AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2014 (10) TMI 600
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....ruction of buildings. The petitioner entered into an agreement with M/s. Sri Ramdas Motor Transport Corporation (for short SRMT) on 04.02.2011 for executing the works contract of construction of residential apartments. The said agreement dated 04.02.2011, which required the petitioner to construct residential apartments in the areas mentioned in the agreement within 24 months, stipulated that payment would be made to them according to the stage of construction. The petitioner claims that SRMT, which is the owner of the property, had entered into agreements with various individual purchasers for the construction and selling of apartments; while SRMT was the owner of the land, they were nevertheless a contractor as they enter into agreements with independent purchasers for construction and selling of residential flats, along with the property; sale by SRMT, to individual and independent purchasers, is a deemed sale taxable under the provisions of the Act as works contracts. It is the petitioners case that they had sought an option, for payment of tax by way of composition, as per the provisions of the Act and Rule 17(4) of the AP VAT Rules (hereinafter called the Rules); pursuant to....
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....ce of the second respondent, who is the regular assessing authority before whom returns were filed by the petitioner; as the offices of the first and second respondents were in the same building, the reply ought to have been forwarded by the second respondent to the first respondent; the Managing Director of the petitioner fell sick during the period 03.09.2013 to 06.02.2014; he suffered from viral hepatitis and, consequently, the appeal could not be filed within time; the petitioner was not in a position to understand the show-cause notice, as nothing was mentioned therein giving reasons for levying a higher rate of tax; the contractual receipts from SRMT were disclosed in the returns; the impugned order levying tax on the petitioner at 4% or 5%, under Section 4(7)(b) and (c), instead of 1.00% or 1.25% under Section 4(7)(d), is without authority of law and is in violation of principles of natural justice; the petitioner is exempted from payment of tax as SRMT is liable to pay tax; even if the petitioner is ineligible for concessional rate of tax under Section 4(7)(d), they ought to have been levied tax under Section 4(7)(a) if the composition was found unacceptable; SRMT, which is....
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....nor that eight instalments were granted by the third respondent; the judgments referred to by the petitioner, in the writ affidavit, deal with cases where a contract is awarded to a contractor either by the Government or some other agency and that contractor, in turn, engages sub- contractors; in all those cases, the issue involved was whether or not the liability to pay VAT was on the main contractor; in the present case, the petitioner filed a copy of the agreement entered into between them and SRMT, wherein the petitioner was shown as a contractor or builder, and the other party was shown as the owner of the property; hence, there is a direct contract between the owner and the builder; the owner is not a works contractor under the Act, and is not liable to pay VAT; the petitioner has deliberately mis-stated that SRMT is the main contractor, and they are the sub-contractors; they have referred to all those cases where there is a contractor, a contractee and sub-contractors; in the present case, there are only two parties i.e., the owner of the property, and the contractor or the builder; as per clause 8 of the agreement, the petitioner is liable to pay sales tax or VAT and, hence....
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....titioner, having filed a no objection letter dated 30.08.2013, having admitted their liability and having sought instalments for payment of the entire tax, cannot now question the assessment order on its merits; the present case is not merely one of laches, but is a case where this Court is sought to be mislead by filing an affidavit with false allegations and twisting facts. In their reply-affidavit, it is stated by the petitioner that the letter dated 24.08.2013, said to have been submitted on 30.08.2013, was not filed by the Managing Director who is not aware of the said letter; the said letter is filed by some employee of the company; even he does not state that he had accepted payment; he merely stated that an audit was conducted for assessment; and, referring to the demand by the first respondent, it was stated by the signatory that there was no objection; the Managing Director is not aware of the same, and it cannot be construed as his acceptance for payment of tax contrary to the statutory provisions; on enquiry it is learnt that the employee was coerced to file such a letter; the petitioner had approached the third respondent who informed him that, as an assessment order ....
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...., filed it in the office of the second respondent who is their regular assessing authority; such a mistake on the part of the petitioners employee cannot be put against them; the second respondent ought to have forwarded the objections to the first respondent; the Managing Director of the petitioner did not file any letter accepting the demand, and it cannot be said that the petitioner is trying to mislead the Court; it is not for the first respondent to doubt the genuineness of the medical certificate; the order of assessment was handed over to the employee of the petitioner and, in the light of the illness of the Managing Director, no appeal could be preferred thereagainst; the assessment order is contrary to Section 4(7)(d) and Form 250 of the Act, without authority and jurisdiction, and in violation of Article 265 of the Constitution of India; there is no estoppel against a statute; as the impugned order of assessment is without authority and jurisdiction, the petitioner cannot be denied the remedy of invoking the jurisdiction of this Court under Article 226 of the Constitution of India; the first respondent is estopped from passing an assessment order contrary to Section 4(7)(....
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.... of the work, notify the prescribed authority on Form VAT 250 of the details including the value of the contract on which the option has been exercised. Under the proviso thereto, a consolidated Form VAT 250 can also be filed by the contractor who undertakes multiple works contracts of similar nature. Rule 17(2)(f) stipulates that, if any part of the contract is awarded to a sub-contractor, the sub-contractor shall be exempted from tax on the value of the sub-contract, and shall not be eligible to claim input tax credit on the inputs used in the execution of such sub- contract. Dealers executing works contracts for the government or local authorities were, hitherto, entitled to exercise option under clause (b) of Section 4(7) prior to its amendment and every other dealer executing works contracts was entitled to exercise option under clause (c) of Section 4(7) of the Act. After its amendment, the option exercisable by a dealer executing works contract, either for works contracts executed for the Government, local authority or other works, is only under clause (b) of Section 4(7). Exercise of option to pay tax under composition would enable such a dealer to pay tax at the rate of 5....
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....(d) of the Act, is his sub-contractor exempt from payment of tax. Rule 17(4) of the Rules relates to treatment of Apartment Builders and Developers under composition. Rule 17(4)(a) stipulates that, where a dealer executes a contract for construction and selling of residential apartments, houses, buildings or commercial complexes and opts to pay tax by way of composition under Section 4(7)(d), he must register himself as a VAT dealer. Rule 17(4)(b) stipulates that, before commencement of the execution of the work, the VAT dealer shall notify the prescribed authority on Form VAT 250 of his intention to avail composition for all works undertaken by him. Rule 17(4)(d) requires such a VAT dealer to pay tax by way of composition at 4%/5% on 25% of the total consideration received or receivable or the market value fixed for the purposes of stamp duty, whichever is higher; and the balance 75% of the total consideration received or receivable shall be allowed as deduction for the purpose of computation of the taxable turnover. In effect the tax payable, under Section 4(7)(d) read with Rule 17(4)(d), is 1%/1.25% of the total consideration received or receivable towards the cost of land as w....
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.... in the Rules. It is only if SRMT was engaged both in the construction, and in the sale, of residential apartments, they had exercised the option of composition under Section 4(7)(d) of the Act, and they had sub-contracted execution of works contract to the petitioner, can the petitioner claim the benefit of exemption under the proviso to Section 4(7)(d) of the Act. No documentary evidence has been placed by the petitioner before this Court to show that SRMT is a dealer engaged both in the construction, and in the sale of, residential apartments; or that SRMT has exercised the option of composition under Section 4(7)(d) of the Act. The agreement, a copy of which is enclosed to the Writ Petition, refers to SRMT as the owner and not as a Contractor. It refers to the petitioner as a contractor or a builder, and not as a sub- contractor. It does not refer to SRMT as being engaged in construction of residential apartments. Even if we were to presume that SRMT is engaged in the business of sale of residential apartments, no documentary evidence has been placed by the petitioner on record to show that SRMT is also engaged in construction of residential apartments. As it is evident from th....
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....th following the month in which payment was received. Along with their monthly returns, the petitioner filed the certificate of tax deducted at source in the Form VAT 501A, and not Form VAT 501-B. It is evident, therefore, that the contract between SRMT and the petitioner is between a contractor and a contractee, and not a contractor and a sub-contractor. Consequently the petitioner is not entitled to claim protection under the proviso to Section 4(7)(d) of the Act. Clause (8) of the agreement between SRMT and the petitioner, stipulates that the contract value is inclusive of all taxes; and any liability, on account of Sales Tax, VAT etc., shall be to the account of the petitioner. Having accepted liability to pay VAT, the petitioner cannot now turn around and contend that the liability to pay VAT is on SRMT, and they are not liable to pay tax under the Act. No material has been placed on record to show that SRMT had collected tax at 1.25% from independent purchasers, and had remitted the same to the State exchequer. On the other hand tax at 1.25% was deducted from the petitioners bills by SRMT and paid to the department. The petitioner has not even chosen to array SRMT as a respo....
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....ly the same to the contractor within fifteen days after the end of the month in which the deduction is made. The contractor VAT dealer is required to submit Form 501A along with his tax returns. Rule 17(1)(g) provides that, if the dealer has not maintained accounts to determine the correct value of the goods, he shall pay tax at the rate of 14.5% on the total consideration or receivable subject to the deductions specified in the table given therein. In such cases the contractor VAT dealer is not eligible to claim input tax credit or to issue tax invoices. The percentage of value eligible for deduction under Rule 17(1)(g), in the case of civil works like construction of buildings etc, is 30%. A dealer, who has not opted for composition and who does not maintain books of accounts, is required to pay tax at 14.5% on the total consideration received or receivable subject to deduction of 30%. In effect, the dealer is required to pay 14.5% tax on 70% of the total consideration received or receivable on the execution of the works contract relating to construction of buildings. It is not even the petitioners case that they are maintaining proper books of accounts, or that they have filed ....
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....3 was addressed by him to the Commercial Tax Officer that, as per the VAT audit assessment for the period from 2009-10 to 2012-13 conducted by him, he had made a demand of tax liability of Rs. 67,58,184/-. The said letter dated 24.08.2013 gives a break-up of the tax liability for each of the four years 2009-10 to 2012-13, records the petitioners no objection in this regard, and bears the seal of the petitioner company. The said letter was received by the first respondent on 30.08.2013. The impugned order passed on 31.08.2013 refers to the show-cause notice issued in Form VAT 305-A dated 12.08.2013 which was served on the petitioner on 14.08.2013 calling for their written objections along with documentary evidence, if any. It also records that, in response to the notice, the petitioner had filed a no objection letter on 30.08.2013, and had requested that the assessment be finalized. The turnover, and the tax proposed in the show-cause notice, was confirmed by the C.T.O, and an order in Form VAT 305 was passed. A copy of assessment order dated 31.08.2013 was served on the General Manager (Finance) Sri Y. Ram Mohan Rao on 31.08.2013, who also furnished his Mobile phone number i.e 917....
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....nt notice dated 07.11.2013 calling upon the petitioner to pay tax of Rs. 67,58,184/- and penalty of Rs. 16,89,427/- within three days of receipt of the notice. The petitioner was also informed that, if the tax demanded with interest was not paid within three days, coercive steps would be taken to recover the arrears without further notice. This letter of the second respondent dated 07.11.2013 was served on the petitioner on 12.11.2013, and bears the seal of the petitioner company. Again on 06.12.2013 the second respondent demanded payment of amounts, outstanding of a VAT dealer, from the bank or third party in Form VAT 206. By the notice in Form VAT-206 both the petitioner, and their bankers i.e., Punjab National Bank, were informed that Rs. 84,47,611/- were the outstanding dues; and, in accordance with the provisions of Section 29 of the Act, they were required to make payment of the outstanding amount by way of demand draft or bankers cheque in the name of the second respondent. Copies of this letter dated 06.12.2013 was served both on Punjab National Bank and the petitioner company on 09.12.2013. Another demand for payment of amount, outstanding of a VAT dealer, from the bank or....
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....ach would be made in monthly intervals till the total dues were cleared. They requested the Deputy Commissioner (CT) to consider their proposal. By his letter dated 25.02.2014, the second respondent informed the Deputy Commissioner (CT) that, keeping in view their financial problems, the petitioner may be granted instalments to clear the arrears as early as possible. The third respondent, in his proceedings dated 05.03.2014, referred to the petitioners representation that they were not in a position to pay the entire tax demand immediately as they had almost stopped the work at site, and were not in a position to claim any bills from their clients; they had not paid salaries since the last three months; their business had come to a halt and, in view of these reasons, they had requested for grant of instalments. The third respondent also noted that the petitioner had preferred an appeal against the penalty order; at the time of filing the appeal, they had paid Rs. 1,57,000/-; the outstanding VAT balance and penalty was Rs. 67,58,184/- and Rs. 15,32,427/-, totalling to Rs. 82,90,611/-; and, accordingly, eight monthly instalments were granted to the petitioner subject to the conditio....
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....d suffered serious illness for more than five months which, according to the enclosed medical certificate, necessitating his having to take rest, and in his inability to monitor the companys day-to-day affairs. The certificate dated 03.02.2014 is issued not by a specialist, but by a doctor with an M.B.B.S. degree. Even the rubber stamp on the medical certificate is not visible. The said certificate dated 03.02.2014 records that Sri V. Ravi Kumar (the Managing Director of the petitioner company) was under his treatment for viral hepatitis, he was advised rest from 03.09.2013 to 03.02.2014, and he is fit to resume duties from 04.02.2014. No material is placed on record to show the basis on which the said MBBS doctor concluded that the Managing Director of the petitioner-company suffered viral hepatitis; and what tests were conducted and medicines prescribed for such illness. The certificate does not state that the illness was of such a nature as to render him immobile. The genuineness of the said certificate cannot, therefore, be readily accepted. It is difficult to believe that the assessment and penalty orders passed by the 2nd respondent, which resulted in a huge monetary liabilit....
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.... and the contractee i.e. SRMT were called upon to pay, the amounts due from them to the petitioner, directly to the 2nd respondent. The petitioner received the assessment order dated 31.08.2013 on the same day. It is only after several letters were issued calling upon them to pay the demanded amount, and proceedings under Section 29 of the Act were initiated for recovery of the arrears, did the petitioner make an application on 19.02.2014 seeking payment of the tax and penalty in instalments. The Deputy Commissioner (CT) granted instalments by his proceedings dated 05.03.2013. The petitioner was required to pay the first instalment on 25.03.2014. Suppressing all the facts, subsequent to the assessment order dated 31.08.2013 including their having sought for and being granted instalments for payment of the tax with penalty, the petitioner invoked the jurisdiction of this Court under Article 226 of the Constitution of India on 20.03.2014, and obtained an interim order of stay on 21.03.2014. "Suppressio veri", i.e., the suppression of relevant and material facts is as bad as Suggestio falsi i.e., a false representation deliberately made. Both are intended to dilute- one by inaction a....
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....on-suited for delay and laches or for their having sought payment in instalments, but for their conduct in suppressing material facts and in seeking to mislead this Court by false averments and misrepresentation of facts. In order to sustain and maintain the sanctity and solemnity of proceedings in law courts it is necessary that parties should not make false or, knowingly, inaccurate statements or misrepresentation and/or should not conceal material facts with a design to gain some advantage or benefit at the hands of the Court where truth and justice are the solemn pursuits. If any party attempts to pollute such a place by recourse to misrepresentation, and conceals material facts, it does so at its own risk. Such a party must be ready to take the consequences that follow. There is a compelling need to take a serious view in such matters to ensure purity in the administration of justice. (Vijay Syal v. State of Punjab ). As a petition containing misleading and inaccurate statements, if filed to achieve an ulterior purpose, amounts to an abuse of the process of the court, the litigant should not be dealt with lightly. A litigant is bound to make full and true disclosure of facts.....
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....he Court calculated to hamper the due course of a Judicial proceeding, or the orderly administration of justice, is Contempt of Court. It may be that certain minor abuses of the process of the court may be suitably dealt with as between the parties or in some other manner. But it may be necessary to punish as a contempt, a course of conduct which abuses and makes a mockery of the judicial process, and which thus extends its pernicious influence beyond the parties to the action and affects the interest of the public in the administration of justice. The public have an interest, an abiding and a real interest, and a vital stake in the effective and orderly administration of justice, because, unless justice is so administered, there is the peril of all rights and liberties perishing. The Court has the duty of protecting the interest of the public in the due administration of justice and, so, it is entrusted with the power to commit for Contempt of Court, not in order to protect the dignity of the Court against insult or injury as the expression "contempt of Court" may seem to suggest, but to protect and vindicate the right of the public that the administration of justice shall not be ....