2017 (5) TMI 221 - HC - VAT and Sales Tax

Deduction of tax at source - Works contract service - interstate sale - Form S - Section 13(1) of the Tamil Nadu Value Added Tax Act, 2006 - Held that - every person responsible for paying any sum to any dealer for execution of works contract shall deduct an amount calculated at the rates specified therein. The proviso to Section 13(1) gives exemption where the deduction shall not be made. The dealer has neither shown that he is a party to the works contract as shown in the agreement entered into between the Head Office and the Indian Railways; not has purchased any materials within the State of Tamil Nadu and suffered tax. They have not shown that they actually moved the goods from various places to the warehouses of the second and third respondents; lastly, the petitioner has not shown any connection to the works contract that has executed by the Head Office at Rajasthan through them. The petitioner has filed NIL returns every month. In the absence of accrual of right to raise a cause of action by the petitioner, this Court is not inclined to delve into the merits of the matter. In the absence of any details, it cannot be presumed that those goods were actually moved from various places as specified in the details, to the petitioner, at Tamil Nadu. The writ petitions are disposed of with a direction to the petitioner to approach the revisional authority under the Act to substantiate his case for the entitlement of Certificate of No Liability - decided partly in favor of petitioner.

Summary

Issues:
1. Challenge to the order for not issuing Form "S" to the petitioner.
2. Writ of prohibition against tax deduction for interstate works contract.
3. Jurisdiction of the first respondent to deduct tax at source.
4. Interpretation of Section 13(1) of the Tamil Nadu Value Added Tax Act, 2006.
5. Requirement of proof for interstate movement of goods in works contract.

Analysis:

Issue 1: The petitioner challenges the order for not issuing Form "S" to them. The petitioner is engaged in works contracts for Indian Railways, with the Head Office in Rajasthan. The petitioner sought Form "S" to avoid tax deduction at source, as the materials were purchased from outside Tamil Nadu. The first respondent rejected the application without considering the interstate nature of the transaction. The petitioner argued that the Head Office's order for works contract should not make the Branch Office liable under the State Act.

Issue 2: The petitioner seeks a writ of prohibition against tax deduction for interstate works contract. The petitioner's position is that as per Section 13(1) of the State Act, no tax deduction is required for interstate works contracts. The petitioner contends that the materials were purchased from outside Tamil Nadu and moved to warehouses in the state for contract execution. The petitioner asserts that they are not directly involved in the agreement between the Head Office and the Railways Department.

Issue 3: The jurisdiction of the first respondent to deduct tax at source is questioned. The petitioner argues that the first respondent lacks jurisdiction to refuse Form "S" issuance as the works contract is interstate in nature. The petitioner, being a dealer under the State Act, is entitled to the certificate. The first respondent's counter affidavit claims the petitioner has no connection to the works contract execution and has not purchased materials within Tamil Nadu.

Issue 4: The interpretation of Section 13(1) of the Tamil Nadu Value Added Tax Act, 2006 is crucial. The proviso to Section 13(1) exempts tax deduction for interstate works contracts. The petitioner relies on this provision to support their claim for Form "S" issuance. However, the first respondent argues that without proof of material transfer, the petitioner is not entitled to the certificate.

Issue 5: The requirement of proof for interstate movement of goods in works contracts is highlighted. The petitioner fails to demonstrate the actual transfer of materials from the Head Office to Tamil Nadu. The absence of evidence of purchase within Tamil Nadu and interstate movement raises doubts about the petitioner's eligibility for the certificate. The court emphasizes the need for valid materials to substantiate the claim before the revisional authority.

In conclusion, the court directs the petitioner to approach the revisional authority with valid materials within thirty days to establish their entitlement to the Certificate of No Liability. The judgment underscores the importance of factual evidence in determining tax liabilities and the necessity of following the prescribed procedures under the State Act for resolving such disputes.