IN THE HIGH COURT OF KERALA AT ERNAKULAM
Date: 10th NOVEMBER 2014
WP(C). No. 11716 of 2010 (L)
M/s SURYA CONSTRUCTIONS
By Advs.Sri.Harisankar V. Menon Smt. Meera V.Menon
Vs
1. COMMERCIAL TAX OFFICER (WC & LT)
2. STATE OF KERALA
[By Government Pleader Smt. Lilly K.T.]
PRESENT
THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR
A.K.JAYASANKARAN NAMBIAR, J.
J U D G M E N T
The petitioner is a works contractor who was awarded a contract by BPCL. The gross amount of the contract was Rs.6,17,70,494.90. The petitioner got the said work executed through a sub contractor on the basis of Ext.P2 agreement. The amount paid to the sub contractor as per the said agreement was Rs. 5,71,77,732/-.
By virtue of Ext.P2 agreement, the entire work that had to be executed as part of the works contract was sub contracted to the sub-contractor and, therefore, no portion of the work was executed by the petitioner. By Ext.P3 letter, the petitioner approached the 1st respondent for the issuance of a liability certificate in Form 20B of the Kerala Value Added Tax Rules. This certificate was required to enable the petitioner to get release of an amount of Rs.45,92,762.90 from the awarder. The amount represented the profit of the petitioner from the transaction and the certificate was required to show that the petitioner has discharged his tax liability, if any, to the Department in respect of the said sum. Although it was the case of the petitioner that he was not liable to pay any tax in respect of this amount of Rs. 45,92,762.90 since the said amount represented only his profit from the transaction, the petitioner paid tax on the said amount so that he could get the Form 20B certificate from the department, as a prerequisite for obtaining a release of the principal amount of Rs.45,92,762.90 from the awarder of the contract. The request of the petitioner was initially turned down by the 1st respondent on the ground that the petitioner had to pay the tax amount on the profit retained by him. Although the petitioner had preferred Ext.P4 objection before the 1st respondent, the 1st respondent did not accept the contention of the petitioner and proceeded to issue Ext.P5 demand for tax on the said amount of Rs. 45,92,762.90. Thereafter the petitioner submitted Ext.P6 objection to the demand but then effected a payment of the tax amount under protest through Ext.P7 communication to the 1st respondent. It was thus that he got Ext.P8 liability certificate in Form 20B which he submitted before the awarder of the contract and obtained release of the principal amount of Rs.45,92,762.90. In the writ petition, the petitioner impugns Exts.P5 and P8 to the extent it demands tax from the petitioner, on the sum of Rs. 45,92,762.90 that was received by him in connection with the transaction with BPCL, the awarder of the work. The petitioner also seeks a direction to the 1st respondent to refund the amount of Rs. 5,79,836/- that was collected from him by way of tax on the profit amount that was derived by him.
2. A counter affidavit has been filed on behalf of the 1strespondent wherein it is stated that the petitioner had obtained a Form 20B certificate from the respondent in respect of the amount of Rs.45,92,762.90. It is pointed out that while seeking a Form 20B certificate, the petitioner had indicated that the amount of Rs.45,92,762.90 represented the cost of establishment charges and profit for supplying labour and services. This, according to the respondent, was not a permissible deduction under Rule 10(2)(a) of the Kerala Value Added Tax Act, 2005. It is also submitted that on account of Circular No.5/2006 dated 11.1.2006, the petitioner would be liable to pay tax even on the profit made out of a contract.
