Prodair Air Products INDIA Private Limited vs. The Deputy Commissioner Of State Tax

Facts

The petitioner, Prodaire Air Products India Private Limited, filed two writ petitions challenging assessment orders issued under Section 25 of the Kerala Value Added Tax Act, 2003. W.P.(C) No. 17451 of 2021 challenged assessment orders for the years 2015-16, 2016-17, and 2017-18, which imposed a significant tax liability. The tax was levied on the assumption that the supply of industrial gases to BPCL under a Build, Own, Operate (BOO) agreement constituted a works contract. W.P.(C) No. 18783 of 2021 challenged the rejection of input tax credit on capital goods, also based on the premise that the agreement was a works contract. The petitioner argued that the agreement did not involve a transfer of property, a prerequisite for works contract classification.

Held

The High Court held that it would not exercise its writ jurisdiction under Article 226 of the Constitution of India in these cases. The Court reasoned that the determination of whether the agreement between the petitioner and BPCL constituted a works contract, involving the transfer of property, required a detailed appreciation of disputed facts. The assessing officer had referred to various circumstances to conclude it was a works contract, and the correctness of these circumstances needed to be examined. Similarly, the rejection of input tax credit was intrinsically linked to this factual determination. The Court relied on precedents like Union of India and Another v. Guwahati Carbon Limited and Assistant Commissioner of State Tax and Others v. Commercial Steel Limited, emphasizing that the existence of an alternative statutory remedy of appeal is a significant factor. Therefore, the petitioner was relegated to pursuing their statutory remedy of appeal. The Court, however, granted liberty to the petitioner to seek exclusion of the time spent pursuing these writ petitions while filing their appeals.

Key Issues

1. Whether the High Court, under Article 226 of the Constitution of India, can interfere with assessment orders when the existence of a jurisdictional fact, such as the nature of the agreement as a works contract, depends on the appreciation of disputed questions of fact? (Section 6(1)(f) of the Kerala Value Added Tax Act, 2003) Petitioner's arguments: The petitioner contended that the assessment orders were issued without jurisdiction because the agreement with BPCL was for the supply of industrial gases and not a works contract, as there was no transfer of property. They argued that the jurisdictional fact of transfer of property was erroneously decided, justifying interference under Article 226, citing precedents like Deputy Commissioner, Central Excise and Another v. Sushil and Company and Arun Kumar and Others v. Union of India and Others. They also argued that the rejection of input tax credit was based on the same incorrect assumption. Respondent's arguments: The respondent contended that the jurisdictional fact of transfer of property in the alleged works contract could only be decided upon an appreciation of disputed questions of fact, and therefore, the High Court should not entertain the writ petitions under Article 226.