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TMI Blog2008 (6) TMI 563X X X X Extracts X X X X X X X X Extracts X X X X ..... been listed for hearing after the matter was remitted back by the Supreme Court in terms of the order dated July 23, 2007 (Larsen Toubro Ltd. v. State of Jharkhand) passed in Civil Appeal No. 3188 of 2007. The writ petition was filed by the petitioner challenging the order of reassessment dated May 5, 2006 passed under sections 17(3) and 19 of the Bihar Finance Act, 1981. The writ petition was dismissed by this bench on November 27, 2006 holding that the petitioner may avail of the statutory remedy of appeal against the assessment order as provided under the Act. Aggrieved by the said order the petitioner moved the Supreme Court. The Supreme Court remitted the matter to this court with observation that the question of vires of the provisions of the Act and the Rules cannot be gone into by the authority under the Act. The relevant portion of the order of the Supreme Court is reproduced hereinbelow: In our view the question of vires of provisions of the Act and Rules cannot be gone into by the authority under the Act and on this account the High Court could not have dismissed the writ petition on the ground of alternate remedy. Accordingly, this appeal is accepted, impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to appear before the Deputy Commissioner of Commercial Taxes with the entire record on the ground that the authority came to know that there has been less assessment of tax for the said period. The petitioner was again served with another notice dated May 27, 2005 pursuant to which it appeared. Another demand notice dated February 18, 2006 was also served by the respondents alleging, inter alia, that the petitioner has suppressed relevant materials which were used by it during execution of works contract and thereby the petitioner was asked to file show-cause and produce the entire records. In compliance thereof, the petitioner submitted show-cause and the authority, after considering the show-cause, passed the impugned order under sections 17(3), 19(1)(a) and 19(2) of the Bihar Finance Act raising a demand of Rs. 3,42,52,151. In exercise of power conferred under section 48 of the Bihar Finance Act 1981, the Bihar Sales Tax Rules, 1983 was framed which was notified vide Notification No. S.O. 1 dated January 2, 1984. Rule 13 of the said Rules lays down the provisions with regard to claims for payment of tax at special rate. According to this provisions, a dealer who claims that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 15 (14) In the case of other contracts. 30 However, the said rule was struck down by the Patna High Court in the case of Jamshedpur Contractors' Association v. State of Bihar [1989] 75 STC 132 on the ground that said rule provides for levy of tax, particularly when claim of contractor for deduction under this rule is restricted to the percentage prescribed even if he had spent more on such charges. Consequent, thereupon ,a new rule, rule 13A was substituted in place of earlier rule vide Notification No. SO. 43 dated February 1, 2000. The substituted rule 13A is quoted hereinbelow: PERCENTAGE Per cent (1) (a) Earthwork in all types of soil and in all works on canals, roads, embankments, small dams, etc., by manual labour; and exclusive labour-rate contracts. 100 (b) Earthwork in all types of soil in all works on canals, roads, embankment, dams, etc., by machines. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of works contract by applying rule 13A was challenged before the Patna High Court in the case of Larsen Toubro Ltd. v. State of Bihar [2004] 134 STC 354. In that case the fact was that the petitioner executed a works contract and submitted return. In response to the notice issued by the Commercial Tax Authority, the petitioner produced their metes and bounds and other details to finalise assessment for the period 2000-01. The order of assessment was passed on January 7, 2002. The said order was challenged on the ground, inter alia, that the manner and extent of deduction as contemplated under section 21(1)(a)(i) has not been provided. The said case was registered by the Department on the ground that deductions were made as per the amended rule 13A of the Sales Tax Rules as amended in February 2000. The Division Bench of the Patna High Court set aside the assessment order holding that rule 13A of the Rules as amended in 2000 was not workable because the manner and extent of deduction relating to any other charges has not been provided. The bench observed: (at page 369 of STC) 21. The word 'prescribed' according to the clause (r) of section 2 of the Act means presc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Rules were not providing for particular deductions the same were invalid. In the present matter the constitutional provision of law says that particular deductions would be provided but unfortunately nothing is provided in relation to the other charges either in section 21 itself or in the Rules framed in exercise of the powers conferred by section 58 of the Bihar Finance Act. ... 31.. In our considered opinion sub-clause (i) of clause (a) of section 21(1) read with rule 13A of the Rules did not make sub-clause (1) fully workable because the manner and extent of deduction (1)Here italicised. relating to any other charges has not been provided/prescribed by the State. However, the Bench further observed: 33. It is, however, made clear that the liability of the dealer shall survive and continue and he would be liable to be taxed after the provisions are made workable. The aforementioned rule 13A as amended in 2000 again came for consideration before a Bench of this court in the case of Voltas Limited v. State of Jharkhand [2007] 5 VST 492. In that case also, vires of rule 13A of the Sales Tax Rules 1983 as amended in 2000 was challenged. The Division B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 134 STC 354, cannot be ignored. The provision in question, i.e., section 21(1)(a)(i) read with rule 13A, in pursuance of which the impugned assessment has been made, has been held to be not workable, as the manner and extent of deduction relating to any other charges has not been provided/prescribed by the State. The decision rendered by this court in Voltas Ltd. [2007] 5 VST 492 was challenged by the State before the Supreme Court(1) which after considering the decision of the Patna High Court held as under: (page 321 of 7 VST) Interpretation of the amended section 21(1) and the newly substituted rule 13A fell for consideration of a Division Bench of the Patna High Court in the case of Larsen Toubro Ltd. v. State of Bihar [2004] 134 STC 354. The Patna High Court, in the said decision, observed as under: 'Rule 13A unfortunately does not talk of any other charges . Rule 13A unfortunately does not take into consideration that under the Rules the deduction in relation to any other charges in the manner and to the extent was also to be prescribed. Rule 13A cannot be said to be an absolute follow-up legislation to sub-clause (i) of clause (a) of section 21(1). When the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determining the taxable turnover under sub-clause (i) of clause (a) of sub-section (1) of section 21, for the goods transferred, in course of the execution of works contract, in the same form or in any other from shall be as under: (a) labour charges for execution of the works; (b) Amount paid to a sub-contractor for labour and services; (c) Charges for planning, designing and architect's fees; (d) Cost of consumables such as water, electricity, fuel, etc., used in the execution of the works contract the property in which is not transferred in the course of execution of a works contract; and (e) Charges for obtaining on hire of otherwise machinery and tools used for the execution of the works contract; (f) Cost of establishment of the contractor to the extent it is relatable to supply of labour and services; (g) other similar expenses related to supply of labour and services; (h) profit earned by the contractor to the extent it is relatable to supply of labour and services. The amount deductible under the aforesaid heads of charges/ expenses will have to be determined, in the light of the facts of particular case(s), on the basis of the accounts/m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s completed on the basis of the revised returns and its gross turnover was determined at Rs. 34,99,43,827 and tax was assessed under section 17(2) and subsequently under section 47 of the Act at Rs. 50,38,081.70 and consequently the petitioner was refunded Rs. 8,22,004. Further case of the respondents is that during the aforesaid period, the petitioner-company had done works contract in two capacities. Firstly, as the main contractor of Tata Steel Ltd. and secondly, as a sub-contractor of a Japan-based company, namely, M/s. Nissho Iwai Corporation, who was awarded a contract by M/s. Tata Steel Ltd. M/s. Nissho Iwai Corporation did the design and drawing work itself but awarded the sub-contract to the petitioner to the tune of Rs. 19,68,65,972. The said Japanese company was assessed for the period 1999-2000 in Jamshedpur Circle, where it claimed a deduction of Rs. 19,68,65,972 from its gross turnover, because for the same amount it had awarded a sub-contract to the petitioner. But its claim was partly rejected by the assessing authority on the ground that the petitioner had not shown the full amount in its returns and had not paid tax on the turnover of Rs. 5,39,10,466. The respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordance with the Rules and the Act and taxable turnover was assessed on the basis of sound principles of law. The respondents have, therefore, stated that in the writ petition, the petitioner has suppressed the material facts and has concealed the facts with a sole intention to evade tax. It is also stated that the petitioner has not moved the appellate authority intentionally because it knew that in the appellate court, M/s. Nissho Iwai Corporation had earlier given evidence that its sub-contractor, the petitioner, had not paid tax on Rs. 5,39,10,466.64 and had argued that it cannot be taxed for the offence committed by its sub-contractor. Therefore, the reassessment order under section 19(1) has been passed after the notification dated March 24, 2006 in which deductions for other charges were also allowed in the best judgment assessment while arriving at taxable turnover under section 19(1) of the Act. When the original assessment made under section 17(2) of the Act was valid and deductions allowed under section 21(1) and rule 13A were valid, then the reassessment made under section 19(1) of the Act cannot be said to be invalid. Hence, the allegation of the petitioner that rule 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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