Larsen and Toubro Limited vs State of Punjab and Others

Ajay Kumar Mittal, J.—Through the present petition filed under articles 226/227 of the Constitution of India, the petitioner impugns the order dated November 11, 2013, annexure P1 passed by respondent No. 2-Assistant Excise and Taxation Commissioner-cum-Designated officer, Mohali, whereby the tax has been levied on such transactions which are assessable under the provisions of the Central Sales Tax Act, 1956 (in short, "the CST Act") in the State of Punjab from where the movement of goods has originated. Prayer has also been made for directing the respondents not to enforce recovery of any tax, interest or penalty in view of the impugned order. A few facts relevant for the decision of the controversy involved, as narrated in the petition, may be noticed. The petitioner is engaged in construction business, undertaking execution of works contract of divisible and indivisible nature of different customers, including in the State of Punjab from its principal place of business located at SCF 63, Phase 3B-2, Mohali. It is registered both under the Punjab Value Added Tax Act, 2006 (in short, "the PVAT Act") and the CST Act. It has been regularly filing returns as prescribed under the statute. The petitioner having effected supply and sale inter-State transaction under the CST Act to the clients, reported the turnover vide form 1 and claimed exemption from levy of tax being transit sales as well as supported by C forms and E1 certificates issued by clients/out-station vendors, respectively. The assessing authority however, sought to undertake an exercise of conducting assessment invoking section 29(2) of the PVAT Act and directed the petitioner to appear on different specific dates. The petitioner filed a consolidated statement of turnover under vide letter dated August 16, 2013, annexures P4 and P5. A show-cause notice dated September 9, 2013, annexure P6 was issued directing the petitioner to respond the same by September 19, 2013, including on a proposal to impose penalty u/s 53 of the PVAT Act. The petitioner replied to the said notice vide letter dated September 17, 2013, annexure P7. The assessing authority-respondent No. 2 after examining the matter passed the impugned order dated November 11, 2013, annexure P1, whereby a huge additional demand of more than Rs. 55 crores which includes penalty and interest has been raised. The exemption as claimed on such inter-State sales turnover was disallowed holding that there could not be any such transaction in respect of client order to be of works contract nature. According to the petitioner, he had submitted a number of documents before respondent No. 2 to prove each and every aspect of the contract but inspite of that, the impugned order has been passed. Hence the present petition.

We have heard learned counsel for the petitioner and perused the record.

The learned counsel for the petitioner submitted that the assessment framed by respondent No. 2 was without jurisdiction as the same was in violation of provisions of articles 269(3) and 286(2) of the Constitution of India coupled with section 84 of the PVAT Act. Relying upon the judgments of the apex court in Gannon Dunkerley and Co. and Others Vs. State of Rajasthan and Others, and Bharat Sanchar Nigam Ltd. and Another Vs. Union of India (UOI) and Others, , it was submitted that the assessing authority had exceeded its jurisdiction in framing the assessment for the assessment year in question.

The following are the broad principles when a writ petition can be entertained without insisting for adopting statutory remedies:

(i) where the writ petition seeks enforcement of any of the fundamental rights;

(ii) where there is failure of principles of natural justice; or

(iii) where the orders or proceedings are wholly without jurisdiction or the vires of an Act is challenged.

We are not inclined to entertain this petition against the assessment order as it does not fulfill any of the broad outlines noticed hereinabove. The assumption of jurisdiction by respondent No. 2 cannot be said to be bad. The ground of challenge herein is that the transactions which have been sought to be taxed could not be taxed and therefore, the assessment framed by respondent No. 2 was without jurisdiction. The apex court in Titaghur Paper Mills Co. Ltd. and Another Vs. State of Orissa and Others, , observed as under:

Under the scheme of the Act, there is a hierarchy of authorities before which the petitioners can get adequate redress against the wrongful acts complained of. The petitioners have the right to prefer an appeal before the prescribed authority under sub-section (1) of section 23 of the Act. If the petitioners are dissatisfied with the decision in the appeal, they can prefer a further appeal to the Tribunal under sub-section (3) of section 23 of the Act, and then ask for a case to be stated upon a question of law for the opinion of the High Court u/s 24 of the Act. The Act provides for a complete machinery to challenge an order of assessment, and the impugned orders of assessment can only be challenged by the mode prescribed by the Act and not by a petition under article 226 of the Constitution. It is now well recognised that where a right or liability is created by a statute which gives a special remedy for enforcing it, the remedy provided by that statute only must be availed of. This rule was stated with great clarity by Willes, J. in Wolverhampton New Water Works Co. v. Hawkesford [1859] 6 CB (NS) 336 at page 356 in the following passage:

There are three classes of cases in which a liability may be established founded upon statute.... But there is a third class, viz., where a liability not existing at common law is created by a statute which at the same time gives a special and particular remedy for enforcing it ... the remedy provided by the statute must be followed, and it is not competent to the party to pursue the course applicable to cases of the second class. The form given by the statute must be adopted and adhered to.

The rule laid down in this passage was approved by the House of Lords in Neville v. London Express Newspaper Ltd. 1919 AC 368 and has been reaffirmed by the Privy Council in Attorney General of Trinidad and Tobago v. Gordon Grant & Co. [1935] AC 532 and AIR 1940 105 (Privy Council) . . .

Similar view was taken by this court in CWP No. 16751 of 2011 ( Larsen and Toubro Limited Vs. State of Haryana and Others, ) decided on January 19, 2012 and CWP No. 20204 of 2013 (Amrit Banaspati Company Limited, Noida v. State of Punjab [2014] 69 VST 451 (P & H)), decided on September 18, 2013. In Amrit Banaspati Company Limited''s case [2014] 69 VST 451 (P & H), it was recorded as under (page 452 in 69 VST):

Admittedly, the petitioner has an alternative remedy of filing an appeal, under the VAT Act. The petitioner''s pleas, in essence, are that the impugned order is erroneous on facts, and in law. A due consideration of the arguments reveals that the impugned order may, at best, disclose an erroneous exercise of jurisdiction but does not disclose an assumption of jurisdiction where there is none. Where a statute confers an alternative remedy, power under article 226 of the Constitution may be exercised if the impugned order discloses an assumption of jurisdiction, where there is none. Where, however, the impugned order, prima facie, discloses an erroneous exercise of jurisdiction, the party aggrieved would be required to approach the appellate forum. The petitioner''s case pertains to an erroneous exercise of jurisdiction, namely, exigibility to sales tax of ''slump sale'', applicability of the Full Bench judgment of the Andhra Pradesh High Court and legality of the penalty and, therefore, can be validly urged before the appellate forum. The petitioner has approached this court, as a precondition to the filing of an appeal is the requirement to pre-deposit a part of amount claimed by the Revenue. We are not inclined, to entertain the appeal merely because the petitioner is statutorily required to pre-deposit tax and penalty.

In view of the above, we refrain from interfering with the assessment order and dispose of the writ petition by relegating the petitioner to the appellate authority to challenge the assessment order before it. It is, however, observed that in case the appeal is filed by the petitioner, the same shall be decided by the appellate authority expeditiously in accordance with law.