2018 (6) TMI 1633 - HC - VAT and Sales Tax

Interest on refund u/s 54(1) (aa) of the Gujarat Sales Tax Act, 1969 - Indivisible Works Contract or not - erection and installation of air-conditioning plants - whether the activity undertaken by it falls under Entry No.5 of the said Notification dated 18.10.1993 issued under Section 55A of the erstwhile Gujarat Sales Tax Act, 1969? - applicable rate of tax - HELD THAT - In the present case, the proceedings before the Tribunal were against the order passed by the first appellate authority levying/ charging tax at the rate of 15% against the claim of the Dealer at 5%. In the meantime and during the pendency of the proceedings before the Tribunal, in another proceeding, including in the case of the very Dealer, the Hon ble Supreme Court held that the Dealer shall be entitled to interest under Section 54(1)(aa) of the Gujarat Sales Tax Act, 1969, on refund arising from the appellate order. Consequently, by impugned order, the learned Tribunal has allowed the appeals by holding that the Dealer shall be liable to pay tax at the rate of 5%. Therefore, as such, the impugned orders passed by the learned Tribunal wherein the appeals against the assessment order/ first appellate order are allowed. The Dealer shall be entitled to the refund of differential amount and as the said amount was retained/ recovered by the State, the Dealer shall be entitled to interest on the refund. Appeal dismissed - decided against appellant.

Summary

Issues:
Interpretation of applicable tax rate under Notification dated 18.10.1993 for works contract involving air-conditioning plants; Entitlement to claim interest on refund under Section 54(1)(aa) of the Gujarat Sales Tax Act, 1969.

Analysis:

Issue 1: Interpretation of applicable tax rate under Notification dated 18.10.1993
The case involved a registered Dealer under the Gujarat Sales Tax Act, 1969, engaged in the business of design, supply, and installation of air-conditioning plants. The Dealer claimed that the entire process of erection and installation constituted an indivisible works contract falling under Entry No.5 of the Notification dated 18.10.1993, attracting a tax rate of 5%. However, the Assessing Officer believed the activities fell under Entry No.2, attracting a tax rate of 15%. The Tribunal, considering the Dealer's argument and the Supreme Court's decision favoring the Dealer in a similar case, held that the works contract should be categorized under Entry No.5, thus attracting a tax rate of 5%.

Issue 2: Entitlement to claim interest on refund under Section 54(1)(aa)
The State of Gujarat contested the Tribunal's decision allowing the Dealer to claim interest on the refund under Section 54(1)(aa) of the Gujarat Sales Tax Act, 1969. The State argued that the facts of the present case were different from previous decisions where interest was allowed on refunds arising from appellate orders. However, the Court noted that the Dealer was initially charged tax at 15% instead of 5%, which was later corrected by the Tribunal. As the Dealer was entitled to a refund of the differential amount, the Court held that interest on the refund was justified based on previous Division Bench decisions. The Court concluded that no substantial question of law arose, agreeing with the Tribunal's decision, and dismissed the appeals.

In summary, the Gujarat High Court interpreted the applicable tax rate under a specific notification for works contracts involving air-conditioning plants and addressed the issue of entitlement to claim interest on refunds under the Gujarat Sales Tax Act, 1969. The Court upheld the Tribunal's decision in favor of the Dealer, emphasizing the correctness of categorizing the works contract under a lower tax rate entry and allowing interest on the refund due to the Dealer.