2016 (4) TMI 1018 - HC - VAT and Sales Tax

Seeking direction for refund an amount - Excess amount deducted from the sixth and seventh running account bills of the petitioner for execution of work pertaining to an agreement and further Accountant General, Bihar, restraining them from making deduction of sales tax under the Bihar VAT Act, 2005 from the gross amount of running account bills and to do so strictly in accordance with Section 41 ibid read with Rule 29 of the Bihar Vat Rules, 2005. Held that - the issue is squarely covered by the directions of this Court in the case of M/s. Debashree Constructions (India) Pvt. Ltd. Vs. Ircon International Limited & ors. 2015 (7) TMI 1081 - PATNA HIGH COURT and its analogous cases. It has been clearly held by this Court in the said order that it is the obligation of the authorities to comply with the provisions of the Bihar VAT Act and the Rules and if the Act and the Rules provide that deduction shall not be made with regard to certain items, it is not permissible for the person making the deduction of tax at source to continue to make deduction of the entire amount from the bills without giving the benefit as provided under the Rules which is couched in the form of injunction and violation of the same is legally impermissible. The deducting authorities were, accordingly, directed to strictly comply with the provisions of Section 41 of the Bihar VAT Act and Rule 29 of the Bihar VAT Rules in the matter of making deduction and wherever the details were provided to them by the petitioner-contractor or were available to them then they were obliged not to make deduction with regard to the heads mentioned therein and the TDS was to be deducted with respect to the remaining part of the bills. In view of the aforesaid directions of this Court it is not open to any person deducting tax at source under the Bihar VAT Act to do so otherwise than directed and doing so would be a clear attempt to override the direction of this Court. In view of the aforesaid directions of this Court it is not open to any person deducting tax at source under the Bihar VAT Act to do so otherwise than directed and doing so would be a clear attempt to override the direction of this Court. The stand of the Accountant General is that they have done so on the basis of the circular issued by the Department and also the decision of this Court in the case of Abdul Majeed Khan vs. The State of Bihar & Ors.. In the aforesaid view of the matter, the impugned letter of the Accountant General (Audit), Bihar, in so far as it directs the deduction on the gross amount of the bill, is quashed. The respondents are further directed not to make any deduction contrary to the provisions of Section 41 and Rule 29 of the Rules as have been explained by this Court in M/s Debashree Constructions case (supra). Any excess amount deducted by the respondents shall be refunded to the petitioner. - Decided in favour of petitioner

Summary

Issues: Refund of excess amount deducted from running account bills, compliance with Bihar VAT Act and Rules, deductions made by authorities, circular issued by the Department, decision of the Court in Abdul Majeed Khan case.

In this judgment by the Patna High Court, the petitioner sought a refund of an excess amount deducted from their running account bills for work executed under an agreement. The petitioner also requested a direction to restrain authorities from making deductions under the Bihar VAT Act and Rules. The Court noted that the issue raised by the petitioner was previously addressed in a related case, where it was held that authorities must comply with the Act and Rules, and deductions should not be made on items where not permissible. The Court directed strict compliance with Section 41 of the Bihar VAT Act and Rule 29 of the Bihar VAT Rules, emphasizing that deductions must align with the provided guidelines. Any deviation was deemed impermissible, and authorities were instructed to follow the specified provisions.

Regarding deductions made by the authorities, it was argued that deductions were made from gross bills due to directions from the Accountant General, Bihar. The Accountant General justified this action based on a circular and a previous court decision. However, the Court clarified that the decision cited did not mandate deductions from the gross bill amount. The Court emphasized that deductions should only be made as per the provisions of Section 41 and Rule 29, ensuring that deductions are within the legal framework. It was highlighted that no deductions should be made beyond what is allowed by the State Legislature for taxing works contracts, especially in cases not involving transfer of property.

Ultimately, the Court allowed the writ application, quashing the directive to deduct from the gross bill amount issued by the Accountant General. The respondents were directed to refund any excess amount deducted to the petitioner within four weeks. The Court reiterated the importance of adhering to the Bihar VAT Act and Rules, as explained in the previous case, to prevent unauthorized deductions and ensure compliance with the legal provisions.