2024 (10) TMI 559 - HC - VAT / Sales Tax

Levy of commercial tax under the Commercial Tax Act as well as the Entry Tax Act - challenge to assessment orders - works contract or not - Build, Operate and Transfer (BOT) contract - scope of registered dealer as defined under Section 2 (gg) of the M.P. Entry Tax Act, 1976 - HELD THAT - It is a settled law that no person has a right to collect a toll or any tax from private persons for using the road. The State Government gave a right to collect the toll to the petitioner from the vehicle passing through the road for a definite period to recover the only cost of construction i.e. the sale amount or the contract value, therefore, the Dy. Advocate General for the State has rightly contended that in this case, the contract amount or sale price is liable to be made to the contractor as a deferred payment by authorizing him to recover the toll tax and except this, there is no difference in the work done under the BOT scheme and in the normal works contract. This issue has been considered in detail by the Full Bench of this Court in the matter of Viva Highways 2017 (5) TMI 1622 - MADHYA PRADESH HIGH COURT before the Apex Court in which it has been held that the works contract means an agreement must be in writing, it must be executed of any work related to the construction, repair or maintenance of any building, superstructure or other amenities mentioned in the definition. Any agreement by whatever name is called, if it falls within the meaning of a definition of works contract as per the definition of 1983 it must be treated as the works contract. The petitioner is misconstruing the terms of the agreement and the construction of Dewas by-pass road on a BOT basis that it does not amount to execution of works contract, the petitioner executed the works contract on the land belonging to the State Government and recovered the construction and maintenance cost by way of toll with the due permission from the State Government, it is nothing but a deferred payment by a mode of recovery of toll. Hence, there are no substance in the writ petition. The petition being devoid of merit and substance are hereby dismissed.

Summary

Issues Involved:
1. Whether the Build, Operate and Transfer (BOT) contract awarded to the petitioner is a "works contract" under the Commercial Tax Act and Entry Tax Act.
2. Liability of the petitioner to pay taxes under the Commercial Tax Act and Entry Tax Act.
3. Interpretation and application of relevant statutory definitions and provisions.

Issue-wise Detailed Analysis:

1. BOT Contract as a Works Contract:
The primary issue was whether the BOT contract for constructing the Dewas By-pass road constituted a "works contract." The petitioner argued that the BOT scheme did not involve a works contract as there was no monetary consideration paid by the government, nor was there any transfer of property. However, the court found that the BOT contract fell under the definition of a works contract. The petitioner was granted the right to collect tolls to recover the construction costs, which was deemed a form of deferred payment. The court cited the Full Bench decision in Viva Highways, which held that such agreements, irrespective of their nomenclature, are considered works contracts if they involve construction, repair, or maintenance activities. The court concluded that the BOT contract involved the execution of a works contract on government land, with the petitioner recovering costs through toll collection.

2. Tax Liability under the Commercial Tax Act and Entry Tax Act:
The petitioner contested the tax liability, arguing that the BOT contract did not involve a sale of goods, hence no tax should be levied. The court, however, upheld the assessment orders, stating that the petitioner, as a registered dealer, was liable for taxes under both the Commercial Tax Act and the Entry Tax Act. The court noted that the petitioner was authorized to collect tolls as a deferred payment for the works contract executed, thus making them liable for commercial tax and entry tax on the materials used. The court emphasized that the definitions of "dealer" and "sale" under the relevant statutes supported the tax liability, as the petitioner engaged in activities that constituted a transfer of property in goods for valuable consideration.

3. Interpretation of Statutory Definitions:
The court examined the statutory definitions of "dealer" and "sale" under the M.P. Vanijyik Kar Adhiniyam, 1994, and the M.P. Entry Tax Act, 1976. It clarified that the petitioner, as a dealer, was engaged in the business of supplying goods in the execution of a works contract. The court highlighted that the definition of "sale" included the transfer of property in goods involved in the execution of a works contract. The court also referred to relevant case law, including the Supreme Court's decision in Larsen and Toubro Ltd. v. State of Karnataka, which supported the interpretation that additional obligations in a contract do not alter its nature as a works contract.

Conclusion:
The court dismissed the petitions, affirming the tax assessments under the Commercial Tax Act and Entry Tax Act. It concluded that the BOT contract was indeed a works contract, and the petitioner was liable for the taxes assessed. The court directed the recovery of taxes with interest, reinforcing the applicability of the statutory provisions and the interpretation of works contracts in similar contexts.