LARSEN AND TOUBRO LTD Vs. STATE OF BIHAR

JUDGEMENT

(1.) This order shall finally dispose of C.W.J.C. No. 2740 of 2003 ( Larsen & Toubro Ltd. v. State of Bihar) and C.W.J.C. No. 3327 of 2002 (M/s. Larsen & Toubro Ltd. v. State of Bihar).

(2.) The petitioner, M/s. Larsen & Toubro Ltd., is registered as a dealer in commercial tax at Begusarai Circle as a works contractor. The petitioner secured a turn-key contract of divisible nature from M/s. Indian Oil Corporation Limited, New Delhi ("IOCL", for short) vide letter of acceptance dated April 28, 2000 followed by detailed contract agreement. The said contract agreement provides a separate Schedule for supply of goods with separate consideration for the same as well as another schedule relating to erection/installation including civil portion of work to be executed, as appended to the contract. After securing the contract the petitioners secured an exclusive registration on the file of the Deputy Commissioner of Commercial Taxes, Barauni, respondent No. 3. It is submitted by the petitioners that in response to the notice issued by respondent No. 3, they produced their books of accounts and other details to finalise the assessment for the period April 1, 2000 to March 31, 2001 under the Bihar Finance Act, 1981 and the Central Sales Tax Act, 1956. It is also submitted that in compliance to the notice issued by the respondent No. 3 they submitted various details and documents under their registered letter and thereafter also personally appeared before the said Deputy Commissioner on various dates and produced the required documents, and as alleged by the petitioners extended full co-operation to finalise, the assessment for the period under reference. According to them they were served with a notice of demand dated January 28, 2002 which was received by the petitioners on January 31, 2002. According to the petitioners, huge demands were made which were not only illegal but were contrary to law and were contrary to the judgments of the Supreme Court. It is also submitted by them that demand of additional tax and penalty is not only confiscatory in its nature but is also bad because no follow up legislation to Section 21(1) of the Bihar Finance Act has been enacted nor the Rules to make Section 21(1) of the Bihar Finance Act workable have been made. According to the petitioners, the amount already paid by them towards the tax was depicting the correct tax amount and the demands made by the taxing officer after illegally assessing the petitioner were bad. According to them the respondents acted in a hot haste in issuing the order and did not give proper opportunity of hearing to the petitioners. It is also submitted by them that the order dated January 7, 2002 under which the petitioners have been assessed is patently illegal and the authority has not taken into consideration the inter-State sale and has also not given the benefit of the deductibles in a works contract. According to the petitioners, they have secured a turn-key contract for a sum of Rs. 435 crores. Out of these Rs. 15,22,50,000 are towards design and engineering portion of work vide Schedule of SP-1. Vide Schedule of SP-2 a sum of Rs. 271,10,27,000 is towards supply of goods specifically described for the price mentioned as per the contract. A sum of Rs. 148,67,23,000, vide Schedule of SP-3 is towards erection and installation, including contract as well as civil portion of work to be executed.

(3.) According to the petitioners, after entering into the contract they took up the work and thereafter for the said assessment period submitted their return giving their turnover details, including computation of gross turnover (GTO), taxable turnover (TTQ) and the tax amount as supported by various entries for the exemption claimed under the specific caption. According to them they are entitled to deduction under the head of sales tax, inter-State sales turnover, tax paid works and labour charges. According to them the authority did not appreciate the true import of taxable turnover and also issued a notice observing that the petitioners had brought in certain goods, therefore, they were liable to pay the sales tax. They have also submitted that unless the follow up legislation to Section 21(1) of the Bihar Finance Act is enacted, the said Section 21(1) of the Act would not become workable and in the matter of works contract, the works contractor cannot be assessed. Number of other pleadings were raised by the petitioners in the writ applications, however, the argument was confined to the follow up legislation to section 21(1)(a)(i) of the Bihar Finance Act, 1981 prescribing the "manner and extent of deduction". The other questions raised in the writ applications were not pressed into service probably because this Court could direct that the petitioners may raise all the questions in a duly constituted appeal.