2022 (7) TMI 764 - HC - VAT and Sales Tax

Taxability - work executed as per the work order issued by MCL - absence of transfer of property in goods - Section 2(g) of the Orissa Sales Tax Act - HELD THAT - The Court finds that neither in the order of the STO nor in the order of the ACST, is it stated that there was actually any sale of goods or any transfer of property in goods during execution of the work by the Assessee. On the other hand, Mr. Sahoo, learned Senior Counsel has pointed out that in the order of the ACST, it has been noticed that the Petitioner had received Rs.1,05,000/- from local people towards hiring charges of machinery and it is possible that the sales tax collected pertained to that amount. In any event, merely because a sum of Rs.12,672/- has been shown having been collected as sales tax will not automatically imply that the use of the mechanical excavators for digging of overburden and removing it through tippers and transporting to a dump yard, involved any transfer of property in goods from the Petitioner to the MCL. In absence of any specific finding in that regard by the STO, it could not have been simply presumed that 20% of that work is attributable to sale of goods thereby limiting the deduction only to 80%. In other words, the disallowance of 20% of the hiring charges has to be based on some material which was available to the STO or to the ACST. The question framed is answered in the affirmative i.e. in favour of the Assessee and against the Department and it is held that the entire sum received by the Petitioner from MCL for performing the work order was not exigible to sales tax and the amount of TDS deducted by the MCL was refundable to the Petitioner - revision petition disposed off.

Summary

Issues Involved:
1. Interpretation of taxable transactions under the Orissa Sales Tax Act.
2. Determination of whether a specific work order involves transfer of property in goods.
3. Assessment of sales tax liability based on the nature of services provided.
4. Refund of Tax Deducted at Source (TDS) amount by the service recipient.
5. Review of lower authorities' decisions regarding sales tax liability.

Issue 1: Interpretation of taxable transactions under the Orissa Sales Tax Act
The revision petition addressed the question of whether the work executed as per the work order issued by Mahanadi Coalfields Ltd. (MCL) is taxable under Section 2(g) of the Orissa Sales Tax Act in the absence of transfer of property in goods. The petitioner contended that the work undertaken did not involve any transfer of goods and was purely a service activity, thus not subject to sales tax.

Issue 2: Determination of whether a specific work order involves transfer of property in goods
The petitioner was awarded a work order by MCL for the hire of a mechanical excavator for specific tasks. The court analyzed the nature of the work performed, emphasizing that the absence of any transfer of property in goods during the execution of the work order was crucial in determining the tax liability.

Issue 3: Assessment of sales tax liability based on the nature of services provided
The Sales Tax Officer (STO) had initially allowed a portion of the amount towards labor and service charges, treating the remaining balance as taxable under the Orissa Sales Tax Act. The court reviewed this assessment, highlighting the importance of establishing whether the services provided involved any transfer of property in goods to determine the taxable amount accurately.

Issue 4: Refund of Tax Deducted at Source (TDS) amount by the service recipient
The petitioner had claimed a refund of the Tax Deducted at Source (TDS) amount by MCL, which was deducted while making payments. The court examined the grounds for this refund claim and assessed whether the TDS amount was rightfully deducted based on the nature of the services rendered.

Issue 5: Review of lower authorities' decisions regarding sales tax liability
The court scrutinized the orders passed by the Assistant Commissioner of Sales Tax (ACST) and the Sales Tax Tribunal, which upheld the assessment of sales tax liability on the petitioner. The court considered the arguments presented by both parties and evaluated the legal precedents to arrive at a decision favorable to the petitioner, setting aside the lower authorities' orders.

This detailed analysis of the judgment showcases the court's thorough examination of the issues related to the interpretation of taxable transactions, determination of tax liability based on service nature, and the refund of TDS amount, ultimately leading to a decision in favor of the petitioner based on the absence of transfer of property in goods during the execution of the work order.