2017 (2) TMI 1053 - HC - VAT and Sales Tax

High Court rules 'Terminalling Service Agreement' as a works contract, directs proper dispute resolution process

The High Court dismissed the writ petitions challenging orders concerning Assessment Years 2010-11 to 2012-13. The dispute centered on whether a ... Works contract - Build Own Operate and Transfer (BOOT) contract - adjustment under Rule 8(5)(c) of the Tamil Nadu Value Added Tax Rules, 2007 - alternate remedy - pre-deposit requirement for appeal - application of principles analogous to Section 14 of the Limitation Act, 1963Alternate remedy - application of principles analogous to Section 14 of the Limitation Act, 1963 - Maintainability of writ petitions given the availability of statutory appellate remedy and the appropriate forum for adjudication - HELD THAT: - The Court held that the appellate authority is the appropriate forum to decide both facts and law in the first instance where there is a factual dispute about classification of the agreement. Although the petitioner invoked the writ jurisdiction, the Revenue's objection on alternate remedy was considered unfair given the Revenue's nebulous stance on delay objections. The Court observed that principles analogous to Section 14 of the Limitation Act, 1963 (as applied to quasi judicial authorities) are available to the petitioner to meet delay in filing appeals and referred to relevant Supreme Court authorities endorsing that approach. Consequently, the writ petitions cannot be entertained on merits and the petitioners must pursue the statutory appeal remedy. [Paras 9, 10, 11]Writ petitions dismissed; liberty granted to the petitioner to approach the statutory appellate authority.Works contract - Build Own Operate and Transfer (BOOT) contract - Classification of the agreement between the petitioner and NOCL as a works contract versus a BOOT contract is not finally decided and requires adjudication by the appellate authority - HELD THAT: - The Court identified the primary controversy as whether the Terminalling Service Agreement constitutes a 'works contract' or a BOOT contract. The impugned orders recorded factual findings treating the agreement as a works contract, but the High Court found that disputed facts would need to be ascertained by the appellate authority which can examine both facts and law in the first instance. Accordingly, the Court did not decide the substantive classification issue on merits but directed that it be agitated before the appellate forum. [Paras 8, 9]Issue remitted to the appellate authority for fresh consideration of facts and law.Adjustment under Rule 8(5)(c) of the Tamil Nadu Value Added Tax Rules, 2007 - Question of adjustment of payments made to the subcontractor under Rule 8(5)(c) is left to be considered by the appellate authority - HELD THAT: - The petitioner urged that, alternatively, amounts paid to the subcontractor ABIR must be adjusted under Rule 8(5)(c) even if the agreement is held to be a works contract. The Revenue submitted that this, too, can be dealt with by the appellate authority. Given the requirement that factual and legal disputes be examined by the appellate forum, the High Court declined to adjudicate this alternative contention and left it for determination on appeal. [Paras 5, 6, 9]Left open for determination by the appellate authority.Pre-deposit requirement for appeal - Inability to make the statutory pre-deposit is not a ground to bypass the appellate process before the writ court - HELD THAT: - The Court rejected the petitioner's contention that inability to make the prescribed pre-deposit (25% of disputed tax) justified retention of the writ petitions. It held that appeals must be entertained only in accordance with the prescribed statutory procedure and that alleged lack of funds to make the pre deposit is not an acceptable ground to avoid compliance; the petitioner must either arrange the deposit or seek remedies available under the statute concerning insolvency or inability to pay. The Court noted that the writ jurisdiction cannot ordinarily be used to circumvent pre deposit requirements. [Paras 10]Petitioner's plea of inability to make pre-deposit rejected; appellate process and pre-deposit requirement to be complied with.Final Conclusion: The writ petitions are dismissed; the petitioner is granted liberty to pursue statutory appeals before the appellate authority (including seeking relief for delay by reference to principles analogous to Section 14 of the Limitation Act, 1963), and the factual and legal issues including classification of the agreement and adjustment under Rule 8(5)(c) are to be decided by the appellate authority; no order as to costs. Issues:1. Determination of whether the agreement between the petitioner and another entity constitutes a works contract.2. Contention regarding adjustment of payments made to a sub-contractor under Rule 8(5)(c) of the 2007 Rules.3. Consideration of the appropriate forum for addressing the issues raised in the writ petitions.Analysis:1. The judgment pertains to writ petitions challenging three separate orders dated 18.07.2016 concerning Assessment Years 2010-11, 2011-12, and 2012-13. The primary issue revolves around whether the agreement between the petitioner and another entity, termed as a 'Terminalling Service Agreement,' qualifies as a works contract. The petitioner argues that it is a Build Own Operate and Transfer contract (BOOT Contract) rather than a works contract, emphasizing the nature of the agreement and the payments involved. The first respondent, however, asserts that the agreement falls under the definition of a works contract based on the provisions of the Tamil Nadu Value Added Tax Act, 2006.2. The petitioner further contends that even if the agreement is considered a works contract, the payments made to a sub-contractor, ABIR Infrastructure Pvt. Ltd., should be adjusted under Rule 8(5)(c) of the 2007 Rules. The Revenue, represented by Mr. Kanmani Annamalai, suggests that this aspect can be addressed by the appellate authority, emphasizing the need for factual determination and dispute resolution through an appeal process.3. The High Court, after hearing arguments from both parties, acknowledges the disputed facts and the need for a thorough examination of the case. The court deems the appellate authority as the appropriate forum to address both factual and legal aspects initially. However, due to the petitioner's direct approach to the court instead of the appellate authority, questions arise regarding the opposition to a potential appeal based on delay. The court finds the Revenue's objection to the petition's maintainability on the grounds of an alternate remedy unfair, considering the time spent on the writ petitions. The judgment dismisses the writ petitions, granting liberty to the petitioner to pursue remedies available under the statute, emphasizing adherence to prescribed procedures, including pre-deposit requirements for filing appeals.This detailed analysis highlights the key legal issues, arguments presented by both parties, and the court's decision regarding the appropriate forum for addressing the disputes raised in the writ petitions.