2021 (9) TMI 52 - HC - VAT and Sales Tax

Grant of refund which was deducted from the petitioner s bills in course of execution of a work contract - assessment period 2010-11 to 2013-14 - HELD THAT - One cannot lose sight of the fact that the failure or inability of the revenue to frame an assessment should not place the assessee in a more disadvantages position then what it would have been an assessment had been made. In a case where an assessee chooses to deposit by way of abundant caution advance tax or self assessment tax which is in excess of his liability on the basis of the return furnished or there is any arithmetical error or inaccuracy, it is open to him to claim refund of the excess tax paid in the course of assessment proceeding. Section 240 of the Act enjoins an obligation on the revenue to refund the amount to the assessee without his having to make any claim in that behalf. In appropriate cases it is open for the assessee to bring facts to the notice of the concerned authority on the base of the return furnished which may have a bearing on the quantum of the refund. In the present case, the assessee had not paid tax voluntarily. From the beginning the assessee had contested any collection of tax from its payments by KSS. The Superintendent of taxes however insisted that such deduction be made and the amount so deducted be deposited with the government revenue. The assessee had every right to dispute such collection and such dispute when raised in the return filed, had to be adjudicated by the Superintendent. The amount so collected cannot be retained without adjudication. Not framing the assessment till the return gets time barred cannot be the ground for retaining such tax. The Superintendent not having framed assessment, must refund the amount in question to the petitioner with statutory interest - the respondent No.4 shall refund the said sum of ₹ 24,21,007/- to the petitioner with interest as prescribed under the Act - petition disposed off.

Summary

Issues Involved:
1. Legality of tax deduction by KSS from the petitioner’s bills.
2. Determination of VAT liability under the TVAT Act.
3. Time-barred assessment and refund claim.
4. Superintendent’s failure to adjudicate the tax dispute.

Detailed Analysis:

1. Legality of Tax Deduction by KSS from the Petitioner’s Bills:
The petitioner, a private limited company engaged in laying and installation of pipes, challenged the deduction of ?24,21,007/- from its bills by KSS during the year 2011-12. This deduction was directed by the Superintendent of Taxes. The petitioner contended that it was a service provider liable to service tax and not VAT, as there was no transfer of property in goods during the execution of the work contract.

2. Determination of VAT Liability under the TVAT Act:
The Superintendent of Taxes believed that the petitioner had imported taxable materials for the work, thus falling under Section 4 of the TVAT Act, necessitating VAT deductions. The petitioner, however, maintained that the transaction was service-based with no sale of goods, thus not liable for VAT. Despite the petitioner’s objections and submission of returns, the Superintendent did not pass a formal assessment order to resolve this dispute.

3. Time-Barred Assessment and Refund Claim:
The Superintendent informed the petitioner on 23.04.2018 that the assessment for 2010-11 to 2012-13 had become time-barred under Section 33 of the TVAT Act, while the period for 2013-14 was still open until 31.03.2019. The petitioner sought a refund of the excess tax collected, but the revisional authority dismissed the revision petition on the grounds that it could not take cognizance of the Superintendent’s communication.

4. Superintendent’s Failure to Adjudicate the Tax Dispute:
The court emphasized that the Superintendent failed to adjudicate the petitioner’s objections by not passing a formal assessment order. The Superintendent allowed the assessments to become time-barred, thus retaining the provisionally collected tax without due process. The court held that the Superintendent’s inaction deprived the petitioner of the opportunity to appeal or challenge the taxability of the transaction.

Conclusion:
The court concluded that the Superintendent’s failure to assess the petitioner’s tax liability within the statutory period and the subsequent retention of the provisionally collected tax was without authority of law. The Superintendent must refund the amount of ?24,21,007/- to the petitioner with statutory interest within four months. The petition was disposed of accordingly, with all pending applications also disposed of.