TaxTMI 
TaxTMI 
2026 (8) TMI 91
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....laintiff) is a company engaged in execution of infrastructure and construction projects. The respondent, Indian Oil Corporation Limited (the defendant), is a Public Sector Undertaking engaged in the energy sector. Pursuant to Tender No. LPG/ENG/PT-281/12 floated by the respondent for civil work, pre-engineered buildings/sheds, structural and other allied works at its LPG Bottling Plant at Mysuru, the appellant's bid was accepted. A Letter of Intent dated 01.08.2012 was issued, followed by Work Order dated 06.08.2012, of a total contract value of Rs. 9,08,22,617.25. The General Conditions of Contract, the Special Conditions of Contract and the Particular Conditions of Contract, which formed part of the work order. The appellant commenced work on 11.08.2012 and completed the contractual work on 30.10.2013, and the respondent accepted the completed work. 3. During the execution of the contract, the respondent retained 10% of each running account bill towards security deposit aggregating to Rs. 97,07,341 in accordance with the agreement. As stipulated under the Particular Conditions of Contract, on the appellant's requests dated 15.11.2014 (Ex.P6) and 29.11.2014 (Ex.P7), the....
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.... 21.04.2016 (Ex. P-18) had put the appellant on notice that the loss of Input Tax Credit (ITC) would be adjusted against payments due. 5. The appellant, having obtained a non-starter report in PIM No. 558/2022 from the District Legal Services Authority, Bengaluru, instituted Com. O.S. No. 1490/2022. In the said case, the Commercial Court framed the following issues: "1. Whether the plaintiff proves that defendant is liable to pay an amount of Rs. 36,64,474/- withhold by the defendant inspite of plaintiff had provided all requisite documentation pertaining to VAT as requested by the defendant and thereby he is liable to pay the same along with interest @ 18% per annum from due date till realization of the amount? 2. What order or decree?" 6. The Commercial Court answered Issue No.1 in the negative. It held that the burden lay throughout upon the appellant to prove that it had paid the tax and had submitted proper tax invoices. Accordingly, it was held that the appellant had failed to establish the submission of valid tax invoices in accordance with law, and concluded that the respondent's version was the more probable one and that the withholding of pa....
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....ution of the work. It is further contended that clause 1.9 of the Particular Conditions of the Contract authorises deduction only of compensation or other sums payable by the contractor under the contract. The alleged loss of ITC is not a contractual liability payable by the contractor, but merely a statutory consequence claimed by the respondent. Therefore, the respondent has no contractual authority to appropriate the security deposit towards such alleged loss. It is contended that although the respondent asserted that it had suffered a monetary loss of Rs. 36,64,474, it did not file any counter claim seeking recovery of the said amount. The respondent merely raised the plea by way of a defence without seeking adjudication of its alleged claim. In the absence of a counter claim, conjoint evidence establishing actual loss and proof of contractual entitlement to recover the same from the security deposit, the respondent could not lawfully retain the plaintiff's money. Submissions on behalf of the respondent 9. The learned Senior Counsel appearing for the respondent submits that the appellant failed to discharge the burden of proof cast upon it under Section 101 of the Indian....
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....there was no material to show that invoices marked as Ex. P22 series had actually been delivered to the respondent and that PW1 also admitted that the revised invoices had subsequently been prepared and forwarded to the respondent, but the said revised invoices were not produced before the court and that these admissions, according to the respondent, substantially discredit the appellant's case. 13. Further, it is contended that the comparison between Ex. P-22 series and Ex. D-1 and Ex. D-2 materially differ. The discrepancy in WCT rates and other statutory particulars clearly demonstrated that the appellant had failed to produce genuine and valid tax invoices. It is argued that the burden of proof never shifted to the respondent because the appellant had failed to establish the foundational facts necessary to make out its claim. 14. Reliance is placed on the decisions of the Supreme Court in Anil Rishi vs Gurbaksh Singh (2006) 5 SCC 558, Smriti Debbarma (Dead) through L.R vs Prabha Ranjan Debbarma (2023) 19 SCC 782 and Mohd. Abdullah Azam Khan vs Nawab Kazim Ali Khan (2022) 20 SCC 233 to contend that the initial burden under Section 101 of the Evidence Act always rests u....
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....s the affirmative issues and not the party who denies it. The said rule may not be universal in its application and there may be an exception thereto. The learned trial court and the High Court proceeded on the basis that the defendant was in a dominating position and there had been a fiduciary relationship between the parties. The appellant in his written statement denied and disputed the said averments made in the plaint. x x x 19. There is another aspect of the matter which should be borne in mind. A distinction exists between burden of proof and onus of proof. The right to begin follows onus probandi. It assumes importance in the early stage of a case. The question of onus of proof has greater force, where the question is, which party is to begin. Burden of proof is used in three ways: (i) to indicate the duty of bringing forward evidence in support of a proposition at the beginning or later; (ii) to make that of establishing a proposition as against all counter-evidence; and (iii) an indiscriminate use in which it may mean either or both of the others. The elementary rule in Section 101 is inflexible. In terms of Section 102 the ini....
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....by it, each time the Plaintiff was called upon to do so. As such, it is submitted that the Defendant cannot now withhold amounts lawfully due to the Plaintiff on the frivolous grounds detailed above." 20. The appellant specifically pleaded that all tax invoices and VAT-related documents had been furnished to the respondent during the execution of the contract and that, whenever further documents were sought during 2019 and 2020, the same was furnished again. PW-1, in his examination-in-chief deposed as such: "6. During the execution of the tender works, it is pertinent to note that the Plaintiff raised several invoices on the Defendant, per the format prescribed under the Karnataka Value Added Tax Act, 2003 ('KVAT Act') in as much as the invoices contained a consecutive serial number, the date of issue, details of the seller (the Plaintiff), name and address of the buyer (the Defendant), the description and value of the goods, the rate and amount of tax charged, total value, and signature of selling dealer. Each of these invoices was accepted by the Defendant at the time of submission. ***** ***** ***** 18. In response to this email, the Plaint....
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....Ex.P.4 and asked him whether the form prescribed in the said clauses have been furnished to the plaintiff. Witness answers that such forms have been furnished by the defendant to the plaintiff. We have sent the said format through the email. The said email is not the part of the record. I do not know the fact that whether we have responded to Ex.D.4 email. I do not know whether we have provided the format prescribed in clauses 6.2.1 and 6.4.1 to the plaintiff or not. I am not aware that when the defendant has made payments to the plaintiff as per Ex.D.3. The defendant regularly submitted monthly returns through K-VAT. Within 20th day of succeeding month we have submitted K-VAT returns to the payments shown in Ex.D.3. The defendant can produce the said VAT returns to the court. Witness again states that the defendant has not filed K-VAT returns to the payments shown in the Ex.D.3. The plaintiff had submitted wrong invoices therefore we could not able to file K-VAT returns and could not able to get the Input Tax Credit. I do not know that the defendant asked for the revised invoice from the plaintiff as per Ex.D.4 for the first time. It is true to suggest that the plaintiff has raise....
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....asserts the existence of a particular state of things on the basis of which she claims relief. This is mandated in terms of Section 101 of the Evidence Act, which states that burden of proving the fact rests with party who substantially asserts in the affirmative and not on the party which is denying it. This rule may not be universal and has exceptions, but in the factual background of the present case, the general principle is applicable. In terms of Section 102 of the Evidence Act, if both parties fail to adduce evidence, the suit must fail. Onus of proof, no doubt shifts and the shifting is a continuous process in the evaluation of evidence, but this happens when in a suit for title and possession, the plaintiff has been able to create a high degree of probability to shift the onus on the defendant. In the absence of such evidence, the burden of proof lies on the plaintiff and can be discharged only when he is able to prove title. The weakness of the defence cannot be a justification to decree the suit." 27. In Mohd. Abdullah Azam Khan (supra), it is held : "77. It is also to be noted at this juncture that there is an essential distinction between burden of proof an....
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.... of the Particular Conditions of Contract. Those clauses are set out as below: "1.3 No claim shall lie against the Corporation in respect of interest on cash deposit or depreciation thereof. The Corporation shall be entitled to deduct from the deposit any loss or damage which the Corporation may be put to by reason of any act or default recoverable by the Corporation from the Vendor and to call upon the Vendor to maintain the deposit at the original limit by making further deposits. 1.8 The refund of security deposit: The security deposit will be released after 12 months from the work completion date and receipt of performance bank guarantee valid for five years as per contract terms & conditions. 1.9 Forfeiture of SD: - All sums of compensation or other sums of money payable by the vendor may be deducted from SD. In the event of SD being reduced from the original quantum due to recoveries as aforesaid the vendor shall with in 15 days of recoveries, make good deficiency in SD either by cash or by way of Demand Draft." 29. These clauses require careful interpretation. Clause 1.3 authorises deduction only of loss or damage suffered by the Corporation by ....
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....ng that no person can take advantage of his own wrong. If the respondent had indeed been filing monthly VAT Returns and had accepted the invoices, issued Form VAT 156 and processed the payment without objections, any failure to avail the statutory benefit within the prescribed period cannot automatically be attributed to the appellant. A party cannot remain silent during the statutory period, fail to rectify the alleged defect and thereafter shift the consequences of its own omission upon the other contracting party. 33. The evidence on record establishes that the appellant completed the contractual work, fulfilled its statutory contractual obligation, furnished the documents demanded by the respondent and repeatedly sought refund of the balance security deposit after expiry of the warranty period. While the respondent has failed to establish the contractual default, actual loss, causal connection and contractual authority necessary to justify withholding the amount, the Commercial Court was not justified in holding that the respondent was entitled to deduct Rs. 36,64,474 from the security deposit. The impugned judgment is unsustainable and liable to be set aside. The appellant ....