The Punjab & Haryana High Court has held in an important case namely Lajpat Rai Chanana V State of Haryana & others (2011) 38 PHT 390 (P&H) that input tax credit to a works contractor executing the works contract will be justified if the contractee has already paid the tax on the goods supplied by him to the contractor. The assessee was a works contractor for executing various works for the Government and its authorities. For executing the work, the State and its authorities supplied material to the petitioner (Contractor) which was treated as sale. Since the said authorities had paid the tax while purchasing the said material before supplying the same to the petitioner, the petitioner claimed the benefit of input tax credit. It is held by the Hon’ble High Court that in such case assessee (Contractor) is entitled to input tax credit paid by the contractee.

Thus if contractor is able to prove the tax paid by contractee on the material purchased by contractee and supplied by him to the contractor and produces the relevant bill to that effect then the contractor shall be eligible for input tax credit of such tax paid by the contractee.

The text of the judgment is as follows:

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHAN DIGARH.

C.W.P. No.17900 of 2005 Date of decision: 23.2.2011

Lajpat Rai Chanana. Vs. The State of Haryana and others.

CORAM:- HON’BLE MR. JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL

Present:-   Mr. Sandeep Goyal, Advocate for the petitioner.

Mr. Vinod S. Bhardwaj, Addl.A.G., Haryana. —

ADARSH KUMAR GOEL, J.

1. This petition, inter-alia, seeks quashing of order dated 14.7.2005 passed by the Deputy Excise and Taxation Commissioner, Haryana acting as revisional authority under the provisions of the Haryana VAT Act, 2003.
2. Case of the petitioner is that he was a contractor for executing various works for the Government and its authorities. For executing the work, the State and its authorities supplied material to the petitioner which was treated as sale. Since the said authorities had paid the tax while purchasing the said material before supplying the same to the petitioner, the petitioner claimed the benefit of input tax credit. Though the Assessing Authority allowed the said benefit, the revisional authority set aside the same, exercising its suo motu jurisdiction with the following observation:-

“Since the dealer has failed to produce the tax invoices in respect of purchases/supply of materials by the contractees, as such, the dealer is not entitled to any input tax credit being in violation of Section 8 read with Rules 54 of the Act. All the judgements relied upon by the Ld. Counsel relate to pre VAT sales tax laws in the State of Haryana. The present case is governed by VAT law. The detail of material supplied by the contractees submitted by the dealer is now placed on record and tax is being levied according to the provisions of the HVAT Act, 2003.”

3. Learned counsel for the petitioner submitted that the petitioner was in a position to furnish the invoices in respect of goods purchased by the Government and its agency and supplied to the petitioner for executing the works which should be duly considered by the revisional authority.

4. Learned counsel for the State says that if such invoices are furnished by the petitioner, the same can be verified and taken into account by the revisional authority and for this purpose, it will be proper if the matter is remitted to the revisional authority for a fresh decision.

  1. In view of this stand on behalf of the respondents, learned counsel for the petitioner does not press other issues raised in the petition.
  2. In view of above, the impugned order is set aside and the matter is remanded to the revisional authority for a fresh decision in accordance with law. The petitioner will also be at liberty to raise any other point which may be necessary for taking a final decision in the matter. If aggrieved by the decision so taken, the petitioner will be at liberty to take his remedies in accordance with law.

(ADARSH KUMAR GOEL)

JUDGE

February 23, 2011                               ( AJAY KU MAR MITTAL )

ashwani                                                                  JUDGE

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(Author – Amit Bajaj Advocate, Bajaj & Bajaj Advocates, 128, Sangam complex, Milap chowk, Jalandhar City (Punjab), Email: amit@amitbajajadvocate.com, M +919815243335)

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