2006 (6) TMI 489 - HC - VAT and Sales Tax

Court invalidates assessment & reassessment orders, prohibits recovery proceedings. Dealer's liability continues if provisions made workable.

Voltas Limited Versus State of Jharkhand others

Voltas Limited Versus State of Jharkhand others - [2007] 5 VST 492 (Jhar) Issues Involved:1. Legality of assessment orders for the years 1985-86 to 1988-89.2. Validity of orders of remand for the years 1990-91 to 1992-93 on the ground of limitation.3. Nature of air-conditioning plants and their taxability.4. Applicability of the Bihar Finance Act, 1981 and subsequent amendments.5. Compliance with procedural requirements for availing concessional tax rates.Issue-wise Detailed Analysis:1. Legality of Assessment Orders for the Years 1985-86 to 1988-89:The petitioner, M/s. Voltas Limited, challenged the assessment orders for the years 1985-86 to 1988-89 after exhausting all statutory remedies. The court noted that the installation and commissioning of air-conditioning plants constituted works contracts, as admitted by the assessing authority. The petitioner relied on the Madras High Court decision in 'State of Madras v. Voltas Limited' [1963] 14 STC 446, which held that such contracts are indivisible and not subject to sales tax on the transfer of materials involved. However, the respondents argued that air-conditioning plants are notified goods under entry No. 116 of the Government's Notification No. 14545 dated December 26, 1977, and are taxable at 16%.2. Validity of Orders of Remand for the Years 1990-91 to 1992-93 on the Ground of Limitation:The petitioner contested the orders of remand for the years 1990-91 to 1992-93, arguing that the reassessment was barred by limitation under Section 24 of the Bihar Finance Act. The court found that the appellate order was communicated to the assessing authority on November 5, 1998, and the reassessment should have been completed by November 5, 2000. Since the reassessment was done on November 27, 2004, it was held to be time-barred and illegal.3. Nature of Air-Conditioning Plants and Their Taxability:The court distinguished between movable air-conditioners and immovable air-conditioning plants. It held that while air-conditioners are movable and taxable at 16%, air-conditioning plants, once installed, become immovable and are not covered under entry No. 116. The court emphasized that the taxability should be based on the nature of the goods involved in the works contract.4. Applicability of the Bihar Finance Act, 1981 and Subsequent Amendments:The court examined the amendments to Section 21 and Rule 13A of the Bihar Finance Act, which were adopted by the State of Jharkhand. It referred to the Patna High Court's decision in 'Larsen & Toubro Ltd. v. State of Bihar' [2004] 134 STC 354, which held that Rule 13A did not adequately provide for deductions of labor and other charges. Consequently, the court found the provisions unworkable and set aside the assessment orders.5. Compliance with Procedural Requirements for Availing Concessional Tax Rates:The respondents argued that the petitioner failed to produce original Form IX, a precondition for availing concessional tax rates under Section 13 of the Bihar Finance Act. The court did not delve into this issue in detail but noted the procedural lapses on the part of the petitioner.Conclusion:The court set aside the assessment orders for the years 1985-86 to 1988-89 and the reassessment orders for the years 1990-91 to 1992-93, declaring them illegal and time-barred. The court prohibited the respondents from initiating any recovery proceedings based on these orders. The liability of the dealer would continue if the provisions are made workable within a reasonable period. The writ petitions were allowed without any order as to costs.