HINDUSTAN CONSTRUCTION COMPANY LIMITED Vs. STATE OF BIHAR

JUDGEMENT

(1.) This petition under Article 226 of the Constitution has been filed by one Hindustan Construction Company Limited, a works contractor. According to the writ petitioner, the writ petitioner has secured a work contract for construction of a 'Mini Plant, CW, Offsite Civil Works and Chimney & Chimney Elevator Package for Muzaffarpur TPP, Stage-II (2x195MW)-Bidding Document No. CS-0350-315-9 for a total price of Rs. 232,07,02,686/- spread over a period of five years. According to the writ petitioner, a considerable part of the contract work is completed and the petitioner is entitled to part payment under the contract. The question is deduction of Value Added Tax at source from the payment due to the writ petitioner. Section 41 of the Bihar Value Added Tax Act, 2005 (hereinafter referred to as 'the 2005 Act') and the Notification issued thereunder enjoin the employer to deduct 5% of the bill amount towards Value Added Tax. It is not in dispute that such deduction is required to be made in respect of the amount paid for sale of the goods which forms part of the contract. The amount spent on labour or inter State transfer of goods is not exigible to Value Added Tax under the 2005 Act. Thus, it is only that part of the amount which is spent on sale of goods is required to be subjected to deduction of Value Added Tax at source. The writ petitioner claims that in violation of the aforesaid provision the respondent employer has deducted 5% of the total amount towards Value Added Tax under the 2005 Act. In other words, the petitioner has been subjected to deduction of tax at source in respect of the amount spent on labour which otherwise is not exigible to Value Added Tax.

(2.) Learned advocate Mr. R.K. Agrawal has appeared for the respondent No. 5, the employer. He has submitted that unless the petitioner satisfies the employer with respect to the amount spent on labour, the employer on its own cannot assess the amount spent on labour. The employer is under a legal duty to deduct the amount of Value Added Tax at source from the amount of works contract paid to the contractor.

(3.) It appears to us that the petitioner has unnecessarily approached this Court without first satisfying the employer in respect of the amount spent on labour. The petitioner having not performed its duty to satisfy its employer in respect of the amount spent on labour or the amount which is not exigible to Value Added Tax under the 2005 Act, the employer is not expected not to deduct the amount of Value Added Tax at source.