TaxTMI 
TaxTMI 
2018 (7) TMI 2245
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....in connection with setting up of Diesel Loco Component Factory for manufacturing and sub-assembling of HMD Locos, etc., at Dankuni of the Eastern Railway in the State of West Bengal, India undertaken infrastructure job at the project site. As per the work orders the operational creditor completed the work. An amount of Rs. 6,39,831 is outstanding against the work order being WO-2588 which was for Rs. 1,27,96,395.00. Such amount fell due on September 30, 2013 and Rs. 11,11,950 which is outstanding against work order being WO-2814 which was for Rs. 11,597,485 and that amount fell due on September 30, 2014. (ii) The operational creditor/applicant raised bills after deductions of sales tax and copies of bills is produced and marked as annexures C, D, E and F. As per the work orders the work at the Diesel Locomotive Workshop Project Site of Railways was completed by the operational creditor in terms of the work orders on March 31, 2013 and the work at the Electro Loco Factory Project Site of Railways was done up to March, 2014. Upon raising the bills the amount referred to above is outstanding and despite repeated demands the corporate debtor failed to repay the amount an....
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....deposited by the corporate debtor with the statutory authorities. At the same time the operational creditor was also required, inter alia, to disclose sales turnover and contract transfer price and pay taxes accordingly to the sales tax authorities on the statutory date prescribed. The corporate debtor duly filed its sales tax returns for each year between 2011-12 and 2014-15 pertaining to the said project and claimed benefits and deductions available to the corporate debtor under the prevailing laws. However, when the audit and assessment was done by the authorities under the WBVAT Act and Rules, it appeared that the operational creditor did not disclose and/or wrongly disclosed its sales turnover. That is to say that the operational creditor raised various bills on the corporate debtor but did not disclose the turnover arising out of such bills to the tax authority. This is apparent from the audit report of the Directorate of Commercial Taxes, Government of West Bengal. The operational creditor has, therefore, not paid taxes as per its actual sales turnover as it has not disclosed its actual turnover to the tax authorities for reasons best known to the operational creditor. Due t....
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....iterating the contentions raised by it in the reply affidavit. In addition to the said contentions the corporate debtor contends that the claim, if any, barred by limitation. The recovery against the works orders is on the face of it time barred. Whether there has been extension of the time period of limitation is a question of dispute. Upon the said contentions the corporate debtor also annexed an annexure to sur-rejoinder to show that there was no tax disclosure made by the operational creditor with regard to the transactions with the corporate debtor. Upon the said contentions the corporate debtor prays for rejection of the application. 5. Heard both sides. Perused the records and citations referred to by learned counsel for the applicant as well as learned counsel for the respondent. 6. Upon hearing the arguments and on consideration of the contentions raised on both sides, the point that arises for consideration is whether the respondent/corporate debtor succeeds in proving existence of disputes in respect of the claim of the operational creditor? If not, whether the applicant is barred by limitation? 7. The application is filed by one Mr. Kumar Dutta, sole proprietor....
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....t and did not propose resolution professional. The application of the applicant is, therefore, complete and all the requirement to be meted out for consideration of an application of this nature is fulfilled on the side of the applicant. However, the claim of the applicant is in dispute by the corporate debtor. The balance amount claimed by the operational creditor is allegedly the aggregate amount retained by the corporate debtor raising frivolous allegations regarding the payment of taxes deducted at source by the corporate debtor. To substantiate the contention of the respondent that there exist a dispute regarding the amount retained by tine respondent, learned counsel appearing on the side of the respondent referred to 2 (two) prior demand notices issued by tine operational creditor. Admittedly the operational creditor issued a demand notice dated August 19, 2016 demanding the very same amount from the corporate debtor and to the said demand notice corporate debtor sent a reply raising the very same contentions as raised in the reply notice given to the operational creditor dated January 12, 2018. 12. Annexure G at page 102 of the application is the copy of demand notice is....
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.... did not discharge its tax liabilities for various bills raised on our client for supply of material for various periods during the period of the contract. This is apparent from he audit report of the Directorate of Commercial Taxes, Government of West Bengal. (g) Due to such deliberate and wrongful disclosure and/or suppression of fact by your client, our client faces a huge liability to the sales tax authorities on account of deductions disallowed, for various months throughout the period of contract amounting to lakhs. (h) Such deductions are rightfully available to our client under the prevailing laws but our client is being unlawfully deprived of the same due to your client's wilful and deliberate default in meeting it statutory obligations. (i) As such our client is entitled to claim the entire amount of sales tax liability which has now become a financial liability on our client, from your client and reserves its right to do so at the relevant point of time, once assessment of our client's liability is completed by the Directorate of Commercial Taxes, Government of West Bengal. The authorities will also recover interest and huge penalty fro....
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....h reply it was reiterated that your claim was not payable by us as per our books of account as we have suffered due to your non-disclosure and/or wrong disclosure of your sales turnover and non-discharge of your tax liabilities for various bills raised on us for supply of material for various periods during the period of the contract. We are burdened with liabilities payable to the Directorate of Commercial Taxes, Government of West Bengal solely due to your mala fide acts and/or omissions." 15. The reply notice above referred also clearly reveals that the dispute regarding non-disclosure or wrong disclosure of sales turnover by the operational creditor and non-discharge of operational creditor's tax liability that enabling the corporate debtor to demand back the amount deducted was unsolved in between the operational creditor and the respondent/corporate debtor. 16. Learned counsel for the applicant at this juncture referring to the annexure A, copies of tax returns filed by the operational creditor before the Joint Commissioner of Commercial Taxes, submitted that the operational creditor has paid taxes and the copies of returns prove payment of tax in respect of the wor....
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....on completion of the work contract by the operational creditor has been issued in the month of March, 2014. Admittedly the amount claimed by the operational creditor allegedly due arising out of work orders issued between September 30, 2013 and September 30, 2014. The application in the case in hand has been filed on February 9, 2018. Therefore, the claim of the amount due on the basis of above referred work orders is rime barred. At this juncture learned counsel for the operational creditor referring to the reply notice dated September 24, 2016 submits that there is an admission of amount retained by the corporate debtor and therefore, the period of limitation, if any, only runs from the date of admission, i.e., September 24, 2016 and therefore, there is no limitation. 20. To prove the admission learned counsel for the applicant referred to paragraph 3(1) in annexure H at page 112. It reads as follows: "3. (1) Our client has rightfully retained a portion of the billed amount out of the bills raised by your client until your client meets its contractually and statutory obligation of correctly disclosing the contract transfer price to the Directorate of Commercial ....