order of ADC on grounds other than those referred to him and on ground that appeal could not have been entertained belatedly Therefore order of Commissioner, seeking to revise order of ADC hereby set aside Decided against revenue. Printing and Supply of cine-walls Held that - In order to constitute sale it is necessary that there is agreement between parties for purpose of transferring title to goods, agreement must be supported by money consideration and property should actually pass in goods For being classified as works contract transaction, under consideration, must be composite transaction involving both goods and services If transaction involves only service, i.e. work and labour, then it cannot be treated as works contract Expression tax on sale or purchase of goods in Entry 54 of List II of Seventh Schedule, when read with definition clause 29-A of Article 366, includes tax on transfer of property in goods whether as goods, or in form other than goods, involved in execution of works contract Authorities had treated business transactions of assessees as sale of goods, and not as works contracts Work involving preparation of negatives of wall-posters, was exclusively job work involving skill and labour, hence price charged thereof could not be subject to sales tax However, second part of work involving printing of positive prints of wall- posters, was deemed to be works contract and, as such, tax was levied Activity of printing and supply of cine wall-posters cannot be considered as failing under terms fitting out, improvement or repair, as supply of cine wall-posters was not supply of goods; and there was no improvement or repair, consequently these transactions cannot constitute specified works contracts referred to in Section 2(t), therefore not exigible to tax under APGST Act It was only after 01.04.2005 that all kinds of works contracts were brought within ambit of works contracts as defined in Section 2(ja) of CST Act Therefore no tax could have been levied on such works contracts under CST Act also Subject transactions were not liable to tax either under APGST Act or CST Act during the relevant period Decided against revenue. Payment of Tax Against refund order Whether Commissioner could have directed appellants to pay tax under APGST, 1957, and CST, 1956, when order of ADC setting aside order of assessing authority withholding refund under Section 33-BB had attained finality Held that - As appellants had already paid tax, consequence of order of ADC was that they were entitled to claim refund of tax paid earlier Upon revisional order of Commissioner, appellants-assessees were liable to pay tax As long as order of Commissioner remained in force, assessees continued to remain liable to pay tax and was not disabled from revising earlier order of ADC Decided in favour of revenue. Tax collected from Customers Whether appellants can be permitted to retain amounts collected by them from their customers on manufacture, printing and supply of cine wall-posters Held that - appellants may not be liable to pay tax as subject transactions were not sale of goods, but it was not disputed that appellants have collected tax from their customers on manufacture, printing and supply of cine wall- posters Doctrine of unjust enrichment is just and salutary doctrine As appellants were not exigible to tax during relevant period, appellants cannot be permitted to retain amount collected by them from their customers as that would resulted in their unjust enrichment Onus was on appellants to show that they have not collected tax from their customers to whom they supplied cine wall-posters manufactured and printed by them Decided against Appellant.
Issues Involved:
1. Revision of the Appellate Deputy Commissioner's order due to delayed appeal. 2. Nature of the printing and supply of cine-wall posters as works contract and its taxability under APGST Act and CST Act. 3. Validity of tax imposition under APGST and CST Acts when the Appellate Deputy Commissioner's order on withholding refund had attained finality. 4. Entitlement of the appellants to retain collected tax and the concept of unjust enrichment. Issue-wise Detailed Analysis: Point No.1: Revision of the Appellate Deputy Commissioner's Order Due to Delayed Appeal The Commissioner of Commercial Taxes issued a show cause notice and revised the Appellate Deputy Commissioner's (ADC) decision, but the initial notice did not propose revising the order based on the delay in filing the appeal. The High Court noted that the ADC had the authority to condone delays under Section 19(1) of the APGST Act. The Commissioner exceeded his jurisdiction by revising the order on grounds not originally cited. The delay condoned by the ADC was not so inordinate as to necessitate interference. Thus, the revision on this ground was set aside. Point No.2: Nature of the Printing and Supply of Cine-Wall Posters as Works Contract The appellants argued that the transactions were works contracts involving skill and labour, not sales of goods. The court referred to the 46th Amendment to the Constitution, which allows the bifurcation of contracts into sale of goods and services. The term "works contract" was given a restricted meaning under the APGST Act before 01.04.1995, not including the printing and supply of cine-wall posters. The court concluded that these transactions did not fall within the specified works contracts under Section 2(t) of the APGST Act during the relevant period and were not taxable under the APGST Act. Similarly, the CST Act did not define "works contract" or include such transactions as sales before 01.04.2005, making them non-taxable under the CST Act as well. Point No.3: Validity of Tax Imposition under APGST and CST Acts The ADC's order setting aside the assessment authority's decision to withhold refunds had attained finality. The Commissioner's subsequent revision did not affect this finality. However, since the earlier order of the ADC was set aside, the appellants were liable to pay tax as per the restored order of the assessing authority. The court held that the Commissioner was not barred from revising the ADC's order on this ground, as the subsequent refund order was a consequence of the earlier order. Point No.4: Entitlement to Retain Collected Tax and Unjust Enrichment The doctrine of unjust enrichment prevents the appellants from retaining the tax collected from customers if the transactions were not taxable. The court emphasized that the appellants could not keep the collected tax, which would result in unjust enrichment. The assessing authority was directed to determine if the appellants had collected tax from their customers and, if so, recover the amounts refunded to them. The onus was on the appellants to prove that they had not collected such tax. Conclusion: The assessment years in question were prior to the amendments that expanded the definitions of "works contract" and "sale" under the APGST and CST Acts. Consequently, the transactions of manufacturing, printing, and supplying cine-wall posters were not taxable under these Acts during the relevant periods. The revisional orders of the Commissioner were set aside, and the cases were remanded to the assessing authorities to determine if the appellants had collected sales tax from their customers and to recover any refunded amounts accordingly. The entire process was to be completed within four months.
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