Tvl.Dilip Buildcon Limited. vs. The Assistant Commissioner (CT

Held

The Court found merit in the submissions of the petitioner. Regarding the levy of purchase tax on blue metal, the Court noted the petitioner's contention that it was produced from boulders excavated by them and not purchased, and that the respondent failed to deal with this jurisdictional aspect. The Court also found that the adoption of the statutory formula for labour and service charges under Rule 8(5)(d) was vitiated as it was done without examining the petitioner's books of accounts, contrary to the provision which mandates examination of books first. The Court further observed that the levy of purchase tax on sand and bricks used in works contracts, which are deemed sales, was also unjustified. The Court also noted the petitioner's argument regarding the violation of natural justice in levying tax on hollow blocks without a prior proposal. The respondent, facing these infirmities, sought liberty to redo the assessment. Consequently, the impugned orders were set aside, and the matter was remanded to the respondent for fresh assessment after considering the petitioner's objections, books of accounts, and documentary evidence, and providing a reasonable opportunity of hearing.

Facts

The petitioner, Tvl.Dilip Buildcon Limited, filed two writ petitions challenging assessment orders for the assessment years 2014-15 and 2015-16, passed by the Assistant Commissioner (CT), Sivagangai. The petitioner, engaged in works contracts including road construction, reported its turnover and paid tax. Following an inspection by the Enforcement Wing, a revised notice was issued proposing various levies, including purchase tax on blue metal and dust, reversal of input tax credit due to mismatch in returns, treating sales suppression based on purchase permission, denial of input tax credit beyond the stipulated period, and deduction of labour charges at 30% of contract value. The petitioner objected, arguing that proposals were based on assumptions, purchase tax was not leviable on self-generated blue metal, and the statutory formula for labour deduction was applied without examining books of accounts. The respondent rejected the objections and confirmed the proposals, leading to the present writ petitions.

Key Issues

1. Whether purchase tax under Section 12 of the TNVAT Act is leviable on blue metal and dust produced from boulders excavated by the petitioner from leased quarries and used in works contracts, when the petitioner did not purchase the blue metal itself? The petitioner argued that no purchase tax is leviable as there was no purchase of blue metal, and the material was converted from boulders at their own crusher unit. The respondent contended that purchase tax is attracted when the material has not suffered taxes and has changed form. 2. Whether the respondent was justified in reversing Input Tax Credit (ITC) due to mismatch between Annexure-II of sellers and Annexure-I of the petitioner, and whether the assessment order should have considered Circular No.3/2019? The petitioner argued that discrepancies should be determined based on the circular. The respondent confirmed the denial of ITC due to discrepancies. 3. Whether the respondent correctly invoked Rule 8(5)(d) of the TNVAT Act to adopt a statutory formula for deducting labour and service charges at 30% of the contract value without examining the petitioner's books of accounts, despite the petitioner's request to do so and offer to produce them? The petitioner contended that the statutory formula is applicable only when labour charges cannot be ascertained from books of accounts, and its adoption without examination vitiates the assessment. The respondent confirmed the adoption of the statutory formula, finding the claimed labour deduction excessive. 4. Whether the levy of purchase tax on sand and bricks used in works contracts is justified, given that works contracts are deemed sales? The petitioner argued that purchase tax is unwarranted as the materials were used in a deemed sale. The respondent maintained that purchase tax is levied on purchase value while sales tax is on deemed sale value. 5. Whether the levy of tax on hollow blocks, which was not proposed in the revised notice, violates the principles of natural justice? The petitioner argued that this levy suffers from a violation of natural justice. The respondent confirmed the levy on hollow blocks due to lack of supporting tax invoices.