Contractual tax deductions on coal supply bills were unjustified where VAT applied and entry tax could not be levied.

A contractual supply rate stated to be inclusive of royalty, statutory taxes and levies, including entry tax, but exclusive of VAT at 4% was held not to justify deduction from coal supply bills where VAT had been paid. Coal being a declared good, Assam VAT applied at 4%, and the Assam Entry Tax Act barred entry tax on specified goods already subject to VAT when sold by a registered dealer. The later invalidation of the Entry Tax Act did not support the deduction, especially in light of the validating provision in the 2008 Act. The deducted amount was therefore refundable to the supplier.

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Issues: Whether the deduction of Rs. 9,38,140 from the petitioner's bills for supply of coal was justified under the contractual terms and the applicable VAT and entry tax provisions.

Analysis: The contractual clause fixed the rate at Rs. 2,450 per MT inclusive of royalty and all statutory taxes and levies, including entry tax, but exclusive of VAT at 4%. It further provided that if Assam Entry Tax was withdrawn or abolished, the rate would become inclusive of VAT and any VAT amount paid thereafter could be recovered from subsequent bills. Coal being a declared good under Section 14 of the Central Sales Tax Act, 1956, the VAT rate applicable in Assam was 4% under the Second Schedule to the Assam Value Added Tax Act, 2003. Under Section 5 of the Assam Entry Tax Act, 2001, no entry tax was leviable on specified goods already subject to VAT when sold by a registered dealer. The petitioner had paid VAT on the transaction, and the later declaration of unconstitutionality of the Assam Entry Tax Act, 2001 did not justify the deduction, particularly in view of the validating provision in Section 12 of the Assam Entry Tax Act, 2008.

Conclusion: The deduction was not justified, and the respondents were liable to refund the deducted amount to the petitioner.

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