CA Bimal Jain
Fortis Health Care Ltd. And Another (“the Petitioners”) filed an application before the Excise & Taxation Commissioner, Punjab, Patiala Division, Patiala (“the Commissioner”), seeking advance determination of the question whether medicines, drugs, stents etc., administered to patients during a medical procedure (“impugned goods”) are a ‘Sale’, under the Punjab VAT Act, 2005(“Punjab VAT Act”).
The Commissioner vide Order dated August 10,2005 responded the aforesaid question in favour of Revenue and therefore the impugned goods are made exigible to VAT (“Order 1”). Thereafter, the Petitioner got registered as a dealer under the Punjab VAT Act and the Central Sales Tax Act, 1956 and started discharging their statutory obligations.
Later, the Hon’ble High Court of Jharkhand in Tata Main Hospital Vs. The State of Jharkhand and others [2008(2) JCR 174 (Jhr.)] (“Tata Main Hospital Case”) held that the impugned goods are not exigible to VAT as the same is not ‘Sale’. Being aggrieved, the State of Jharkhand, filed a Special Leave Petition before the Hon’ble Supreme Court, which was dismissed.
Based on the decision in Tata Main Hospital Case, the Petitioner stopped charging VAT and also filed refund of VAT (“Refund Claim”) for the Financial Year 2005-06. The Assistant Excise & Taxation Commissioner-cum-Designated Officer, rejected the Refund Claim and held that the judgment by the Jharkhand High Court is a judgment in personam and as the Petitioner has accepted Order 1, it is required to pay VAT.
Being aggrieved, the Petitioner preferred an appeal before the Deputy Excise and Taxation Officer where the appeal wasdismissed with the finding that the Petitioner has paid VAT from its own resources without recovering the same from patients/ ECHS. Thereafter, the Petitioner preferred an appeal before the Hon’ble Tribunal which was again dismissed holding that jurisdiction to determine the controversy, lies with the Hon’ble High Court. Therefore, the Petitioner filed a Writ Petition before the Hon’ble High Court of Punjab and Haryana.
The Hon’ble High Court of Punjab and Haryana made elaborate discussion in this regard and held as under:
Very recently, the Hon’ble Supreme Court in the case of State of Karnataka Etc. Vs. Pro LAB and Ors [2015-TIOL-08-SC-CT-LB] had re-affirmed the position laid down in Larsen Toubro and another Vs. State of Karnataka and another [2013-TIOL-46-SC-CT-LB] followed by landmark judgment of Five Judge Constitution Bench of the Hon’ble Supreme Court in the case of Kone Elevator India Private Limited Vs. State of Andhra Pradesh [2014-TIOL-57- SC-CT-CB], regarding inapplicability of ‘Dominant Intention Test’ in case of Works contract. Consequent to the aforesaid decisions, Assessees or the Revenue should no longer be able to have recourse to the ‘Dominant Intention Test’ for determining the taxability of Works contract transactions.
However, the question was still open on applicability of ‘Dominant Intention Test’ for transactions which do not get covered under Article 366(29A) of the Constitution.
Now, with the above stated judgment of the Hon’ble High Court of Punjab and Haryana, the scenario seems to be clarified to infer that if a transaction doesn’t qualify as a Works contract, it would not be open for vivisection.
However, the same may light up fresh litigation in deciding as to whether a contract falls within the ambit of Works contract under Article 366(29A) of the Constitution, making it imperative for the
Assessee to closely examine the transactions in order to determine their true nature.
(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: firstname.lastname@example.org)