Custom, Excise & Service Tax Tribunal
Ece Industries Ltd. vs Commissioner Vat Department Of Trade & ... on 31 January, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. I
CENTRAL SALES TAX APPEAL NO. 15 OF 2014
(Arising order out of dated 30.06.2014 passed by the Appellate Tribunal, Value Added Tax,
Delhi in Appeal No. 16/STT/05-06)
ECE Industries Ltd. ....Appellant
28-A, K.G. Marg,
New Delhi - 110001
VERSUS
1. Commissioner, VAT & Another
Department of Trade & Taxes,
Govt. of NCT of Delhi,
Vyapar Bhawan,
New Delhi - 110002
2. State of Uttar Pradesh .....Respondents
through
Commissioner, VAT,
Sector - 4,
Ghaziabad, U.P.
APPEARANCE:
Shri H.C. Bhatia, Advocate for the Appellant
Shri M.L. Garg, Advocate for the State of Delhi
Shri Anil Mittal and Shri Atul Chauhan, Advocates for the State of Uttar Pradesh
CORAM: HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT
HON'BLE MR. P.V. SUBBA RAO, MEMBER (TECHNICAL)
Date of Hearing: 17.01.2025
Date of Decision: 31.01.2025
FINAL ORDER NO. 50118/2025
JUSTICE DILIP GUPTA:
This appeal has been filed by ECE Industries Ltd. 1 for setting aside the
order dated 30.06.2014 passed by the Appellate Tribunal, Value Added Tax,
Delhi 2 dismissing the appeal that had been filed by the appellant against
order dated 11.03.2005 passed by the Deputy Commissioner (Appeal-II),
1. the appellant
2. the Appellate Tribunal
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CST/15/2024
New Delhi 3. The Deputy Commissioner (Appeal) had dismissed the appeal
filed by the appellant in respect of the assessment year 2002-03 under the
Delhi Sales Tax on Works Contract Act, 1999 4 on the ground that the
appellant had opted for composition under section 6 of the Delhi Sales Tax
on Works Contract Act and so there was no need to examine whether the
transaction of Rs. 2,59,19,818/- was in connection with inter-State sale or
not.
2. The appellant claims to be engaged in the business of designing,
manufacture, supply, installation and commissioning of elevators. The
manufacturing unit of the appellant is located at Ghaziabad and the
registered office is at Delhi. The appellant has branches across India. The
appellant claims that the orders from the customers are booked by the
branch offices depending upon the requirement of the customers and are
then transmitted to the Ghaziabad factory for execution. Parts of the
elevators are then manufactured at the Ghaziabad factory and sent directly
to the sites of the customers in other States, including Delhi. According to
the appellant, it had executed "works contract" during the year 2002-03 for
designing, manufacture, erection and commissioning of elevators for various
customers at Delhi for a total value of Rs. 2,59,99,073/-.
3. The Delhi Sales Tax on Works Contract Act is an Act to levy and collect
the taxes on the transfer of property in goods involved in the execution of
works contract in the National Capital Territory of Delhi.
4. Section 3 provides that every dealer whose turnover of sales during
the year exceeds the taxable quantum shall be liable to pay tax on the
taxable turnover effected by the dealer.
5. Section 4 deals with the liability of the dealer and it is as follows:
3. the Deputy Commissioner (Appeal)
4. the Delhi Sales Tax on Works Contract Act
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CST/15/2024
"4. Liability of the dealer. - Subject to the
provisions of this Act and the rules made thereunder,
a tax shall be levied on the taxable turnover
involving transfer of property in goods in the
execution of works contract commenced or
continued for execution on or after the
commencement of this Act, whether such contract
was entered into prior or subsequent to such
commencement."
6. Section 5 deals with levy of tax and it is as follows:
"5. Levy of tax. - (1) Save as provided in sub-
sections (2), (3), (4), (5) and (6), every dealer shall
file return and pay tax under this Act for each year
on his taxable turnover of sales or transfer of
property in goods whether as goods or in some other
form involved in the execution of works contract, in
the manner as may be prescribed at the rate of eight
paise on every rupee of his net turnover of sales.
(2) The tax shall be paid at the rate of four paise on
every rupee of his net turnover of sales pertaining to
declared goods, if the goods have not suffered tax
earlier, and no tax shall be payable on the turnover
of sales pertaining to declared goods, if such goods
have suffered tax earlier under the Delhi Sales Tax
Act and transferred from the contractor to the
contractee in the same form in which they were
purchased by the contractor."
7. Section 6 deals with composition of tax and it is reproduced below:
"6. Composition of tax. - (1) Subject to such
conditions and in such circumstances as may be
prescribed, the assessing authority of the area may,
if a dealer, liable to pay tax under this section so
elects, accept in lieu of the amount of tax payable by
him under section 5 of this Act during the year by
way of composition an amount at the rate of four per
cent of his total amount of the contract or the total
aggregate value of the contracts received or
receivable towards the execution of works contract.
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CST/15/2024
Provided that a dealer who makes inter-State
purchases of the material used in the execution of
the works contracts, on the strength of his
registration certificate, shall not be entitled to opt for
composition of tax under this section.
(2) No tax shall be payable under this section on the
turnover relating to the amount paid to a sub-
contractor as consideration for the execution of
works contract, whether wholly or partly, subject to
the production of proof as may be prescribed that
such sub-contractor is a registered dealer liable to
tax payment of composition of tax under the Act as
the case may be, and that the turnover of such
amounts is included in the return of turnover filed by
such sub-contractor and tax or the composition as
the case may be has been paid thereupon.
(3) Every dealer who elects to pay tax under this
section shall apply in the prescribed form to the
assessing authority to be permitted to pay the
amount of tax under sub-section (1) and, on being
so permitted, in the prescribed manner and form,
shall pay the same."
8. Section 7 deals with deduction of tax at source and the relevant
portion is reproduced below:
"7. Deduction of tax at source. - (1) Every
person, other than individual and Hindu undivided
family responsible for making payment to any dealer
hereinafter this section referred to as "the
contractor" for discharge of any liability on account
of valuable consideration payable for the transfer of
property in goods whether as goods or in some other
form in pursuance of a contract, shall at the time of
credit of such sum to the account of the contractor
or at the time of making such payment to the
contractor either in cash or in any other manner,
deduct an amount equal to two percent from such
sum towards the tax payable under this Act."
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CST/15/2024
9. Section 11 provides that no dealer shall, while being liable to pay tax
under the Act, execute a works contract unless he possesses a valid
certificate of registration.
10. Section 16 provides that certain provisions of the Delhi Sales Tax Act,
including provisions relating to appeals, revisions and reference shall be
applicable.
11. The appellant had obtained registration under the Delhi Sales Tax on
Works Contract Act.
12. An assessment order for the Assessment Year 2002-03 under the Delhi
Sales Tax on Works Contract Act was passed by the officer on 02.08.2005
and the relevant portion of the order is reproduced below:
"LOCAL ORDER
FORM OF ORDER OF ASSESSMENT U/S 16 READ
WITH SECTION 23(3) OF DST. ACT 1975 OF
THE DELHI SALES TAX ON WORKS CONTRACT
ACT 1999
WARD-6
Name of the Dealer : M/S ECE Industries
Limited
60 Ram Nagar Paharganj,
New Delhi 55
(New Address:- 28 A, K.G.
Marg New Delhi)
Regn. No. : W/C/063002008188/1299
Nature of Business :
Assessment Year : 2002-2003
Assessment made u/s : 16 Read with 23(3)
ORDER
In response to notice ST-13(WC) for 16.02.2004 followed by show cause notice for 24.03.2004, Shri H L Sehgal Advocate with POA appeared before me 24.03.2004 and filed sales statement of Delhi Division, photocopy of receipt bearing no. 423085 dt. 24.4.2002 as proof for opting the composition tax in form VII for the year 2002-03 an affidavit for execution of works, 28 TDS certificates 6 CST/15/2024 The dealer has opted for composition of tax under section 6. The same is allowed as the dealers application was in time. All returns of the dealer are late, tax also deposited late therefore I impose a consolidated penalty of Rs. 2000/- with interest of late deposit of tax. As per sales statement, the dealer has executed the total works contract of Rs. 25999073/- in Delhi. Therefore all the works contract of Rs. 25999073/- is liable to tax and all relates to Delhi as all the orders are placed on Delhi office for execution of work contract.
In the Sales statement the claim for deduction of stock inter state of the deemed sale is not admissible in this case as the dealer has opted for composition of tax in section 6 of DST WC Act. As per provision of section 6 of DSTWC Act, no deduction any kind is given to the contactor except turnover relating to sub contractor. Therefore the total contract value received/receivable during quarter/year are liable to tax @ 4%. Hence the total value of contract is Rs. 25999073/- is taxed @ 4% with interest thereon."
13. Under section 16(1) of the Delhi Sales Tax on Works Contract Act, an appeal can be filed against the said assessment order by taking recourse to the provisions of the Delhi Sales Tax Act, 1975 5 and section 43(1) of the Delhi Sales Tax Act provides for an appeal to the prescribed authority.
14. The appellant filed an appeal before the Deputy Commissioner (Appeal) under section 43(1) of the Delhi Sales Tax Act against the order of the assessing authority. The Deputy Commissioner (Appeal), by order dated 11.03.2005, rejected the appeal and the relevant portions of the order are reproduced below:
"It was stated that during the year 2002- 03 the dealer filed sales, return under Delhi Sales Tax on works, contract act totaling of Rs. 79255/- for the assessment year 2002-03 including sales amounting to Rs. 25919818/-
5. the Delhi Sales Tax Act 7 CST/15/2024 which had been made from their manufacturing unit at Ghaziabad but the AA wrongly taxed the entire amount of works contract of Rs. 25999073/- disregarding the fact that an amount of Rs. 25919818/- were interstate sales made by the Ghaziabad unit on which interstate sales tax had already been paid at Ghaziabad and therefore not liable for tax under Delhi works contract Act and pleaded to set aside the same. The Ld. Counsel also cited various rulings saying that the supply of lifts from their factory at Ghaziabad to the work sites at Delhi are interstate sales under Central Sales Tax Act, 1956 and therefore not liable for tax at Delhi.
I have gone through the submission made by the appellant and also the assessment proceedings. As per the assessment record, the appellant dealer after responding to tanders called by various agencies / parties at Delhi entered into agreement with those parties at Delhi for the supply and erection of lifts at Delhi and received payment for the execution of the contracts and the other parties also deducted TDS from the above said dealer at Delhi in the returns filed the dealer had only shown sales of Rs. 79255/- in the first two quarters, but in the statement of sales submitted before the AA at the time of assessment, shown gross turnover of Rs. 25999073/- out of which Rs. 79255/- as local taxable sales and an amount of Rs. 29919818/- as interstate deemed sales and claimed exemption on this amount. The total TDS shown by the dealer was Rs. 659538/-and had claimed refund of Rs. 656368/- after deducting the amount under local sales tax amounting to Rs 3170/-.
As per the assessment order, AA did not allow the deductions claimed on account of interstate deemed sales amounting to Rs.
25919818/- stating that the claim for deduction of interstate deemed sales is not admissible in this case, the dealer has opted for composition of tax under section 6 of DSTWC Act as no deduction of any kind is given 8 CST/15/2024 to the contractor except turnover relating to sub contractor. Accordingly the AA taxed the total amount for the works contract of Rs. 25999073/- @4%. As per the assessment order, the dealer opted for composition of tax under section 6 of DSTWC Act and it was allowed.
The contention of the dealer is as the lifts were manufactured and moved from their unit at Ghaziabad to Delhi the cost of the lifts amounting to Rs. 25919818.00 are interstate sales, therefore, cannot be taxed under DSTWC Act.
***** The dealer had opted for composition under section 6, therefore the contractor is liable to pay by way of composition at 4% on the aggregate value of works contract without availing any deduction except amount paid to the sub contractor, if any, therefore the appellant is liable to pay tax at 4% on the total value of the contract. As the dealer had opted for composition which was already allowed there is no need to go into the question whether the transaction amounting to Rs. 25919818/- was interstate sales or not. In my view, the interpretation made by AA in the assessment order is in accordance with law and I uphold the same. Therefore the appeal is dismissed."
(emphasis supplied)
15. Feeling aggrieved with the order dated 11.03.2005 passed by the Deputy Commissioner (Appeal), the appellant filed an appeal before the Appellate Tribunal under section 43(2) of the Delhi Sales Tax Act. The Appellate Tribunal also dismissed the appeal by order dated 30.06.2014 and the observations are as follows:
9
CST/15/2024 "15. Having heard the respective counsels for the parties, perusal of the impugned orders, default assessment, grounds of appeal and the written submissions filed by the parties along with authorities cited, this Tribunal is of the considered view that appellant cannot be allowed to take somersault to his own admissions and action because of levy of tax in term of composite scheme u/s 6 of the of the Delhi Sales Tax on Works Contract Act, 1999 which permits in term of proviso that a dealer who makes inter-state purchases of the material used in the execution of the works contracts, on the strength of his registration certificate, shall not be entitled to opt for composition of tax under this section. The facts remains in accordance to the appellant himself that appellant is a registered dealer as composite dealer as is clear from the assessment order that appellant dealer who has opted for tax under section 6 was allowed as dealer's application for composition scheme was within times prescribed. It is admitted fact that this admission has not been controverted by the appellant even before the Ld. FAA as the ground was taken in respect of the same before this Tribunal for the first time while stating that in permitting the composition to the dealer in the Assessment Order instead of permitting within 30 days in prescribed Form VIII from the date of application in Form VII made by the dealer and hence acceptance of the appellant as composite dealer was not legal. Such a challenge is not acceptable as sought to be submitted by the Ld. Counsel for the appellant who now submitted that composition scheme was never accepted by the department in Form VIII.
Accordingly, the reference made to the case of B. Damodara v. Addl. Asstt. Commissioner of Commercial Tax, 1st Circle Shimoga & Others [2005] STC 454 Vol.10 and [2009]26 VST 495 (Karn.) J.C. Industries v. State of Karnataka are of no availed to the appellant as the facts of the case in hand are 10 CST/15/2024 distinguishable from the facts in the authority cited which have been quoted out of context.
16. The submissions made by the Ld. Counsel for the appellant that u/s 5(4) dealing with levy of tax the appellant is not leviable tax on the turnover of the sales on transfer of property in goods if such transfer from the contractor to the contractee constitute a sale in the course of inter state trade or commerce u/s 3 or 4 or 5 as the case may be of the Central Sales Tax Act and hence appellant is not liable to pay tax as assessed against him for the contract of work of execution i.e. supply and commissioning of Elevators. On the other hand, Ld. Counsel for the Revenue submitted that since the appellant has opted for composite scheme and also availed benefit there under by filing return as composite dealer for the assessment year in question, Sec. 6 would apply in toto and Sec. 5(4) has no application when r/w proviso to clause 1 of Sec. 6 which reads as under:
***** Section 6 as referred to above has to be read with clause 4 of Sec. 5. The dealer who makes inter state purchase of material used in the execution of work contract on the strength of his registration certificate is not entitled to opt for composition of tax under this scheme but when the appellant himself applied for composition scheme as was accepted by the assessing authority, the appellant is debarred from invoking clause 4 of Sec. 5 of the DST on Works Contracts Act, 1999 as it was appellant in the present case who opted for composition scheme with a knowledge that thereafter he would not be entitled for tax exemption as other available under Clause 4 of Sec. 5 to an ordinary registered dealer. The appellant cannot be allowed to take benefit of somersault of denial of registration as composite dealer because of irregular procedure applied while granting him option for registration as composite dealer."
(emphasis supplied) 11 CST/15/2024
16. This appeal was filed by the appellant before the Central Sales Tax Appellate Authority under section 20 of the Central Sales Tax Act, 1956 6.
This appeal has thereafter been transferred to this Tribunal by virtue of substitution of section 19 of the CST Act w.e.f. 31.03.2023 by Finance Act No. 8 of 2023.
17. Section 20 of the CST Act deals with Appeals and it is as follows:
"20. Appeals. - (1) An appeal shall lie to the Authority against any order passed by the highest appellate authority of a State under this Act determining issues relating to stock transfers or consignments of goods, in so far as they involve a dispute of inter-State nature."
18. The preliminary objection raised by learned counsel for the State of Delhi is that this appeal is not maintainable since an appeal shall lie only against an order passed by the highest Appellate Authority of a State under the CST Act determining issues relating to stock transfers or consignment of goods, in so far as it involves a dispute of inter-State nature.
19. The preliminary objection has merits. An appeal would lie to this Tribunal only against any order passed by the highest Appellate Authority of the State under the CST Act. "Authority" has been defined under section 19 of the CST Act. Prior to 31.03.2023 an appeal would lie to the Central Sales Tax Appellate Authority, but after the amendment made by Finance Act No. 08 of 2023 w.e.f. 31.03.2023, appeal would lie to this Tribunal, namely, The Customs, Excise & Service Tax Appellate Tribunal.
20. As noticed above, the assessment order was passed under the provisions of the Delhi Sales Tax on Works Contract Act, against which the appellant filed an appeal under section 43(1) of the Delhi Sales Tax Act before the Deputy Commissioner (Appeal) as the provisions of section 16(1)
6. the CST Act 12 CST/15/2024 of the Delhi Sales Tax on Works Contract Act make applicable the provisions of appeals under the Delhi Sales Tax Act. A further appeal was filed by the appellant before the Appellate Tribunal under section 43(2) the Delhi Sales Tax Act. The said appeal was dismissed by order dated 30.06.2014.
21. The order dated 30.06.2014 was certainly not passed by the Appellate Tribunal under the provisions of the CST Act. An appeal would, therefore, not lie under section 20 of the CST Act against the order of the Appellate Tribunal before this Tribunal as an appeal to this Tribunal will lie under section 20 of the CST Act against any order passed by the highest Appellate Authority under the CST Act which would be an order passed under section 18A of the CST Act. In fact, the appellant did have a remedy against the order dated 30.06.2014 of the Appellate Tribunal under section 45 of the Delhi Sales Tax Act by requiring the Appellate Tribunal to refer the matter to the High Court on any question of law arising out of such order, but that remedy was not exercised by the appellant and instead this appeal was filed under section 20 of the CST Act, which appeal is clearly not maintainable.
22. This appeal would, therefore, have to be dismissed as not maintainable and is, accordingly, dismissed.
(Order pronounced on 31.01.2025) (JUSTICE DILIP GUPTA) PRESIDENT (P.V. SUBBA RAO) MEMBER (TECHNICAL) Shreya