2021 (3) TMI 175 - HC - VAT and Sales Tax

Adjustment of tax deducted at source - Benefit of Section 7C of the TNGST Act, 1959 denied - demanded towards freight and pumping charges - HELD THAT - The present writ petition ought not to have been admitted in the 1st place as the petitioner had an alternate remedy before the Sales Tax Appellate Tribunal against the impugned order passed by the 2nd respondent Appellant Joint Commissioner. Be that as it may, since the writ petition was admitted in the year 2012 and an interim injunction was ordered by restraining the Commercial Tax Department from proceeding further with the recovery proceedings pursuant to the impugned order of the 2nd respondent, it would be unfair to relegate the petitioner to an alternate remedy at this distant point of time. Further, one of the issue can be answered based on the law. Therefore, I take up the case and dispose this writ petition on the merits. The demand sustained for alleged violation of Rule 6C of TNGST Rules Act, 1959 regarding the inclusion of the freight and pumping charges into the taxable turnover are concerned is liable to be quashed. Therefore, to that extent the impugned order is quashed. Tax Deducted at Source (TDS) - HELD THAT - There cannot be any grievance of the petitioner as the case has been remitted back to the 1st respondent to pass a speaking order after due verification. The 2nd respondent has clearly held that for administrative delay or deficiency in the mechanism of transfer of TDS credits to the petitioner s account, the petitioner cannot be made to suffer. There are different kinds of transactions involved. Some are pure supply and therefore sale and some were deemed sale viz. works contract within the meaning of Section 2 (u) of Tamil Nadu General Sales Tax Act, 1959. When the petitioner ad-disguised sale as 'works contract' - Since the question as to whether the transaction involved sale or works contract liable to tax under Section 3B or under Section 7C of the Tamil Nadu General Sales Tax Act, 1959 is a question of fact. No conclusion on facts can be arrived under Article 226 of the Constitution of India based on sample copies of invoices filed by the petitioner before this Court to convince the court to conclude that there was indeed works contract during the supply of ready mix concrete to its customers. The petition is partly allowed.

Summary

Issues Involved:
1. Denial of benefit under Section 7C of the TNGST Act, 1959.
2. Demand for freight and pumping charges.
3. Adjustment of Tax Deducted at Source (TDS).

Issue-wise Detailed Analysis:

1. Denial of Benefit under Section 7C of the TNGST Act, 1959:

The petitioner challenged the impugned order dated 25.06.2012, which denied the benefit of Section 7C of the TNGST Act, 1959. The petitioner argued that the supply of Ready Mix Concrete (RMC) involved both sale and works contract, and thus they opted to pay tax at a compounding rate under Section 7C. The court referred to the decision in Thirumalai Ready Mix Concrete v. State of Puducherry, 2013 SCC OnLine Mad 3938, which supported the petitioner's claim that such transactions constitute a works contract. Additionally, the Supreme Court's decision in Larsen & Toubro Ltd. v. State of Karnataka, (2014) 1 SCC 708 clarified that the dominant intention of the contract is not material in determining whether an activity amounts to a sale or works contract. However, the court noted that determining whether the transaction involved sale or works contract is a question of fact that should be decided by the appropriate authority. The court granted the petitioner liberty to file a statutory appeal within 30 days, subject to compliance with statutory requirements, including the mandatory pre-deposit of the disputed tax amount.

2. Demand for Freight and Pumping Charges:

The petitioner contested the inclusion of freight and pumping charges in the taxable turnover. The court referred to the decision in Larsen & Toubro Limited v. State of Tamil Nadu, 2018 SCC OnLine Mad 12418, which held that freight and pumping charges are post-sale services and should not be included in the taxable turnover. The court confirmed that the State had accepted this decision and had not appealed against it. Consequently, the demand for freight and pumping charges was quashed, and the impugned order was partially set aside to this extent.

3. Adjustment of Tax Deducted at Source (TDS):

The petitioner also sought adjustment of TDS paid by their clients. The 2nd respondent had referred the issue back to the 1st respondent to pass a rectification order allowing credit for the unadjusted TDS amounting to ?40,13,050/-. The court found no merit in the petitioner's challenge to this portion of the impugned order, as the 2nd respondent had already directed the 1st respondent to address the issue. The court directed the 1st respondent to pass appropriate orders within three months regarding the adjustment of TDS.

Conclusion:

The writ petition was partly allowed. The demand for freight and pumping charges was quashed, and the petitioner was granted liberty to file a statutory appeal regarding the denial of benefit under Section 7C. The 1st respondent was directed to address the adjustment of TDS within three months. No costs were awarded, and the connected miscellaneous petition was also closed.