IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. C.W.P. No.6040 of 2010 Date of decision: 30.8.2010 Rajeev Gumber. -----Petitioner Vs. Bharat Sanchar Nigam Ltd. and others. -----Respondents CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- None for the petitioner. Mr. D.R. Sharma, Advocate for respondent No.1. Mr. Piyush Kant Jain, Addl.A.G., Punjab. --- ADARSH KUMAR GOEL, J. 1. This petition seeks a direction declaring deduction towards sales tax by respondent No.1-Bharat Sanchar Nigam Ltd. out of bills of the petitioner by relying upon agreements dated 11.7.2006 and 31.1.2007 to be illegal and without any authority of law. 2. Case of the petitioner is that he is executing works contract of excavation of trenches, opening, cleaning, jointing of cables, resetting of DPs etc., in which process, some material such as second class bricks, steel clamps and RCC is used. CWP No.6040 of 2010 Liability of the petitioner is to pay tax on the material so used whereas the major component of the amount of bills raised by the petitioner is towards providing of service which involves cost of labour employed, on which value of the contract, sales tax is not attracted. It is also submitted that dominant nature of contract was of providing service. In these circumstances, deduction from total value of bills was illegal as tax was not due on total bill but only on value of material used. Respondent No.1 could make deduction only of tax due and not from total amount of bill. 3. Notice was issued, but no reply has been filed by respondent No.1 inspite of two adjournments granted for the purpose i.e. on 6.7.2010 and 12.8.2010. 4. As per averments in the petition, the matter is covered by judgment of this Court dated 9.5.2002 in CWP No.13947 of 2001 Rajiv Gumber v. Bharat Sanchar Nigam Ltd. & ors, Annexure P-5. Therein, it was held as under:- “.....It is clear that the respondents could not have mechanically made deductions @ 2% from the total bills submitted by the petitioners. They had to examine the facts. If any sales tax was leviable only then the deductions could have been made. Since nobody has gone into the matter, the deductions already made cannot be sustained. In view of the above, the writ petitions are disposed of with directions that the respondent- authorities shall refund the amount deducted from the petitioners’ bills and deposited with the respondent- State. The needful shall be done within one month 2 CWP No.6040 of 2010 from today. In case of failure to make the refund, the petitioners shall be entitled to the amount along-with interest @ 9% from the date of deposit till the date of payment. This will1 not, however, preclude the competent authority from examining the facts and raising a demand. If any tax is found due from the petitioners it shall have been levied and recovered. If the competent authority passes orders of assessment after examination of the evidence within one month then the amount due from the petitioners may be deducted out of the amount already lying deposited. However, no tax shall be leviable on the supply of labour by the petitioners as there is no transfer of property in the goods.” 5. Similar view has been taken in judgment of this Court dated 26.8.2009 in LPA No.740 of 2009 M/s Cobra Instalaciones Y. Services v. State of Punjab & others, Annexure P-9. 6. Thus, point raised in the petition is covered in favour of the petitioner. Learned counsel for the respondents have not been able to show any distinguishing feature. Accordingly, we allow this petition and hold that respondent No.1 is not justified in making deductions mechanically @ 2% from the total bills. It may deduct such tax as may be considered due according to Section 27 of the Punjab VAT Act, 2005, which provides for deduction towards the tax payable. In view of Article 265 of the Constitution, liability to tax has to be as per law and mere fact that in the agreement provision is incorporated to deduct a particular 3 CWP No.6040 of 2010 amount, without such amount being due as tax, cannot justify such deduction. We further direct that the amount already deducted, which is not due as tax, be refunded/adjusted within three months from today. In this regard, respondent No.1 may pass an appropriate order, fixing liability to tax and consequent liability to deduction on that account. In future, respondent No.1 may make deduction as per above orders. The petition is disposed of accordingly. (ADARSH KUMAR GOEL) JUDGE August 30, 2010 ( AJAY KUMAR MITTAL ) ashwani JUDGE 4