VIRAMGAM-MAHESANA PROJECT LTD Vs. STATE OF GUJARAT

JUDGEMENT

(1.) The petitioners have filed this petition with a prayer for direction to quash the impugned action of the respondents of demanding taxes on the "access charges" received by the petitioners from railway authorities. The petitioners have also prayed for quashing a provisional attachment order dated June 2, 2006 issued by the Assistant Commissioner of Commercial Tax, Ahmedabad under section 45 of the Gujarat Value Added Tax Act, 2003 ("the VAT Act" for short). We may notice facts at this stage.

(2.) Petitioner No. 1 is a company registered under the Companies Act Petitioner No. 2 is its shareholder. Petitioner No. 1 company is a consortium of three public limited companies constituted specifically for creating a special purpose company for the purpose of executing a contract with the western railways for gauge conversion of Viramgam-Mahesana track. The agreement for this purpose titled as "concession agreement" was entered into between the western railway and the petitioner-company on May 23, 2003. We shall taken note of relevant terms of such agreement at a later stage. Suffice it to note at this stage however, that under such agreement petitioner No. 1 company had to convert an existing meter gauge railway line into broad gauge through its own finance. Upon completion of such work of gauge conversion, petitioner No. 1 company had to permit access to the railways to such infrastructure so created for which purpose the railways had to pay agreed charges for a period of 12 years. Upon completion of such period or sooner if the contract was terminated, the railways would get what according to the petitioners was full ownership over such infra-structural facilities. In the meantime, since the land belonged to the railways, the petitioner was granted use of such land on payment of nominal lease amount of Rs. 1,000 per annum. This contract has become the centre of controversy for the purpose of sales tax under the Gujarat Sales Tax Act as was applicable in the State of Gujarat till the same was substituted by the VAT Act and thereafter, under such successor Act.

(3.) In brief stand of the petitioners is that in absence of any sale of goods, they are not exigible to sales tax or value added tax (vat). The State Government however, holds a belief that looking to the various terms and conditions of the contract, sales tax/vat is payable.