The Patna High Court directed the Railways to refund Rs 38.22 lakhs in the matter of illegal deduction of VAT from contractors in inter-state sale of goods.
The writ petition was filed seeking a direction to the Respondents 2, 3, and 6 for refund of an amount of Rs. 38,22,897. It was the petitioner’s contention that the said amounts were illegally deducted and recovered from the bills of the petitioner as advance Value Added Tax purportedly under the provisions of Section 40 and 41 of the Bihar Value Added Tax Act, 2005 (VAT Act).
The petitioner, PCM Cement Concrete Pvt. Ltd, entered into two separate agreements with the East Central Railway. An agreement was entered into after the petitioner bid successfully in a tender and pursuant to negotiations. The specific contract was for “Manufacturing and transportation of clear span pre-stressed concrete bridge slabs for MBC loading including RCC ballast retainers and stacking and loading in to a Railway wagon/Road vehicle at the nearest Railway station.
The petitioner argued that the VAT Act has absolutely no applicability since the manufacture and supply of the goods by the petitioner to the Railways was an inter-state sale; which is not exigible to sales tax within the State of Bihar either as a sale of goods or as a works contract.
The counsel who appeared for the Railways specifically referred to the counter affidavit filed on behalf of the respondent Railways. It is pointed out that Clause 34 of the contract document specifically speaks of recovery at source of sales tax for any work executed within the State of Bihar, Jharkhand, MP and UP; the rate of which is also specified as 4% of gross work value. It was the specific contention of the Railways that the work having been executed within the territory of Bihar, the deduction was only proper.
In the present case the transaction is purely of an inter-state sale of goods and is not a works contract nor a sale of goods exigible to tax within the State of Bihar.
A Division Bench of Chief Justice K. Vinod Chandran and Justice Partha Sarathy observed that “We direct the refund, but, confined to the deductions made three years prior to the date of registration of the above writ petition which is on 14.05.2012; giving effect to the limitation as prescribed for recovery of money under the Limitation Act.
“The Railways shall refund the amounts with 6% interest within a period of 4 months from the date of receipt of the certified copy of this judgment. If the refund is not granted within that time then the interest shall run at the rate of 12% from the date of expiry of the 4 month period. The Railways can apply for refund or adjustment to future dues from the State of Bihar” the Court noted.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
