2022 (12) TMI 46 - HC - VAT and Sales Tax

Deduction VAT / TDS from the bills by the Recipient of work contract service - Sub-contractor of Main contractor - Non issue to TDS certificate since the amount was adjusted as per the terms of contract - Direction upon the respondent company to issue Certificate of Tax Recovery at Source in Form-JVAT 400 in favour of the petitioner - HELD THAT - The entire portion of contract was sub-contracted by HSCL in favour of the petitioner and in turn it raised bill to Bokaro Steel Plant. The Supplies and activities covered by both bills were the same and there was only one accretion resulting in one deemed sale. The said deemed sale, Bokaro Steel Plant while paying HSCL s bills deducted TDS on account of VAT payable at the applicable rate and TDS deducted was deposited with the State Government authorities by Bokaro Steel Plant. The Relevant clause 8 of the Special Conditions of Contract wherein it is mentioned that the applicable VAT etc. payable by HSCL shall be reimbursed by the agency s bill. This was merely a mode and manner of fixing price between HSCL and the sub-contractor-petitioner. The TDS was deducted by Bokaro Steel Plant and paid by Bokaro Steel Plant. Thus, it is crystal clear that the entire portion of contract was sub-contracted by the Respondent Company to the petitioner on back-to-back basis and the sub-contractor raised bills to HSCL and HSCL in turn raised bills to Bokaro Steel Plant and Bokaro Steel Plant while paying HSCL s bills deducted TDS on account of VAT payable at the applicable rate and TDS deducted was deposited with the State Government authorities by Bokaro Steel Plant. Nothing has been produced by the petitioner which would reveal deduction on account of VAT for the works contract of M/s Hindustan Steel Works Construction Limited, for which the respondent-M/s Hindustan Steel Works Construction Limited is under a duty to issue certificate in Form-JVAT 400. Application dismissed.

Summary

Issues:
Petitioner seeks direction for issuance of Certificate of Tax Recovery at Source in Form-JVAT 400 for specific amounts and years. Interpretation of statutory obligations under JVAT Act and Rules. Dispute regarding VAT deduction by Respondent Company and non-issuance of certificate. Assessment by Commercial Taxes Department and demand notices issued. Revision before Commissioner of Commercial Taxes. Compliance with contractual obligations and reimbursement of VAT. Jurisdiction of High Court in enforcing contract performance.

Analysis:
The petitioner, a registered dealer executing work contracts, sought a direction for the issuance of Certificate of Tax Recovery at Source in Form-JVAT 400 from the Respondent Company for specific amounts for the years 2012-13, 2013-14, and 2014-15. The petitioner contended that as per Section 44 of the JVAT Act and Rule 23 of the JVAT Rules, the Respondents were obligated to issue the certificate equal to the VAT deducted from the RA Bills. The Respondent Company had subcontracted work to the petitioner, and VAT was deducted by the Respondents from the bills without issuing the required certificate, leading to difficulties in adjusting tax demands by the Commercial Taxes Department.

The Respondent Company argued that the subcontracting arrangement involved reimbursement of applicable VAT from the sub-contractor's bill as per the contract terms. The TDS on VAT was deducted by Bokaro Steel Plant and deposited with the State Government authorities. The Respondent State clarified that the main prayer of the petitioner was against Respondent Nos. 1 to 3 for the issuance of JVAT-400 certificates, and not against the State. The High Court noted that a similar case involving a different sub-contractor had been disposed of earlier, emphasizing the lack of evidence regarding VAT deduction specific to the petitioner's works contract.

The High Court concluded that the contractual arrangements and VAT deductions were adequately addressed through the subcontracting process, with TDS being deducted and paid by Bokaro Steel Plant. The Court found that the petitioner's grievance was related to contractual performance issues, best addressed in a Civil Court under relevant provisions of the Act, rather than through a writ petition. Consequently, the High Court dismissed the petitioner's application, refraining from granting relief and not delving into the merits of the contractual entitlements of the petitioner.