Sri K.K.Durga Prasad V. Commercial Tax

WP/35527/2012

AI Insights

The case involves a challenge to an order of assessment under the A.P.VAT Act, 2005, by a petitioner, a Limited Company, which was contracted by Reliance Infrastructure Limited for services related to the Krishna Patnam Ultra Power Project. The assessment was contested on grounds that the contract should not be treated as an electrical contract and that the turnover should not be subjected to a standard deduction of 20% as a labor component. The assessing authority's decision was based on the terms of the contract, which the petitioner argued was an erroneous interpretation of the law. The court, however, found that the issues raised were suitable for resolution through the appellate process provided under the Act, rather than through judicial review.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 692187 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 20-11-2012
• Assessment Year: misc
• Other Referred Cases: Rama Textiles V. I.T.Officer, Rampur, Kashmir University V. Mohd. Yasin, Indian Railway Construction Co. Ltd V. Ajay Kumar, State of H.P. V. Gujarat Ambuja Cements Ltd
• Laws Referred To: A.P.VAT Act, 2005
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: P BALAJI VARMA
• Assessee Lawyers: M V K MURTHY
• Keywords: Assessment Order; Certiorari; Certiorari; Jurisdictional fact; VAT; Works contract; Writ petition
• Section: 31; 4(7)(a); 17(1)(g); 17(1)(e)

Judgement Text

" HON'BLE SRI JUSTICE GODA RAGHURAM AND HON'BLE SRI JUSTICE M.S.RAMACHANDRA RAO WRIT PETITION No.35527 of 2012 ORDER: (per Hon’ble Sri Justice Goda Raghuram) Heard Sri M.V.K.Murthy, learned counsel for Sri K.K.Durga Prasad, learned counsel for the petitioner and Sri P.Balaji Varma, learned Special Standing counsel for Commercial Tax for the respondent. The order of assessment dated 26.09.2012 passed by the respondent under the provisions of the A.P.VAT Act, 2005 (for short ‘the Act’) is assailed in this Writ Petition despite availability of an alternative appellate remedy under Section 31 of the Act. The petitioner, a Limited Company registered under the Companies Act, 1956, was appointed by Reliance Infrastructure Limited to provide works contract services in respect of execution of Krishna Patnam Ultra Power Project. The Assistant Commissioner (CT-VI) inspected the petitioner’s premises on 25.01.2012 and called upon it to subject itself for assessment. After a due process, the order of assessment impugned was passed. During the course of assessment the petitioner contended that (a) it executed a single contract during the year, in the nature of a civil works contract; (b) that the proposal of the assessing authority to treat the same as electrical contract and subjecting the turnovers to standard deduction @ 20% as labour component under Rule 17(1)(g) of the Act is contrary to the facts; (c) that the petitioner performed only earth work and other such services during the period under consideration for assessment and in the circumstances there was no transfer of property in goods in the execution of the contract; (d) that the return filed by them returning taxable turnovers under Rule 17(1)(g) of the Act should be treated as a provisional return, as Rule 17(1)(e) of the Act provides for a final return at the time of completion of the contract; and (e) the value of the goods at the time of incorporation should be ascertained from the books of accounts and not on the basis of the returns filed by the petitioner under a mistake of law. By the order impugned the respondent concluded that the contract in question was a fixed price contract; the parties thereto had agreed for a fixed price with a specific ratio of material value and value of services to be provided by the contractor; therefore, the percentage of material at any stage in the execution of the contract would be the same and should be accounted for accordingly; and in view of the terms of the contract the material value at any point of time during the execution of the contract should be 30% of the total works executed. On the basis of these premises of the respondent on the scope and meaning of the provisions of Section 4(7)(a) of the Act, the order of assessment was passed. The total receipts of the petitioner under the contract in question for the relevant assessment year was computed at Rs.246,23,30,242/-; the material value (incorporation value) at 30% thereof, as per the terms of the contract at Rs.73,86,99,073/-; the tax thereon was assessed at 14.5% i.e., at Rs.10,71,11,370/-; and after considering that the petitioner had already paid tax of Rs.26,02,23,123/-, the excess tax paid by the petitioner was determined at Rs.15,31,12,123/-. Sri M.V.K.Murthy, learned counsel for the petitioner, would strenuously contend that the impugned order of assessment is contrary to the provisions of Section 4(7)(a) of the Act; that qua provisions of Section 4(7)(a) the value of goods at the time of incorporation of such goods in the works executed, at the rates applicable to the goods under the Act is taxable and not an artificial value of the goods incorporated or incorporable on the basis of a clause in the contract between the parties. Sri M.V.K. Murthy asserts that the computation of the tax liability by the respondent by placing reliance on the terms of the contract without asserting the value of the goods incorporated; and in eschewing the books of accounts and the statement of the auditors’ constitutes an erroneous conclusion on a jurisdictional fact amenable to Certiorari under Article 226 of the Constitution of India. His contention is that in the facts and circumstances, the petitioner should not be relegated to the appellate remedy under Section 31 of the Act; and that this Court in discharge of its constitutional obligation should take up the aforementioned errors of the respondent for correction, in judicial review. Reliance for the proposition that the petitioner ought not to be relegated to the alternative statutory remedy is placed on the decisions of the Supreme Court in Rama Textiles V. I.T.Officer, Rampur[1]; Kashmir University V. Mohd. Yasin[2]; Indian Railway Construction Co. Ltd V. Ajay Kumar[3]; and State of H.P. V. Gujarat Ambuja Cements Ltd[4]. In Rama Textiles case (1st supra), the Supreme Court reiterated the well established principle that even a quasi judicial authority cannot confer jurisdiction on itself by erroneously deciding a jurisdictional fact; the question whether jurisdictional fact has been rightly decided or not is a question that is open for examination by the High Court in an application for a writ of Certiorari and if the High Court comes to the conclusion that the Income Tax Officer had clutched at jurisdiction by deciding a jurisdictional fact erroneously, then the assessee would be entitled to relief in Certiorari. The facts of this case to the extent relevant and material for the purposes of the present case disclose that the Income Tax Officer rejected the contention of the petitioner (before the Supreme Court) that the firm-M/s Nathirmal and Sons, Djakarta (Indonesia) is not a non- resident firm. The status of the said firm whether a resident or a non-resident was a jurisdictional fact on which depended the jurisdiction of the Income Tax Officer to exercise power under Section 18(3B) read with Section 18(7) of the Income Tax Act, 1922. Aggrieved by the order of the Income Tax Officer, the appellant preferred an appeal to the Assistant Commissioner and the appeal having been rejected, the appellant moved the High Court. A learned single Judge set aside the order of the Income Tax Officer and the Revenue successfully appealed; and there against, the appellant moved the Supreme Court. The observations of the Court above are in the context of the finding that there was an erroneous determination of a jurisdictional fact which goes to the root of exercise of jurisdiction, of the Income Tax Officer. I n Kashmir University’ s case (2nd supra) no principle relating to the appropriateness of the Forum and entitlement to a writ of Certiorari fell for consideration. The respondent-Mohd. Yasin was terminated from service as a Professor of the appellant- university contrary to the substantive and processual provisions of the Kashmir and Jammu Universities Act, 1969 and the observations of the Supreme Court in para-8 (relied upon by the petitioner in this case) merely delineate the limitations of an executive authority i.e., that its conduct ought to be in conformity with the provisions of the governing Statute and Statutory instruments. The Gujarat Ambuja Cements Limited’s case (4th supra), delineates the scope of Article 366-29(a)(b) of the Constitution and rules that the measure for levy of tax would only be the value of the goods involved in execution of the contract and incorporated into the works and would not include the cost of incorporation of the goods. This decision is an authority for interpretation of the provisions of Article-366 of the Constitution and interpretation of the scope of the provisions of Section 4(7) (a) of the Act. The Gujarat Ambuja Cements Limited’s case (4th supra), is also not an authority for the proposition that in all cases and in all circumstances wherever an order of assessment is passed on an erroneous appreciation of the substantive provisions of law, a writ of certiorari is the only remedy available; and that exclusion of a recourse to alternative statutory remedy of appeal would be justified. In Gujarat Ambuja Cements Limited’s case (4th supra), the Supreme Court declined to interfere with the judgment of the High Court which entertained the Writ Petition without relegating the assessee to the alternative statutory remedy. The Supreme Court found no error in the exercise of Certiorari by the High Court. In the facts and circumstances of the case before us, there is no patent or inherent lack of jurisdiction either pleaded or established by the petitioner, in the respondent passing the impugned order of assessment. All that is urged is that the respondent erred in exercise of jurisdiction, by a misconstruction of the provisions of the 2005 Act, committed a palpable error in interpretation of the relevant statutory provisions considered in the light of the governing constitutional provisions and authoritative precedents and erred in placing reliance or disproportionate reliance as the case may be, on a clause in the contract between the parties which is not a germane consideration for determining the value of the goods that have been incorporated into the contract in question. All these are errors within the jurisdiction of the respondent and are therefore eminently amenable to appellate scrutiny under the provisions of Section 31 of the Act. This is not to say that this Court has no jurisdiction to judicially review such errors as well. It is a trite principle that the constitutional authority of this Court under Article 226 of the Constitution cannot be circumscribed or impeded by creation of statutory appellate remedies. The principle that in the context of an available alternative remedy, judicial review must be avoided, is a principle engendered for efficient exercise of the function of adjudication across different tiers in the hierarchy of the judiciary, a measure of division of labour. Where there is an efficient alternative statutory remedy provided by way of an appeal under Section 31 of the Act and the appellate authority is adequately authorized (on this score there is no dispute even by the petitioner) to go into errors both of law and of fact recorded by an assessing authority; and where the error as pointed out in the present case is not one that goes to the root of jurisdiction of the respondent-assessing authority, but an error allegedly in the legitimate; but allegedly erroneous exercise of it, we consider it appropriate that the aggrieved assessee must be relegated to the statutory remedy of an appeal; and judicial review in the circumstances, must be declined, to facilitate efficient exercise of the extra-ordinary remedy of judicial review and its conservation for appropriate cases involving extreme error. For the aforesaid reasons, we decline to entertain this Writ Petition for judicial review. The Writ Petition is dismissed at the stage of admission. The petitioner is however at liberty to pursue the appellate remedy in accordance with the provisions of the A.P.VAT Act, 2005. None of the observations herein shall be construed as observations by this Court on the merits of the petitioner’s case and the appellate authority shall consider the appeal on its own merits and in accordance with law. No costs. ______________________ JUSTICE GODA RAGHURAM __________________________ JUSTICE M.S.RAMACHANDRA RAO 20th November 2012 DR [1] AIR 1973 SC 1362 [2] AIR 1974 SC 238 [3] AIR 2003 SC 1843 [4] AIR 2005 SC 3936 "