Allowed

M/s.Somdatt Builders - Ramky (Jv), v. Hyderabad Growth Corridor Ltd.

Telangana HC29 Oct 2013WP/23979/2013

Case brief

AI extract

What is this about?

Writ petition filed challenging deduction of additional 1% VAT from bills, contrary to contract terms. Court allowed petition relying on prior judgment holding respondent unfair in deducting enhanced tax despite agreed rates, reversing estoppel defense based on voluntary payment.

What did the court decide?

Respondents granted eight weeks to remit the 1% additional tax previously deducted from the petitioner's bills.

M/s.Somdatt Builders - Ramky (Jv), Vs Hyderabad… — GST and Indirect Tax | Telangana HC (2013)

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THE HON’BLE Ms. JUSTICE G.ROHINI And

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THE HON’BLE SRI JUSTICE T.SUNIL CHOWDARY

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WRIT PETITION No.23979 OF 2013

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Dated: 29.10.2013

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Between: M/s. Somdatt Builders .. Petitioner And Hyderabad Growth Corridor Ltd. and 4 others

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.. Respondents

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THE HON’BLE Ms. JUSTICE G.ROHINI And THE HON’BLE SRI JUSTICE T.SUNIL CHOWDARY

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WRIT PETITION No.23979 OF 2013

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ORDER: (Per Hon’ble Ms. Justice G.Rohini)

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The petitioner was awarded the contract of construction of Package-I a part of 8 Lane Access Controlled Express Way as Outer Ring Road to the Hyderabad City in the State of Andhra Pradesh stretching from Patancheru to Shameerpet i.e., from KM 23.700 to KM 35.000 Patancheru – Mallampet which is a part of the total stretch from Patancheru to Shameerpet from KM 23.700 to KM 61.700. The said contract was awarded on 26.02.2009 vide Contract Agreement No.CGM(T)/HGCL/28/08-09.

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This writ petition is filed seeking a declaration that the action of the respondents in deducting additional 1% Tax under the A.P.Value Added Tax Act, 2005 (for short, ‘the VAT Act’) from the Bills payable to the petitioner on the ground that the Government of Andhra Pradesh through Ordinance No.9/2011 has increased the rate of Tax on work contracts under the VAT Act from 4% to 5% is illegal, arbitrary and contrary to Clause-70.2 and Sub-Clause-70.8 & 73.2 of the subsisting Contract Agreement No.CGM(T)/HGCL/28/08-09, dated 02.03.2009 executed between the petitioner and the 1^st respondent.

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When the matter is taken up for consideration, it is brought to our notice by the learned counsel for the petitioner that W.P.No.14510 of 2012 filed by a similarly situated contractor with an identical prayer was disposed of by a Division Bench of this Court by order dated 05.12.2012 holding as under:

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“In the present case, there are no disputed questions of fact and the only question is whether on an interpretation of clause 70.8 read with clause 73.2 of the Contract between the parties, the first respondent can deduct additional 1% VAT from the bills payable to the petitioner with effect from 14.9.2011 on the ground that the Government of Andhra Pradesh by way of Ordinance 9/2011 had increased the rate of Tax on works contract from 4% to 5%, without adding the amount equivalent to the increase of 1% in the monthly bills payable to the petitioner. In our view, the terms of clause 70.8 are categorical and clear and there is no option to the first respondent but to add to the petitioner’s bills the 1% increase in VAT and then only deduct 5% VAT from his bills.

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We are of the view that the plea of the first respondent that there is effective alternative remedy (by way of reference to the Dispute Resolution Board under clause 67.1 or by way of Arbitration under Clause 67.3) and therefore writ petition should not be entertained, is untenable. We are of the view that the judgment of the Supreme Court in ABL INTERNATIONAL LTD’s case (1 supra) applies to the facts and circumstances of the present case and the first respondent being an instrumentality of the State, has acted unfairly and unreasonably in its contractual obligations and thereby violated Article 14 of the Constitution of India. Therefore existence of an alternative remedy by way of a reference to the Dispute Resolution Board or Arbitration would not bar exercise of jurisdiction by this Court under Article 226 of the Constitution of India.

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For the above reasons, the writ petition is allowed and the first respondent is directed to add to the monthly bills of the petitioner, increase in VAT of 1% and then deduct 5% from the bills payable to the petitioner from 14.9.2011 onwards. In case the first respondent has already deducted VAT @ 5% from the bills of the petitioner from 14.9.2011 till today, the first respondent shall immediately compensate the petitioner for the component of tax deducted to the extent of increase of 1% of additional tax brought into effect from 14.9.2011 by Ordinance 9/2011. No costs.”

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It is also brought to our notice that aggrieved by the said order though the respondents carried the matter to the Supreme Court, the

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Special Leave Petition was dismissed by the Supreme Court by order dated 05.04.2013.

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Having carefully gone through the affidavit filed in support of the writ petition as well as the supporting material filed by the petitioner, we are satisfied that the issue involved is squarely covered by the above noticed judgment of the Division Bench.

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However, in the counter affidavit filed on behalf of the respondents, it is contended that since the petitioner company itself agreed and voluntarily contributed the increased VAT amount without any protest and allowed the respondents to deduct the VAT at enhanced rate of 5% for the last two years, the petitioner company is estopped from contending contra, and therefore the petitioner is not entitled to the relief granted in W.P.No.14510 of 2012.

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It may be true that the petitioner had contributed the increased VAT amount without any protest, however having regard to the fact that such deduction being contrary to the very terms and conditions of the contract, it appears to us that the petitioner cannot be denied the relief as granted in W.P.No.14510 of 2012. The law is well settled that the basis for the levy of tax in a fiscal statute must be in accordance with the provisions of the charging section and mere admission or conduct of dealer cannot be a valid ground for the levy of tax. Therefore, the petitioner cannot be denied the relief merely on the ground that the tax was already paid without raising any objection.

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Accordingly, the Writ Petition is allowed in terms of the order in W.P.No.14510 of 2012, and the respondents are hereby granted eight (8) weeks time from the date of receipt of this order for remitting the 1% additional tax that was already deducted from the bills of the petitioner. No costs.

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Consequently, Miscellaneous Petitions, if any, pending in this Writ Petition shall stand closed.

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____________

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G.ROHINI, J

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_________________________ T.SUNIL CHOWDARY, J Date: 29.10.2013 Ivd

M/s.Somdatt Builders - Ramky (Jv), v. Hyderabad Growth Corridor Ltd.

Case brief

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M/s.Somdatt Builders - Ramky (Jv), v. Hyderabad Growth Corridor Ltd.

Case brief

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