TaxTMI 
TaxTMI 
2014 (10) TMI 810
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....sible and separate contracts for designing, engineering, procurement and supply of equipments including mandatory spares BOP package and also for erection, testing, commissioning and civil works of balance of plant (BOP) package for setting up of thermal power project at Suratgarh and Chhabra in the State of Rajasthan. Civil Writ Petition No. 8491 of 2011 is directed against the aforesaid show-cause notice for rectification under section 33 of the VAT Act, 2003 while connected Writ Petition No. 9185 of 2011, is mainly directed against the impugned assessment order passed by the respondent-assessing authority on September 29, 2011, for the same assessment year 2008-09 (April 1, 2008 to March 31, 2009) which was passed by the assessing authority soon after filing of the present writ petition in this court on September 26, 2011 in which only the show-cause notice issued by the assessing authority vide annexure 16 dated September 19, 2011 was challenged. The factual matrix in nutshell taken from Civil Writ Petition No. 8491 of 2011 is like this. Two contracts in question awarded by the RRVUNL to the petitioner-company for the Suratgarh power project are the contract No. 3381 date....
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...., duties as applicable on date (1.0 + 2.0) 186 crores Total amount in words : Rupees one hundred eighty six crores only. Contract No. 3382 : Suratgarh:- Schedule of Material and Prices S. No. Details Amount in Indian Rs. 1 Total f. o. r. price of supply items of civil and structural work of entire BOP including all taxes and duties as applicable on date 80 crores 2 Total f. o. r, price of erection, testing and commissioning of entire scope of BOP including unloading, storage at site, handling from the storage area to erection site and performance testing for the equipment and test before taken over including all taxes and duties. 20 crores 3 Civil structural and architectural works for entire BOP package along with all necessary investigation including all taxes and duties as applicable on date. 85 crores 4 Total price for civil and etc., work for entire BOP package including all taxes and duties as applicable on date (1.0 + 2.0) 185 crores Total amount in words : Rupees one hundred and eighty five crores only. Contract No. 56 : Chhabra:- Schedule of Material and Prices S. No. Details Amount in Indian Rs. ....
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....ealers engaged in execution of works contract subject to condition of payment of exemption fees on the gross total value of such works contract and to the extent relevant for present controversy, the said Notification dated August 11, 2006 is reproduced hereunder for ready reference:- "No. F.12(63)FD/Tax/2005-80 Jaipur dated August 11, 2006 In exercise of the powers conferred by sub-section (3) of section 8 of the Rajasthan Value Added Tax Act, 2003 (Act No. 4 of 2003), the State Government being of the opinion that it is expedient in the public interest so to do, hereby exempts from payment of tax the registered dealers engaged in execution of works contracts leviable on the transfer of property in goods (whether as goods or in some other form) involved in the execution of works contract(s) subject to following conditions, namely:- (1) to (8)..... List Item No. Description of work contract Rate of exemption fee % of the total value of the contract 1 2 3 1 Works contracts relating to dyeing, printing, processing and similar activities 0.25% 2 Works contracts relating to building, roads, bridges, dams, canals, sewerage system 1.5....
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....id contractor, shall within ten days of receipt of such application, on being satisfied that the transaction of sale took place in the course of inter State trade and commerce, pass an order directing the awarder not to deduct the amount in lieu of tax from the payment to be made in this behalf. The order so issued shall be provisional in nature and applicable only for deduction of amount in lieu of tax under sub-section (2) of section 20 of the Value Added Tax Act, 2003, and shall be subject to assessment under the said Act." The case of the petitioner is that in view of the said amendment vide Notification dated July 5, 2010, the assessing authority even directed the RRVUNL vide annexure 11 dated July 27, 2010, not to deduct the tax/exemption fee at source for contract No. 3381. However, the petitioner was served with the impugned show-cause notice for rectification of the aforesaid exemption fees certificate in prescribed form VAT-14 for the aforesaid period vide annexure 16 dated May 12, 2011, purportedly after the assessing authority consulting the head of the Department, namely, Commissioner, Commercial Taxes Department, Jaipur vide communication, annexure 13, dated Februa....
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....ction, testing and commissioning including civil works of balance of plant (BOP) therefor as one integrated project, whereas, the contracts are not only separate and divisible contracts and, whereas, first contract, namely, contract No. 3381 for Suratgarh and contract No. 56 for Chhabra are contracts for supply/sale of equipments, whereas, both the secqnd contracts, namely, contract No, 3382 for Suratgarh and contract No. 57 for Chhabra are the works contracts which comprise of erection, testing, commissioning of balance of plants including civil works therefor, besides another company BHEL (Bharat Heavy Electrical Limited), supplying the main plant in the form of turbines and, therefore, the learned assessing authority could not have undertaken the rectification proceedings for amending the exemption certificates duly granted in favour of the, petitioner-company after realizing 1.50 per cent of the total value of the contracts as exemption fees under the notification dated August 11, .2006, which exemption certificates, in his submission, were issued, with open eyes and full application of mind as per clause (2) of the list appended in the notification dated August 11, 2006, quote....
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.... a revision petition before this court also. The learned counsel for the Revenue without prejudice to their preliminary objections as to maintainability of the writ petition, also vehemently submitted that the contracts in question were deliberately divided into separate contracts of the one integrated contract of petitioner-company with the RRVUNL and such turnkey contract or integrated contract divided into two or more could not be permitted to be used as a device to evade the tax or to reduce the liability of payment of exemption fees in lieu of tax liability and such an integrated contract by no stretch of imagination could fall under clause (2) of the notification dated August 11, 2006, which pertains to exemption fee of 1.50 per cent of the total value of the works contract relating to building, roads, bridges, dams, canals and sewerage system. The integrated contract as per the learned counsel for the Revenue clearly and could fall only in entry No. 3, which pertains to works contract relating to installation of plant and machinery including PSPO water treatment plant, laying of pipeline with material, on which the exemption fee of 2.25 per cent is leviable. They further ....
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....ther for erection, testing, commissioning and civil work relating to the thermal project were issued. As such Rajasthan Rajya Vidyut Utpadan Nigam issued two separate orders each for Suratgarh and Chhabra to the petitioner. Supply Order No. RVUN/SE (TD-II)/TDM-I/STPS-BOP(S)/TNS-1/D. 3381 dated October 3, 2006 (hereafter referred to as Supply Order No. 3381 dated October 3, 2006) was for design, engineering, procurement and supply of equipments including mandatory spares of BOP package of EPC basis for Suratgarh Thermal Power Station. A copy of supply order No. 3381 dated October 3, 2006 is submitted herewith and marked as annexure 1. Work Order No. RVUN/SE CTD-II)/TDMI/ STPS-BOP(ETC)/TNS-1/D. 3382 dated October 3, 2006 (hereafter referred to as Work Order No. 3382 dated October 3, 2006) for erection, testing and commissioning including civil works of BOP package on EPC basis for Suratgarh Thermal Power Station. A copy of the Work Order No. 3382 dated October 3, 2006 is submitted herewith and marked as annexure 2. Similarly, Supplies Order No. RVUN/Dy. CE (TD-M)/TDM-I/ CTPP-II BOP/TNCH-3/D.56.dated January 7, 2009 (hereafter referred to as Supply Order No. 56 dated Janua....
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....an that every such show-cause notice or appealable order passed upon such show-cause notice has to be adjudged as right or wrong in writ jurisdiction. Even the question about jurisdiction of the assessing authority like the case does not fall within the scope of section 33 of the Act or not, is the question which has to be decided first by the assessing authority himself and subject to further appeal and revisional mechanism available to the assessee under the Act, it is only on the question of law arising out of the order of the Tax Board, that this court in revisional jurisdiction can pronounce upon such question of law raised before it. The questions involved in the present case are apparently complex and mixed questions of facts and law-more of facts and less of law. Whether the two contracts is a mere device or mechanism to divide one integrated works contract into two contracts, one for sale/supply of equipments and other for erection, testing and commissioning of plant and machinery including civil works or not is a question which cannot be answered on the face of it. Whether the first contract of design, engineering, procurement and supply of equipments itself is merely ....
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....ion is to transfer for a price a chattel in which the transferee had no previous property, then the contract is a contract for sale. Ultimately, the true effect of an accretion made pursuant to a contract has to be judged not by artificial rules but from the intention of the parties to the contract. In a 'contract of sale', the main object is the transfer of property and delivery of possession of the property, whereas the main object in a 'contract for work' is not the transfer of the property but it is one for work and labour. Another test often to be applied is : when and how the property of the dealer in such a transaction passes to the customer : is it by transfer at the time of delivery of the finished article as a chattel or by accession during the procession of work on fusion to the movable property of the customer? If it is the former, it is a 'sale'; if it is the latter, it is a 'works contract'. Therefore, in judging whether the contract is for a 'sale' or for 'work and labour', the essence of the contract or the reality of the transaction as a whole has to be taken into consideration. The predominant object of the contract,....
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....n of learned counsel for the petitioner, Mr. Pallav Shishodia that after the judgment of the honourable Supreme Court in the case of Builders Association of India [1989] 73 STC 370 (SC); [1989] 2 SCC 645 and Gannon Dunkerley and Co. [1993] 88 STC 204 (SC); [1993] 1 SCC 364, the assessing authority is not entitled to impose tax on works contracts even after the deeming fiction introduced by State Legislatures for bifurcation of indivisible contract into divisible contract for sale and supply and of service and labour, which was the position obtaining prior to 46th Amendment of the Constitution of India by which article 366(29A) of the Constitution of India was amended and State sales tax laws were further amended to fall in line with the said constitutional amendment, which was interpreted and held valid by the honourable Supreme Court in the aforesaid two judgments explaining the entire concept of levy of sales tax, in the case of works contract, the submission of learned counsel for the petitioner that the assessing authority could not integrate the works contract with contract of supply of plant and machinery and impose works contract tax of exemption fees in lieu of such tax, mi....