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TMI Blog2013 (3) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... a local project office in Delhi and Punj Lloyd Ltd., a company incorporated in India under the Companies Act, 1956. Both these companies are registered with the sales tax department of the Government of NCT of Delhi separately under the WC Act and the DST Act. The Malaysian company and the Indian company were separately awarded contracts by the Delhi Metro Rail Corporation (DMRC) for execution of certain works. The Malaysian company was awarded the contract for reinforced and pre-stressing steel, pre-cast concrete work for the superstructure and the Indian company was to execute the work in connection with the survey, temporary barricades, pile foundations, etc. Under a memorandum of understanding executed on 10.10.2003 these two companies came together as a joint venture. Under the MOU, each member of the joint venture had to raise its own independent bill for the work executed and the payment was to be received by the joint venture from DMRC to be distributed by the joint venture between its two members in terms of their separate bills. The petitioner, which is the joint venture, was also registered as a dealer under the WC Act w. e. f. 13.01.2013. 3. On 21.03.2005, an assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from the contractor to the contractee in the same form in which they were purchased by the contractor. (3) No tax shall be levied on the turnover of sale on transfer of property in goods, specified in the Third Schedule to the Delhi Sales Tax Act, involved in the execution of works contract, if such goods are transferred from the contractor to the contractee in the same form in which they were purchased by the contractor. (4) No such tax shall be leviable on the turnover of sales on transfer of property in goods, whether as goods or in some other form involved in the execution of works contract, if such transfer from the contractor to the contractee constitutes a sales in the course of inter-State trade or commerce under section 3 or a sale outside the State under section 4 or a sale in the course of import or export under section 5 of the Central Sales Tax Act, 1956. (5) No tax shall be payable under this section on the turnover of sales relating to the amount paid to a sub-contractor as consideration for the execution of works contract whether wholly or partly subject to the production of proof, as may be prescribed, that such sub-contractor is a registered dealer liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Provided further that where any deduction has been made by a contractor from the payments made to his sub-contractor in accordance with sub-section (3) the amounts of such payments shall be deducted from the amount on which deduction is to be made under this sub-section subject to production of a certificate as prescribed in sub-section (5) of this section." (3) Any contractor responsible for making any payment or discharge of any liability to any sub-contractor, in pursuance of a contract with the sub-contractor, for the transfer of property in goods (whether as goods or in some other form) involved in the execution, whether wholly or in a part, of the works contract undertaken by the contractor, shall, at the time of such payment or discharge, in cash or by cheque or draft or any other mode, deduct an amount equal to two per cent. of such payment or discharge, purporting to be part or full amount of the tax payable under this Act. (3A) (i) A contractor with respect to the contracts other than the private contracts, may make an application to the contractee authorising him to deduct tax at the rate of four per cent. towards the tax payable under this Act instead of two per cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount so deducted, he shall be liable to pay simple interest at the rate of two per cent. per month on the amount deductible under this section but not so deducted and, if deducted, not so deposited from the date on which such amount was deductible to the date on which such payment is actually deposited. (9) Where the amount has not been, deposited after deduction, such amount together with interest and penalty referred to in sub- section (7) and sub-section (8) shall be a charge upon all the assets of the person concerned and recoverable as arrears of land revenue. [(10) Every person responsible for making deduction of tax under this section shall apply to the Commissioner for a Tax Deduction Account Number within the prescribed time and in the prescribed form and shall also furnish an annual return in the prescribed form within the prescribed period. Explanation.--Nothing contained in this section shall apply to works contract executed in the course of inter-State trade or commerce or outside the State, or in the course of import or export out of India.] 5. Section 5 of the WC Act provides for the levy of tax on works contract. Sub-section (2) provides for the rate of four ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ....... to ...........Rs........... 3. Turnover of Taxable sales in respect of period from.......... to .......... Rs. ............. Declared Goods Other than Declared Goods Turnover of Taxable Sales Tax paid 4. Amount of sales tax paid on the turnover referred to at Sl. No.3: ........... 5. Particulars of payment: Period Challan No. Date Amountof tax Total Place: Signature Date Status 6. It will be seen from the assessment order that a refund of Rs. 85,06,203/- was determined as payable to the petitioner. DMRC paid Rs. 29,32,34,912/- to the petitioner in respect of the tax period 2003-04 out of which tax of Rs. 86,97,203/- was deducted. Since the petitioner was only a joint venture of two companies and was to act merely as a conduit for passing on the monies to the member- companies who were sub-contractors who were to actually carry out the work, the assessment order refers to the sub-contract to show that the entire amount received by the petitioner from DMRC was paid to the sub-c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n submissions dated 13.9.2005 challenging reassessment dated 8.5.2006, affidavit dated 31.03.2006, photocopies of returns, 4 Forms VI (received from two of its sub contractors), chart reflecting amount receipt from DMRC (distributed among subcontractors) with TDS, WCT and other details), Two Form-IX 26(6) proceedings have been taken separately. Dealer submitted No. books of accounts are maintained. Only Form IX and Form VI & returns is the basis of assessment. The receipt of payment which are further distributed among two of his associates sub contractors, who have issued Form VI for executing works contracts and has thus claimed refund of TDS - Since dealer has not executed any job work and is claimed 100% exemptions only on account of sub contract. Filed affidavit dated 31.03.2006 stating the assessee dealer named as joint venture consists of two equal constituents (1) Persys Sdn Bhd and (2) Punj Lloyd Ltd. - Both of which are separate companies registered under DST WC Act, 1999. The Joint Venture simply acts as a conduit between both the constituents and DMRC Ltd. and does not execute any work on its own. The taxable turnover in the hands of joint venture is Nil. Further DMRC h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the fact that the taxable turnover in the hands of the joint venture is nil. The reassessment order further refers to a detailed letter dated 31.03.2006 sent to DMRC for verification and that the said letter was part of the assessment. In addition, the reassessment order notes the fact that the petitioner did not deduct tax when the amounts were paid to the sub-contractors i.e. the two member-companies and accordingly was liable to pay a penalty of Rs. 10,000/-. Ultimately no tax demand was raised against the petitioner in the reassessment because the amount of Rs. 29,32,34,912/- received from the DMRC was paid to the sub-contractors fully. Thus except for reiterating the petitioner‟s claim for refund and stating that it would be granted after verification and imposing a penalty of Rs. 10,000/- for not deducting tax on the amounts paid by the petitioner to the member-companies, no taxable turnover has been determined to have escaped assessment. In other words, in the reassessment order also there was no tax demand. 9. In respect of the tax year 2004-05, an order of assessment was passed on 31.03.2006 under Section 23(3) of the DST Act read with Section 16 of the WC Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2006. These applications sought rectification of the mistake allegedly committed by the assessing authority while passing the orders determining the refund and mentioning that the letters have been issued to DMRC for verification of the tax deducted at source by them from the payments made to the petitioner. The letters have been filed as Annexure P-III to the writ petition. We consider it necessary to reproduce one of these letters: - "Rajnish Goyal & Associates ADVOCATES & ATTORNEYS E-mail: The D.V.A.T.O. Ward No.62 New Delhi Resi.:22371556, 22376332 Mob.: 9811078700 I-1/16, Shanti Mohan House (Behind Shiv Mandir) Ansari Road, Darya Ganj New Delhi - 110002.Dated: 23.06.2006 Sub: M/S PERSYS PUNJLLOYD JOINT VENTURE ¼, Sunder Vihar, Paschim Vihar, New Delhi - Rectification of Mistake in Re-Assessment under Delhi Sales Tax on Works Contract Act for Asst. Year 2003-04 & Issuance of Refund regarding. Dear Sir, This is with reference to the reassessment for the Asst. Year 2003-04 completed in the case of the captioned assessee by your learned predecessor under the Delhi Sales Tax on Works Contract Act, 1999 (hereinafter referred to as the „Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DMRC and the payment which was duly certified by the DMRC were also submitted by the petitioner and were part of the record and that the verification part should not take such a long and unreasonable time and in these circumstances it was prayed that the refunds may be issued as early as possible. Formal applications for refund in the prescribed form (Form ST-21 prescribed by Rule 29) were also submitted on 13.01.2008 seeking refund of Rs. 85,07,203/- for the assessment year 2003-04 and Rs. 2,20,60,306/- for the assessment year 2004-05. Despite these applications and reminders, the assessing authority did not refund the amounts. Instead of refunding the amounts, the assessing authority in fact started reassessment proceedings which culminated in reassessment orders being passed under Section 24 of the DST Act on 11.05.2009 raising demands of tax, interest and penalty which virtually nullified the refunds. 13. The contention of the petitioner, predictably, is that the refunds have been determined by the assessing authority under orders validly passed and there being no dispute regarding the authenticity/ genuineness of the certificate of TDS issued by DMRC in Form-IX and there bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m No. VI issued by the sub-contractors and that in those forms, the sub-contractors i.e. the member-companies of the joint venture have certified that they have undertaken the work from the petitioner and that the sales tax on the turnover in executing the contract was paid by them. It was pointed out that all the particulars relating to the total value of the works contract undertaken by the sub-contractors, the turnover of sales, and the details of payments of tax such as challan number, date, relevant period etc. were furnished in those forms which were part of the record. It was thus pointed out, inter alia, that there was no such failure on the part of the petitioner as would attract the penalty provisions of Section 7(7) and a prayer was accordingly made that the proceedings may be dropped. It is not known as to what happened to those proceedings. 17. However, on 27.04.2009 i.e. two days prior to the date on which the petitioner submitted its detailed reply to the show cause notice, the assessing authority issued notices under Section 24 of the DST Act read with Section 16 of the WC Act in Form ST-15 seeking to re-open the assessments for the Assessment Years 2003-04 and 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r sales tax on Contract Act, 1999 vide notice no. 13425-13426 dated 17.04.2009. In this connection the reply received from the dealer on 29.04.2009 is not found satisfactory. Thereafter ST 15 was issued to dealer on 27.04.2009 for 11.05.2009 but no body has appeared on behalf of the dealer. Therefore, the Re-assessment Order is framed as under:- GTO/Receipts : 242553806.00 Tax/TDS @ 2% : 4851076.00 Penalty : 9702152.00 Interest : 5821291.00 Total Tax Due : 20374519.00 The dealer is directed to deposit tax Rs. 20374519/-. Copy to the dealer" Sd/- AA WARD 21. The following chart sets out the relevant details with regard to all the three writ petitions, including the figures of tax, interest and penalty demanded in the re-assessment orders:- Writ Petition (C) No. Tax period/ Assessment Year Date of re- assessment order Amount demanded (1) (2) (3) 10311/09 2003-04 11.05.2009 Tax (` ) Interest Penalty (`) [13.01.2004 to (`) 31.03.2004] 48,51,076 58,21,291 97,02,152 10312/09 2003-04 11.05.2009 Tax (` ) Interest Penalty (`) [22.10.2003 to (`) 12.01.2004] 14,53,743 17,44,492 29,07, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... astri next pointed out that at the stage when the Income Tax Officer issued the notices he was not acting judicially or quasi-judicially and so a writ of certiorari or prohibition cannot issue. It is well settled howsoever that though the writ of prohibition or certiorari will not issue against an executive authority, the High Courts have power to issue in a fit case an order prohibiting an executive authority from acting without jurisdiction. Where such action of an executive authority acting without jurisdiction subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment, the High Courts, it is well settled, will issue appropriate orders or directions to prevent such consequences. Mr. Sastri mentioned more than once the fact that the company would have sufficient opportunity to raise this question, viz. whether the Income Tax Officer had reason to believe that under assessment had resulted from non-disclosure of material facts, before the Income Tax Officer himself in the assessment proceedings and, if unsuccessful there, before the Appellate Officer or the Appellate Tribunal or in the High Court under Section 66(2) of the Indian Income Tax Act. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of jurisdiction, alternative remedy may not be a bar. (See: Whirlpool Corporation v. Registrar Trade Marks and Mumtaz Post Graduate Decgree College vs. Vice Chancellor)." In the light of the above observations of the Supreme Court, we overrule the preliminary objection of the respondents. In the case on hand, apart from being appeals from "Caesar to Caesar", the petitioner would be likely to be asked to make pre-deposit of the disputed tax, interest and penalty u/s. 43(5) of the DST Act. This is likely to affect the finances of the petitioner prejudicially, particularly when the grievance is that the orders complained of lack jurisdiction, ex-facie. In such a scenario, the appeal remedy cannot be said to be an efficacious one. 26. The contentions of the petitioner in WP(C) No.8620/2009 on the one hand and the other three writ petitions on the other, necessarily telescope into each other because though refunds were determined by the respondents, they did not bother to get the response from the DMRC for the letter of verification sent by them and furthermore, proceeded to pass re-assessment orders raising huge demands against the petitioner which neutralised the refund claims. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payments made to the sub- contractors, but failed to do so. The question is whether this can hold good as the reason to believe that taxable turnover had escaped assessment. It must be remembered that the petitioner does not effect any sales to its sub-contractors; all it does - and this fact has also been accepted by the respondents - is to pass on the monies received from DMRC to the sub-contractors, acting as a conduit. The question of turnover in the hands of petitioner would arise only if it indulges in sale of goods. The petitioner merely transfers the monies received from DMRC to the member-companies. 30. Section 2(t) of the WC Act defines "turnover of sale" as meaning "the aggregate of the amount of sale price received or receivable by a dealer in respect of any transfer of property in goods involved in the execution of any works contract whether executed fully or partly during any period". Since the expression "turnover of sale" is defined in the WC Act, it is not permissible to look at the definition of "turnover" in Section 2(o) of the DST Act, because Section 16(1) of the WC Act does not incorporate the definition sections of the DST Act into the WC Act. It is not in d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng heard as envisaged under that section, but strangely it has been imposed in the reassessment orders. No reasonable opportunity was given to the petitioner of being heard nor was a separate order imposing the penalty passed. The petitioner filed the returns for the assessment years 2003-04 and 2004-05 and had also furnished Form-VI with all the relevant particulars showing the payment of tax by the sub- contractors. It seems to us that the respondent No.2 (VATO) chose to adopt a rather unusual procedure - to say the least- by imposing penalty in the reassessment order itself without bothering to go through the procedure envisaged by Section 7(7) of the Act, assuming that penalty proceedings could be lawfully initiated against the petitioner under that section. 32. The reassessment orders passed on 11.5.2009 for both the assessment years are, therefore, without jurisdiction. The notices as well as the reassessment orders are accordingly quashed. 33. The contention of the petitioner in WP(C) No.8620/2009 merits acceptance. Refunds were determined by orders passed by the respondents under Section 23(3) and/or Section 24 of the DST Act read with Section 16 of the WC Act for both th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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