23. Can the assessing authority revise the interest levied under section 36(3)(b) read with section 9(2) of the Central Sales Tax Act after the lapse of 2 years or is it an original action for which there is no statutory limit as held by the appellate authority?

Ans: No. It is not an original order and statutory provisions of section 62 apply.

In this case the assessment under the Bombay Sales Tax Act for the period 1993-94 resulted in a refund of Rs. 6,35,251/-. However, the assessing authority imposed interest under section 36(3)(a) at Rs. 36,730/- for the delay in payments and after adjusting the said interest the net refund was sanctioned at Rs. 5,98,521/-. For the same period the assessment under the Central Act resulted in a demand of Rs. 8,71,642/- After taking into consideration the gross refund of Rs. 6,35,251/- the assessing authority levied interest under section 36(3)(b) read with section 9(2) at Rs. 2,17,480/. The assessee accepted the assessment orders and paid the balance amount of Rs. 4,90,601/- under the Central Act.

After a period of about 7 years, the assessing authority felt that there is a short levy of interest under section 36(3)(b) read with section 9(2) to the extent of considering the gross refund for the purpose of levying interest instead of net refund under the Bombay Sales Tax Act. He worked out the interest on the differential dues at Rs. 33,791/- under section 36(3)(b) read with section 9(2) of the Central Act. The contention of the appellant that the action is under section 62 of the Bombay Sales Tax Act, 1959 and barred by limitation was not accepted. In appeal before the Deputy Commissioner the appellant again pleaded that the action is barred by limitation. However, the learned Deputy Commissioner held that the action is an original action for which there is no statutory limit.

The Tribunal after considering the rival submissions held while passing the assessment order the assessing authority had considered the taxes paid and payable under both the Acts and arrived at the unpaid tax liability for the purpose of calculation of interest under section 36(3)(b). Thus the original action to levy the interest under section 36(3)(b) was already taken by the assessing authority through his assessment order. According to the Tribunal if after taking this action the assessing authority is of the opinion that there is a short levy of interest due to the differential tax dues having been adjusted towards the gross refund instead of the net refund, it is an error in calculation and can be corrected only by following the remedies provided under the Act. The correction has to be made within the particular statutory time limit. The Tribunal did not accept the contention that the impugned action to levy additional amount of interest is an original action under section 9(2) read with section 36(3)(b) of the Bombay Sales Tax Act 1959. The interest under section 36(3)(b) is leviable with reference to the differential tax dues as per the assessment order for a given period and therefore the original action to levy such interest can be taken only once. Once such original action is taken, any subsequent variation in the interest has to be made through the actions as provided in sections 62, 35, 55, 57 etc. As the action was taken after a lapse of 7 years, it was clearly barred by limitation. On merits also the Tribunal held the action of taking net refund to determine the CST tax dues for the purpose of levy of interest is legally unsustainable in the light of the Tribunal’s judgment in the case of Royal Agencies (S.A. 1454 of 2002 dated 20-12-2003).

(Skol Breweries Limited vs. The State of Maharashtra – Second Appeal No. 1323 of 2006 dated 9th February, 2007. The judgment is delivered at the Third Bench of the Tribunal by the Hon’ble Member G.G. Kochrekar. The appellant was represented by B. D. Advani, Advocate.)

24. Whether the appellant is entitled to set off under Rule 41D(2)(iii) of the Bombay Sales Tax Act, 1959 in the context of the goods manufactured and transferred to branches which are used in the execution of Works Contract in other States.

Ans. Yes.

The appellant is a manufacturer of paint booths, paint systems, spares, components and accessories required for the said machineries. The appellant had branch transferred the manufactured goods to its Gurgaon Branch. The said branch is registered under the Central Act and had issued Form 31C duly filled in and signed by the Manager. The appellant had claimed set off under Rule 41D(2) (iii) in respect of the said branch transfer. The Assessing Officer disallowed the set off and in appeal the action of the Officer was upheld. Before the Tribunal the appellant pointed out the relevant portion of the Rule and the term “Export”in the said rule and submitted that it had fulfilled all the conditions. It was also argued that if at all the term “sale” is to be interpreted, it has to be as per the provisions of the law applicable in the State where the contract is executed; i.e., Haryana and Works Contracts have been treated as sales under the Haryana Act. Suffice it to say, the appellant argued that the definition of the term “sale” as per the Bombay Act speaks only in respect of sales within Maharashtra and has no bearing for sales effected outside the State of Maharashtra. In support of his plea, the appellant has also referred o the decision of the Tribunal in Shirke Construction Equipments Pvt. Ltd (S.A.1557 of 1993 dated 31-10-1996) and B.G. Shirke Construction Technology Pvt. Ltd. (S.A. No.1410 of 2001 dated 15-3-2003). In the said cases the Tribunal has also referred to Circular No.13 of 1987 issued by the Commissioner. The Tribunal therefore held that the appellant is eligible for set off under Rule 41D(2)(iii) in the context of the use of the manufactured goods in the execution of works contracts in other States subject to fulfilling other conditions.

(M/s Thermax Surface Paints Limited vs. The State of Maharashtra (Second Appeal No.62 of 2005 dated 20th April 2007. The judgment is delivered at the First Bench by the Hon’ble President Mr. G. D. Parekh. The appellant was represented by Mr. A.B.Ghanekar, Sales Tax Practitioner.)

25. Whether the contract for erection/construction of 400 KV LILO involving use of building material would be a civil construction contract for the purpose of sub-section (1) of section 6A of the Works Contract Act?

Ans: Yes.

The facts in brief are:– The Maharashtra State Electricity Board awarded a contract in favour of the appellant for construction of 400 KV LILO to Aurangabad on 400 KV Bhusaval-Bhabhaleshwar S/C line. The scope of the work involves excavation, stub foundation, back filling, tower erection, stringing of earth wire, conductor protection etc. All the material such as towers with accessories, earthing set, insulators with hand wares, conductors, and earth wire will be supplied by MSEB. However, cement, steel, metal, sand, stone water back filling material coke etc. required for foundation and tower footing protection and earthing will be arranged by the appellant. The assessing authority as well as the first Appellate Authority treated the contract as a non construction contract and levied tax under the Works Contract Act by following Government Notification dated 8-3-2000 specifying the contracts mentioned therein to be only construction contracts for the purpose of sub-section (1) of section 6A of the Works Contract Act. The periods involved in these appeals are 1999-00 and 2000-01.

The appellant submitted before the Tribunal that an explanation is added to sub-section (1) of section 6A by Maharashtra Act No.1 of 2000 dated 1-1-2000, providing that for the purpose of the sub-section the expression construction contract shall mean such contract as may be notified by the State Government from time to time. In view of the said explanation the Government has issued Notification on 8-3-2000 specifying the contracts to be construction contracts. According to the appellant prior to 8-3-2000 the expression “construction contract” was not defined in the WCT Act or Rule made thereunder. In the absence of definition of construction contract it has to be interpreted with reference to the dictionary meaning. According to the appellant up to 8-3-2000 all contracts which could be legitimately held as construction contracts were covered by the scope of section 6A attracting the composition rate of 1% in respect of the contracts awarded and executed prior to 1-5-1998 and 2% for construction contracts after 1-5-1998 as applicable. So far as the period after 8-3-2000, according to the appellant the contracts notified are only illustrative and not exhaustive and therefore the type of contract which he undertakes would also be covered in construction contracts. The object of issuing the Notification is to give benefit of lower rate of composition to the civil work.

The Tribunal observed that prior to the Notification dated 8-3-2000 the expression “construction contract” was not defined. The Notification dated 8-3-2000 is not issued retrospectively for the reason that the explanation is added to sub-section (1) of section 6A by Amendment Act dated 1-1-2000 and thereby the Government is empowered to Notify the contract as construction contract. According to the Tribunal the Notification dated 8-3-2000 cannot be taken help of to determine the nature of the contract as construction contract or otherwise prior to 8-3-2000. The Tribunal also discussed the work involved in the erection of Tower. It also examined the Schedule of the item wise rate appended to the Work Order in Parts A & B issued by MSEB. After considering the entire work the Tribunal came to the conclusion that the work executed by the appellant involves major civil work compared to the cost of erection of towers and related work and the contract is therefore predominantly a civil contract liable to composition rate of 2% prior to 8-3-2000.

The Tribunal further held that as far as the period after 8-3-2000, the position as to the construction contract is unambiguous. The State Government is empowered to Notify the contracts as Construction contracts in the Official Gazette from time to time. It has notified the contracts mentioned in the Notification dated 8-3-2000 to be construction contracts. The contract of erection of transmission tower executed by the appellant is not covered by the said Notification.

(Electrical Manufacturing Co. Ltd. vs. The State of Maharashtra - Second Appeal Nos. 286 and 287 of 2006 dated 5th May 2007. The judgment is delivered at the Fourth Bench by the Hon’ble Member Mr. D.H. Sali. The appellant was represented by Mr. A.B.Ghanekar, Sales Tax Practitioner.)