Delhi High Court
Abb India Ltd. vs The Commissioner Trade & Taxes on 27 February, 2017
Author: S. Ravindra Bhat
Bench: S. Ravindra Bhat, Najmi Waziri
$~112, 113, 115 to 154 & 157 - 160
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 27th February, 2017
+ W.P.(C) Nos. 1757/2017, 1758/2017, 1803/2017, 1804/2017,
1805/2017, 1806/2017, 1807/2017, 1808/2017, 1809/2017,
1810/2017, 1811/2017, 1812/2017, 1813/2017, 1814/2017,
1815/2017, 1816/2017, 1817/2017, 1818/2017, 1819/2017,
1820/2017, 1821/2017, 1822/2017, 1823/2017, 1824/2017,
1825/2017, 1826/2017, 1827/2017, 1828/2017, 1829/2017,
1830/2017, 1831/2017, 1832/2017, 1833/2017, 1834/2017,
1835/2017, 1836/2017, 1837/2017, 1838/2017, 1839/2017,
1840/2017, 1841/2017, 1842/2017, 1843/2017, 1844/2017,
1845/2017 & 1846/2017
ABB INDIA LTD ..... Petitioner
Through: Mr. R. Jawaharlal, Mr. Siddharth Bawa,
Mr. A. K. Bhardwaj, Mr. Manish Hirani
and Mr. Shyamal Anand, Advocates.
Versus
THE COMMISSIONER TRADE & TAXES ..... Respondent
Through: Mr. Shadan Farasat and Mr. Ahmed Said,
Advocates.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE NAJMI WAZIRI
S. RAVINDRA BHAT (Oral):-
CM Nos.7805/2017, 7807/2017, 8005/2017, 8007/2017, 8009/2017,
8011/2017, 8013/2017, 8015/2017, 8017/2017, 8019/2017, 8021/2017,
8023/2017, 8025/2017, 8027/2017, 8029/2017, 8031/2017, 8033/2017,
8035/2017, 8037/2017, 8039/2017, 8041/2017, 8043/2017, 8045/2017,
8047/2017, 8049/2017, 8051/2017, 8053/2017, 8055/2017, 8057/2017,
8059/2017, 8061/2017, 8063/2017, 8065/2017, 8067/2017, 8069/2017,
W.P.(C) Nos.1757/2017 & other connected matters Page 1 of 10
8071/2017, 8073/2017, 8075/2017, 8077/2017, 8079/2017, 8081/2017,
8083/2017, 8085/2017, 8087/2017, 8089 /2017& 8091/2017 (for
exemptions)
1. Allowed, subject to all just exceptions.
2. The applications are disposed off.
W.P.(C) No. 1757/2017 & CM No.7804/2017,
W.P.(C) No. 1758/2017 & CM No.7806/2017
W.P.(C) No. 1803/2017 & CM No.8004/2017
W.P.(C) No. 1804/2017 & CM No.8006/2017
W.P.(C) No. 1805/2017 & CM No.8008/2017
W.P.(C) No. 1806/2017 & CM No.8010/2017
W.P.(C) No. 1807/2017 & CM No.8012/2017
W.P.(C) No. 1808/2017 & CM No.8014/2017
W.P.(C) No. 1809/2017 & CM No.8016/2017
W.P.(C) No. 1810/2017 & CM No.8018/2017
W.P.(C) No. 1811/2017 & CM No.8020/2017
W.P.(C) No. 1812/2017 & CM No.8022/2017
W.P.(C) No. 1813/2017 & CM No.8024/2017
W.P.(C) No. 1814/2017 & CM No.8026/2017
W.P.(C) No. 1815/2017 & CM No.8028/2017
W.P.(C) No. 1816/2017 & CM No.8030/2017
W.P.(C) No. 1817/2017 & CM No.8032/2017
W.P.(C) No. 1818/2017 & CM No.8034/2017
W.P.(C) No. 1819/2017 & CM No.8036/2017
W.P.(C) No. 1820/2017 & CM No.8038/2017
W.P.(C) No. 1821/2017 & CM No.8040/2017
W.P.(C) No. 1822/2017 & CM No.8042/2017
W.P.(C) No. 1823/2017 & CM No.8044/2017
W.P.(C) No. 1824/2017 & CM No.8046/2017
W.P.(C) No. 1825/2017 & CM No.8048/2017
W.P.(C) No. 1826/2017 & CM No.8050/2017
W.P.(C) No. 1827/2017 & CM No.8052/2017
W.P.(C) No. 1828/2017 & CM No.8054/2017
W.P.(C) No. 1829/2017 & CM No.8056/2017
W.P.(C) No. 1830/2017 & CM No.8058/2017
W.P.(C) No. 1831/2017 & CM No.8060/2017
W.P.(C) Nos.1757/2017 & other connected matters Page 2 of 10
W.P.(C) No. 1832/2017 & CM No.8062/2017
W.P.(C) No. 1833/2017 & CM No.8064/2017
W.P.(C) No. 1834/2017 & CM No.8066/2017
W.P.(C) No. 1835/2017 & CM No.8068/2017
W.P.(C) No. 1836/2017 & CM No.8070/2017
W.P.(C) No. 1837/2017 & CM No.8072/2017
W.P.(C) No. 1838/2017 & CM No.8074/2017
W.P.(C) No. 1839/2017 & CM No.8076/2017
W.P.(C) No. 1840/2017 & CM No.8078/2017
W.P.(C) No. 1841/2017 & CM No.8080/2017
W.P.(C) No. 1842/2017 & CM No.8082/2017
W.P.(C) No. 1843/2017 & CM No.8084/2017
W.P.(C) No. 1844/2017 & CM No.8086/2017
W.P.(C) No. 1845/2017 & CM No.8088/2017
W.P.(C) No. 1846/2017 & CM No.8090/2017
3. Issue notice. Mr. Shadan Farasat, Advocate accepts notice on behalf
of the Revenue.
4. With the consent of the parties, these matters are taken up for hearing.
5. The grievance of the petitioner in all these cases is that the contracts
which it entered into with BSES Yamuna Power Ltd., BSES Rajdhani Power
Ltd., Delhi International Airport Ltd. (for short "DIAL") and North Delhi
Power Ltd. (for short "NDPL") for supply design, manufacturing, erection
and commissioning of electrical systems, could not have been taxed under
the Delhi Value Added Tax Act, 2004 (for short "DVAT Act") - given these
were the subject matter of inter State sale and import under Section 5(2) of
the Central Sales Tax Act, 1946 (for short "CST Act"). The period pertains
to assessment years 2007-08 and 2008-09. The assessee/petitioner had
entered into specific contracts with each of the parties for the supply of said
electrical systems. Upon default assessments made by the DVAT
Authorities, the petitioner preferred appeals to the Objection Hearing
W.P.(C) Nos.1757/2017 & other connected matters Page 3 of 10
Authorities (for short "OHA") contending that the nature of the transactions
was inter State sale and the movement of goods of import pursuant to
distinct contracts which had spelt out different specifications. The petitioner
relied upon Sections 3(a) and 3(b) and 5(2) of the CST Act. It was
contended inter alia that the payments were directly linked to the erection
and installation and not to local sales as to attract DVAT. The petitioner's
appeals to the Special Commissioner (OHA) were rejected. The petitioner
had relied upon a Division Bench ruling of this Court in ABB Limited Vs.
The Commissioner, Delhi Value Added Tax 194 (2012) DLT 97 (DB).
6. The OHA rejected the submissions made by the petitioner/appellant
inter alia recording as follows:-
"11. It is noteworthy that the items supplied by the objector
against these three companies are such which are not
consumer specific and specifications could be common to
many other operators involved into similar business. Perusal
of the contract documents also indicates that the responsibility
of the supplier was extended upto fabrication, installation and
operationalization of equipments. In case of any damage or
loss of property the supplier has been made responsible. The
Ld. Assessing Authority has rightly held that the items were
handed over to the beneficiary at site after installation and
commissioning. The clauses for inspection are quite different
from the provisions made in case of DMRC. The list of
suppliers as provided by DMRC in cited case has not been
shown in respect of other three contractee organizations. It
has been noted that the items supplied are not such that only
the contractee organizations could have utilized and thus there
was feasibility for diversion. It is further added that in the
case of DMRC drawings & certification were provided by
DMRC in respect of their purchases. No such arrangement
were found to have been provided to objector in case of sales
made to NDPL, BSES and DIAL thereby indicating that privity
of contract between the supplier and the user is not firmly
W.P.(C) Nos.1757/2017 & other connected matters Page 4 of 10
established. The contractee in these cases had not been
specified the suppliers and objector had not been specifically
asked to make the procurements from outstation suppliers.
Possibility of diversion of goods cannot be overruled in such
eventuality. Goods dispatched on behalf of ABB were also
found to be received after inter-State movement by ABB itself
which was responsible for insurance and security at site till
operationalisation. Therefore, the inter-State sales were for all
practical purposes from ABB to ABB and the goods passed on
to the final user at the time of execution of works contract.
xxxx xxxx xxxx
13. The final conclusion is that these transactions also did
not satisfy the conditions highlighted by the Hon'ble High
Court of Delhi in the case of objector dealer for the DMRC
related transactions for the period of 2005-06. Obviously the
facts cited above are not individually determinative or
decisive, but the net conclusion, which emerges on taking a
holistic view by appreciation of all ingredients, is that the
requirements of Section 3 of CST Act are not satisfied in
respect of these transaction. It can be clearly inferred that the
objector dealer of CST Act in respect of works contract
executed for vendors other than DMRC since the sales do not
qualify as such. Hence disallowance of the exemptions on the
interstate sale/import is upheld and the contention of the
objector dealer that the present case is covered by the cited
judgments is not found sustainable.
I4. Certain transit sales were also made by the objector
dealer for NDPL/ BSES. The contentions of the counsel that
these were in pursuance of the contract with the NDPL was
examined. It was observed that delivery of the goods was
taken by the objector dealer itself and transit sale transaction
was not complete as property in goods was effected by transfer
of documents of title while the goods were not in transit. It
was already predetermined that the goods wee to be
transferred to NDPL/BSES. Hence the transfer of goods by
W.P.(C) Nos.1757/2017 & other connected matters Page 5 of 10
transfer of documents was predetermined and not effected in
course of transit. In ase of works contract the title of goods
passes as and when goods are used in works contract. Section
3(b) of the CST Act provides for passing of property in goods
by transfer of document of title of the goods while the goods
are in transit from one state to another, unless the property in
goods passes by transfer of document of title to the goods,
provisions of section 3(b) cannot be applied. The conditions
are not satisfied in this case. In view of the above the rejection
of exemption by the AA is upheld on this account."
7. The petitioners' appeals to the DVAT Tribunal are pending.
However, in its applications for waiver of the pre-deposit condition which is
premised upon the Division Bench's ruling of this Court - and which was
affirmed by the Supreme Court in Commissioner, Delhi Value Added Tax
Vs. ABB Limited (2016) 6 SCC 791, the Tribunal held that the matter
required closer examination and on that premise granted relief to the extent
that the petitioner was permitted to deposit 20% of the tax and interest
demand and 10% of the penalty amount - the aggregate of which works out
to `2.91 crores in all these cases. The DVAT Tribunal prima facie observed
as follows:-
"23. After hearing both the counsel we have considered the
record of the case including the rival submissions, grounds of
appeal, default assessment orders, orders passed by the OHA
and the decisions cited this Tribunal is of the considered view
that the point raised for consideration can only be
meticulously examined on the basis of documents and evidence
to be produced when the matter is heard on merits. Moreover,
the provisions of section 76( 4) of the Act cannot be termed as
undue hardship or irreparable loss to the appellant.
Accordingly considering the submissions made by the Ld
Counsel for Revenue as well as law and procedure which
require entertainment of the appeals on merits being not an
W.P.(C) Nos.1757/2017 & other connected matters Page 6 of 10
absolute right of the appellant but always subject to the
fulfilment of the condition to be prescribed under section 76(
4) of the DVAT Act, this Tribunal is of the view that the
appellant at this stage is required a direction to deposit 20%
of the amount in dispute of tax and interest and 10% of the
amount in dispute of the penalties which is consequential in
nature, rounded off to the nearest tenth digit, as precondition
for hearing the appeals on merits within a period of 30 days.
Orders passed accordingly. The applications stand disposed
of. On compliance of the orders the file be listed for hearing
on 01.03.2017."
8. It is contended by the petitioner that there is no radical difference
between the transactions that were the subject matter in the previous ruling
and the present case, save and except its customers are different. It is also
highlighted that these cases involve three different types of transactions, all
of which fall within the scope of 'inter State sale', defined under the Central
Sales Tax Act. It is submitted that the first kind of transaction is a
movement of goods, appropriated to the contracts by the petitioners which it
manufactures, from other parts of the country but which ultimately are used
for its customers purposes in the latter's premises - this falls under Section
3(a) of CST Act. The second kind of transaction is covered by Section 3(b)
of CST Act i.e. bought out items strictly in accordance with the
specifications, used for erection and installation purposes and the goods are
imported again for the purpose of fulfilling the contractual obligations -
subjected to Section 5(2) of CST Act. In that sense, there is no difference
between the nature of the transactions in this case and those dealt with in the
judgment of this Court. The petitioner had entered into contracts with
DMRC in the previous reported decision.
W.P.(C) Nos.1757/2017 & other connected matters Page 7 of 10
9. Counsel for the revenue on the other hand argued that there are
important differences in the nature of the transactions and the scope of the
contracts. He highlighted the observations of the OHA that the goods can
well be used for purposes other than they were contracted for by the
petitioner on the one hand and its customer's i.e. L & T (on behalf of
DIAL), BSES Yamuna Power Ltd. and NDPL. In these circumstances, the
DVAT Tribunal acted within jurisdiction while directing deposit of a portion
of the tax liability. Learned counsel highlighted that substantial relief has
been given to the petitioner by the Tribunal. It is further submitted that a
substantial amount involved (i.e. `8,00,00,000/-) is in respect of high seas
sales, which were never the subject of the Division Bench's ruling, that was
ultimately affirmed by the Supreme Court.
10. This Court has considered the submissions. The Supreme Court in
ABB Limited (supra) noted nature of the transaction between the petitioners.
The relevant portion of the same is as under:-
"17. The aforesaid conclusion leading to our concurrence
with the views of the High Court is also based upon the salient
facts, particularly the various conditions in the contract and
other related covenants between DMRC and the respondent
which have been spelt out in paragraph 31 of the High Court
judgment (ABB Ltd. Vs. Commr., 2012), enumerated and
described as follows: (ABB Ltd. case, SCC OnLine Del)
"(1) Specifications were spelt out by DMRC;
(2) Suppliers of the goods were approved by the DMRC;
(3) Pre-inspection of goods was mandated;
(4) The goods were custom made, for use by DMRC in its
project;
(5) Excise duty and Customs duty exemptions were given,
specifically to the goods, because of a perceived public
interest, and its need by DMRC;
W.P.(C) Nos.1757/2017 & other connected matters Page 8 of 10
(6) The Project Authority Certificate issued by DMRC the
name of the subcontractors as well as the equipment/goods to
be supplied by them were expressly stipulated;
(7) DMRC issued a Certificate certifying its approval of
foreign suppliers located in Italy, Germany, Korea etc. from
whom the goods were to be procured.
(8) Packed goods were especially marked as meant for
DMRC's use in its project."
Before us there was no attempt to assail the aforesaid
features and to even remotely suggest any factual error on the
part of the High Court in noting those features.
18. The salient features flowing out as conditions in the
contract and the entire conspectus of law on the issues as
notice earlier, leave us with no option but to hold that the
movement of goods by way of imports or by way of inter-state
trade in this case was in pursuance of the conditions and/or as
an incident of the contract between the assessee and DMRC.
The goods were of specific quality and description for being
used in the works contract awarded on turnkey basis to the
assessee and there was no possibility of such goods being
diverted by the assessee for any other purpose. Hence the law
laid down in K.G. Khosla & Co. (P) Ltd. v. CCT, AIR 1966 SC
1216 has rightly been applied to this case by the High Court.
We find no reasons to take a different view."
11. The Revenue is undoubtedly correct in submitting that the DVAT
Tribunal has granted significant relief to the petitioners. At the same time,
the Court notices that the declaration of law by the Supreme Court was in
respect of almost the nature of the transactions as in this case; they do not
prima facie differ from the facts that led to the judgment of the Division
Bench (as endorsed by the Supreme Court). No significant material
particulars were shown to distinguish the two cases.
W.P.(C) Nos.1757/2017 & other connected matters Page 9 of 10
12. In the circumstances, this Court is of the opinion that the impugned
orders to the extent that they direct the petitioners to deposit 20% of the tax
and interest demanded and 10% penalty assessed cannot be sustained. They
are accordingly set aside. The Court was informed during the hearing that
the DVAT Tribunal, which is seized of the appeals, is likely to hear them on
01.03.2017. In the light of the modifications directed, the DVAT Tribunal
shall proceed to hear the appeals on merits and render its decision preferably
within three months from today. All rights and contentions of the parties
are reserved; nothing stated in this order shall preclude the rights of the
parties to urge all contentions. All the petitions are allowed in the above
terms. All the petitions and the pending applications are disposed off.
13. A copy of this order be given dasti to the parties under the signatures
of the Court Master.
S. RAVINDRA BHAT, J.
NAJMI WAZIRI, J. FEBRUARY 27, 2017 sb W.P.(C) Nos.1757/2017 & other connected matters Page 10 of 10