2024 (1) TMI 177 - HC - VAT and Sales Tax

EPC contract for thermal power project ruled intra-state transaction subject to RVAT not inter-state CST

M/s B.G.R. Energy Systems Limited, Versus Assistant Commissioner, Anti Tax Evasion, Kota, Taxes Department, Rajasthan

M/s B.G.R. Energy Systems Limited, Versus Assistant Commissioner, Anti Tax Evasion, Kota, Taxes Department, Rajasthan - TMI Issues Involved:1. Whether the contracts between the assessee and RVUNL were composite and indivisible, tantamounting to a works contract.2. Whether the sale of Onshore and Offshore Goods by the assessee to RVUNL was intra-state or inter-state.3. Whether the Respondent Department is estopped from contending that the sale of goods was made by BGR Rajasthan to RVUNL in Rajasthan.4. Whether the State of Rajasthan can levy RVAT on a sale transaction assessed under CST Act in other states.5. Whether the larger bench of the Rajasthan Tax Board exceeded its jurisdiction in giving directions beyond the scope of questions framed.6. Whether the directions regarding goods of special importance under Section 14 of the CST Act were justified.7. Whether the deletion of penalty by the RTB was justified.Summary:Issue 1: Composite and Indivisible ContractThe court held that the contracts between the assessee and RVUNL were a composite and indivisible works contract. The separation into three contracts was for payment convenience and did not dilute the responsibility of the assessee to complete the project on a turnkey basis. The RTB's conclusion that the contract was a single, composite, and indivisible works contract was affirmed.Issue 2: Nature of Sales (Intra-state vs. Inter-state)The court determined that the sale of goods involved in the execution of the works contract was intra-state and taxable under the RVAT Act. The title to the goods transferred to RVUNL upon completion of the contract, not during their movement from other states. The RTB's finding that the sales were intra-state and taxable under RVAT was upheld.Issue 3: Estoppel of the Respondent DepartmentThe court did not find merit in the argument that the Respondent Department was estopped from contending the sales were made by BGR Rajasthan to RVUNL in Rajasthan. The nature of the transaction, as determined, attracted RVAT applicability regardless of previous assessments under CST.Issue 4: Levy of RVAT on Transactions Assessed under CST in Other StatesThe court held that the nature of the transaction attracted RVAT, and the assessee could not be absolved of liability to pay RVAT merely because tax was paid under a different statute in other states. The issuance of forms under CST or RVAT Rules did not affect the nature of the transaction.Issue 5: Jurisdiction of RTB in Giving DirectionsThe court found that the RTB exceeded its jurisdiction by giving directions beyond the scope of the questions framed. The directions of remand were set aside as they were beyond the scope of pleadings and not argued before the RTB or lower authorities.Issue 6: Directions Regarding Goods of Special ImportanceThe court set aside the RTB's directions of remand for recalculating tax on goods of special importance, as these directions were beyond the scope of pleadings and not claimed by the assessee.Issue 7: Deletion of PenaltyThe court upheld the RTB's decision to set aside the penalty, considering the issue involved a pure question of interpretation of statutes and one of the parties was an extended arm of the State. The deletion of penalty was found justified.Result:The questions of law framed in STR Nos. 217-219/2020 (preferred by the assessee) were answered in favor of the Revenue. The questions of law nos. 1-3 in STR Nos. 155-157/2020 (preferred by revenue) were answered in favor of the Revenue, while question of law no. 4 regarding penalty was answered in favor of the assessee. The RTB's order was modified to set aside the remand directions, but the rest of the order was maintained.