2016 (11) TMI 1076 - HC - VAT and Sales Tax

Court quashes tax order under VAT Act citing lack of reasoning.

Peptech Construction Pvt. Ltd. Versus State of M.P. & others

The Court allowed the writ petition, quashing the order imposing tax liability under the M.P. VAT Act, 2002 for a works contract due to lack of reasoning ... Works contract - applicability of the provisions of M.P. VAT Act, 2002 on works contract - Held that: - The legal question with regard to imposition of liability only with effect from the date the agreement is entered into is a question legal in nature based on the law laid down in the case of Larsen & Toubro Ltd. [2013 (9) TMI 853 - SUPREME COURT] and this aspect of the matter has to be considered. That apart, finding the order identical in nature, not to be a speaking order without disclosing any reason, similar order has been quashed by this Court in W.P. No.1767/2014 and in certain other cases. Order impugned Annexure P/2 and all consequential action thereto stands quashed and the matter remanded back to the Assessing Officer for reconsideration keeping in view the observations made herein above. The petitioner shall appear before the Assessing Officer on 22nd August, 2016 and on the same being done, the Assessing Officer shall proceed in accordance with law - petition allowed - decided in favor of petitioner. Issues:Challenge to the applicability of M.P. VAT Act, 2002 on a works contract; Lack of reasoning in the order Annexure P/2; Legal principle regarding liability in works contract as per Larsen & Toubro Ltd. case; Jurisdiction of High Court under Article 226; Remand for reconsideration based on legal principles and lack of reasoning in the order.Analysis:The judgment pertains to a writ petition challenging the order Annexure P/2, which held the petitioner liable to pay tax under the M.P. VAT Act, 2002 for a works contract. The petitioner contended that the order lacked reasoning on the basis of which the liability was imposed. The counsel referred to the Larsen & Toubro Ltd. case, emphasizing that liability arises only from the stage the developer enters into a contract with the flat purchaser for a works contract. The Court observed that the order failed to consider this legal principle and lacked a speaking order, necessitating its quashing and remand for reconsideration by the competent authority.The Court addressed a preliminary objection raised regarding the jurisdiction of the High Court under Article 226, citing a previous decision where the Court had refused to exercise jurisdiction and directed the assessee to appeal. However, the petitioner argued that the present case involved a challenge to the order applying the VAT Act without considering the Larsen & Toubro Ltd. case. The Court agreed with the petitioner, noting the legal question of liability imposition from the agreement date as per the Larsen & Toubro Ltd. case. Considering the lack of reasoning in the order, similar to previously quashed orders, the Court allowed the petition, quashed the impugned order, and remanded the matter for reconsideration by the Assessing Officer.In conclusion, the Court disposed of the petition by quashing the order Annexure P/2 and remanding the matter for reconsideration in light of the legal principles discussed, particularly the timing of liability imposition in works contracts as per the Larsen & Toubro Ltd. case. The petitioner was directed to appear before the Assessing Officer for further proceedings in accordance with the law.