M/S. POOJA MARBLES Vs. ASSISTANT COMMISSIONER (CT)

JUDGEMENT

(1.) Heard Mr.S.Ramanathan, learned counsel for the petitioner and Mr.M.Hariharan, learned Additional Government Pleader for the respondent.

(2.) The petitioner who is the registered dealer on the file of the respondent under the provisions of the Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act) and the Central Sales Tax Act, 1956 (CST Act) is engaged in the business of dealing in marbles and also laying of tiles, marble granite work on contract basis. The petitioner had executed a contract work for M/s.DLF Info City Developers (Chennai) Ltd., who are the developers of Special Economic Zone for the assessment year 2006-2007. The petitioner was assessed to tax on a total and taxable turnover of Rs. 1,84,19,590.00 under Section 22 of the TNVAT Act. Subsequently, the petitioner's place of business was inspected by the officers of the Enforcement Wing on 31.08.2012 and during the course of inspection, it was pointed out that the petitioner has done works contract to M/s.DLF at Ramapuram and they have not exercised their option to pay tax under compounded scheme under Section 6 of the TNVAT Act. Therefore, it was pointed out that the petitioner was not eligible to file monthly return in Form "L" and accordingly, the respondent proposed to reject the return and assessed the turnover at 12.5% under Section 3(2) of the Act and to the said effect, notice dated 30.11.2012 was issued. The petitioner submitted their reply to the proposal stating that they undertook works contract for M/s.DLF Info City Developers (Chennai) Ltd. at Ramapuram which is located in Special Economic Zone and to that effect, they are eligible to claim the sale as zero rated sales. A copy of the letter of the Development Commissioner to prove that the contractee is located in Special Economic Zone was furnished for the information of the Assessing Officer. The respondent on receipt of the same accepted the stand taken by the petitioner and held that the petitioner is eligible for exemption on the contract receipt of RS.1,84,19,590.00. However, in the impugned assessment order, the respondent has stated that the TDS amount recovered and remitted by the contractee attracts penalty under Section 40(2) of the TNVAT Act and accordingly levied penalty of Rs. 1 lakhs and adjusted the TDS to the said penalty. This order is impugned in this writ petition.

(3.) Firstly, it has to be pointed out that at no point of time the petitioner deducted the tax at source but it is the contractee for whom the petitioner executed the works contract had deducted tax at source and remitted it to the respondent. Therefore, the petitioner cannot be blamed for such deduction. This fundamental error would render the impugned proceedings as unsustainable. The respondent has referred to Section 40(2) of the TNVAT Act to justify his action in levying penalty. So far as the deduction of tax at source in works contract is concerned, the same is governed by Section 13 of the TNVAT Act. Sub-section (1) of Section 13 of the TNVAT Act starts with a non obstante clause stating that notwithstanding anything contained in the TNVAT Act, every person responsible for paying any sum to any dealer for execution of works contract shall, at the time of payment of such sum, deduct an amount calculated at the rates mentioned in the said provision. In order to protect the interest of dealers who are not liable to pay tax, sub-section (6) of Section 13 of the TNVAT Act provides for a remedy where the dealer can prove to the satisfaction of the Assessing Officer that he is not liable to pay tax under Section 5 of the TNVAT Act, then the Assessing Officer shall refund the amount deposited under sub-section (2) of Section 13 of the TNVAT Act after adjusting the arrears of tax, if any, due from the dealer. Thus the deduction of tax at source was at the instance of the contractee. Therefore, even assuming such deduction was made, then if the dealer proves to the satisfaction of the respondent that he is not liable to pay tax, then the respondent is liable to refund the amount deposited to the dealer, namely, the petitioner herein.