M/S JAIPRAKASH ASSOCIATES LIMITED Vs. SUPERINTENDING ENGINEER

JUDGEMENT

(1.) The petitioner, a public listed company, engaged in the business of executing civil, mechanical and other infrastructure works, filed the writ petition for issuance of a writ, more particularly a writ of mandamus declaring the action of the respondents in collecting tax at source from the monthly work bills due to the petitioner at the rate of 2.8 % instead of 0.36% as illegal, arbitrary and without jurisdiction and consequently seeks a direction to the respondents to collect the tax at the rate of 0.36% and return the excess amount recovered.

(2.) As per the averments in the writ affidavit, the 5th respondent issued a notice inviting tenders from the eligible contractors for execution of work viz., Investigation, design and execution of Tunnel-1 and Tunnel-2 including Head regulator at the entrance portal of Tunnel-1 of Srisailam Left Bank Canal Tunnel Scheme of Alimineti Madhava Reddy Project (A.M.R.P.) from Neelam Sanjeeva Reddy Sagar Project Reservoir (Srisailam Reservoir) in Mahaboob Nagar and Nalgonda Districts of Andhra Pradesh, India, and the bidder shall quote for the entire scope of work including O&M for two years. Petitioner emerged as successful bidder and a contract agreement bearing No.54SE/2005-2006 was entered into on 25.08.2005 between the petitioner and the 1st respondent, the executing authority. The lump sum amount agreed to be paid for entire contract work was specified as Rs.1,925 crores. In terms of the contract agreement and also in terms of the Andhra Pradesh Value Added Tax Act and Rules, 2005 (in short "A.P.VAT Act and Rules"), the petitioner is liable to pay Value Added Tax (in short "VAT") and the 2nd respondent department is entitled to deduct VAT as Tax Deduction at Source (in short "TDS") and deposit the same to the credit of 6th respondent i.e. Commercial Tax Officer, Basheerbag, Hyderabad. Petitioner having estimated the quantum of work involved, where the petitioner is required to utilize the goods in execution of works contract, had applied in Form 501-C to the 6th respondent, under Section 22 of the Andhra Pradesh Value Added Tax Act, 2005 (in short "A.P.VAT Act") read with Rule 18 of the Andhra Pradesh Value Added Tax Rules, 2005 (in short "A.P.VAT Rules") for issuance of a certificate, and the 6th respondent in turn had passed an order in Form 501-D on 15.03.2007, specifying tax to be deducted as TDS @ 2% on the 18% of the gross value, which comes to about Rs.346.77 Crores. Tax @ 2% or at 0.36% of the gross value of the bill was being deducted from the petitioner's bills and payments were made accordingly upto March, 2012. However, from April, 2012 onwards TDS is being deducted at the rate of 4% on 70% of the work i.e. at the rate of 2.8% of the gross value ignoring the form 501-D issued by the 6th Respondent. Petitioner was informed that the excess deductions are being made on account of the instructions issued by the 3rd respondent vide their letter dated 11.05.2012. Petitioner had written several letters clarifying legal position, but in spite of the same respondent Nos.2 and 3 continued to deduct tax at the rate of 2.8% from the gross payments. Further, even assuming without conceding, the 2nd respondent may deduct TDS on account of VAT, in view of Section 22, Section 57 and Rule 18 of the A.P.VAT Act and Rules, they are mandatorily required to deposit the same with the 6th respondent, they cannot keep the said amount. The 6th respondent in turn would make necessary adjustments while completing the assessment proceedings. As a matter of fact, the petitioner pleads the action of the respondent Nos.2 and 3 in deducting higher amounts and not depositing the same in the account of 6th respondent as contrary to the A.P.VAT Act and Rules and thus the Writ Petition.

(3.) Separate counter affidavits have been filed on behalf of the respondent Nos.2 and 3. So far as 2nd respondent is concerned, in its counter had practically put the entire burden on 3rd respondent and in no uncertain terms had stated that it is solely on account of the objections raised by the 3rd respondent and on their instructions TDS is being deducted at the rate of 2.8% from the running bills since April, 2012. A reference was made to Clause 105-1 of contract agreement. Along with the counter affidavit, the correspondence exchanged between the 2nd and 3rd respondents was also placed on record.