2022 (12) TMI 3 - HC - VAT and Sales Tax

Price escalation clause - Remand of the case for re-examining the issue concerning labour and service charges and amount allegedly received as hire charges by the Assessee for the year 1996-97 - deductions towards labour and service charges can be limited to 34% in the 1st year of the project work which is to be completed within a period of five years or not - whether petitioner in execution of works contract has received any amount towards hire charges? HELD THAT - As rightly pointed out by learned counsel appearing for the Petitioner, the above percentages were indicative of the escalation that was permissible on these items in terms of the agreement and did not reflect on the actual expenditure incurred on the ground of labour and services. On the other hand, the books of account produced by the Petitioner-Assessee were accepted as such both by the STO as well as the ACST. They examined the books of account thoroughly and found that the amounts were properly accounted for. In fact, the STO also noted that the Assessee had produced Labour payment register, vouchers, Cash book, muster rolls and copies of the trial balance (audited) for the year 1996-97. With both the STO and the ACST having accepted the books of account produced by the Assessee without any reservation, there was no occasion for the Tribunal to have limited the labour and service charges to 34%. Hire charges purportedly received by the Assessee - HELD THAT - The fact remains that no material whatsoever was produced by the Department to substantiate even prima facie that the Assessee had received that amount. In fact, the Tribunal notes that the Assessee disputed having ever received such an amount. There was accordingly no occasion again for the Tribunal to have remanded this issue to the STO for determination - decided in favour of the Petitioner-Assessee and against the Department. Revision petition allowed.

Summary

Issues involved:
1. Interpretation of deductions towards labour and service charges in a construction project.
2. Determination of alleged receipt of hire charges by the Assessee.
3. Validity of remanding the matter back to the assessing officer for re-computation.

Interpretation of deductions towards labour and service charges:
The revision petition stemmed from an order of the Orissa Sales Tax Tribunal remanding the matter to the Sales Tax Officer for re-examining deductions concerning labour and service charges and alleged hire charges received by the Assessee for the year 1996-97. The Tribunal limited deductions towards labour and service charges to 34% of the total gross amount received for executing the works contract, citing an agreement clause. However, the Petitioner argued that the percentages in the agreement did not reflect actual expenditure, which was duly accounted for in the books of account accepted by the STO and ACST. The Court agreed, noting that the Tribunal's conclusion was based on a mistaken notion of the agreement clause and ruled in favor of the Assessee against the Department.

Determination of alleged receipt of hire charges:
The Tribunal remanded the issue of alleged receipt of Rs. 1.34 Crores by the Assessee towards hire charges of equipment and machinery, despite the Assessee disputing ever receiving such an amount. The Court found that the Department failed to produce any material substantiating the receipt of hire charges, leading to a lack of prima facie evidence. Consequently, the Court ruled in favor of the Petitioner-Assessee and against the Department on this issue as well, setting aside the Tribunal's order.

Validity of remanding for re-computation:
The Tribunal's decision to remand the matter back to the assessing officer for re-computation, particularly on the issues of labour and service charges and hire charges, was found to be unwarranted. Since the Assessee's books of account were accepted without reservation by the STO and ACST, and no material evidence was presented by the Department to support the alleged hire charges, the Court concluded that there was no basis for the remand. As a result, the Court set aside the impugned order of the Tribunal and allowed the revision petition in favor of the Petitioner-Assessee.