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TMI Blog2014 (10) TMI 600X X X X Extracts X X X X X X X X Extracts X X X X ..... o the office of the second respondent cannot be readily accepted as, even subsequent thereto, in the correspondence between the petitioner on the one hand and respondents 1 to 3 on the other, no reference is made to their having submitted their objections, to the show cause notice dated 12.08.2013, on 31.08.2013. The affidavit, filed in support of the Writ Petition, makes no mention of any of the events which took place subsequent to the assessment order dated 31.08.2013. As is evident from the facts narrated hereinabove, the petitioner was repeatedly called upon to pay the tax due; proceedings under Section 29 of the Act was instituted; and both the petitioners bankers and the contractee i.e. SRMT were called upon to pay, the amounts due from them to the petitioner, directly to the 2nd respondent. The petitioner received the assessment order dated 31.08.2013 on the same day. It is only after several letters were issued calling upon them to pay the demanded amount, and proceedings under Section 29 of the Act were initiated for recovery of the arrears, did the petitioner make an application on 19.02.2014 seeking payment of the tax and penalty in instalments. The Deputy Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpt of court. On the other hand, where an irregularity or misuse of process amounts to an offence against justice, extending its influence beyond the parties to the action, it may be punished as a contempt. Both on merits and for abuse of process of Court, the Writ Petition is liable to be, and is accordingly, dismissed. While initiation of contempt proceedings for such misrepresentation and suppression of facts is in order, we refrain from doing so and, instead, dismiss the Writ Petition with exemplary costs of ₹ 25,000/- which the petitioner shall pay to the State Government within four weeks - Decided against assessee. - Writ Petition No. 8665 of 2014 - - - Dated:- 9-9-2014 - Ramesh Ranganathan And M. Satyanarayana Murthy,JJ. For the Petitioner : Sri M. V. J. K. Kumar For the Respondents : Sri M. Govind Reddy, Learned Special Standing Counsel for the Commercial Taxes ORDER (Per the Honble Sri Justice Ramesh Ranganathan) The assessment order passed by the first respondent on 31.08.2013 is questioned in this Writ Petition as being arbitrary, illegal, in violation of principles of natural justice, Articles 14, 19(1)(g) of the Constitution of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontractor from payment of tax; the petitioner, being the sub-contractor, is eligible for exemption and is not liable to pay tax under the Act; however, for the works executed by them, SRMT had deducted tax @ 1.25% from their contractual receipts; the petitioner had disclosed the receipts, relating to the execution of various contracts, in their returns and had provided details of the TDS; the same were accepted by the second respondent; pursuant to the authorisation issued by the third respondent, the first respondent conducted audit of their books of accounts; on verification, and pursuant to an authorisation for assessment, a notice dated 12.08.2013 was issued by the first respondent calling upon them to show cause against the proposal to levy tax @ 4% and 5%, as the case may be, on the turnover relating to the works executed for SRMT, along with other contracts, representing ₹ 8,60,02,248/- during the assessment year 2011-2012; since they had opted for composition, under Section 4(7)(d) of the Act, tax @ 4% or 5% could not be levied on them for the works executed by them for SRMT; they had filed their reply dated 30.08.2013 contesting the levy as improper, and had sought a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he impugned assessment order, a pre- assessment show-cause notice was issued to the petitioner; in reply thereto, the petitioner submitted letter dated 24.08.2013, received on 30.08.2013, stating that they had no objection to the proposed assessment; this letter contains the round seal of the petitioner company; he had passed the assessment order only after receipt of the said letter; he had referred to the said letter at page six of the assessment order; the petitioner had, however, suppressed this fact and had deliberately filed a copy of another letter dated 30.08.2013, which was never filed before him, and does not bear his signature or the seal of his office; this letter was filed only to mislead this Court, and to strengthen the petitioners case; after the assessment order was passed, a notice was issued to the petitioner, by the second respondent, asking him to pay VAT; the petitioner submitted a petition dated 19.02.2014 before the third respondent admitting his liability to pay VAT, as levied under the assessment order dated 31.08.2013, and had sought to pay the same in instalments; the third respondent had considered the request sympathetically, and had passed an order da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cepting and admitting their liability under the assessment order which has become final; they also filed a petition before the third respondent seeking instalments; after eight instalments were granted, they had approached this Court suppressing all these facts, and had obtained interim stay; the letter dated 30.08.2013 submitted by the petitioner to them, is different from the letter dated 30.08.2013 mentioned in the writ affidavit; the letter dated 30.08.2013, referred to in the writ affidavit, was never filed before him; the petitioner is deliberately misleading this Court; the genuineness of the medical certificate, filed by the petitioner, is highly doubtful; the petitioner claims to have fallen sick during the period 03.09.2013 to 06.02.2014, and claims to have suffered from viral hepatitis which is a serious illness; yet the Managing Director, of a big company like the petitioner, claims to have consulted only a doctor with an MBBS degree, and did not consult any specialist in the field; even the rubber stamp, on the so called medical certificate, is not visible to the naked eye; even otherwise, the petitioner is not a proprietary concern but is a company; hence, the illness ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or, and is exempted from payment of tax; the clauses of the agreement would be relevant to the extent of payment of tax by the petitioner; they are paying taxes in accordance with the statutory provisions only; as the assessment order was void ab-initio, the Writ Petition was filed; the contention that the petitioner cannot challenge the assessment order in the light of the instalments granted by the third respondent, or that he had suppressed facts is not relevant for filing the Writ Petition challenging the assessment order; the petitioner had approached the first and second respondents who had expressed their inability, and had advised them to approach the third respondent; there is no malafide intention on their part in referring to SRMT as the main contractor and themselves as the sub-contractor; it cannot be said that the petitioner is trying to mislead the Court necessitating issuance of contempt proceedings against the Managing Director; failure to file an appeal does not preclude them from filing the Writ Petition; the no objection letter, alleged to have been filed prior to the assessment order admitting the turnover, cannot be considered as acceptance of liability; the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 4% on the total value of the contract executed for the Government or local authority. After its amendment, clause (b) of Section 4(7) stipulates that every dealer executing works contract may, in lieu of the amount of tax payable by him under clause (a), opt to pay, by way of composition, at the rate of 5% of the total amount received or receivable by him towards execution of the works contract either by himself or through the sub-contractor subject to such conditions as may be prescribed. Under the proviso thereto the sub-contractor, executing works contract on behalf of the contractor who opts to pay tax under this clause, shall be exempted from levy of tax. Clause (c) of Section 4(7) of the Act, prior to its amendment by Act 21 of 2011 with effect from 15.09.2011, stipulated that any dealer executing works contracts, other than for the Government and local authority, may opt to pay tax by way of composition at the rate of 4% of the total consideration received or receivable for any specific contract subject to such conditions as may be prescribed. Clause (c) was omitted by Act 21 of 2011 with effect from 15.09.2011. Rule 17(2) of the Rules relates to treatment of works co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ildings or commercial complexes, may, in lieu of the amount of tax payable by him under clause (a), opt to pay tax by way of composition at the rate of 5% on 25% of the amount, received or receivable towards the composite value of both the land and building or the market value fixed therefor for the purpose of stamp duty, whichever is higher, subject to such conditions as may be prescribed. Under the proviso thereto, no tax shall be payable by the sub-contractor of a works contractor, who opts to pay and has paid tax under this clause on the turnover relating to the amount received as a sub- contractor from such main contractor towards the execution of works contract, whether wholly or partly, subject to the production of evidence to prove that such main contractor has exercised such option in respect of the specific work and subject to such other conditions as may be prescribed. The twin conditions required to attract Section 4(7)(d), and thereby enable payment of tax at 1.25%, are (1) the dealer should be engaged both in construction and in selling of residential apartments, houses, buildings or commercial complexes; and (2) he should have opted to pay tax by way of compositio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of payment of tax in Form VAT 250. The name of the contractee is mentioned therein as SRMT, Kakinada. The nature of the contract is referred to therein as construction of residential apartments, the date of contract as 04.02.2011, and the full value of the contract as ₹ 26 Crores. Form VAT 250 is common to all cases of composition under Section 4(7)(b) to (d). While the petitioner claims to have ticked column 3 of Form VAT 250 which relates to composition under Section 4(7)(d), the fact remains that the contractees name is shown therein as SRMT, and the nature of contract as construction of residential apartments. Section 4(7)(d) is applicable only to a dealer engaged both in construction and selling of residential houses/buildings/commercial complexes, and not merely to those engaged only in construction, and not in the sale, of residential apartments. It is not even the petitioners case that they are engaged in selling residential apartments. It is evident, therefore, that they are not entitled for composition under Section 4(7)(d) of the Act. Consequently the Form VAT-250 filed by them, exercising the option of composition, could only have been under Section 4(7)(b)/(c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... source, shall remit such amount in the manner prescribed. Under the proviso thereto, no deduction shall be made, from any amount paid as consideration to any sub- contractor, if tax was already deducted by the contractee. Rule 18(1)(e) of the Rules stipulates that, if any tax is deducted under Section 22(3) in respect of any dealer executing works contract, and the work in whole or any part of such work is awarded by him to a sub-contractor, the tax, proportionate to the amount paid as consideration to the sub-contractor out of the tax deducted by the contractee, shall be transferred to the sub-contractor by issuing Form 501B to the sub-contractor. The sub-contractor is required to file Form 501B to the authority prescribed, along with the return in Form VAT 200. While Form VAT 501A is the certificate of tax deduction at source given by the person responsible for deduction of TDS, Form VAT 501-B is the certificate of transfer of tax deduction at source by the contractor to the sub-contractor and is required to be signed by the contractor. Rule 18(1)(bc) of the VAT Rules requires the contractee to complete the Form VAT 501-A supplied by the contractor, indicating the TIN of the cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. Section 4(7)(a) of the Act stipulates that, notwithstanding anything contained in the Act, every dealer, executing works contract, shall pay tax on the value of goods at the time of incorporation of such goods in the works executed, at the rates applicable to the goods under the Act. Rule 17(1)a) stipulates that, in the case of contracts not covered by sub-rules (2) and (4), the VAT dealer is required to pay tax on the value of the goods, at the time the goods are incorporated in the work, at the rates applicable to the goods. Rule 17(1)(b) provides that such a VAT dealer shall be eligible to claim input tax credit on 75% of the tax paid on the goods purchased, other than those specified in Rule 20(2); and he is eligible to issue a tax invoice. Rule 17(1)(c) stipulates that, where a VAT dealer mentioned in clause (a), awards any part of the contract to a registered sub-contractor, no tax shall be payable on the consideration paid to the sub-contractor. Rule 17(1)(d) provides that the value of the goods, used in the execution of the work in the contract, declared by the contractor shall not be less than the purchase value and shall include seigniorage charges etc. Rule 17(1)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their having paid tax at 14.5% of 70% of the total consideration received or receivable on the execution of works contracts relating to construction of residential apartments. Having given their no objection to the demand, and having sought permission for payment of tax and penalty in instalments, these contentions are being raised by the petitioner, for the first time in the present writ proceedings before this Court, only to avoid payment of tax which they are liable to pay under the Act. II. DOES THE ASSESSMENT ORDER CONTRAVENE ARTICLE 265 AND WAS IT PASSED IN VIOLATION OF PRICNIPLES OF NATURAL JUSTICE: Article 265 of the Constitution of India prohibits levy or collection of tax save by authority of law. The assessment order passed by the first respondent is in accordance with the provisions of the Act and the Rules and is, therefore, not in contravention of Article 265 of the Constitution of India. Having failed to submit their reply to the show-cause notice dated 12.08.2013, despite receipt of a copy thereof on 14.08.2013, the petitioner cannot now be heard to contend that the impugned assessment order dated 31.08.2013 is in violation of principles of natural justice. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is information, they had advised their contractor to deduct VAT TDS as per the formula above; (3) in the audit they came to know that this project would come under Section 4(7)(b) i.e., 5% tax on the total turnover; and (4) the total amount (99%) of the demand raised related only to one project i.e., construction of residential apartments at Kakinada. The petitioner requested the CTO to consider the present scenario of the construction industry which was in a bad situation (i.e, delay in release of bills, high competition, etc), and waive the penalty imposed on them. They also stated that they would clear the tax due, as per the demand raised by the CTO, on or before the requested time in their earlier letter. They further stated that they had advised their contractor to deduct tax at 5% on the total turnover; and they had implemented the same for the month of September, 2013. This letter dated 03.10.2013 was also addressed by Sri Y. Ram Mohan Rao, General Manager (Finance) and bears the seal of the petitioner company. A penalty order dated 18.10.2013 was passed confirming the proposed levy of penalty of ₹ 16,89,427/- for the tax period 2009-10 to 2012-13. This letter was ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir letter dated 19.02.2014, that they had not deducted any tax from parties or clients; instead, they had instructed their employers to deduct tax from their running bills, and deposit the same with the commercial taxes department on their behalf regularly; this was done as per the advice of their assessing authority at the time of filing Form 250; they had almost completed all their previous works; some were at the closure stage, for which they had to invest more funds; their profitability was almost nil; they had stopped all their works since the last three months, and they were under severe pressure from their suppliers for payment; their pending dues to bankers, finance companies and other statutory authorities had also mounted due to stoppage of work at sites because of non-receipt of payments, after issue of notice by the authorities; it was impossible for them to make total payment in a single instalment, as there were almost no receipts from their employers since the last two months; their cash flow would be severally affected, and they would not be in a position to continue their business, as they would not be left with any monies if such payments were made; and third part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er was addressed to SRMT on 06.03.2014. The petitioner filed this Writ Petition on 20.03.2014, and obtained an interim order of stay on 21.04.2014, just a few days prior to the date on which the first instalment fell due. It is not in dispute that the petitioner received the show- cause notice dated 12.08.2013 on 14.08.2013. It is also not in dispute that no reply was filed thereto by the petitioner before the first respondent, prior to the assessment order being passed on 31.08.2013. The petitioner claims to have submitted their objections, vide letter dated 30.08.2013, not to the first respondent, but to the office of the second respondent on the same day. The letter dated 30.08.2013 contains initials, which the Learned Counsel for the petitioner contends is the signature of the person, in the office of the 2nd respondent, who received the said letter. The letter does not even bear the stamp or seal of the office of the second respondent. The writ affidavit is silent regarding the name and identity of the person who is alleged to have received the said letter. The petitioners contention that their employee had, by mistake, delivered the said letter to the office of the second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14, were to be accepted, the letter dated 30.08.2013 was submitted by the petitioner prior thereto. The Managing Director of the petitioner- company could not, therefore, have been unaware of the no objection conveyed on behalf of the petitioner to the demand raised by the first respondent. Receipt of the letter dated 30.08.2013, the subsequent letters, and several other proceedings from the commercial tax department, was acknowledged by the General Manager (Finance) of the petitioner-company. However, an impression was created in the writ affidavit that the letter dated 24.08.2013, received by the first respondent on 30.08.2013, was addressed by a lower rung employee of the petitioner-company. The writ affidavit makes no mention of the said no-objection letter having been submitted by the General Manager (Finance) of the petitioner-company. If a wrong or misleading statement is deliberately and willfully made by a party to a litigation with a view to obtain a favourable order, it would prejudice or interfere with the due course of the judicial proceeding and thus amount to contempt of court. (Naraindas v. The Government of Madhya Pradesh (1975) 3 SCC 31; Afzal v. State of Haryana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejected. The plea of estoppel is taken for the first time in the reply affidavit after the 1st respondent had pointed out, in his counter-affidavit, the fact that the petitioner had suppressed their having made an application seeking instalments on 19.02.2014, and their being granted instalments by the Deputy Commissioner on 05.03.2014. It is also for the first time in the reply affidavit that the petitioner now contends that their employee was coerced to file the letter dated 30.08.2013 before the 1st respondent. Nowhere in the earlier correspondence, after the assessment order was passed on 31.08.2013 till they filed the Writ Petition, was any such plea taken. It is only after the Writ Petition was filed and the petitioner had obtained interim stay, is this contention now raised in the reply affidavit, evidently to drag on proceedings and avoid payment of the admitted liability, and the interest and penalty thereon. Several judgments were relied upon by Sri MVJK Kumar, Learned Counsel for the petitioner, in support of his contention that the delay of seven months in invoking the jurisdiction of this Court, questioning the assessment order dated 31.08.2013, is not so inordina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat its judicial process is not abused and its order does not become an instrument or aid to overreach the adversary. (M.V. Venkataramana Bhat v. Returning Officer and Tahsildar ). When a person invokes the equitable and extraordinary jurisdiction of the High Court, under Articles 226/227 of the Constitution, he must approach the court not only with clean hands but also with a clean mind, a clean heart and a clean objective. The judicial process should never become an instrument of oppression or abuse or a means to subvert justice. He, who seeks equity, must do equity. The legal maxim Jure naturae aequum est neminem cum alterius detrimento et injuria fieri locupletiorem, means that it is the law of nature that one should not be enriched by the loss or injury to another. (Manohar Lal6; Ramjas Foundation v. Union of India ; K.R. Srinivas v. R.M. Premchand ; Noorduddin v. Dr. K.L. Anand ). The power, under Article 226 of the Constitution of India, is discretionary and is exercised only in furtherance of the interest of justice and in larger public interest, and not merely on a legal point being made out. The interest of justice and the public interest coalesce. They are very oft ..... X X X X Extracts X X X X X X X X Extracts X X X X
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