2011 (4) TMI 1402 - AT - VAT and Sales Tax

Tribunal orders refund of tax to company, deems transaction not a works contract

Earbis Engineering Co. Ltd. and Another Versus Deputy Commissioner of Sales Tax, Ballygunge Charge and Another

The Tribunal ruled in favor of the petitioner-company, directing the respondents to refund Rs. 27,500 deducted as tax at source by Bally Municipality. The ... Works contractor - refund claim - section 40(6) of the VAT Act read with rule 81(2) of the VAT Rules - Held that: - there was no bilateral agreements in between the parties and/or containing some specified terms and conditions on after sale service as is contended by the respondents. From the documents as aforesaid there is nothing to show that save and except supply of the ultra sound imaging system the petitioner-company was agreed to install the system in any building and/or with undertaking to do repairing works of the machinery in future though there was a warranty for one year on the goods supplied - we find no reason as to why the petitioner-company will not get refund of the amount of ₹ 27,500 deducted by the Bally Municipality as tax at source and deposited in the Government exchequer and particularly when there is no case on record that the dealer is found liable to pay any tax after the deemed assessment u/s 47 of the Act and, therefore, there cannot be also any question as to the undue enrichment on the part of the petitioner in refunding the amount claimed - petition allowed - decided in favor of petitioner. Issues Involved:1. Refund of tax deducted at source.2. Classification of the transaction as a 'works contract.'3. Compliance with the West Bengal Value Added Tax (VAT) Act and Rules.4. Entitlement to refund under Section 40(6) of the VAT Act and Rule 81(2) of the VAT Rules.5. Assessment proceedings under Section 46(1) of the VAT Act.6. Deemed assessment under Section 47(1) of the VAT Act.Issue-wise Detailed Analysis:1. Refund of Tax Deducted at Source:The petitioner-company challenged the Deputy Commissioner of Sales Tax's order dated January 30, 2009, which refused to refund Rs. 27,500 deducted as tax at source on the sale price of Rs. 15,14,423 of goods supplied to Bally Municipality. The petitioner argued that the refund should have been processed within six months as per Rule 81(2) of the VAT Rules since they were not liable to pay tax under Section 14 of the VAT Act.2. Classification of the Transaction as a 'Works Contract':The respondents contended that the transaction was a works contract as defined under Section 2(57) of the VAT Act, involving three parts: buyback of Siemens Adora, supply of the system, and after-sale service. The petitioner argued that the sale of the ultrasound imaging system was not under a works contract since there was no bilateral agreement for construction, fitting out, improvement, or repair of any building or machinery.3. Compliance with the West Bengal Value Added Tax (VAT) Act and Rules:The petitioner filed an application for refund under Section 40(6) of the VAT Act and Rule 81(2) of the VAT Rules. The respondents argued that the sale was part of a works contract and thus subject to tax under Section 18 of the VAT Act. The Tribunal noted that the Bally Municipality deducted the tax at source and deposited it in the Government exchequer, indicating that the transaction was treated as a works contract.4. Entitlement to Refund under Section 40(6) of the VAT Act and Rule 81(2) of the VAT Rules:The Tribunal found that the petitioner-company was entitled to a refund as the transaction did not constitute a works contract. The Tribunal noted that there was no bilateral agreement or specified terms for after-sale service, and the petitioner had already deposited the VAT amount of Rs. 60,577 in the Government exchequer.5. Assessment Proceedings under Section 46(1) of the VAT Act:The Deputy Commissioner opined that the refund could only be considered during the assessment proceedings under Section 46(1) of the VAT Act. However, the Tribunal found that the assessment for the relevant period had been completed under the scheme of deemed assessment as per Section 47(1) of the VAT Act, and the petitioner was not liable to pay any additional tax.6. Deemed Assessment under Section 47(1) of the VAT Act:The Tribunal noted that the assessment for the fourth quarter ending on March 31, 2008, had been completed under the scheme of deemed assessment, and the petitioner was not found liable to pay any additional tax. Therefore, the Tribunal directed the respondents to refund the amount of Rs. 27,500 deducted by Bally Municipality as tax at source.Conclusion:The Tribunal concluded that the petitioner-company was entitled to a refund of Rs. 27,500 deducted by Bally Municipality as tax at source. The respondents were directed to refund the amount by May 31, 2011, failing which the amount would carry interest at 10% per annum until payment. The case was disposed of accordingly.