The Patna High Court directed to refund of illegal Value Added Tax (VAT) deductions made by the contractor.
PCM Cement Concrete Pvt. Ltd, the petitioner is a private limited Company incorporated under the provisions of the Companies Act, of 1956.
The petitioner contended 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 Sections 40 and 41 of the Bihar Value Added Tax Act, 2005 (VAT Act).
The petitioner argued that the VAT Act has no applicability since the manufacture and supply of the goods by the petitioner to the Railways was an inter-state sale; which is not eligible for sales tax within the State of Bihar either as a sale of goods or as a works contract.
Shri Satyabir Bharti, counsel appeared for the petitioner Shri Anshay Bahadur Mathur, counsel appeared for the Respondents 1, 2, 3 and 6 and Shri Vikash Kumar counsel appeared for the State.
The petitioner entered into two separate agreements with the East Central Railway and the latter one was entered into after the petitioner bid successfully in a tender and under negotiations.
The issue was the sale being mere manufacture and supply of goods which is a sale simplicity of the goods; which goods have also been transported in pursuance to a prior contract of sale which is the reason for the movement of the goods from one State to the other herein from the State of West Bengal to the State of Bihar.
It was also held that a movement of goods which takes place independently after a contract of sale would not fall within the meaning of inter-state sale. Similarly, if the transaction of sale stands completed within the State and the movement of goods takes place thereafter, it would be independent of the contract of sale and necessarily by or on behalf of the purchaser alone and the transaction would not be having an inter-state sale element.
The contract is one for the manufacture and transportation of pre-stressed concrete slabs and RCC Ballast Retainers of precise and particular specifications. There is no works contract involved and it is only a sale pure and simple of goods manufactured by the petitioner, who has been awarded the contract which is only for manufacture and sale.
The manufactured goods are loaded and stacked in a vehicle or railway wagon, by which it is transported to the site within the State of Bihar for accretion in the works of the Railways; which work or accretion is not the responsibility of the petitioner.
It was evident that the transaction is purely 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. The sale of goods as per agreements constitutes an inter-state sale not exigible to tax within the State of Bihar.
The Railways had made a deduction on the ground that it is a works contract; which we have negatived. The Railways is bound to refund the illegal tax deduction made from the bills to the petitioner contractor. The Railways could apply for a refund from the Bihar Value Added Tax Department.
Chief Justice K. Vinod Chandran and Justice Partha Sarthy directed the Railways to refund the amounts with 6% interest within a period of 4 months from the date of receipt of the judgment. Further held that “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 months.”
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