WP (C) No.5828/2007 Page 1 of 54 * HIGH COURT OF DELHI : NEW DELHI + Writ Petition (Civil) No.5828 of 2007 Judgment reserved on: March 10th, 2008 % Judgment delivered on: March 14th, 2008 M/s International Metro Civil Contractors 167, Amrit Puri-B, 3rd Floor East of Kailash New Delhi – 110 065 …Petitioner Through Mr. Neeraj Kishan Kaul, Sr. Adv. with Mr. Dhruv Mehta, Mr. Yashraj Singh & Mr. K.D. Tiwari, Advs. Versus 1. Commissioner of Sales Tax/VAT, Delhi Vyapar Bhawan, New Delhi 2. Deputy Commissioner Sales Tax/VAT Special Zone, Vyapar Bhawan New Delhi ...Respondents Through Mr. A.S. Chandhiok, Sr. Adv. with Mr. M.K. Arora & Mr. Ritesh Kumar, Advs. Coram: HON'BLE MR. JUSTICE MADAN B. LOKUR HON'BLE MR. JUSTICE V.B. GUPTA 1. Whether the Reporters of local papers may be allowed to see the judgment? Yes WP (C) No.5828/2007 Page 2 of 54 2. To be referred to Reporter or not? Yes 3. Whether the judgment should be reported in the Digest? Yes MADAN B. LOKUR, J. This case exposes us to another unfortunate aspect of the underbelly of litigation in India – one where both litigating parties go hammer and tongs at each other with neither side willing to give any quarter. This may be understandable where the litigating parties are individuals or corporations seeking a slice of the cake. But where one of the parties is the State, it is a little difficult to appreciate why a litigation should be fought tooth and nail, particularly when a Constitutional Court has repeatedly taken a view that is not only unfavourable to it, but has resulted in observations suggesting that the State is trying to overreach the process of the Court. There is also a severe indictment of a functionary of the State, by this Court, of interpolations and manipulations in an official order. This is perhaps what makes the stage show enacted by the State in this litigation a little distasteful and unpalatable if not sordid and tragic. 2. To make matter worse, if we were to include the initiation of contempt proceedings, this is the fifth time that the Petitioner has had to WP (C) No.5828/2007 Page 3 of 54 approach this Court for relief that was due to it as far back as in April, 2003 – such is the irony of this litigation, which has twice reached the Supreme Court already. 3. Add to this the fact that when we requested learned counsel for the parties to let us know the expenses incurred by their clients so that meaningful costs could be awarded to the successful party, as laid down by the Supreme Court, we were shocked to learn that this litigation alone (not to mention the earlier forays in this Court or the Supreme Court) has cost the parties almost half a crore of rupees – so much for access to inexpensive and affordable justice! 4. With this preface, it is necessary to consider the challenge mounted by the Petitioner which is to: (a) An order dated 19th April, 2007 issued by the Commissioner, Value Added Tax. By this order, the jurisdiction in respect of the Petitioner for the assessment year 2000-2001 onwards under the Delhi Sales Tax on Works Contract Act, 1999 (the Works Contract Act) and the Central Sales Tax Act, 1956 was transferred to the Deputy Commissioner (Special Zone). (b) Another order dated 19th April, 2007 issued by the Commissioner, Value Added Tax. Essentially, this order delegates revisionary powers under Section 46 of the Delhi Sales Tax Act, 1975 (the DST Act) to the Deputy WP (C) No.5828/2007 Page 4 of 54 Commissioner (Special Zone). It may be noted that the DST Act was repealed on 31st March, 2005. (c) A notice dated 18th July, 2007 issued by the Deputy Commissioner (Special Zone) of the Government of NCT of Delhi, Department of Trade and Taxes. By this notice, the Deputy Commissioner (Special Zone) seeks to exercise his (delegated) revisionary jurisdiction to call for and examine the record/proceedings pertaining to the assessment of the Petitioner under the Works Contract Act and the DST Act. The initial facts: 5. On 31st March, 2003, an assessment order was passed by the Tax Assessment Officer in respect of the Petitioner for the assessment year 2001-2002. By virtue of this order, the Assessing Officer granted a refund of Rs.6,30,79,487/- to the Petitioner which was then to be made over to the Petitioner on an application filed by it. The assessment order was accepted by the Revenue and was not sought to be immediately revised or otherwise set aside. It may be mentioned, en passant, that the assessment order was rectified on 9th June, 2003 but that is admittedly of no real significance or import. 6. Consequent upon the assessment order, the Petitioner preferred an application on 2nd May, 2003 for refund of the amount due to it under Section 30(1) of the DST Act. Unfortunately, the Assessing WP (C) No.5828/2007 Page 5 of 54 Officer, instead of granting the refund, went on to consider the merits of the assessment order as if he were sitting in appeal over the assessment made. 7. Eventually, the Assessing Officer passed an order dated 14th August, 2003 whereby he rejected the refund application. But what is worse, he made interpolations and manipulations in the order dated 14th August, 2003. The Assessing Officer also did not communicate the order dated 14th August, 2003 to the Petitioner. Instead, on 4th September, 2003 a notice was issued to the Petitioner seeking to reopen the assessment in respect of the assessment year 2001-2002. The reassessment proceedings continued and culminated in an order of reassessment dated 15th January, 2004. The first writ petition: 8. Feeling aggrieved by the rejection of its refund application preferred under Section 30(1) of the DST Act (by the order dated 14th August, 2003) as well as the order of reassessment dated 15th January, 2004, the Petitioner filed in this Court WP (C) No.869 of 2004 (the first writ petition). In that writ petition, which was decided on 28th July, 2004 the following conclusions were arrived at by the Division Bench: WP (C) No.5828/2007 Page 6 of 54 (1) The order dated 14th August, 2003 passed by the Assessing Officer was the following:- “Dealer is asked to file the present addresses of sub-contractor and sales tax wards, tax deposited figures of each. But he refused to sign and left office. Application is not kept in abeyance and is rejected.” (2) The underlined words, that is, „not‟ and „and is rejected‟ were interpolated by the Assessing Officer and so the order rejecting the refund application deserved to be quashed. (3) A refund could be withheld only under the conditions mentioned in Section 30(6) of the DST Act. These conditions are: (a) the assessment order is the subject matter of an appeal or further proceedings or where any other proceeding is pending under the DST Act, and (b) the Commissioner is of the opinion that the grant of refund is likely to adversely affect the Revenue. (4) In the present case, no such proceedings were pending and so the refund could not be withheld. “Therefore it goes without saying that it is very clear that an application for refund ought to have been allowed under Section 30.” (Emphasis given) (5) The order rejecting the refund was quashed and the reassessment order was also quashed. (6) The Commissioner was directed to pass appropriate orders on the refund application keeping in view the mandate of Section 30 of the DST Act within a period of 15 days. 9. Instead of complying with the mandamus issued by this Court, the Commissioner passed an order on 12th August, 2004 (on the WP (C) No.5828/2007 Page 7 of 54 extended date) on the application for refund and came to the prima facie conclusion that the assessment order dated 31st March, 2003 was erroneous and prejudicial to the interest of the Revenue. Therefore, he concluded that before granting the refund, the assessment order dated 31st March, 2003 is required to be revised under Section 16 of the Works Contract Act read with Section 46 of the DST Act. Consequently, the Commissioner directed the concerned Assistant Commissioner [who was delegated powers of the Commissioner under Section 46 of the DST Act by an order dated 12th September, 1994] to revise the assessment order. It was further directed that only thereafter should the Zonal Assistant Commissioner take up the question of refund due to the Petitioner. 10. Section 46 of the DST Act is of some importance and this reads as follows: “46. Revision of orders prejudicial to revenue: The Commissioner may call for and examine the record of any proceeding under this Act and if he considers that any order passed therein by any person appointed under sub-section (2) of section 9 to assist him, is erroneous in so far as it is prejudicial to the interests of revenue, he may, after giving the dealer an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment WP (C) No.5828/2007 Page 8 of 54 and penalty (if any) imposed or cancelling the assessment and penalty (if any) imposed and directing a fresh assessment. Provided that a final order under this section shall be made before the expiry of five years from the date of the order sought to be revised.” 11. Feeling aggrieved by the failure of the Commissioner to comply with the mandamus issued by this Court in the matter of refund, and instead, attempting to revise the assessment order dated 31st March, 2003 the Petitioner filed a miscellaneous application in the first writ petition seeking appropriate orders from this Court. 12. On 20th September, 2004 an order came to be passed on the miscellaneous application directing the Revenue to deposit the entire refundable amount with interest, in the Registry of this Court, within one week. The order dated 12th August, 2004 passed by the Commissioner was also stayed by this Court and this interim stay continued until the miscellaneous application was decided on 18th November, 2005 when it was held that it would be appropriate for the Petitioner to initiate separate substantive proceedings challenging the order dated 12th August, 2004 instead of through a miscellaneous WP (C) No.5828/2007 Page 9 of 54 application. 13. In the meanwhile, on 31st March, 2005 both the Works Contract Act as well as the DST Act were repealed and on 1st April, 2005 the Delhi Value Added Tax Act, 2004 (the DVAT Act) was brought into force. 14. There are two significant aspects of the DVAT Act that we are concerned with. Firstly, the provision for repeal and savings, which is Section 106 of the DVAT Act and this reads as follows: “106. Repeal and savings (1) The Delhi Sales Tax Act, 1975 (43 of 1975), the Delhi Tax on Entry of Motor Vehicles into Local Areas Act, 1994 (4 of 1995), the Delhi Sales Tax on Works Contract Act, 1999 (9 of 1999), and the Delhi Sales Tax on Right to Use Goods Act, 2002 (13 of 2002) as in force in Delhi (referred to in this section as the “said Acts”), are hereby repealed. (2) Notwithstanding sub-section (1) of this section, such repeal shall not affect the previous operation of the said Acts or any right, title, entitlement, obligation or liability already acquired, accrued or incurred thereunder. (3) For the purposes of sub-section (2) of this section, anything done or any action taken including any appointment, notification, notice, order, rule, form or certificate in the exercise of any powers conferred by or under the said Acts shall be deemed to have been done or taken in the exercise of the powers conferred by or under WP (C) No.5828/2007 Page 10 of 54 this Act, as if this Act were in force on the date on which such thing was done or action was taken, and all arrears of tax and other amounts due at the commencement of this Act may be recovered as if they had accrued under this Act.” 15. Secondly (and this is important in so far as the Petitioner is concerned) no power of revision was conferred upon the Commissioner of Value Added Tax under the DVAT Act. The revisionary power, which earlier existed under the DST Act, was not saved under the DVAT Act. It came into existence under the DVAT Act only by an amendment brought into force with effect from 16th November, 2005 by the inclusion of Section 74A in the DVAT Act. In other words, the power of revision conferred upon the Commissioner under the DST Act was omitted under the DVAT Act and conferred on the Commissioner only on 16th November, 2005. 16. Given this factual background, it is necessary at this stage to pause and take stock of the facts as they existed on 1st April, 2005 when the DVAT Act came into force. The important facts are: 1. The Works Contract Act and the DST Act were repealed by the DVAT Act. Section 106 of the DVAT Act dealt with repeal and savings. 2. Under the DVAT Act, on 1st April, 2005 the WP (C) No.5828/2007 Page 11 of 54 Commissioner of Value Added Tax did not have the power to revise an assessment order which was erroneous or prejudicial to the interest of the Revenue. [Such a power was conferred on him much later only on 16th November, 2005]. 3. The power of revision earlier available with the Commissioner under the DST Act was omitted under the DVAT Act. 4. An order dated 12th September, 1994 issued by the Commissioner was in existence delegating powers of revision under Section 46 of the DST Act to the Assistant Commissioner. 5. The order dated 12th August, 2004 passed by the Commissioner was in existence. By this order, the Assistant Commissioner was asked to revise the assessment order dated 31st March, 2003 and thereafter take up the application filed by the Petitioner for refund. 6. No proceeding was initiated or pending in respect of the Petitioner on 1st April, 2005 pursuant to the order dated 12th August, 2004. 7. The Petitioner had filed a miscellaneous application in the first writ petition (decided on 28th July, 2004) in which an order was passed by this Court on 20th September, 2004 staying the operation of the order dated 12th August, 2004. The contempt petition: 17. It appears that in view of the recalcitrant attitude (but despite the pendency of the miscellaneous application in the first writ petition) the Petitioner filed a civil contempt petition in this Court on 11th May, WP (C) No.5828/2007 Page 12 of 54 2005 against the Commissioner of Value Added Tax (earlier the Commissioner of Sales Tax) being CCP No.381 of 2005. The grievance of the Petitioner was that not only was the refund denied to it in spite of a mandamus of this Court but the order dated 12th August, 2004 was an attempt to overreach the orders passed by this Court in the first writ petition decided on 20th July, 2004. 18. The civil contempt petition came to be heard by a Division Bench of this Court and by an order dated 18th November, 2005 the learned Judges expressed different opinions. One of the learned Judges (T.S. Thakur, J) was of the view that the contempt petition merited dismissal and that the amount deposited by the Revenue pursuant to the orders of this Court passed on 20th September, 2004 shall stand refunded to the Revenue. The other learned Judge (Badar Durrez Ahmed, J) was of the opinion that the Commissioner had committed contempt of Court by showing complete and thorough disrespect to the orders passed by this Court and had deliberately and intentionally and by a device thwarted the opinion of this Court dated 20th July, 2004. However, the learned Judge was of the view that since contempt proceedings involve penal consequences and T.S. Thakur, J did not find the Commissioner in WP (C) No.5828/2007 Page 13 of 54 contempt, it would be appropriate to give him the benefit of doubt and not haul him up for contempt of Court. Accordingly, the contempt petition was dismissed. The second and third writ petitions: 19. On 16th January, 2006, an office order was issued by which the Commissioner transferred the jurisdiction concerning the assessment of the Petitioner to the Special Zone in respect of all proceedings, whether commenced, pending or to be initiated. 20. Pursuant thereto, the Joint Commissioner, Special Zone issued a notice dated 21st February, 2006 to the Petitioner in exercise of powers delegated to him under Section 46 of the DST Act. It was stated in the notice that the assessment order dated 31st March, 2003 was erroneous and prejudicial to the interest of the Revenue and therefore the Petitioner may show cause why the assessment order be not revised. Although no reference was made to the order dated 12th August, 2004 it is quite clear that the notice was pursuant to that order passed by the Commissioner of Sales Tax. WP (C) No.5828/2007 Page 14 of 54 21. A few days earlier, on or about 17th February, 2006, the Petitioner had filed WP (C) No.2355 of 2006 (the second writ petition) in this Court in which it was prayed that the order dated 12th August, 2004 passed by the Commissioner of Sales Tax be quashed. The writ petition was heard for admission by a Division Bench of this Court on 20th February, 2006 and judgment reserved. Judgment was eventually delivered by the Division Bench on 15th September, 2006 when again there was a difference of opinion between the learned Judges constituting the Division Bench (T.S. Thakur and B.N. Chaturvedi, JJ) – but more on that a little later. 22. The Petitioner filed a reply to the show cause notice dated 21st February, 2006 and soon thereafter in April, 2006 filed WP (C) 5272 of 2006 (the third writ petition) in this Court challenging that show cause notice. It was contended in the third writ petition, inter alia, that the show cause notice is without jurisdiction since it was issued in exercise of powers conferred by the Works Contract Act and the DST Act both of which statutes had been repealed, the revisionary power vested in the Commissioner under the DST Act was not saved or preserved and that no revisionary power was conferred on the WP (C) No.5828/2007 Page 15 of 54 Commissioner under the DVAT Act until 16th November, 2005 when Section 74A was inserted in that statute. 23. The third writ petition challenging the show cause notice dated 21st February, 2006 was heard for admission on 3rd April, 2006 when orders were reserved. However, it was directed on that date that the revision proceedings may go on before the appropriate authority but no final order shall be passed thereon and that the Petitioner should cooperate with the proceedings. 24. As mentioned above, the second writ petition which was argued for admission on 20th February, 2006, was decided by a Division Bench of this Court on 15th September, 2006. T.S. Thakur, J upheld the validity of the notice dated 12th August, 2004 whereby the refund application of the Petitioner was rejected by the Commissioner and a direction was given to the Zonal Assistant Commissioner to revise the assessment order dated 31st March, 2003 and thereafter decide the refund application of the Petitioner. On the other hand, B.N. Chaturvedi, J concluded that the order dated 12th August, 2004 deserved to be quashed, which he did. It was directed by the learned Judge that the WP (C) No.5828/2007 Page 16 of 54 Revenue should pass appropriate orders on the refund application filed by the Petitioner in conformity with the orders dated 20th July, 2004 passed by this Court in the first writ petition. Liberty was granted to the Revenue to pass appropriate orders in regard to revision of the assessment order, in accordance with law, but not before disposing of the refund claim. 25. In view of the difference of opinion between the learned Judges in the second writ petition, the matter was referred to a third learned Judge (Mukul Mudgal, J) who passed an order on 18th October, 2006 concurring with the view taken by B.N. Chaturvedi, J quashing the order dated 12th August, 2004. It was held that the Revenue should first comply with the mandamus dated 20th July, 2004 directing refund to the Petitioner. 26. After the third learned Judge rendered his opinion, the second writ petition was placed before the Division Bench on 3rd November, 2006 for passing consequential orders. On that date, the Division Bench allowed the writ petition and quashed the order dated 12th August, 2004. The Commissioner was directed to pass appropriate WP (C) No.5828/2007 Page 17 of 54 orders on the refund application in conformity with the orders of this Court dated 20th July, 2004 in the first writ petition. The Revenue was also given liberty to pass appropriate orders, in accordance with law, in regard to the assessment order but only after disposing of the refund application. 27. The Revenue preferred Special Leave Petition (C) No.20786 of 2006 against the final order dated 3rd November, 2006 in the second writ petition, but the SLP was dismissed by an order dated 4th January, 2007 with the Supreme Court observing that: “On the facts of the case, we are not inclined to interfere keeping the question of law open. The special leave petition is dismissed.” 28. Therefore, the factual position as it stood on 4th January, 2007 when the Supreme Court dismissed the SLP of the Revenue was as follows: 1. The Petitioner was entitled to a refund on the basis of the assessment order dated 31st March, 2003. This was conclusively held by two Division Benches of this Court, both in the first writ petition (decided on 20th July, 2004) as well as in the second writ petition (decided on 3rd November, 2006). 2. An SLP against the decision rendered by this Court in the WP (C) No.5828/2007 Page 18 of 54 second writ petition was dismissed on 4th January, 2007. 3. The order passed on 12th August, 2004 to initiate reassessment proceedings against the Petitioner stood quashed in the second writ petition. 4. While the order dated 12th August, 2004 was quashed in the second writ petition, liberty was given to the Respondents to pass appropriate orders in respect of the assessment order dated 31st March, 2003 in accordance with law. 5. The Works Contract Act and the DST Act were repealed with effect from 31st March, 2005 and the DVAT Act was brought into force on 1st April, 2005. 6. The DVAT Act did not confer any power of revision on the Commissioner of DVAT till 16th November, 2005 when Section 74A was inserted in the DVAT Act. 7. The third writ petition challenging the show cause notice dated 21st February, 2006 issued by the Joint Commissioner, Special Zone on the ground of lack of jurisdiction was heard for admission on 3rd April, 2006 and judgment reserved. The Joint Commissioner was permitted to go ahead with the proceedings but was restrained from passing a final order thereon. The fourth writ petition: 29. After finality was given to all the pending proceedings (other than the third writ petition in which judgment was still awaited), the refund due to the Petitioner was granted to it by an order dated 8th January, 2007 passed by the Commissioner (T&T). However, in the WP (C) No.5828/2007 Page 19 of 54 order dated 8th January, 2007 the Commissioner stated in paragraph 10 thereof as follows: “This order would, however be without prejudice to the rights and powers of the competent authority for suo-moto revision under Section 46 of the Delhi Sales Tax Act, 1975 read with