RSA No.1234 of 2008 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH RSA No.1234 of 2008 Date of Decision:15.07.2010 Dilbagh Singh .....appellant Versus State of Haryana .....respondent CORAM: HON'BLE MR.JUSTICE RAKESH KUMAR GARG 1.Whether Reporters of local papers may be allowed to see the judgement? 2. To be referred to the Reporters or not? 3. Whether the judgment should be reported in the Digest? Present: Mr.Sanjay Mittal,Advocate for the appellant Mr.Ashok Jindal, Additional Advocate General, Haryana for the respondent **** RAKESH KUMAR GARG J.(ORAL): This is plaintiff's second appeal challenging the judgment and decree of the Lower Appellate Court, whereby appeal filed by the respondent-State against the judgment and decree of the trial Court has been accepted and suit of the plaintiff-appellant has been ordered to be dismissed. As per the averments made in the plaint, appellant entered into an agreement with the respondent to execute some construction work and agreement was completed between the parties on 25.07.2001 and the sale tax payable by the appellant on such works contract was at the rate of 2% of the total payment made on the basis of work done but vide notification dated 01.08.2001 respondent has notified that a contractee responsible for making any payment or discharging his liability on such works contracts, shall at the time of credit or payment to the contractor deduct tax at the rate of 4% of the amount paid. According to the appellant, RSA No.1234 of 2008 2 the contract with the respondent was complete on or before 31.07.2001 and therefore the respondent could deduct sale tax at the rate of 2% from the appellant. However, since the respondents were threatening to recover sale tax at the rate of 4% the present suit for permanent injunction restraining the respondents from charging sale tax at the rate of 4% instead of 2% on the works mentioned in the suit was filed. The aforesaid suit was contested by the respondents. It is not disputed that the respondents sent their acceptance for the contract to the appellant on or before 31.07.2001. However, a stand was taken that the aforesaid contract was reduced into writing between the parties on 07.08.2001 and thus the respondents were well within their right to claim interest at the rate of 4% instead of 2%. After giving an opportunity of hearing to both the counsel for the parties and considering the evidence on record, the trial Court decreed the suit holding that the acceptance of the contract was given by the respondents before the date of notification of increasing the sale tax and therefore the respondents were not entitled to recover the sale tax at the rate of 4%. On an appeal filed by the respondent-State, the judgment of the trial Court was set aside and suit filed by the appellant was dismissed. While accepting the appeal, the Lower Appellate Court observed as under: “After hearing the learned counsel for the parties and going through the evidence came on the record, I am of the view that the dispute involved between the parties is whether the contract between the parties became final on 31.07.2001, when the defendants sent their letter of acceptance or after 01.08.2001 when the plaintiff was required to sign the formal agreement. Both the parties RSA No.1234 of 2008 3 have based their contentions on letter Ex.P3 and the relevant portion of which reads as follows: “The time limit for completion of works as agreed(6)six months from the date of commencement which will be reckoned w.e.f.01.08.2001. You are, therefore, requested to contact the Sub-Division Engineer, P.H.Sub Divn.No.1, Bahadurgarh for taking nishans and start the work immediately. The documents containing details of terms and condition of the contract which stands concluded with this communication are under preparation and you are requested to please attend this office on any working day to sign the same within 10 days from the issue of this communication. Please also note that no payment shall be made to you unless the documents mentioned above signed by you.” After going through the contents of the letter,it is quite evidence that this letter of acceptance of the contract of the plaintiff was subject to signing of certain documents containing the details of terms and conditions of the contract. In the said letter, it was specifically mentioned that both the parties agreed to complete the work within a period of six months from the date of commencement which would be reckoned w.e.f.01.08.2001. Vide the said letter, the contractor was also required to contact the Sub- Divisional Engineer, Bahadurgarh for taking nishans and to start the work immediately. The documents containing the details of terms and conditions of the contract which stood concluded with this communication were also under preparation and therefore, within a period of ten days he RSA No.1234 of 2008 4 was also requested to sign the same. Admittedly, this letter was signed after 01.08.2001. Learned trial Court has erroneously held that only formal act was to be done by the parties and, therefore, the contract between them was concluded on 31.07.2001, when this letter was put into the course of transmission. I am not in concurrence with this contention of the learned trial Court, in this regard. It is settled principle of law that when the parties have agreed to reduce their contract in writing, then no oral evidence for explanation of its terms and conditions is admissible as per the provisions of Section 92 of the Indian Evidence Act. Signing of these documents was not a mere formality rather the parties have agreed to reckon their contract from 01.08.2001. No doubt, the contract was directed to start the work immediately but acceptance of his work was subject to the terms and conditions which were to be executed by him after 01.08.2001. Thus, it was intended by the defendants to give effect to the contract of the plaintiff not from 31.07.2001 but from 01.08.2001. Therefore , the appeal is accepted and the observations made by the learned trial Court under Issue No.1 are set aside.” Feeling aggrieved from the aforesaid judgment and decree of the Lower Appellate Court, the plaintiff has approached this Court by way of instant appeal. Learned counsel for the appellant has vehemently argued that the Lower Appellate Court has misinterpreted the contract between the parties and also Section 4 of the Indian Contract Act, according to which the contract between the parties was complete as soon as the acceptance RSA No.1234 of 2008 5 was submitted by the respondent. According to the learned counsel for the appellant, there is no dispute that respondent sent their acceptance of contract on 31.07.2001 i.e. well before the date of notification of levying sale tax at the rate of 4% i.e.01.08.2001 and therefore sale tax at the rate of 4% was not deductable from the appellant. I have heard learned counsel for the appellant. The argument raised by the appellant seems to be attractive but is without any force. Admittedly, as per Clause 51 of the contract, sale tax was to be deducted from gross payment as per government instructions. There is no dispute of the fact that the works were executed by the appellant after 07.08.2001 and when the works were executed/completed, the rate of sale tax were imposable on such works contract was 4%. Even as per Clause 35 of the contract, the contractor is under legal obligation to pay the sale tax as per the rules and instructions of the government issued from time to time. Again, it is not disputed that liability of the contractor to pay sale tax arises only at the time of payment of the work done and at that time notification dated 01.08.2001 was applicable. Learned counsel for the appellant has very fairly stated before this Court that there is no other clause in the Contract Act which regulates the payment on sale contract upon the works contract. The appellant has not challenged the notification dated 01.08.2001 in the suit. In view of the aforesaid provisions in the contract, the argument raised by the learned counsel for the appellant regarding the completion of contract i.e. whether the contract was completed between the parties on 31.07.2001 or on 07.08.2001 is immaterial and has no effect on his liability to pay sale tax at the rate of 4% on the payment made on the basis of works contract. RSA No.1234 of 2008 6 No substantial question of law rises. Dismissed. (RAKESH KUMAR GARG) JUDGE 15.07.2010 neenu