1. This Writ Petition has been filed with a prayer to issue a writ in the nature of mandamus directing Opp. Parties 2 & 3 to refund Rs.8,10,516 in favour of the Petitioner within a stipulated period on the ground that Opp. Party.No.2- Commissioner of Sales Tax, Orissa & Opp. Party 3-Sales Tax Officer, Bhubaneswar-II Circle, Bhubaneswar realized the aforesaid amount of tax illegally & arbitrarily from the Petitioner as per the certificate in Form VAT 605 in respect of sales in course of inter State trade pursuant to contract with Opp. Party No.4-Indian Oil Corporation Ltd., 304-Bhoi Nagar, Bhubaneswar.
2. The Petitioner’s case in a nutshell is that it is a Company registered under the provisions of the Companies Act, 1956 & it is a manufacturer supplier-contractor of canopy, cladding etc. having its factory at Sasewadi, Mumbai-Bangalore Highway, Tal. Bhor, Dist- Pune in the State of Maharashtra. The Petitioner-Company was awarded with various work orders by the Indian Oil Corporation Ltd. (for short, 'IOCL') for supply, fabrication & installation & Retail Visual Identity (for short, 'RVI') elements at various retail outlets against limited tender No. OSO-ENG/2006-07/LT-41. As per the work order placed on the Petitioner by IOCL, the Petitioner is required to supply fabrication & installation of RVI elements at various retail outlets which will be subject to various terms & conditions, specifications & rate quoted by the Petitioner company & us finalized by IOCL. The work order provides for a time period for completion of work & further provides for compensation for delay. The contract further provides for service tax as per the provisions of law. Pursuant to the aforesaid contract entered into by the Petitioner with IOCL, the Petitioner- company supplied canopy, sales building fascia, column cladding etc. to IOCL. Against such supply, the Petitioner-company has raised running account bills for 70% & 30% as per the completion stage of site invoices on IOCL & has charged Central Sales Tax at the appropriate rate i.e. 12.5% in the Commercial Invoice as required under Section 8 of the Central Sales Tax Act. IOCL for the purpose of dispatch of goods to its various retail outlets has also duly issued way bill form in the prescribed Form XXXII issued by the Sales Tax Officer which also contains the details of goods dispatched from Pune by the Petitioner-company to IOCL. The goods sent by the Petitioner is supported by consignment note, way bill, commercial invoice, challan & all other documents. The Petitioner-company has dispatched 23 consignments pursuant to the contract relating to various work orders issued by the IOCL. The IOCL while making payment to the Petitioner in respect of 23 RVI elements in various retail outlets has deducted service tax @ of 4.04 per cent (12.24 per cent x 33%) income tax @ 2.244 per cent, the works contract tax at the rate of 4% & retention at the rate of 5% while making payment of the balance bill amounts to the Petitioner-company. Opp. Party No.4 has in the process deducted a sum of Rs.8,10,516 from the Petitioner even though the same is not realizable u/s. 54 of the Orissa Value Added Tax Act (for short, 'OVAT’ Act'). Hence, the present Writ Petition.
3. Mr. Jagabandhu Sahoo, Learned Counsel appearing for the Petitioner-company submits that the materials which are required for the purpose of RVI elements are supplied in pursuance of the contract entered with the IOCL by the Petitioner-company in course of interstate sales as contemplated u/s 3 of the CST Act. As per the Explanation of Sec. 54 of the OVAT Act, the tax deducted by Opp. Party No.4 is not realizable u/s. 54 of the OVAT Act. Neither the Explanation to Section 54 of the OVAT Act, nor the provisions of sub-Section (5) nor any other provisions of Section 54 of the OVAT Act shall be construed as to authorize deduction of any amount of tax on the value of the property in goods transferred in the course of inter-state sales, sales outside the State or sales in the course of import. The Petitioner in the present case having not transferred any property in goods in the State of Orissa pursuant to the contract with IOCL & the entire goods which are required for the purpose of RVI elements in various retail outlets having been supplied by the Petitioner to IOCL under the CST Act, the Petitioner does not incur any liability under the provisions of OVAT Act. The Petitioner thus being not liable to pay tax under the OVAT Act does not incur any liability for obtaining registration under Section 24 of the said OVAT Act. The expression 'sale' is defined under Section 2 of the OVAT Act & the note annexed to the explanation speaks in no uncertain terms that a sale or purchase shall not be deemed to have taken place inside the State, if the goods are sold in the course of inter-state trade & commerce.
4. Placing reliance on a decision of the Hon’ble Supreme Court in the case of Gannon Dunkerley & Co. & ors v. State of Rajasthan & others, 88 STC 204 (SC)) Mr. Sahoo submitted that for the purpose of arriving at Taxable Turnover, turnover relating to inter State transactions, export, import under the CST Act are to be excluded. Thus, the provision of State Sales Tax Act is always subject to the provisions of Sections 3 & 5 of the CST Act. Sale or purchase in course of interstate trade or commerce & levy & collection of tax thereon is prohibited by Article 269 of the Constitution of India. Similarly, Article 286(1) of the Constitution prohibits the State from making a law imposing or authorizing the imposition of tax on the sale or purchase of goods where such sale or purchase takes place; (a) outside the State; or (b) in the course of import of goods into or export of goods out of the territory of India. As a result of the said provision, the legislative power conferred under Entry-54 of the State List does not extend to imposition of tax on a sale or purchase of goods which takes place in course of import or export of goods. Therefore, the Hon’ble Supreme Court held that power conferred upon the State Legislature under Entry-54 of the State List cannot transgress the limitations provided under the Constitution & accordingly, a deemed sale resulting from transfer of goods involved in execution of works contract which take place in course of inter-State trade or commerce or which take place outside the State or in the course of import or export within the meaning of Sections 3, 4 & 5 respectively of the CST Act cannot be lost sight of. The Petitioner under the scheme of law therefore, being not at all liable to pay tax under the OVAT Act within the scope of Entry-54 List-II 7th Schedule of the Constitution vis-a-vis the provisions of OVAT Act & rules framed thereunder, the amount realized from the Petitioner by Opp. Party No.4 & deposited with the Sales Tax Department is liable to be refunded to the Petitioner.
5. Mr. Sahoo, further submitted that the procedure provided under Section 54 of the OVAT Act & the mechanism provided therein though prescribes grant of no deduction & partial deduction of tax at source upon application by a contractor, but the Explanation to Section 54 speaks in unequivocal terms that the said procedure shall not be construed as to authorize deduction of amount towards tax on the value of the properties in goods transferred in course of inter-State sale under the CST Act. Since supply of all the goods made by the Petitionercompany to IOCL pursuant to the contract executed with the IOCL are sales in course of inter-State trade, therefore, by virtue of Sec. 54 of the OVAT Act deduction of tax at source & so also deposit of such tax with the State Government are grossly unauthorized & the said amount is refundable to the Petitioner. It is a trite rule of law much less the mandate of the Constitution which provides that no tax shall be levied without authority of law as per Article 265 of the Constitution of India. Thus, the deduction of tax from the Petitioner & deposit of such tax with the State Government being unauthorized, the same amounts to unjust enrichment on the part of the State & is thus refundable to the Petitioner. In support of this contention, Mr. Sahoo relied upon the decision of this Court in the case of Brajendra Mishra v. State of Orissa & ors, (1994) 92 STC 17 (Orissa). It was submitted that this Court while examining the validity of Section 13AA of the Repealed Act, struck down the necessary provision of said Section providing deduction of tax in respect of inter-State sales, export or import vis-a-vis deemed sales contemplated under Article 366, Sub-Article 29A(b) of the Constitution of India. The Hon’ble Supreme Court in the case of Steel Authority of India Ltd. V. State of Orissa & ors, (2000) 118 STC 297 (SC) has also struck down the amended provision of Section 13AA of the OST Act as sub-Section (5) (a) of Section 13AA takes no account of the fact that even if a works contract involves both transfer of property in goods & labour or service, State sales tax may not be payable upon the entire value ascribable to the transfer of property in goods for the reason that it is in the course of inter-State sale, an outside sale or a sale in the course of import or export.
6. Placing reliance on a decision of this Court in the case of Ashoka Bidi Works v. State of Orissa (2001) 1 OLR 586 (Orissa) which was confirmed by the Hon’ble Supreme Court in Civil Appeal Nos.4158 to 4186 of 2001 in the case of State of Orissa v. K.B. Shah & Sons Industries Pvt. Ltd. (2007) 7 VST 214 (SC), Mr. Sahoo submitted that since supply of materials by the Petitioner to IOCL are sales in the course of inter-state trade under Section 3 of the CST Act, direction should be given for refund of the tax realized by IOCL from the Petitioner & deposited with the Government. Placing reliance on the Judgment of the Hon’ble Supreme Court in the case of Commissioner of Sales Tax v. Crown Re Roller Put. Ltd., (2007) 6 VST 331 (SC), Mr. Sahoo submitted that where an industrial unit availing sales tax exemption was constrained to pay sales tax while effecting purchase of raw materials because of the notification of the State Government notifying the raw materials to be exigible to sales tax at the first point in the State & thereby resulting in payment of sales tax through purchase price, the Hon’ble Supreme Court directed the State to refund the sales tax it has actually collected. It was further submitted that the Petitioner only provides service in the State of Orissa so far as execution of contract in question with IOCL is concerned. The same being a service exigible to service tax under the Central Law, IOCL deducts service tax at the rate of 4.04 per cent from the Petitioner from its bills while making payment. Concluding his argument, Mr. Sahoo prayed to allow the Writ Petition granting relief claimed in the Writ Petition.
7. Per contra, Mr. R. P. Kar, Learned Standing Counsel appearing for the Revenue submitted that remedy is available to the Petitioner under sub-Section(5) of Section 54 of the Act. Petitioner’s case is that no tax is either payable or deductible at source under Section 54 of the OVAT Act. In such event, the Petitioner should have made an application to the Assessing Officer & if he satisfies that no tax is payable, it could have obtained a ‘No Deduction Certificate’ from the Assessing Officer. On production of such certificate before the contractee i.e. IOCL, no tax would have been deducted from the payments made to the Petitioner by the IOCL. This Court by exercising jurisdiction under Article 226 of the Constitution cannot decide the question whether the transaction in question is inter-State or intra-State in nature. Placing reliance on the Judgment of the Hon’ble Supreme Court in the case of Suganmal vs. State of Madhya Pradesh & ors, (1965) 16 STC (V.64-VI)- 398, Mr. Kar, submitted that the proper course left to the Petitioner is to approach the Civil Court for refund of tax alleged to have been illegally collected & not by a petition under Article 226 of the Constitution of India.
8. On the rival contentions of both parties, the only question that falls for consideration by this Court is; whether a writ in the nature of mandamus directing Opp. Party No.2-Commissioner of Sales Tax, Orissa & Opp. Party No.3 Sales Tax Officer, Bhubaneswar-II Circle, Bhubaneswar can be issued to refund Rs.8,10,516 alleged to have been illegally collected by IOCL from the Petitioner & deposited with the Government?
9. The undisputed facts are that Petitioner entered into a contract with IOCL to execute some works at various retail outlets functioning inside the State of Orissa. In course of execution of the works, the Petitioner supplied some materials, labour & service for installation of RVI elements at various outlets. According to the Petitioner, it only provides service in the State of Orissa so far execution of contract in question with IOCL is concerned & the same being a service exigible to service tax under the Central Law, the IOCL levies service tax from the Petitioner from its bill while making of payment. Petitioner’s further case is that so far as supply of materials is concerned, the same being sales in course of inter-state trade, it is not exigible to tax under the OVAT Act & he is neither liable to be registered nor to pay any tax under the OVAT Act, 2004. Therefore, deduction of tax from the payment made to it by IOCL & deposit of the said amount with the State is illegal, contrary to the provision of the statute, mandate of the Constitution & the State should be directed to refund the amount so collected by IOCL & deposited with the State. In support of his contention that the State has no power or authority to levy tax in respect of inter-State sales, Mr. Sahoo relied upon the decision of the Hon’ble Supreme Court in the case of Gannon Dunkerley & Co. & others (supra) & the provisions of OVAT Act, 2004 so far as ‘sale’ as defined under Section 2 of the OVAT Act, 2004 is concerned. In view of Entry-54 List VII of the Constitution of India, Articles 269,286 (1) of the Constitution of India, we do not think it proper to burden the Judgment by elaborately dealing with the Judgment of the Hon’ble Supreme Court & the constitutional & statutory provisions relied upon by Mr. Sahoo as there is no quarrel over the proposition that for the purpose of arriving at taxable turnover, relating to inter-State transactions, export, import under the CST Act are to be excluded, that the State Act is always subject to the provisions of Sections 3 & 5 of the CST Act; that sale or purchase in course of inter State trade or commerce & levy & collection of tax thereon by the State is prohibited by Article 269 of the Constitution of India; that Article 286 (1) of the Constitution of India prohibits the State from making a law imposing or authorizing the imposition of tax on the sale or purchase of goods where such sale or purchase takes place (a) outside the State or (b) in the course of import of goods into or export of goods out of the territory of India; that the legislative power conferred under Entry-54 of the State List does not extend to imposing tax on a sale or purchase of goods which takes place in course of import or export of goods, & that the State legislature under Entry-54 of the State List cannot transgress the limitations provided under the Constitution.
10. Law is well settled that a particular sale may either be intra State or inter-State sale, but cannot be both. A transaction of sale is a single transaction whereby the property of goods passes through the seller to the buyer & there can never be two transactions of sale in one sale. Thus a single transaction of sale can be assessed either under the State Act or under the Central Sales Tax Act & can never be under both the Acts. (See EDL Cast India v. Sales Tax Officer (1988) 71 STC 253 (Orissa).
11. Whether a particular sale is an inter-State sale or an intra State sale would depend upon the factual scenario & nature of evidence produced. Without examining the evidence it cannot be definitely said whether the transaction is an intra-State or inter-state transaction. The nature of transaction cannot be decided in the Writ Petition because the material produced along with the Writ Petition can be more effectually examined by the Assessing Authority. The stand that the Petitioner is not liable to be registered under the OVAT Act, 2004, does not improve the situation because the High Court cannot examine the material as an original forum. For the said purpose the Petitioner has to establish that there is no breaking of chain of inter-state movement which has to be factually established.
12. Section 54 of the OVAT Act provides that any person responsible for making payment of any sum to any contractor for carrying out any works contract, which involves transfer of property in goods, in pursuance of a contract between the contractor & the Central Government or any State Government or any local authority or an authority or Corporation established by or under a company incorporated under the Companies Act including any State or Central Government. Undertaking, or any Co-operative Society, or any other association registered under the Societies Registration Act shall at the time of credit of such sum to the account of the contractor or any payment thereof in cash or by issue of a cheque or draft or any other mode, whichever is earlier, deduct subject to the certificate, if any, produced by the contractor in pursuance of sub-Section (5), an amount towards tax equal to 4 per cent of such sum in respect of the works contract, if the value of works contract exceeds Rs.50,000. Sub-Section (5)(a) provides that where on an application being made by the contractor in this behalf, the Assessing Authority is satisfied that any works contract of the nature referred to in sub-Section (1) involves both transfer of property in the goods & labour or services or involves only labour or service & accordingly justifies deduction of tax on the part of the same in respect of works contract or as the case may be justifies no deduction of tax he shall, after giving the contractor a reasonable opportunity of being heard, grant him such certificate as may be appropriate in the manner prescribed.
Clause (b) of sub-Section (5) of Section 54 of the OVAT Act provides that where such certificate is produced by a contractor before the deducting authority, until such certificate is cancelled by the assessing authority, the deducting authority shall either make no deduction of tax or make the deduction of tax, as the case may be, in accordance with the said certificate. The explanation appended to Section 54 provides that nothing m sub-Section (5) or any other provision of the this Section shall be construed as to authorized deduction of any amount towards tax on the value of any property in goods transferred in the course of inter-State sales, sales outside the State or sales in the course of the import.
13. In view of the above statutory provision, it was incumbent on the part of the Petitioner-contractor to make an application as provided under sub-Section (5) (a) of Section 54 to the Assessing Authority & satisfies him that no tax is deductible from the payments made to the Petitioner as the materials supplied by it to IOCL is sale in course of inter-State trade & it is protected by Explanation appended to Section 54. In such event, the Assessing Officer has to examine the case of the Petitioner & if is satisfied, he is obliged under the Statute to issue no deduction of tax certificate to the Petitioner & on production of such certificate before the IOCL, IOCL is bound not to deduct any tax from the payments made to the Petitioner as provided under Section 54 (5)(b) of the Act, otherwise for contravention of the provision of Section 54 (5)(b) penalty shall be imposed on the IOCL as provided under sub-Section (6) of Section 54 of the Act. Thus Section 54 is a complete provision so far as deduction of tax from the payment made to the contractor is concerned. Admittedly, the Petitioner has not availed the remedy provided under Section 54(5) of the Act.
14. Now the next question arises as to whether in exercise of power under Articles 226 & 227 of the Constitution, a direction can be issued to the State to refund the tax alleged to have been collected from the Petitioner by IOCL illegally & deposited with the State.
15. At this juncture, it will beneficial to refer to the Constitution Bench decision of the Hon’ble Supreme Court in the case of Suganmal v. State of Madhya Pradesh & others (supra) in which it has been held that a petition under Article 226 of the Constitution of India solely for issue of a writ of mandamus directing the State to refund money alleged to have been illegally collected by the State as tax was not ordinarily maintainable because a claim for such refund is ordinarily made in a suit against the authority which had illegally collected the money as tax. The Hon’ble Supreme Court further held that the question whether the State was bound u/s. 72 of the Contract Act to refund the amount on the ground that it was paid under a mistake was a matter for decision
Please Login To View The Full Judgment!
in a regular suit & not in a proceeding under Article 226. 16. In view of the Constitution Bench decision of the Hon’ble Supreme Court, the decision relied upon by the Petitioner in the case of Ashoka Bidi Works (supra) & Crown Re-roller Pvt. Ltd. (supra) for issuance of a writ of mandamus directing the State to grant refund to the Petitioner is of no help to the Petitioner. Moreover, the facts of those cases are distinguishable from that of the present case. 17. Further contention of Mr. Sahoo, Learned Counsel for the Petitioner is that deduction of tax from the Petitioner & deposit of such tax with the State Government being unauthorized, the same is unjust enrichment on the part of the State & thus the said tax is refundable to the Petitioner. In support of his contention he relied upon the Judgment of this Court in Brajendra Mishra (supra). For the reasons stated herein before it cannot be said that the deduction of tax from the Petitioner & deposit or such tax with the Government is unauthorized. Moreover, decision of this Court in Brajendra Mishra (supra), is of no help to the Petitioner in view of the decision of the Hon’ble Supreme Court in the case of Shree Digvijay Cement Co. Ltd. & anr v. Union of India & anr, (2003) 2 SCC 614, wherein the Hon’blc Supreme Court held that the doctrine of ‘unjust enrichment’ is a just & salutary doctrine. The power of the Court is not meant to be exercised for unjustly enriching a person. The doctrine of unjust enrichment is however, inapplicable to the State Government as it represents the people of the country. No one can speak of the people being unjustly enriched. 18. In view of the detailed provision made under Section 54 with regard to the deduction of tax & no deduction of tax & deduction of tax at a lower rate from the payment made to the contractor with reference to nature of the contract & the Explanation to Section 54 of the OVAT Act, there is no need to deal with the case of Steel Authority of India (supra) relied upon by the Petitioner. 19. For the reasons stated above, the prayer made in the Writ Petition by the Petitioner for a direction to Opp. Party Nos.2 & 3 to refund Rs.8,10,516 cannot be granted. 20. In the result, the Writ Petition is dismissed. No order as to costs. V.GOPALA GOWDA,C.J. I agree.