LPA No. 740 of 2009 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. LPA No. 740 of 2009 Date of decision 26 .8.2009 M/s Cobra Instalaciones Y Services ... Appellant Versus State of Punjab and others ... Respondents. CORAM: HON'BLE MR. JUSTICE M.M. KUMAR HON'BLE MR. JUSTICE JASWANT SINGH Present: Mr. G.R.Sethi,Advocate for the appellant Mr. Piyush Kant Jain, Addl. AG Punjab for respondents 1. Whether Reporters of local papers may be allowed to see the judgement ? 2. To be referred to the Reporter or not ? 3. Whether the judgement should be reported in the Digest ? M.M.KUMAR, J. These five appeals bearing No. 739 to 743 of 2009 have been filed under Clause X of the Letters Patent by the appellant- dealers in respect of assessment years 1997-98, 1998-99, 1999-2000, 2000-01 and 2001-02 partially impugning the judgement dated 13.8.2008 and order dated 20.7.2009 passed by a learned Single Judge of this Court. The learned Single Judge has declared Section 10(C) of the Punjab General Sales Tax Act, 1948 (for brevity 'the Act') and Rule 25A of the Punjab General Sales Tax Rules, 1949 (for brevity 'the Rules') as unconstitutional . The appellant- dealers have not been awarded any interest although the respondents have been directed to pay refund of the tax which was realised under the provision that has been declared unconstitutional. Therefore, challenge is limited to the rejection of the prayer made by the appellants- dealer to award them statutory interest in terms of Section 12(3) of the Act, LPA No. 740 of 2009 2 It would be pertinent to notice few facts which are being taken from CWP No. 17607 of 2005. The dispute raised in the petition pertains to the assessment year 1997-98.The appellant- dealer was awarded two contracts by M/s Power Grid Corporation of India for supply of electric transmission towers in knocked down condition. Another set of contracts were awarded for survey, optimization, design and contract of two 800 KV single circuit transmission lines from Kishanpura to Moga. The first set of contracts were purely for sale of material. The tower parts were manufactured and supplied by M/s Kalpataru Power Transmission Ltd. and M/s Transpower Engineering Limited whereas the second set of contracts were works contract, described as 'Erection Contracts'. The same were got executed through the sub contractor M/s Mukand Engineering limited. M/s Power Grid Corporation for whom the petitioner-appellant was working deducted tax amount of Rs. 27,00,933/- under Section 10(C) of the Act and Rule 25A of the Rules at source from the bills raised by the petitioner- appellant qua the work contract. The deducted tax was deposited with the respondent- State. As the petitioner-appellant had also got the job executed through a sub contractor, a deduction of 2% from the payment made to the sub contractor was made and deposited with the sales tax department. Certificates given by the Power Grid Corporation to the petitioner- appellant on account of deduction of tax at source were submitted alongwith the returns. However, at the time of framing of assessment on 24.4.2002, the credit thereof was not given to the petitioner-appellant. In the assessment order the taxable turnover was determined as nil. No credit of the amount of the amount of tax deducted at source on behalf of the petitioner-appellant was granted by the assessing authority. Aggrieved against the order of LPA No. 740 of 2009 3 assessment, petitioner- appellant filed an appeal before the Deputy Excise and Taxation Commissioner (A) who vide order dated 16.9.2004 remanded the case back to the assessing authority for verification of TDS certificates within 90 days of the date of order. As the remand order was not passed within the prescribed time, the petitioner-appellant approached the Sales Tax Tribunal who vide order dated 27.4.2005 directed the assessing authority to decide the case within one month. The assessment order was framed on 20.2.2006 and a sum of Rs. 27,00,933/- was found to be refundable to the petitioner-appellant. In the petition, the petitioner prayed for striking down the provision of Section 10(C) of the Act and also for grant of interest on the amount of tax retained by the official respondents without any authority of law. According to Section 10(C) of the Act read with Rule 25A of the Rules a provision has been made authorising levy of taxes on a transaction concerning execution of various works contract granted to the appellant dealers. In those works contract the major component is of labour or majority of the goods involved in the execution of works contract have been imported from other States or even from other countries which are not taxable as such under the Act. The petitioner- appellant has filed separate writ petitions in respect of each assessment year seeking declaration that Section 10(C) of the Act read with Rule 25A of the Rules unconstitutional and beyond the competence of the State Legislature. A further direction was sought for refund of the amount deducted from the bills of the petitioner- appellant and deposited as sales tax in respect of assessment years 1997-98, 1998-99, 1999-2000, 2000-01 and 2001-02 . The writ petitions eventually came up for consideration before the learned Single Judge. The learned Single Judge LPA No. 740 of 2009 4 after detailed consideration of various judgements of Hon'ble the Supreme Court came to the conclusion that provisions of Section 10(C) of the Act was beyond the competence of the State Legislature. Reliance in that regard was placed on the judgements of Hon'ble the Supreme Court in the cases of Steel Authority of India Ltd. v.State of Orissa and others (2000) 118 STC 297, Nathpa Jhakri Joint Venture v. State of Himachal Pradesh and others (2000) 118 STC 306 and a judgement of the Gujarat High Court in the case of Larsen and Toubro Limited and others v. Commissioner of Sales Tax (2001) 124 STC 162. The view of the learned Single Judge is discernible from paras 26 and 27 of the judgement which reads as under: “26. Before Karnataka High Court in Larson and Toubro Limited’s case (supra) also the challenge was to the vires of Section 19A of the Karnataka Sales Tax Act, 1957 providing for deduction of tax for similar transactions. The Karnataka High Court as well following judgment in Steel authority of India Limited’s case (supra) and Nathpa Jhakri Joint venture’s case (supra) struck down the provision opining the same to be beyond the purview of the State legislature. To similar effect is the judgment of Jharkhand High Court again in the case of Larson and Toubro Limited’s case (supra). 27. If the enunciation of law as referred to above is considered in the facts and circumstances of the present case, the conclusion is that the provisions of Section 10C of the Act which are para materia to provisions, which were struck down by Hon'ble the Supreme Court and High Courts, have to be declared ultra vires to the Constitution of India as the same is LPA No. 740 of 2009 5 clearly beyond the competence of the State legislature.” In the whole order no direction was given by the learned Single Judge with regard to payment of interest which lead to the filing of applications in the decided writ petitions seeking grant of that relief. Those applications were also dismissed vide order dated 20.7.2009 with the observation that “ No case for modification of the order is made out. Dismissed.” It has come on record that the assessment order was framed declaring the liability of the appellant- dealer as 'nil' on 24.4.2002. Even refund was paid under Section 12(3) of the Act on 7.3.2006 after the filing of the writ petitions by the appellant- dealer without paying any statutory interest. The appellant- dealer had claimed that amount of interest was due to them since 24.4.2002 which is the date of 1st assessment order wherein no taxable turnover was determined and no tax was found due because no tax liability under Section 10(C) of the Act and Rule 25 A of the Rules stood proved. In the light of the aforesaid factual backdrop, the question which falls for determination is whether the appellant- dealer would be entitled to statutory interest in terms of Section 12(3) of the Act. It has remained undisputed that the respondent-State in pursuance to Section 12(3) of the Act has already paid the amount of refund on 7.3.2006 of tax deducted under Section 10(c) of the Act Act and the Rules. The order of assessment was passed on 24.4.2002. It would be profitable to read Section 12(3) of the Act which reads thus: “ S. 12 Refund. ( 1) and (2) xx xx xx xx (3) Where any amount required to be refunded by the assessing authority to any person by virtue of an order issued under this LPA No. 740 of 2009 6 Act is not refunded to him within ninety days of the date of the order, the dealer shall be entitled to get simple interest on such amount at the rate of one per centum per month from the date immediately following the date of expiry of the said period for a period of one month and thereafter at the rate of one and a half per centum per month till the refund is made: Provided that for the purpose of calculation of the interest, part of month shall be considered as one month and any amount less than one hundred rupees shall be considered as one hundred rupees.” A perusal of Section 12(3) of the Act would show that the amount is required to be refunded and if the refund is not made within 90 days of the date of the order then the dealer is to become entitled to get simple interest on such amount at the rate of one percent per month from the date immediately following the date of expiry of the said period for a period of one month and thereafter at the rate of one and a half per centum per month till the refund is made. The amount of refund has already been disbursed. The writ petitions were filed in the year 2005 and the refund has been made by the respondents on 7.3.2006 admittedly under Section 12 of the Act and according to the provisions of Section 12(3) of the Act the delay in refund would attract the imposition of interest as per the rates specified in Section 12(3) of the Act. Accordingly there cannot be any escape from the conclusion that interest was payable to the dealer- appellant. As a sequel to the above discussion, the order dated 13.8.2008 of the learned Single Judge is supplemented and modified to the extent that interest in terms of Section 12(3) of the Act deserves to be awarded to the appellant- dealers. The order of the learned Single Judge passed on the applications on 20.7.2009 is set aside. The respondents are directed to calculate the interest and disburse the same within a period of six weeks LPA No. 740 of 2009 7 from the date of receipt of a certified copy of this order. All the five appeals stands disposed of in the above terms. A copy of the order be placed on the file of each connected appeal. (M.M.Kumar) Judge (Jaswant Singh) 26.8.2009 Judge okg