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TMI Blog2024 (10) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... tract. Since the activity of powder coating is in the nature of works contract, it is to be construed that there is a transfer of property in the execution of works contract. Therefore, the Respondent-Assessee is liable to pay tax under Section 15(1) of the PVAT Act, 2007. Therefore, both the substantial questions of law answered in favour of the Petitioner-CTO and against the Respondent-Assessee. As per Section 24(1) of the Puducherry Value Added Tax Act, 2007, the Respondent Assessee was required to file a tax return within a period of 15 days after end of the period in such manner as may be prescribed. A return submitted by the dealer along with tax due is to be accepted as self-assessed. As per proviso to Section 24(2) of the Act, the Assessing Authority may select either at discretion or as directed by the Commissioner any dealer for detailed assessment - As per Section 24(4), the Assessing Authority has to serve a notice, on completion of the Assessment and the dealer is required to pay balance of tax in accordance with terms of that notice. As per sub-section (5) to Section 24, no Assessment under Section 24 shall be made after a lapse of three years from the end of the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only on 12.12.2014 and therefore, the assessment order itself is non-est in law There is no explanation on the side of the Respondent in this context. It is seen that the assessment order had been passed after the period stipulated in Section 24(5) of PVAT Act, 2007. The proviso does not apply since it is no the case of the Respondent that the input tax credit has been availed wrongly or the dealer had produced false invoice, vouchers, declaration certificate or any other documents with a view to support his claim of input tax credit or refund or the assessing authority had reversed the input tax credit availed by the dealer/ appellant and determined tax due as contemplated u/s 24(6) of the PVAT Act, 2007. 10. In such circumstances, this court holds that the Assessment Order dated 12.12.2014 is hit by the provision u/s 24(5) of the PVAT Act, 2007. Therefore the tax due as assessed by the Assessment Officer besides imposing 200% penalty on the tax payable without giving any sufficient reasons is against law and probabilities of the case The Appellate Assistant Commissioner, Puducherry also without going into the merits of the case had blindly upheld to the decision of the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Respondent-Assessee. In the notice dated 25.09.2014 , it was proposed to reject the Nil returns filed by the Respondent-Assessee for the above said years and also to levy tax on the sale of goods involved in the execution of works contract at the rate specified in the schedule for such goods. The notices also proposed to levy penalty on the Respondent- Assessee as provided under Section 24(3) of the Puducherry Value Added Tax Act, 2007. 10. The dispute related to powder coating process on the products like yokes, links and tubes etc supplied by local industries like Lucas TVS, Rane Madas and Remi Electricals to the Respondent-Assessee. 11. The Respondent-Assessee had earlier filed Nil (Returns) stating that the activity carried out by it was only a job work and did not involve any sale i.e. works contract. The Respondent-Assessee was procuring materials, both from local dealer as well as from suppliers located outside the State by making Inter-State purchases for its powder coating activities on job work. The materials procured include chemical's used for pre-cleaning the materials to remove rust and dust, 'powder' used for powder coating, 'sprays' for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... warrant any interference. 18. Aggrieved by the said order dated 29.06.2015 of the Appellate Assistant Commissioner (CT), the Respondent-Assessee has preferred Tax Appeal Nos.2 to 4 of 2016 before the Sales Tax Appellate Tribunal, Puducherry for the Assessment Years 2007-08 to 2009-10. These Appeals were allowed by the Sales Tax Appellate Tribunal, Puducherry, vide Impugned Order dated 02.03.2016 , on the ground that the Assessment Order was passed after a period of three years from the end of the year to which returns relates and therefore the order passed by the Appellate Assistant Commissioner (CT), Commercial Taxes Department was set aside. 19. The Appellate Tribunal thus reversed the order of the Appellate Assistant Commissioner vide Impugned Order dated 02.03.2016 in Tax Appeal Nos.2 to 4 of 2016 and held that the Assessment Orders passed by the Commercial Taxes Department for the Assessment Year 2007-2008 were hit by Section 24(5) of the PVAT Act, 2007. 20. The learned counsel for the Petitioner-Commercial Tax Department submits that the Tribunal had failed to appreciate the fact that the assessing officer had issued a notice on 05.03.2011 for the respective Assessment Years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, building construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, modification, repair or commissioning, of any movable or immovable property. Section 2 (zp) of the Puducherry Value Added Tax Act, 2007 reads as under :- Works Contract - includes any agreement to carrying out for cash, deferred payment or other valuable consideration, the building, construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, modification, repair or commissioning, of any movable or immovable property . 26. After the 46th Amendment to the Constitution, the Hon'ble Supreme Court, had initially, in the case of Rainbow Colour lab and Another vs. State of M.P. and Others (2000) 2 SCC 385 espoused the dominant intention of the contract, to hold an activity exigible under the extended definition of tax on the sale or purchase of goods in clause 29A of the Article 366 of the Constitution of India. Relevant portion of the decision reads as under :- 11. Prior to the amendment of Article 366, in view of the judgment of this Court in State of Madras v. Gannon Dunkerley Co. (Madras) Ltd. [(1958) 9 STC 353 : AIR 1958 SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the expanded definition found in Article 366(29-A)(b) read with Section 2(n) of the State Act. On facts as we have noticed that the work done by the photographer which as held by this Court in Kame case [(1977) 1 SCC 634 : 1977 SCC (Tax) 225 : (1977) 39 STC 237] is only in the nature of a service contract not involving any sale of goods, we are of the opinion that the stand taken by the Respondent State cannot be sustained. * Builders' Association of India vs. Union of India, (1989) 2 SCC 645 27. The ratio laid down in Rainbow Colour lab (supra) was doubted as running counter to the express provision contained in Article 366(29-A) of the Indian Constitution by the Hon'ble Supreme Court in the case of Associated Cement Companies Ltd. vs. Commissioner of Customs (2001) 4 SCC 593. Relevant portion of the decision reads as under:- 26. In arriving at the aforesaid conclusion the Court referred to the decision of this Court in Hindustan Aeronautics Ltd. v. State of Karnataka [(1984) 1 SCC 706 : 1984 SCC (Tax) 90] and Everest Copiers [(1996) 5 SCC 390] . But both these cases related to the pre- Forty-sixth Amendment era where in a works contract the State had no jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods for cash, deferred payment or other valuable consideration; (b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (c) a tax on the delivery of goods on hire-purchase or any system of payment by instalments; (d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; (f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made; 41. Sub-clause (a) covers a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnon Dunkerley [ State of Madras v. Gannon Dunkerley Co. (Madras) Ltd., (1958) 9 STC 353 : AIR 1958 SC 560 : 1959 SCR 379] survived the Forty-sixth Constitutional Amendment in two respects. First with regard to the definition of sale for the purposes of the Constitution in general and for the purposes of Entry 54 of List II in particular except to the extent that the clauses in Article 366(29-A) operate. By introducing separate categories of deemed sales , the meaning of the word goods was not altered. Thus the definitions of the composite elements of a sale such as intention of the parties, goods, delivery, etc. would continue to be defined according to known legal connotations. This does not mean that the content of the concepts remain static. The courts must move with the times. [See Attorney General v. Edison Telephone Co. of London Ltd., (1880) 6 QBD 244 : 43 LT 697] But the Forty-sixth Amendment does not give a licence, for example, to assume that a transaction is a sale and then to look around for what could be the goods. The word goods has not been altered by the Forty-sixth Amendment. That ingredient of a sale continues to have the same definition. The second respect in wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n between contract for sale of goods and contract for work (or service) is virtually diminished. It was further held that the dominant nature test has no application and the traditional decisions which have held that the substance of the contract must be seen have lost their significance where transactions are of the nature contemplated in Article 366(29-A). Relevant paragraph from the above decision is reproduced below :- 97. In light of the above discussion, we may summarise the legal position, as follows:- 97.1. For sustaining the levy of tax on the goods deemed to have been sold in execution of a works contract, three conditions must be fulfilled: (i) there must be a works contract, (ii) the goods should have been involved in the execution of a works contract, and (iii) the property in those goods must be transferred to a third party either as goods or in some other form. 97.2. For the purposes of Article 366(29-A)(b), in a building contract or any contract to do construction, if the developer has received or is entitled to receive valuable consideration, the above three things are fully met. It is so because in the performance of a contract for construction of building, the go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo separate agreements and the States now have power to levy sales tax on the value of the material in the execution of works contract. 97.9 . The expression tax on the sale or purchase of goods in Schedule VII List II Entry 54 when read with the definition clause (29-A) of Article 366 includes a tax on the transfer of property in goods whether as goods or in the form other than goods involved in the execution of works contract. 97.10. Article 366(29-A)(b) serves to bring transactions where essential ingredients of sale defined in the Sale of Goods Act, 1930 are absent within the ambit of sale or purchase for the purposes of levy of sales tax. In other words, transfer of movable property in a works contract is deemed to be sale even though it may not be sale within the meaning of the Sale of Goods Act. 97.11. Taxing the sale of goods element in a works contract under Article 366(29-A)(b) read with Entry 54 List II is permissible even after incorporation of goods provided tax is directed to the value of goods and does not purport to tax the transfer of immovable property. The value of the goods which can constitute the measure for the levy of the tax has to be the value of the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concept of aspect theory which had found echoes in State of U.P. v. Union of India [(2003) 3 SCC 239] has expressly been overruled by a three-Judge Bench in BSNL [(2006) 3 SCC 1] stating: (SCC p. 39, paras 78-79) 78. But if there are no deliverable goods in existence as in this case, there is no transfer of user at all. Providing access or telephone connection does not put the subscriber in possession of the electromagnetic waves any more than a toll collector puts a road or bridge into the possession of the toll payer by lifting a toll gate. Of course the toll payer will use the road or bridge in one sense. But the distinction with a sale of goods is that the user would be of the thing or goods delivered. The delivery may not be simultaneous with the transfer of the right to use. But the goods must be in existence and deliverable when the right is sought to be transferred. 79. Therefore whether goods are incorporeal or corporeal, tangible or intangible, they must be deliverable. To the extent that the decision in State of U.P. v. Union of India [(2003) 3 SCC 239] held otherwise, it was, in our humble opinion erroneous. 31. The definition of work-contract in Section 2(zp) is very w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6) of this section, no assessment under this section for any year shall be made after a period of three years from the end of the year to which the return under this Act relates. 34. Sub-section 5 of Section 24, is however, subject to Subsection (6) to Section 24 of the Puducherry Value Added Tax Act, 2007. Section 24(6) of the Puducherry Value Added Tax Act, 2007, reads as under :- (6) Where, for any reason, the input tax credit has been availed wrongly or where any dealer produces false invoice, vouchers, declaration certificate or any other documents with a view to support his claim of input tax credit or refund, the assessing authority shall, at any time, within a period of five years from the end of the year to which the return relates, reverse input tax credit availed and determine the tax due after making such an enquiry as it may consider necessary: Provided that no order shall be passed under this sub section without giving the dealer a reasonable opportunity to show cause against such order. 35. Admittedly, return pertains to the Assessment year 2007-08 to 2009-2010 as mentioned above. An earlier notice was issued on 05.03.2011 calling upon the Respondent-Assessee to show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .Orient Fans (supra) respectfully following decisions of the Hon'ble Supreme Court in the following cases :- (i) Ghanshyam Das vs. Regional Assistant Commissioner of Sales Tax, Nagpur, 1963 INSC 171 (ii) The State of Punjab and Others vs. M/s.Tara Chand Lajpat Rai, (1967 )19 STC 493 (iii)The State of Punjab and Another vs. Murlidhar Mahabir Parshad , (1968) 21 STC 29 (iv) Additional Assistant Commissioer of Sales Tax, Indore Region, Indore vs. Firm Jagmohandas Vijay Kumar, (1970) 25 STC 74 40. In Ghanshyam Das vs. Regional Assistant Commissioner of Sales Tax, Nagpur, Limitation under Section 11 A (1) of the Central Provinces and Berar Sales Tax Act, 1947 . Section 11-A(1) of the Act, fell for consideration under Section 11 A (1) of the Central Provinces and Berar Sales Tax Act, 1947 read as under :- Section 11A(1): If in consequence of any information which has come into his possession, the Commissioner is satisfied that any turnover of a dealer during any period .......... has escaped assessment ......... the Commissioner may , at any time within three calendar years from the expiry of such period ........ proceed in such manner as may be prescribed to ..... assess ........ th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Punjab and Another vs. Murlidhar Mahabir Parshad, (1968) 21 STC 29, wherein the above case, the Court was concerned with limitation under Section 11 of the Central Tax Act which was amended by Section 7 of the East Punjab General Sales Tax (Amendment) Act, 1952 and later amended in the year 1955, by Section 3 of the East Punjab General Sales Tax (Amendment) Act( No.4 of 1955). Section 11 of the East Punjab General Sales Tax(Amendment) Act, 1952, reads as under:- 11. (1) If the Assessing Authority is satisfied without requiring the presence of a registered dealer or the production by him of any evidence that the returns furnished in respect of any period are correct and complete, he shall assess the amount of tax due from the dealer on the basis of such returns. (2) If the Assessing Authority is not satisfied without requiring the presence of a registered dealer who furnished the returns or production of evidence that the returns furnished in respect of any period are correct and complete, he shall serve on such dealer a notice in the prescribed manner requiring him, on a date and at a place specified therein, either to attend in person or to produce or to cause to be produced any e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stood replaced by Madhya Bharat General Sales Tax Act, 1959 . There the Assessing Officer had issued a notice under Section 8(2) of the Madhya Bharat Sales Tax Act, 1950 , to the dealer to assess the turnover which had escaped assessment. 47. Relevant provisions read as under :- Section 8 (1)(a) Assessment of taxable turnover and determination of tax due for any year shall be made after the returns for all the periods of that year have become due: Provided that in the case of Melas the assessment shall be made as soon as the return of turnover has been received. (1)(b): Notwithstanding anything contained in clause (a), if any dealer fails to submit a return under Section 7(1) for the prescribed period within the prescribed time the Assessing Authority shall, after making such enquiry as he considers necessary and after giving the dealer a reasonable opportunity of being heard, determine the turnover of the dealer for the said period to the best of his judgment and assess the tax on the basis thereof. This assessment, subject to the provisions of Section 10 and to such orders as may be passed in appeal or revision, shall be final for the period . Section 10 : Assessment of tax and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese decisions we hold that in the present case the proceedings for assessment to sales tax taken against the Respondent for the year 1955-56 by the assessing authorities are legally valid and the Respondent has made out no case for grant of a writ under Article 226 of the Constitution for quashing those proceedings or for quashing the notice issued on March 16, 1963 or the order of the appellant dated July 18, 1963. 50. As far as the present case is concerned, a limitation is prescribed under Section 24(5) of PVAT Act, 2007 for completing assessment. As per Section 24(5), no assessment shall be made after a period of three years from the end of the year to which the return under the Act relates. Applying the ratio of the Hon ble Supreme Court and that of this High Court in a catena of decisions discussed above, the test to be applied is whether the notice for completing the assessment was issued within limitation i.e., three years to which the returns relates to. If so, even if the Assessment Order is passed beyond the period of three years, it will be in time. In the present case, since notices were issued on 05.03.2011 i.e., within three years contemplated under Section 24(5) of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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