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Consult Construction

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  • Where VAT has been collected without authority of law and Service tax demand also has been raised for the same period then the VAT Assessing Authority is liable to transfer amount of VAT to Service Tax Department
Idea Cellular Ltd. Vs. Union of India [(2015) 57 taxmann.com 293 (Punjab & Haryana)]
  • Idea Cellular Limited (the Petitioner) is engaged in the business of cellular services and as a part of its business activated SIM cards. The Assessing Authority collected VAT on the premise that activation of SIM cards was a sale.
  • The Hon’ble Supreme Court in the case of Bharat Sanchar Nigam Ltd. Vs. Union of India [(2006) 3 STT 245] held that activation of SIM card was a service and not a sale. Accordingly, the Service Tax Department raised demand of Service tax for the period, VAT was already been paid. Thus, the Petitioner approached the Haryana VAT Department for refund of the amount of VAT.
  • The Hon’ble High Court of Punjab and Haryana held as follows:
  1. In terms of the Article 265 of the Constitution where the levy and collection of tax is without authority of law, the State does not have right to receive or retain taxes or monies realised from the Assessee without authority of law;
  2. The Service Tax Department has raised a demand for Service tax for the period for which the State of Haryana has levied and collected VAT. In order to avoid double taxation, Haryana Vat Department was directed to forward the amount of VAT collected on activation of SIM cards to the Service Tax Department.

 

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21
Finance Minister has approved the formation of 2 Committees for facilitating implementation of Goods and Services Tax from 1.4.2016.

  • A Steering Committee been formed under the Co-Chairmanship of Additional Secretary, Department of Revenue and Member Secretary, Empowered Committee of State Finance Ministers. This Committee has Members from Department of Revenue, Central Board of Excise & Customs, Goods and Services Tax Network (GSTN) and representatives of State Governments. This Committee shall monitor the progress of IT preparedness of GSTN/CBEC/Tax authorities, finalisation of reports of all the Sub-Committees constituted on different aspects relating to the mechanics of GST and drafting of CGST, IGST and SGST laws/rules. The Committee shall also monitor the progress on consultations with various stakeholders like trade and industry and training of officers.
  • Another Committee has been formed under the Chairmanship of the Chief Economic Advisor, Ministry of Finance to recommend possible tax rates under GST that would be consistent with the present level of revenue collection of Centre and States. While making recommendations, this Committee would take into account expected levels of growth of economy, different levels of compliance and broadening of tax base under GST. The Committee would also analyse the Sector-wise and State-wise impact of GST on the economy. The Committee is expected to give its report within two months.
  • Meanwhile, progress is underway to finalise various aspects of GST design like business processes, payment systems, matters relating to dual control, threshold, exemptions, place of supply rules and also making of model GST, SGST and IGST laws and rules. This task is being undertaken through various Sub-Committees formed by the Empowered Committee which has officers from Government of India as well as State Governments as Members.
  • Goods and Services Tax Network (GSTN) is taking steps for preparing the IT infrastructure for roll out of GST. The IT infrastructure shall enable online registration, filing of returns and getting refunds. Various State Governments are also preparing the necessary back end IT infrastructure for implementation of GST which shall relate to aspects like assessments and audit.
  • Periodic reviews are being held in the Department of Revenue to monitor the progress of all the above activities.
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48
Karnataka Govt. clarifies inter alia that printing and supplying of Digital/Laser prints constitutes ‘Works contract’ falling under Sr. No. 8 of Sixth Schedule, and would be taxable @ 5.5 % from August 01, 2012; Also clarifies that printing & supplying of Education / Training / Courseware book with binding is ‘works contract of printing’, taxable @ 5.5 % w.e.f. August 01, 2012
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29
HC allows writ, Seismic survey carried for Oil Company to investigate earth’s subterranean structure constitutes a ‘service’, not ‘works contract’ u/s 2(36) of Tripura VAT Act; Rejects Revenue contention that since there is transfer of right to use equipment to carry out surveys, activity amounts to ‘sale’ u/s 2(25)(d) r/w Rule 7(2) of Tripura VAT Rules, exigible to VAT u/s 4(2); Perusing provisions of Article 366(29-A) of Constitution and jurisprudence thereof, HC observes that in instant case, assessee remains in exclusive possession and control of equipment and all resources supplied under the contract; Though ‘works contract’ registration granted to assessee, no works has been done except carrying out a survey and therefore, amount deducted by Oil Company in terms of Sec 4(3) of the Act refundable; Relies on several judicial pronouncements including SC judgements in BSNL, 20th Century Finance Corp. Ltd., and Delhi HC decision in International Travel House Ltd., as also Division Bench ruling in Oil Field Instrumentation (India) Ltd. and observes that assessee only rendering services amenable to tax by Centre, not by State  : Tripura HC
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21

2015-VIL-231-SIK

NATIONAL HYDROELECTRIC POWER CORPORATION LTD Vs THE STATE OF SIKKIM

Sikkim Sales Tax Act, 1983 – Section 2(m) - Sale – Supply of goods by Petitioner to the contractors - Agreements between the Petitioner and contractors for supply of cement, steel and explosives by the Petitioner and the cost of these materials were to be deducted from the approved bill amount(s) of the contractors at the rate already fixed - Transfer of goods and transfer of the right to use any goods – HELD – Perusal of the clauses of the agreement(s) would show that the goods were supplied to the contractors on a fixed rate and were to be consumed in the work as per approval and then the deductions of their sale price were to be made. Thus, it is clear that the above event of supply of specified goods were clearly covered under sub-clauses (b) and (d) of clause (m) of Section 2 of the Act and were ‘sale’ within the meaning of such clauses - There was transfer of goods involved in the execution of works contract with the transfer of right to use the goods. Thus the taxation authorities have rightly held that the said instances were ‘sale’ within the meaning of Section 2(m) of the Act and the assessee was liable to pay the sales tax on such transactions – Appeal dismissed

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50

2015-VIL-225-TRI

QUIPPO OIL AND GAS INFRASTRUCTURE LIMITED Vs THE STATE OF TRIPURA

  • Tripura Value Added Tax Act, 2004 – Works contract – transfer of right to use goods – Liability to pay VAT on contract for digging directional wells – As directional drilling is one of the components of digging a directional well, accordingly petitioners have entered into a service contract providing service of directional drilling and, therefore, they are paying service tax to the Central Government.
  • The petitioners contend that the contract does not amount to sale and no VAT can be levied on the same – Demand of VAT on the ground that the contract is for hiring of machineries
  • HELD - The contracts we are of the view that the contracts are mainly for hiring of services. There may be a very small element of transfer of right to use goods but according to us the pre-dominant portion of the contract relates to hiring of services and not to transfer of right to use the goods.
  • We are aware that the dominant nature test is not to be used in composite contracts falling within the ambit of Article 366(29A) but from the reading of the contract it is more than apparent that the intention of the parties was to treat the contract as a contract for hiring of services. Moreover, it is impossible to divide the contract into two separate portions. Every element of the digging directional wells and Mobile Drilling Rig service contains a major element of provisions of services. In such an eventuality it is virtually impossible to divide the contract. It is not possible to work out the value of the right to use goods transferred under the contract. In cases, where the contracts are easily divisible or where the parties have by agreement clearly indicated what is value of the service part and what is value of the transfer of right to use goods part, the contract may be divided.
  • We are in agreement with the Delhi High Court that when the contract cannot be divided with exactitude then the Central Law must prevail - Parties have been paying service tax and if the State is allowed to tax any portion of the value of the contract then there has to be a proportionate refund of the service tax to that extent. This cannot be done without hearing the Union of India. If there is any dispute between the State or the Union of India then they must resolve it between themselves. The petitioners or the ONGC cannot be made liable to pay both the taxes for the same transaction - We are clearly of the view that in all the cases the transactions do not amount to sale within the meaning of the TVAT Act, 2004. The State is not entitled to levy any sales tax or Value Added Tax on the transactions in question. It is, therefore, directed that the amount of tax, already deducted and received by the State shall be refunded to the petitioners along with statutory interest - Writ petitions are allowed
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25


Extension of Gujarat VAT Amnesty Scheme for Civil Works Contract till
11/08/2015. However there would be an interest of 18% that shall be charged vide Notification No. GHN 18 VAR 2014(34) dated 26/05/2015.
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15
(STDS) as well as Tax Collection at Source (TCS) of West Bengal Value Added Tax Act
i. Submission of scroll has been made mandatory w.e.f. 02.11.2012 by inserting sub-section
(2A) for a person who deducts tax from a works contractor or supplier, as the case may be,
and deposits that amount to Government Treasury within the prescribed date.
ii. Late fee has been introduced for delay in furnishing scroll, if a person liable to furnish scroll
in Form 19A fails to furnish such scroll within the prescribed time and such late fee will be as
per section 32(2). This provision has been introduced by inserting sub-section (2B) w.e.f.
01.07.2015.
iii. By amending sub-section (3) the date of issue of Form 18A and date for submission of Form
19A, etc., has been fixed as twenty five days from the end of the month during which
deduction is made.
iv. By substituting sub-section (3A), the Commissioner has been vested with the power to
extend the date of filing of revised scroll.
v. Interest payable for delay in payment of tax deducted at source- Two new sub-sections,
namely, sub-section (3B) and sub-section (3C) have been inserted w.e.f. 01.07.2015. As per
sub-section (3B), a person making deduction or a contractee shall be liable to pay interest as
per section 34B for delay in making payment of such tax deducted at source. As per sub-
section (3C), where the interest payable under sub-section (3B) has not been paid, the
Commissioner may determine interest payable and issue notice for making payment of
interest, and the amount may be recovered in accordance with the provisions of section 55 or
section 60 of West Bengal Value Added Tax Act, 2003. However, the State Government may by
notification, waive payment of such interest under sub-section (3D) in such cases or under such circumstances and conditons as may be

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45
CESTAT allows CENVAT credit on items such as channels, angles and coil plates used in fabrication of capital goods, which are further utilised in factory of production; Rejects Revenue’s contention that items fabricated out of said inputs being immovable in nature, are not excisable and hence, credit thereon is inadmissible in terms of Rule 6(1) of CCR; Holds such goods qualify as ‘capital goods’ and also as ‘inputs’ within the meaning of Rule 2(a) r/w Rule 2(k) of CENVAT Credit Rules (CCR); Upholds Commissioner (Appeals) order which held that capital goods embedded to earth is no reason to deny CENVAT credit on inputs used therein; Commissioner (Appeals) had relied on CESTAT decisions in Ritesh Trade Fin Ltd and Divi’s Laboratories Ltd while allowing assessee’s appeal  : Mumbai CESTAT
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10
Denial of composition scheme to dealers engaged in construction and sale of residential apartments, buildings or commercial complexes, for post-sale construction made in terms of initial agreement with prospective buyer, illegal and contrary to provisions of Andhra Pradesh VAT Act and Rules thereunder; Where such dealers comply with conditions stipulated in Sec 4(7)(d) and Rule 17(4), composition benefit available on construction undertaken by them for very same person, after execution of registered deed for sale of semi-furnished structure; Registered deed executed for sale of semi-finished structure, and finishing / completion agreement entered into thereafter to make a fully built residential apartment fit for occupation, integrally connected with initial agreement entered between developer and prospective buyer; Tax liability of dealer, u/s 4(7)(d), is on total consideration stipulated in initial agreement for composite value of land and building, and such liability must be discharged in the month in which sale deed is executed and registered, even if it is for a semi-finished structure; Benefit which accrues to the State in prescribing a scheme for composition, i.e., reduction of the burden of tax administration, would cease if Revenue contention that benefit of composition u/s 4(7)(d) is confined only to those dealers who first construct and then sell residential apartments, is accepted; Words “construction and selling” in said Section only mean activities of both “construction” and “sale” and cannot be read as “construction prior to sale”, entire construction as specified in initial agreement would fall within the ambit of Sec 4(7)(d), not merely that part of construction undertaken prior to execution of sale deed for semi-finished structure; Referring to provisions of erstwhile Andhra Pradesh General Sales Tax Act, HC observes, “…The legislative intent of both the enactments is to extend the benefit of a distinct scheme of composition to a particular class of contractors executing works contracts of residential apartments and buildings, and not to make the benefit contingent on the stage of construction when a registered sale deed is executed for the conveyance of a semi-finished structure…”; However, clarifies that any construction made beyond the scope of initial agreement would be an independent works contract not falling within the ambit of Sec 4(7)(d), and hence taxable as per Sec 4(7)(a); Relies on plethora of judgments including SC ratio in K. Raheja Development Corpn vs. State of Karnataka, Larsen & Toubro Ltd vs. State of Karnataka, and HC decisions in Builders Association of India vs. State of Maharashtra and Mark Infrastructure Pvt. Ltd. vs. The Commercial Tax Officer  : Telangana & Andhra Pradesh HC
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