PERSYS PUNJ LLOYD JOINT VENTURE V. COMMISSIONER OF VAT

W.P.(C)/10287/2009

AI Insights

The case involves four writ petitions filed by M/S Persys Punj Lloyd Joint Venture against the Commissioner of VAT and others, challenging the reassessment orders and the withholding of tax refunds. The petitions arose from orders under the Delhi Sales Tax on Works Contracts Act, 1999, and the Delhi Sales Act, 1975. The petitioner, a joint venture between a Malaysian and an Indian company, was involved in contracts with the Delhi Metro Rail Corporation (DMRC) and faced issues related to tax deductions and refunds. The court examined the legality of the reassessment orders and the procedural lapses in withholding the refunds.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 692977 (HC-DELHI)
• Appeal Type: Others
• Pronouncement Date: 12-02-2013
• Assessment Year: misc
• Other Referred Cases: Calcutta Discount Co. Ltd. vs. Income Tax Officer, State of Himachal Pradesh & Ors. vs. Gujarat Ambuja Cement Ltd., Ram and Shyam Company vs. State of Haryana, Godrej Sara Lee Limited vs. Asst. Commissioner, Whirlpool Corporation vs. Registrar Trade Marks, Mumtaz Post Graduate Degree College vs. Vice Chancellor
• Laws Referred To: Delhi Sales Tax on Works Contracts Act, 1999, Delhi Sales Act, 1975, Constitution of India
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: VINEET BHATIA
• Assessee Lawyers: RANDHIR CHAWLA; RENU SAHGAL
• Keywords: Assessment; Reassessment; Refund; Tax deduction at source; Works contract; Writ petition
• Section: 7(3); 24; 16; 23(3); 7(7); 7(8)

Judgement Text

"IN THE HIGH COURT OF DELHI AT NEW DELHI Reserved on: 13''^ December, 2012 % Date ofDecision: 12\"^ February, 2013 V + W.P.(C) 8620/2009, C.M. APPL. 5744/2009 + W.P.(C) 10287/2009 + W.P.(C) 10311/2009 + W.P.(C) 10312/2009 M/S PERSYS PUNJ LLOYD JOINT VENTURE ..... Petitioner Through: Mr. Randhir Chawla and Ms. Renu Sahgal, Advocates.' versus COMMISSIONER OF VAT & ORS. Respondent Tlirough: Mr. Vineet Bhatia, Advocate. CORAM: MR. JUSTICE S. RAVINDRA BHAT MR. JUSTICE R.V. EASWAR R.V. EASWAR, J.: 1. These are four writ petitions filed under article 226 ofthe Constitution of India by M/s. Persys Punj Lloyd Joint Venture of New Delhi, hereinafter referred to as 'the petitioner'. They arise from orders passed under the Delhi Sales Tax on Works Contracts Act, 1999 ('WC Act') read with Delhi Sales Act, 1975 ('DST Act'). Since all the petitions were heard together and three ofthem also involve common issues, they are disposed ofby asingle order for the sake of convenience. WP(C)Nos.8620'/2009, 10287/2009, 10311/2009 & 10312/2009 Page 1of33 Signed By:RAM DATT Signing Date:12.09.2024 11:03 Certify that the digital and physical file have been compared and the digital data is as per the physical file and no page is missing. Signature Not Verified W.P. (C) No.8620/2009 2. This writ petition has been filed in the following circumstances. The petitioner is a joint venture consisting of two companies-Persys SDN BHD, a company incorporated, in Malaysia and having a local project office in Delhi and Punj Lloyd Ltd., a company incorporated in India under the Companies Act, 1956. Both these companies are registered with the sales tax department of the Government ofNCT of Delhi separately under the WC Act and the DST Act. The Malaysian company and the Indian company were separately awarded contracts by the Delhi Metro Rail Corporation (DMRC) for execution of certain works. The Malaysian company was awarded the contract for reinforced and pre-stressing steel, pre-cast concrete work for the superstructure and the Indian company was to execute the work in connection with the survey, temporary barricades, pile foundations, etc. Under a memorandum of understanding executed on 10.10.2003 these two companies came together as a joint venture. Under the MOU, each member of the joint venture had to raise its own independent bill for the work executed and the payment was to be received by the joint venture from DMRC to be distributed by the joint venture between its two members in terms oftheir separate bills. The petitioner, which is the joint venture, was also registered as adealer under the WC Act w. e. f. 13.01.2013. 3. On 21.03.2005, an assessment was completed upon the petitioner under Section 16 of the WC Act reatd with Section 23(3) of the DST Act. The assessmentorder is brief and it would be better to reproducethe same: - \"FORM OF ORDER OF ASSESSMENT UNDER SECTION 16 OF THE DELHI SALES TAX ON WORK CONTRACT, 1999 READ WITH 23(3) OF THE DELHISALES TAXACT, 1975 WP(C)Nos.8620/2009, 10287/2009, 103I1/2009& 10312/2009 Page2of33 WARD-62 1. Name & Address of the dealer: M/s Persys Punj Lloyd Joint Venture 1/4 Sunder Vihar, New Delhi-87 2. Nature ofbusiness: Construction 3. Registration certificate No. JVC/62/213000534/ 1003 4. P eriod ofAssessment 2003-04 5. Section & Sub-section under which assessment made 16 r/w 23(3) assessment ORDF.n The L&Vhas beenfixed w.e.f. 22.10.73. The dealer deals in the above business. Returns have been filed in time exceptfor f' and 4' qrs hence penalty of riOOO/- is imposed Sale figures differ and the same is allowed. In •response to notice, Shri Rajneesh Goyal CA with POA appeared before me andfiled trading account, sales summary, affidavit, audited balance sheet and details ofpayment. The dealer has filed 2 TDS certificate and the credit of the tax deposited is given after verification. Nothing adverse on record. The assessment isframed as under: GTO Labour & Service Sub-contract Taxable 4% Taxable 8% 293234912 0 293234912 0 0 Tax assd Tax/TDSpaid Tax due Interest Penalty 0 8697203 8507203 0 1000 (f^ WP(C) Nos.8620/2009, 10287/2009, 10311/2009 & 10312/2009 Page 3 of33 4. Taxpaidprucha 0 Total The dealer may applyfor refund asper rules. 8506203 Copy to dealer/Audit AA/W-62 Sd/- Senh Lata AA/W-62 AA/W-62 6394 21.3.05'' Sections 5and 7ofthe WC Act are as follows; - ''Section 5 - Lew oftax (1) Save as provided in sub-sections (2), (3), (4) (5) and ^6) even> dealer shallfile return andpay ,a/under mfctMeich year on his taxable turnover ofsales or transfer ofproperty in goods (whether as goods or in some otherform) involved in the execution ofworh contract, in the manner as may be prescribed at the rate of eight paise on every rupee of his net turnover of sales. •' (2) Tax shall bepaidat the rate offour paise on every rupee ofhis net turnover ofsales pertaining to declared goods, ifthe goods have not suffered tax earlier, and no tax shall be payable on the turnover ofsalespertaining to declaredgoods, ifsuch goods have suffered tax earlier under the Delhi Sales Tax Act and transferred f om the contractor to the contractee in the same form in which theywerepurchased bythe contractor. (3) No tax shall be levied on the turnover ofsale on transfer of , property in goods, specified in the Third Schedule to the Delhi Sales Tax Act, involved in the execution ofworks contract, ifsuch goods are transferredfrom the contractor to the contractee in the sameform inwhich they werepurchasedby the contractor. (4) No such tax shall be leviable on the turnover of sales on transfer ofproperty in goods, whether as goods or insome other form involved in the execution ofworks contract, ifsuch transfer WP(C) Nos.8620/2009, 10287/2009, 10311/2009 & 10312/2009 Page 4 of33 s from the contractor to the contractee constitutes a sales in the course ofinter-State trade or commerce under section 3 or a sale outside the State under section 4or asale in the course ofimport orexport under section 5ofthe CentralSales Tax Act, 1956. (5) No tax shall be payable under this section on the turnover of sales^ relating to the amount paid to a sub-contractor as considerationfor the execution ofworks contract whether wholly orpartly subject to the production ofproof as may beprescribed, that such sub-contractor is a registered dealer liable to tax under the Act and that the turnover ofsuch amount is included in the return ofturnoverfded by such sub-contractor and tax thereupon has been paid. (6) No tax shall be payable under this section on the amount representing the value ofthe goods supplied to the contractor by the contractee, provided that the ownership ofsuch goods remains with the contractee under the terms ofthe contract. (7) Where in respect ofsale price referred to in clause (q) ofsub section (1) ofsection 2, the contractor does not maintain proper accounts or the accounts maintained by him are notfound by the assessing authority to be worthy of credence and the amount actually incurred towards charges for labour and other services and profit relating to supply of lab.our and services are not ascertainable, such charges for labour and services and such profit may, for thepurposes ofdeductions, be determined on the basis ofsuch percentage ofthe value ofthe works contract as may be prescribed and different percentages may be prescribed for different types or works contract. Section —7 Deduction oftax at source (1) Every person other than Individual and Hindu Undivided Family responsible for making payment to any dealer (hereinafter in this section referred to as \"the contractor\") for discharge of any liability on account of valuable consideration WP(C)Nos.8620/2009, 10287/2009, 10311/2009 &10312/2009 Page5of33 • payable for the transfer ofproperty in goods (whether as goods or in some other form) in pursuance ofa contract, shall, at the time ofcredit ofsuch sum to the account of the contractor or at the time ofmaking such payment to the contractor, either in cash or in any other manner, deduct an amount equal to twoper cent from such^ sum towards part or, as the case may be full satisfaction ofthe tax payable under this Act on account oftotal value ofsuch works contract (2) Where, on an application being made by the contractor in this behalf, the Commissioner is satisfied that any works contract involves both transfer of property in goods and labour and service, or involves only labour and service and accordingly, justifies deduction of tax on a part of the sum in respect of the words contract or, as reasonable opportunity of being heard, grant himsuch certification as may be appropriate: Provided that nothing in the said certificate shall affect the assessment of the sales tax liability of the contractor under this Act: Providedfurther that where any deduction has been made by a contractor from the payments made to his sub-contractor in accordance with sub-section (3) the amounts of such payments shall be deducted from the amount on which deduction is to be made under this sub-section subject to production ofa certificate as prescribed in sub-section (5) ofthis section.'' (3) Any contractor responsible for making any payment or discharge ofany liability to any sub-contractor, in pursuance ofa contract with the sub-contractor, for the transfer ofproperty in goods (whether as goods or in some other form) involved in the execution, whether wholly or in a part, of the works contract undertaken by the contractor, shall, at the time ofsuch payment or discharge, in cash or by cheque or draft or any other mode, deduct an amount equal to two per cent, of such payment or discharge, purporting to bepart orfull amount ofthe taxpayable under this Act. WP(C) Nos.8620/2009, 10287/2009, 10311/2009 & 10312/2009 Page6of33 fJAJ (i) A contractor with respect to the contracts other than the private contracts, may make an application to the contractee authorising him to deduct tax at the rate offour per cent, towards the taxpayable under this Act instead oftwoper cent, asprovided insub-section (1) ofthissection. (ii) Where an application is made by the contractor under clause (i) ofthis sub-section, and a copy thereofisforwarded to the appropriate assessing authority by the contractor, the contractor shall be deemed to have opted for composition under section 6 ofthisAct (Hi) A conti'actor, to whom the provision ofclause (i) ofthis sub-section applies, may be assessed in a summary manner on the basis ofthe annual returnfiled by him without being called upon to produce the books of accounts and other records relating to his business.] (4) The amount deducted under sub-section (1) or sub-section (2) or sub-section (3) shall be deposited into the Government treasury by the person making such deduction before the expiry offifteen daysfollowing the month in which such deduction is made in the manner as may beprescribed. (5) The person making such deduction under sub-section (1) or sub-section (2) or sub-section (3) shall, at the time ofpayment or discharge, furnish to the dealer from whose bills or invoices such deduction is made a certificate as may beprescribed in respect of the amount deducted, the rate at which it has been deducted and the details ofdeposit into the treasury. (6) Any deduction made in accordance with the provisions ofthis section and credited into the Government treasury shall be treated as payment of tax on behalf of the person from whose bills or invoices the deduction has been made, and credit shall be given to him for the amount so deducted on the production of the certificate, referred to in sub-section (5) above, in the assessment' made for the relevant assessmentyear. WP(C) Nos.8620/2009, 10287/2009, 10311/2009 & 10312/2009 Page7 of33 [(7) If any person, as is referred to in sub-section (I) or sub section (2) or sub-section (3) ofsub-section (3A), fails to nmke the deduction, or after deducting, fails to deposit the amount so deducted as required by sub-section (4), the assessing authority may, after giving to suchperson an opportunity ofbeing heard, by order in writing, direct that such person shall pay, by way of penalty, a sum not exceeding twice the amount deductible under this section besides tax deductible but not so deducted and, if deducted, notsodeposited into the Government treasury.] (8) Without prejudice to the provisions ofsub-section (7), if any personfails to make deduction, or, afterdeducting, fails todeposit the amount so deducted, he shall be liable to pay simple interest at the rate of two per cent, per month on the amount deductible under this section but not so deducted and, if deducted, not so depositedfrom the date on which such amount was deductible to the date onwhich suchpayment isactually deposited. (9) Where the amount has not been, deposited after deduction, such amount together with interest andpenaltyreferredto insub section (7) and sub-section (8) shall be a charge upon all the assets ofthe person concerned and recoverable as arrears ofland revenue. [(10) Everyperson responsiblefor making deduction oftax under this section shall apply to the Commissionerfor a Tax Deduction Account Number within the prescribed time and in the prescribed form and shall also furnish an annual return in the prescribed form within theprescribedperiod. Explanation—Nothing contained in this section shall apply to works contract executed in the course of inter-State trade or commerce or outside the State, or in the course of import or export out ofIndiaJ 5. Section 5 of the WC Act provides for the levy of tax on works contract. Sub-section (2) provides for the rate of four paise on every rupee of the net WP(C) Nos.8620/2009, 10287/2009, 10311/2009 & 10312/2009 Page 8 of33 turnover of the dealer as tax. Section 2(r) of the WC Act defines \"taxable turnover\" to mean \"such turnover as is arrived at after deducting from the turnover ofsales such amounts as may be prescribed\". Section 2(t) defines \"turnover ofsales\"to mean ''the aggregate ofthe amount ofsaleprice received or receivable by a dealer in respect of the execution of any works contract whether executedfully orpartly during any period\". Rule 5 ofthe Delhi Sales tax on Works Contract Rules, 1999 provides for the computation oftaxable turnover of sales. This has to be read with sub-section (5) of Section 5 ofthe WC Act which we have quoted above. Clause (b) ofsub-rule (1) ofrule 5ofthe aforesaid rules provides for the deduction, from the turnover of sales of the dealer, of \"amounts paid to a sub-contractor for the execution of works contract provided such a sub-contractor is a registered dealer and that turnover is included in the return filed by him before the assessing authority concerned and the sub-contractor furnishes a declaration in Form VI\". The combined effect ofthe above provisions ofthe WC Act and the Rules is that the petitioner is entitled to deduct, from the amounts received from DMRC for the execution of the contract, the amounts paid to its constituents (i.e., the Malaysian and Indian companies) and obtain from them the declaration in Form VI. This declaration, as mandated in sub-section (5) of Section 5 of the Act, shall be to the effect that the amounts received by the sub-contractors (the constituents of the petitioner) are included in the return of turnover filed by them and the tax thereupon has been paid. The specimen Form VI is as follows: \"THE DELHISALES TAX ON WORKS CONTRACTRULES, 1999 Form VI (See Rule 5(l)(b)) WP(C) Nos.8620/2009, 10287/2009, 10311/2009 & 10312/2009 Page 9 of 33 0 Certificate regardingpayment oftax made by the Sub-Contractor I authorised representative of who is registered dealer holding Reg.No under the Delhi State Tax on Works Contract Act, 1999 hereby certify that I have undertaken the sub-contract workfrom who is a registered dealer holding Registration No The details of the Sub- Contract are as under 1.Description & particulars ofworks contracts undertaken: 2. Total value of the works contract undertaken from to .Rs.... 3.Turnover of Taxable sales in respect ofperiod from to Rs. Declared Goods Other than Declared Goods Turnover of Taxable Sales Taxpaid 4. Amount ofsales tax paid'on the turnover referred to at SI. No.3: 5. Particulars ofpayment: Period Challan No. Date Amount oftax Total Place: Date WP(C)Nos.8620/2009, 10287/2009, 10311/2009 & 10312/2009 Signature Status Page 10 of33 s 6. It will be seen from the assessment order that a refund of ^85,06,203/- was determined as payable tothe petitioner. DMRC paid ^29,32,34,912/- to the petitioner inrespect ofthe tax period 2003-04 out ofwhich tax of?86,97,203/- was deducted. Since the petitioner was only ajoint venture oftwo companies and was to act merely as a conduit for passing on the monies to the member- companies who were sub-contractors who were to actually carry out the work, the assessment order refers to the sub-contract to show that the entire amount received by the petitioner from DMRC was paid to the sub-contractors i.e. the members of the joint venture., Accordingly, a refund of ?85,06,203/- was determined as payable to the petitioner after deduction ofpenalty of?1,000/- for delay in filing the return. There is some difference between the figure of TDS and the figure of the refund but that should not detain us because it is common ground that the refund due to petitioner is ?85,07,203/- as per prayer (i) ofthe writ petition. 7. On 08.06.2006 an assessment order under Section 23(6) of the DST Act read with Section 16 of the WC Act was passed for the tax year 2003-04 (22.10.2003 to 12.01.2004). In this assessment order the taxable sale of the petitioner and the tax assessed were determined at ? nil. It was further noticed in the assessment order that the mobilisation advanced of ^19,32,57,640/- received by the.petitioner from DMRC was subjected to tax deducted at source. However, it was stated in the assessment order that the refund of the tax deducted at source shall be discussed in the assessment order to be passed under Section 23(3) and the refund shall be considered separately in the reassessment order to be passed under Section 24, subject to verification of Forms-VI and IX WP(C) Nos.8620/2009, 10287/2009, 10311/2009 & 10312/2009 Page 11 of 33 filed by the sub-contractor and the petitioner respectively. On the same day, i.e., 08.06.2006 areassessment order was passed for the tax period I3.O1I2OO4 to 31.03.2004 relevant to the tax year 2003-04 under Section 24 ofthe DST Act read with Section 16 of the WC Act. It would be neccssaiy to reproduce the entire reassessment order in order to appreciate the controversy in proper perspective and also in order to appreciate the rival stands. The reassessment order is reproduced below: - ''FORM OF ORDER OF ASSESSMENT UNDER SECTION 16 OF THE DELHI SALES TAX ON WORK CONTRACT 1999 READ WITH24 OF THEDELHISALES TAXACT, 1975 ' WARD-62 1. Name & Address of the dealer: M/s Persys Punj Lloyd Joint Venture 1/4 Sunder Vihar, New Delhi-87 2. Nature ofbusiness: Construction 3. Registration certificate No. WC/62/213000534/ 1003 4. Period ofAssessment 2003-04 (13-1- 2004 to 31-3-2004) 5. Section & Sub-section under which assessment made 24 ASSESSMENT ORDER WP(C) Nos.8620/2009, 10287/2009, 10311/2009 & 10312/2009 Page 12 of33 In response to notice ST-15 read with WCC Act, 1999 issuedfor 4.07.2005. Shri Rajneesh Goel, Advocate with POA appeared on 8.8.2005andfinally on 8.5.2006. Filed sale summary, written submissions dated 13.9.2005 challenging reassessment dated 8.5.2006,- affidavit dated 31.03.2006, photocopies These applications sought rectification of the mistake allegedly committed by the assessing authority while passing the orders determining the refund and mentioning thattheletters have been issued to DMRC for verification ofthe tax deducted at source by them from the payments made to the petitioner. The letters have been filed as Armexure P-III to the w^rit petition. We consider it necessary to reproduce one ofthese letters: - ''Rajnish Goyal & Associates ADVOCATES & ATTORNEYS E-mail: The D. V.A.TO. Ward No. 62 New Delhi Resi.:22371556, 22376332 Mob.: [phone] I-1/16, Shanti Mohan House (Behind Shiv Mandir) Ansari Road, Darya Ganj New Delhi -110002. Dated: 23.06.2006 Sub: M/S PERSYS PUNJLLOYD JOINT VENTURE 'A, Sunder Vihar, Paschim Vihar, New Delhi - Rectification of Mistake in Re-Assessment under Delhi Sales Tax on Works Contract Actfor Asst. Year 2003-04 & Issuance of Refund r^egarding. Dear Sir, This is with reference to the reassessment for the Asst. Year 2003-04 completed in the case ofthe captioned assessee by your learned predecessor under the Delhi Sales Tax on Works Contract Act, 1999 (hereinafter referred to as the 'Act'). While completing the assessment, it has been mentioned in the Reassessment Order, that as per the Form IX issued by the Delhi Metro Rail Corporation ltd. (DMRC) a total amount of ^5,07,203.00 has been deducted at source and also deposited by them in the Govt. Treasury on behalfof the assessee. Since the WP(C) Nos.8620/2009, 10287/2009, 10311/2009 & 10312/2009 Page17of33 tax payable as per the reassessment order is Nil, the entire amount of ^5,07,203.00 is Refundable in the hands of the assessee. The Assessing Officer has notgiven creditfor the taxes paid by the DMRC Ltd., despite Form IXhaving been issued by it infavour of the assessee and also copies ofall the Challans in respect of the payments made in the Govt. Treasury being submitted at the time of completion of assessment and already there on record. TheDepartment had issued letter to DMRCLtd. regarding verification of the payments made by them. However, the DMRC Ltd., after verifyingfrom their advisors, has informed us that there was no needfor any separate certificate and the TDS Certificate in Form No.IX alongwith the copies of the challans already issued in respect of the deposit of taxes made were sufficient evidence for the allowability of credit to the assessee. In view of the aforesaid, you honour is requested to pass requisite Orders for the Rectification of mistake, allowing of credit of taxes deducted/ paid & the Issuance of Refund of ^8,07,203.00 along with upto date interest on the same. Thankingyou. Yoursfaithfully, (RAJNISH GOYAL) ADVOCATE Counselfor the assessee\" r 12. The above application for rectification did not evoke any response from therespondents, compelling thepetitioner to remind them by a series of letters/ reminders dated 16.10.2006, 22.01.2007, 16-17.07.2007 and 23.08.2007. Eventually on 20.09.2007 the second respondent (VATO) wrote letters to the petitioners stating that there was no mistake apparent from the record which WP(C) Nos.8620/2009, 10287/2009, I0311/2009.& 10312/2009 Pagel8of33 required rectification under Section 48 of the DST Act in relation to the issuance ofrefunds for the assessment years 2003-04 and 2004-05. Even after receipt ofthe aforesaid letters, the petitioner kept writing to the respondents in the matter of issuing the refiinds. It was repeated that the refunds had already been determined in the assessment orders subject to verification with DMRC, that these orders were passed in the year 2006, that the TDS certificate in Form- IX issued by DMRC and the payment which was duly certified by the DMRC were also submitted by the petitioner and were part of the record and that the verification part should not take such along and unreasonable time and in these circumstances it was prayed that the refunds may be issued as early as possible. Formal applications for refiind in the prescribed form (Form ST-21 prescribed by Rule 29) were also submitted on 13.01.2008 seeking refund of?85,07,203/- for the assessment year 2003-04 and ^2,20,60,306/- for the assessment year 2004-05. Despite these applications and reminders, the assessing authority did not refund the amounts. Instead of refunding the amounts, the assessing authority in fact started reassessment proceedings which culminated in reassessment orders being passed under Section 24 of the DST Act on 11.05.2009 raising demands of tax, interest and penalty which virtually nullified the refunds. 13. The contention of the petitioner, predictably, is that the refunds have been determined by the assessing authority under orders validly passed and there being no dispute regarding the authenticity/ genuineness of the certificate of TDS issued by DMRC in Form-IX and there being no further liability upon the petitioner to pay any tax under the WC Act in respect of the contracts with DMRC which were to be executed only by the member-companies of the WP(C) Nos.8620/2009, 10287/2009, 10311/2009 & 10312/2009 Page19of33 petitioner and there being no dispute that the petitioner was merely acting as a conduit for passing on the monies from DMRC to the Malaysian and Indian company which actually carry out the works, and there being no statutory impediment in issuing the refunds, the action ofthe respondents in withholding the refunds for an unreasonably long period of time without any justification whatsoever is arbitrary, illegal and cannot be countenanced at all. It was even suggested in the course of the arguments on behalf of the petitioner that the action of the respondents was malafide in as much as they proceeded to pass reassessment orders on 11.05.2009 raising huge demands of tax, interest and penalty merely to withhold refunds allegedly determined. WPfC)Nos.10311/2009.10312/2009 and 10287/2009 14. The relevant facts in connection with these three writ petitions mayjnow be stated. After the completion of the earlier assessments/re-assessments in respect of the Assessment Years 2003-04 and 2004-05, a show cause notice was issued to the petitioner on 1?\"' April, 2009. The show cause notice was issued interms ofSection 7(7) ofthe WC Act, which provides as under:- \"(7) If any person as is referred to in sub-section (1) of sub section (2) or sub-section (3)fails to make the deduction or, after deductingfails to deposit the amount so deducted as required by sub-section (4), the assessing authority may, after giving to such person an opportunity ofbeing heard, by order in writing, direct that such person shall pay, by way of penalty, a sum not exceeding twice the amount deductible under this section besides tax deductible but not so deducted and, if deducted, not so deposited into the Government treasury. \" WP(C)Nos.8620/2009, 10287/2009, 10311/2009 & 10312/2009 , Page 20 of 33 15. The show cause notice issued on 17.04.2009 was for the alleged failure of the petitioner to comply with the provisions of Section 7(3) of the WC Act; the petitioner was asked to show cause as to why the penalty for such failure cannot be imposed under Section 7(7). 16.. It would appear that the petitioner submitted a detailed reply dated 29.04.2009 to the assessing authority, pointing out that even as per the earlier assessment/re-assessment orders, the petitioner had submitted Form No. VI issued by the sub-contractors and that in those forms, the sub-contractors i.e. the member-companies of the joint venture have certified that they have undertaken the work from the petitioner and that the sales tax on the turnover in executing the contract was paid by them. It was pointed out that all the particulars relating to the total value ofthe works contract undertaken by the sub-contractors, the turnover ofsales, and the details ofpayments oftax such as challan number, date, relevant period etc. were furnished in those forms which were part of the record. It was thus pointed out, inter alia, that there was no such failure on the part of thepetitioner as would attract the penalty provisions of Section 7(7) and a prayer was accordingly made that the proceedings may be dropped. It is not known as to what happened to those proceedings. 17. However, on 27.04.2009 i.e. two days prior to the date on which the petitioner submitted its detailed reply to the show cause notice, the assessing authority issued notices under Section 24 of the DST Act read with Section 16 of the WC Act in Form ST-15 seeking to re-open the assessments for the Assessment Years 2003-04 and 2004-05. At the end of the notices, the assessing authority recorded the reason for re-opening the assessments. For WP(C) Nos.8620/2009, 10287/2009, 10311/2009 & 10312/2009 Page 21 of 33 instance, in the notice of re-opening issued for the period 13.01.2004 to 31.03.2004, the following reason was mentioned:- \"Reason: the dealer was required to deduct TDS @2%from the payment made to sub-contractor but the dealer failed to do so. Accordingoy ST-15 issuedfor re-assessment ofcase for the year 2003-04 (13.01.2004 - 31.03.2004) \" 18. Similar reasons were recorded in the other two re-opening notices, the only difference being the tax period. In the notice which is the subject matter of challenge in WP(C) No.10312/2009, the tax period mentioned in the reason is 22.10.2003 to 12.01.2004 and in the notice of re-opening which is the subject matter of challenge in WP(C) No.10287/20.09, the tax period mentioned is 13.01.2004 to 31.03.2004 relating to the Assessment Year 2004-05. Except for these differences, the notices are the same. 19. On receiving the notices, the petitioner sought time of 15 days on the ground that the officer concerned who was looking after the sales tax matters was out of station. Apparently, this request did not find favour with the respondents who passed ex pane re-assessment orders, referring to the petitioner's reply dated 29.04.2009 in response to the show cause notice issued under Section 7(7) ofthe WC Act. 20. All the re-assessment orders were passed on the same day i.e. 11\"^ May, 2009. We may reproduce as specimen, the re-assessment order in respect of the Assessment Year 2003-04 (13.01.2004-31.03.2004):- \"Form oforder ofassessment under Section 24 ofDSTAct 1975 read with Section 16/7(7) and Section 7(8) of DST on work Contract Act, 1999. WP(C) Nos.8620/2009, 10287/2009, 10311/2009 & 10312/2009 Page 22 of 33 Name ofthe dealer: M/s Persys Punj LloydJ.V Address ofthe dealer: V4 Sunder Vihar, Paschim Vikar, New Delhi-63 Nature ofBusiness: Construction Registration Certificate: WC/62/213000534/1003 Assessment Period: 2003-04 (13.01.2004 to 31.03.2004) Re-Assessment Order The above named dealer is regd. Under WCT Act 1999 w.e.f 13.01.2003 and he was liable to deduct TDS from the payment made to M/s Persys SDMBHD andM/s Punj LloydLtd as per section 7(3) ofDST on work contract Act, 1999. But he failed to deduct the TDS @2% on payment of ^242553806/- made to above suh-conti'actors. The dealer was asked to explain the reason for sales tax on Contract Act, 1999 vide notice no. 13425-13426 dated 17.04.2009. In this connection the reply receivedfrom the dealer on 29.04.2009 is notfound satisfactory. Thereafter ST 15 was issued to dealer on 27.04.2009 for 11.05.2009 but no body has appeared on behalf of the dealer. Therefore, theRe-assessment Order isframed as under:- GTO/Receipts 'Tax/TDS@2% Penalty Interest Total Tax Due 242553806.00 4851076.00 9702152.00 5821291.00 20374519.00 The dealer is directed to deposit tax ^20374519/-. Copy to the dealer' Sd/- AA WARD WP(C)Nos.8620/2009, 10287/2009, 10311/2009 & 10312/2009 Page 23 of33 21. The following chart sets out the relevant details with regard to all the three writ petitions, including the figures oftax, interest and penalty demanded in the re-assessment orders:- Writ Petition (C) No. Tax period/ Assessment Year Date of re assessment order Amount demanded (1) (2) (3) 10311/09 - 2003-04 [13.01.2004 to 31.03.2004] 11.05.2009 Tax(?=) Interest (?) Penalty 48,51,076 58,21,291 97,02,152 10312/09 2003-04 [22.10.2003 to 12.01.2004] 11.05.2009 Tax(^) Interest (?) Penalty (?) 14,53,743 17,44,492 29,07,485 10287/09 2004-05 [13.01.2004 to 31.03.2004] 11.05.2009 Tax(?) Interest (?) Penalty (T) 2,30,82,150 2,40,78,864 5,01,64,300 22. The prayer in all the three writ petitions is for quashing the re assessment notices dated 2?\"' April, 2009 as well as the re-assessment orders passed on ll\"' May, 2009. The contention of the petitioner in these writ petitions is mainly that there was no turnover that escaped assessment, which alone can confer jurisdiction upon the assessing authority to re-open the assessment. It is submitted that it would be apparent from the reassessment orders that no turnover had escaped assessment and that the only purpose of the re-assessment proceedings was to impose a demand of tax allegedly deductible at source u/s. 7(3) of the WC Aci in respect of the payments made by the petitioner to the member-companies, interest thereon and also penalty under Section 7(7) of the Act. It is further submitted that these demands have been WP(C) Nos.8620/2009, 10287/2009, 10311/2009 & 10312/2009 Page.24 of 33 raised solely with the view to scuttling the claim ofthe petitioner to the refunds which is the subject matter ofWP(C)No.8620/2009. • ' 23. On behalf ofthe respondents, a preliminary objection was taken to the effect that the orders of re-assessment which are challenged in WP(C) Nos. 10311/2009, 10312/2009 and 10287/2009 can be appealed against under the relevant provisions ofDST Act read with Section 16 ofthe WC Act and since that alternative remedy was available to the petitioner, the writ petitions should be dismissed as not maintainable. So far as WP(C) No.8620/2009 is concerned, the contention of the respondents is that no refiinds can be granted since there were huge demands raised against the petitioner under the re-assessment orders for the same period. 24. The preliminary objection of the respondents that writ petitions against the re-assessment orders passed on ll''^ May, 2009 are not maintainable since those orders were appealable need not detain us since it is well settled that where the action ofan executive authority acting without jurisdiction-is likely to subject aperson to dilatory proceedings and undue harassment, the High Courts will issue appropriate writs to prevent such consequences. The following observations ofthe Supreme Court in the case of Calcutta Discount Co. Ltd. V5. Income Tax Officer andAm. reported in (1961) 41ITR 191 are relevant: - ''Mr. Sastri next pointed out that at the stage when the Income Tax Officer issued the notices he was not acting judicially or quasi-judicially and so a writ of certiorari or prohibition cannot issue. It is well settled howsoever that though the writ of prohibition or certiorari will not issue against an executive authority, the High Courts have power to issue in a fit case an order prohibiting an executive authority from acting without jurisdiction. Where such action of an executive authority acting WP(C) Nos.8620/2009, 10287/2009, 10311/2009 & 10312/2009 Page 25 of 33 l^ without jurisdiction subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment, the High Courts, it is well settled, will issue appropriate orders or directions toprevent such consequences. Mr. Sastri mentioned more than once the fact that the company would have sufficient opportunity to raise this question, viz. whether the Income Tax Officer hadreason to believe that under assessment had resulted from non-disclosure of material facts, before the Income Tax Officer himself in the assessment proceedings and, if unsuccessful there, before the Appellate Officer or the Appellate Tribunal or in the High Court under Section 66(2) ofthe Indian Income Tax Act. The existence ofsuch alternative remedy is not however always a sufficient reasonfor refusing aparty quick relief by a writ or order prohibiting an authority acting withoutjurisdictionfrom continuingsuch action. In the present case the company contends that the conditions precedent for the assumption of jurisdiction under section 34 were not satisfied and came to the court at the earliest opportunity. There is nothing in its conduct which wouldjustify the refusal of proper relief under Article 226. When the Constitution confers on the High Courts the power to give reliefit becomes the duty ofthe courts to give such reliefinfit cases and the courts would be failing to perform their duty if relief is refused without adequate reasons. In the present case we can find no reasonfor whichreliefshould be refused. \" 25. In State ofHimachal Pradesh & Ors. v. Gujarat Ambuja Cement Ltd., (2005) 6 see 499, the following principles were recognised: - (a) The issue of existence of alternative remedy is a rule of self-imposed limitation; it is essentially a rule ofpolicy, convenience and. discretion, but never a rule oflaw. (b) The High Court should ensure that the petitioner has made out a strong case to invoke the extraordinary jurisdiction despite the existence ofalternative remedies. WP(C)Nos.8620/2009, 10287/2009, 10311/2009 & 10312/2009 Page26of33 (c) Where there has been a serious breach oftheprinciples of natural justice or procedure, where the order or the proceedings are wholly without jurisdiction, where the ' vires ofa statute is challenged or where there has been an abuse of the process of law, the High Court may exercise its discretion topermit thepetitioner to invoke article 226. In Ram and Shyam Company v. Slate ofHaryana, (1985) 3 SCC 267, it was opined that if the alternative remedy is an appeal from \"Caesar to Caesar's wife\" the existence of such a remedy would be a mirage and an exercise in futility. In Godrej Sara Lee Limited V5. AssLCommissioner and Anr. (2009) 14 SCC 338 the Supreme Court observed as under: - the question as to whether the said Notification could have a retrospective ejfect or retro-active operation being a jurisdictional fact, should have been determined by the High Court in exercise of its writ jurisdiction under Article 226 ofthe Constitution ofIndia as it is well known that when an order ofa statutory authority is questioned on the ground that the same suffersfrom lack ofjurisdiction, alternative remedy may not be a bar. (See: Whirlpool Corporation v. Registrar Trade Marks and Mumtaz Post Graduate Decgree College v^'. Vice Chancellor).'' In the light of the above observations of the Supreme Court, we overrule the preliminary objection ofthe respondents. Inthe case on hand, apart from being appeals from \"Caesar to Caesar\", the petitioner would be likely to be asked to make pre-deposit ofthe disputed tax, interest and penalty u/s. 43(5) ofthe DST Act. This is likely to affect the finances of the petitioner prejudicially, particularly when the grievance is that the orders complained of lack WP(C) Nos.8620/2009, 10287/2009, 10311/2009 &10312/2009 Page 27 of33 jurisdiction, ex-facie. In such a scenario, the appeal remedy cannot be said to ! be an efficacious one. 26. The contentions of the petitioner in WP(C) No.8620/2009 oh the one hand and the other three writ petitions on the other, necessarily telescope into each other because though refunds were determined by the respondents, they did not bother to get the response from the DMRC for the letter of verification sent by them and furthermore, proceeded to pass re-assessment orders raising huge demands against the petitioner which neutralised the refund claims. The validity of the action of the respondents both in not issuing the refund orders within a reasonable time after the passing of the orders determining the refund and in framing re-assessment orders to nullify the refund are to be viewed together and in an integrated manner. They cannot be divorced from each other. We would therefore prefer to first examine the validity of the re assessment proceedings initiated under Section 24 ofthe DST Act. 27. By virtue of Section 16 of the WC Act, several provisions of the DST Act are incorporated by reference into the WC Act. The provisions of the DST Act relating to the assessment, re-assessment, refund, and appeals are some of them. Re-assessment proceedings are dealt with under Section 24 of the DST Act which runs as under \"24. Turnover escaping assessment —1. Where after a dealer has been assessed under Section 23 for any year or part thereof the Commissioner has reason to believe that the whole or any part of the turnover of a dealer in respect of any period has escaped assessment to tax or has been under-assessed or has been assessed at a rate lower than the rate at which it is assessable, or any deduction has been wrongly made therefrom, the Commissioner may - WP(C) Nos.8620/2009, 10287/2009, 10311/2009 & 10312/2009 Page 28 of33 (a) within six yearsfrom the date offinal order ofassessment, in a case where the dealer has concealed, omitted or failed to disclosefully the particulars ofsuch turnover; and (b) withinfour yearsfrom the date offinal order ofassessment, in any other case, serve a notice on the dealer andafter giving the dealer, an opportunity of being heard and making such inquiry ashe considers necessary, proceed to determine to the best judgment, the amount of tax due from the dealer in respect ofsuch turnover, and the provisions ofthis Act shall, sofar as may be, apply accordingly. \" 28. In order that proceedings can be taken under Section 24, the first condition is that the Commissioner should have reason to believe thatthewhole or any part ofthe turnover ofthe dealer has escaped assessment to tax or has been under-assessed or has been assessed at a rate lower than the appropriate rateor any deduction was wrongly made from the turnover. 29. In the reason mentioned at the bottom of Form ST-15 which is the notice of re-assessment, what has been stated by the respondents is that thepetitioner was required to deduct tax at the rate of2% from the payments made to the sub contractors, butfailed to do so. The question is whether this can hold good as the reason to believe that taxable turnover had escaped assessment. It must be remembered that the petitioner does not effect any sales to its sub-contractors; all it does - and this fact has also been accepted by the respondents - is to pass on the monies received from DMRC to the sub-contractors, acting as a conduits The question of turnover in the hands of petitioner Would arise only if it indulges in sale of goods. The petitioner merely transfers the monies received from DMRC to the member-companies. WP(C) Nos.8620/2009, 10287/2009, 10311/2009 &10312/2009 Page 29 of33 30. Section 2(t) of the WC Act defines \"turnover of sale\" as meaning \"the aggregate of the amount of sale price received or receivable by a dealer in respect of any transfer ofproperty in goods involved in the execution of any works contract whether executedfully orpartly during any.period\". Since the expression \"turnover of sale\" is defined in the WC Act, it is notpermissible to look at the definition of \"turnover\" in Section 2(o) of the DST Act, because Section 16(1) of the WC Act does not incorporate the definition sections of the DST Act into the WC Act. It is not in dispute that the petitioner, who is a dealer registered under the WC Act has not received any amount of sale price from the sub-contractors in respect of any transfer of property in goods involved in the execution of any works contract, whether executed fully or partly during any period. On the contrary, the petitioner has transferred orpaid monies to the sub-contractors. It did not deduct tax under Section 7(3) of the WC Act at the rate of 2% of the paymentbecausethe payment was not \"/or the transfer ofproperty ingoods (whether as goods or insome otherform) involved in the execution, whether wholly or inpart \". The payment was merely by way of passing the monies received from DMRC to the sub-contractors. Moreover, the petitioner had obtained Form VI from the sub-contractors in terms of Rule 5(1)(b) of the Delhi Sales Tax on Works Contract Rules, 1999 and these forms were submitted to the respondents when the petitioner's assessments were made. It was in these circumstances and by virtue of the relevant statutory provisions that the petitioner did not deduct tax. 31. It is a highly debatable question whether the failure to deduct tax by the petitioner in accordance with Section 7(3) of the WC Act can amount to \"turnover of sale\" escaping assessm.ent. Tax deducted at source is only a mode WP(C)Nos.8620/2009, 10287/2009,10311/2009 & 10312/2009 Page 30 of 33 ofcollecting the tax payable by the recipient ofthe money; the deductor ofthe tax acts as the agent ofthe Revenue. There is, therefore, no basis to reopen the assessment on the ground ofthe wliole or part ofthe turnover having escaped assessment. The reason given for reopening the assessment does not establish any escapement ofturnover. It only refers to the alleged failure on the part of the petitioner to deduct tax from the payments made to the sub-contractors. Even assuming for the sake of argument that there was such a failure, it does not amount to turnover escaping assessment in the petitioner's hands. The reassessment notices appear to us to have been issued without any application of mind and without having regard to any of the statutory provisions. This becomes more pronounced if one looks at the cryptic manner in which the reassessment orders have been framed. Moreover, eventhe penalty which is to be imposed, if at all, is under Section 7(7) ofthe WC Act and that too after providing reasonable opportunity to the petitioner ofbeing heard as envisaged under that section, but strangely ithas been imposed inthe reassessment orders. No reasonable opportunity was given to the petitioner ofbeing heard nor was a separate order imposing the penalty passed. The petitioner filed the returns for the assessment years 2003-04 and 2004-05 and had also fornished Form-VI with all the relevant particulars showing the payment of tax by the sub-^ contractors. It seems to us that the respondent No.2 (VATO) chose to adopt a rather unusual procedure - to say the least- by imposing penalty in the reassessment order itself without bothering to go through the procedure envisaged by Section 7(7) ofthe Act, assuming that penalty proceedings could be lawfully initiated against thepetitioner underthat section. WP(C)Nos.8620/2009, 10287/2009, 10311/2009 &10312/2009 Page31 of33 32. The reassessment orders passed on 11.5.2009 for both the assessment years are, therefore, without jurisdiction. The notices as well as the reassessment orders are accordingly quashed. 33. The contention of the petitioner in WP(C) No.8620/2009 merits acceptance. Refunds were determined by orders passed by the respondents under Section 23(3) and/or Section 24 of the DST Act read with Section 16 of the WCAct for both the years. In these orders, the refunds due to the petitioner were determined and quantijSed. The petitioner had furnished the relevant forms which enable it to claim the reftind of the tax deducted by DMRC. This is not controverted. It is also a matter of record that letters dated 31.3.2006 were sent by the respondents to DMRC for verification of the claim of the petitioner. It is not loiown whether there was any response from DMRC. It is, however, the case of the petitioner that no such verification was required at all since the Forms-IX were submitted to the respondents in the assessment proceedings. This is not denied by the respondents. There is nothing on record to show that DMRC denied having issued the Forms No.IX to the petitioner certifying to the deduction of tax at source. The respondents have not also found any irregularities or fault with the Forms No.VI filed by the petitioner, being declarations of the sub-contractors that they have paid the tax. The refund claims had also been made in the prescribed form by the petitioner on 13.1.2008. Despite all this and without finding any fault in the certificates or pointing out any lack of compliance on the part of the petitioner, the respondents have refused to grant the refund, for the only apparent reason that verification has to be done from DMRC. That verification has been pending since March, 2006 when letters were purportedly written by the respondents to WP(C) Nos.8620/2009, 10287/2009, 10311/2009 & 10312/2009 Page 32 of33 DMRC. Such circumstances, coupled with the fact that in May, 2009 steps were taken to reopen the assessments of the petitioner to raise demands of not only tax and interest but also of penalty, and that too without affording any hearing to the petitioner, make it clear that the conduct of the respondents in withholding the refund was unwarranted and contrary to law. A writ of mandamus is accordingly issued in terms of prayer (i). The refunds have been withheld for several years without any justification. The respondents are, therefore, directed to issue the refunds forthwith, and at any rate within four weeks from today with interest as applicable under the relevant provisions of the WC Act read with DST Act. 34. In view of the foregoing discussion, all the writ petitions are allowed. The respondents to pay costs to the petitioner which we assess at ^40,000/- . ^ (R.V. EASWAR) JUDGE FEBRUARY 12,2013 hs/shaloo/Bisht (S. RAVINDRA BHAT) JUDGE WP(C)Nos.8620/2009, 10287/2009, 10311/2009 & 10312/2009 Page 33 of33 "