2013 (6) TMI 261 - HC - VAT and Sales Tax

Work Contract Tax - whether petitioner derived double benefit in the form of the escalation of seigniorage fee and Work Contract Tax (WTC) and the amount paid in excess was directed to be recovered through memo, dated 28.03.2009? - Held that - The agreement between the petitioner and the respondents provides for the revision of the bills or the amounts, in case there is revision of the tax regime. The petitioner made claims for enhancement of the bills on account of seigniorage fee and WCT. The scrutiny however has revealed that the benefit was availed at two stages; the first is in the form of cost of material and the second is under Clause 70.8. So was the case with the WCT. On coming to know that serious irregularities in this regard were taking place, the Government issued memo, dated 28.03.2009, directing that wherever the benefit of escalation of seigniorage fee or WCT was extended more than once, recoveries must be effected. It is in this context that the respondents withheld the amount. The petitioner does not dispute that the benefit of escalation in the seigniorage fee and WCT was extended to it in a different form and at the same time, the benefit was claimed under clause 70.8. In case, the petitioner disputes the correctness of the memo, dated 28.03.2009 or it is of the view that it did not avail the double benefit, it can certainly institute proceedings vis-a-vis the same. Withholding of the amount under that count by the respondents cannot be said to be without any basis. The petitioner, which is a Central Government agency, ought not to have driven the respondents to such a prolonged and unnecessary litigation. Therefore, the writ petition is dismissed, with costs of Rs.5,000/-.

Summary

Issues:
- Dispute over settlement amount after road widening project
- Application of 'principle of estoppel' by the petitioner
- Justification of deductions made by the respondents
- Double benefit availed by the petitioner

Analysis:

The case involves a dispute arising from a road widening project funded by the World Bank, where the petitioner, a Government of India undertaking, won the bid for the project. Following three arbitrations, the respective arbitrators awarded sums to the petitioner. Subsequently, the government issued a settlement offer through G.O.Ms.No.614, agreeing to pay a specific amount in full settlement. However, a disagreement arose regarding the unpaid balance, leading to the petitioner filing a writ petition.

The petitioner primarily argued that the respondents are bound by the 'principle of estoppel' due to their representation, leading the petitioner to withdraw cases and waive interest. The respondents contended that the settlement offer was implemented in full, except for deductions mandated by law, including advance income tax, VAT, and education cess. The respondents also justified withholding a portion of the amount due to double benefits availed by the petitioner.

The court emphasized the need for fairness in dealings between the petitioner, a Government of India undertaking, and the state government. It noted that most claims by the petitioner were due to cost escalations imposed by external entities. The court acknowledged the settlement offer made by the respondents, leading to the issuance of G.O.Ms.No.614 and the release of over Rs.11 crores to the petitioner. The deductions made were explained to include recoveries for double benefits obtained by the petitioner.

Regarding the double benefits issue, the court highlighted that the petitioner had availed benefits under different heads, leading to recoveries being made as per a government memo. The court upheld the respondents' decision to withhold the disputed amount, stating that if the petitioner disagreed with the memo's validity, it could challenge it separately. Ultimately, the court dismissed the writ petition, imposing costs on the petitioner and disposing of related petitions.

In conclusion, the judgment favored the respondents, upholding the deductions made and emphasizing the need for fair dealings in government contracts. The court's decision highlighted the importance of adhering to legal provisions and avoiding unnecessary litigation in such matters.