M/S. BOC INDIA LIMITED v. STATE OF KERALA and OTHERS

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** **THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON** **MONDAY, THE 13TH DAY OF AUGUST 2012/22ND SRAVANA 1934** ## **WP(C).No. 18827 of 2012 (C) ---------------------------** ## **PETITIONER(S):** **--------------------------** **M/S.BOC INDIA LIMITED, C/O. KOCHI REFINERIES LIMITED, SHED NO.TS-TF-06-04, AMBALAMUGAL, KOCHI-682 302, HAVING ITS REGISTERED OFFICE AT OXYGEN HOUSE, P 43 TARATALA ROAD, KOLKATA-700 088, REPRESENTED BY ITS LEAD-INDIRECT TAXATION(SOUTH), MR.GIRISH. N.** **BY SRI.A.K.JAYASANKARAN NAMBIAR, SENIOR ADVOCATE ADVS.SRI.M.GOPIKRISHNAN NAMBIAR SRI.P.GOPINATH SRI.P.BENNY THOMAS SRI.K.JOHN MATHAI SRI.KURYAN THOMAS** ## **RESPONDENT(S):** **-----------------------------** ## **1. STATE OF KERALA,** **REPRESENTED BY ITS SECRETARY TO GOVERNMENT, TAXES DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM-695 001.** **2. THE DEPUTY COMMISSIONER (APPEALS), COMMERCIAL TAXES, ERNAKULAM, COMMERCIAL TAX COMPLEX, PERUMANOOR P.O., KOCHI-682 016.** **3. ASSISTANT COMMISSIONER (WORKS CONTRACT), COMMERCIAL TAXES, OLD RAILWAY STATION ROAD, ERNAKULAM, KOCHI-682 018.** ## **BY SPL. GOVERNMENT PLEADER SRI.SOJAN JAMES(TAXES)** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 13-08-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **sts** **WP(C)NO.18827/2012** **APPENDIX** ## **PETITIONER(S) EXHIBITS** **EXT.P1 : TRUE COPY OF THE PURCHASE ORDER DTD.27.5.2008 PLACED BY BPCL ON THE PETITIONER.** - **EXT.P2 : TRUE COPY OF THE SCOPE OF THE WORK SETTLED BETWEEN THE PETITIONER AND EIL.** - **EXT.P3 : TRUE COPY OF THE WORK ORDER DTD.10.10.2009 ISSUED BY THE PETITIONER SUB CONTRACTING THE ERECTION PORTION TO M/S. AKASH ENGINEERING SERVICES.** - **EXT.P4 : TRUE COPY OF THE WORK ORDER DTD.6.7.2009 ISSUED BY THE PETITIONER TO THAMPI AND COMPANY.** - **EXT.P5 : TRUE COPY OF THE CERTIFICATE IN FORM 20E DTD.27.1.2010 ISSUED BY THE ASSISTANT COMMISSIONER (WORKS CONTRACT), ERNAKULAM TO THE PETITIONER.** - **EXT.P6 : TRUE COPY OF THE CERTIFICATE IN FORM 20E DTD.22.2.2010 ISSUED BY THE ASSISTANT COMMISSIONER (WORKS CONTRACT), ERNAKULAM TO THE PETITIONER.** - **EXT.P7 : TRUE COPY OF THE PRE-ASSESSMENT NOTICE DTD.10.10.2011 ISSUED TO THE PETITIONER BY THE 3RD RESPONDENT.** - **EXT.P8 : TRUE COPY OF THE REPLY DTD.3.11.2011 FILED BY THE PETITIONER BEFORE THE 3RD RESPONDENT.** - **EXT.P9 : TRUE COPY OF THE WRITTEN SUBMISSIONS FILED BY THE PETITIONER BEFORE THE 3RD RESPONDENT ON 7.2.2012.** - **EXT.P10: TRUE COPY OF THE ASSESSMENT ORDER DTD.19.5.2012 ISSUED TO THE PETITIONER BY THE 3RD RESPONDENT.** - **EXT.P11: TRUE COPY OF THE APPEAL DTD.29.6.2012 FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT.** - **EXT.P12: TRUE COPY OF THE STAY PETITION DTD.29.6.2012 FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT.** - **EXT.P13: TRUE COPY OF THE CLARIFIED ORDER NO.C3/24336/11CT, DTD.28.3.2012 ISSUED BY THE 3RD RESPONDENT FOR CLARIFICATION, DEPARTMENT OF COMMERCIAL TAXES TO THE PETITIONER.** - **EXT.P14: TRUE COPY OF THE STAY ORDER DTD.20.7.2012 PASSED BY THE 2ND RESPONDENT TO THE PETITIONER.** **RESPONDENTS' EXHIBITS :** **NIL** **/TRUE COPY/** **sts** **P.A.TO.JUDGE** ## **P.R.RAMACHANDRA MENON, J.** - - - - - - - - - - - - - - - - - - - - - ## **W.P.(c) No. 18827 OF 2012** - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 13[th] day of August , 2012 ## **JUDGMENT** The correctness and sustainability of the condition imposed vide Ext.P14, to satisfy 1/3 of the disputed liability, so as to avail the benefit of interim stay during the pendeny of the appeal forms the subject matter of challenge in this writ petition. 2. The case of the petitioner is that, petitioner company having its Head Office in Kolkata was awarded with a works contract by M/s.Bharat Petroleum Corporation Ltd. (BPCL) for setting up a 'Cryogenic Nitrogen Plan' as part of the expansion/modernisation programme. According to the petitioner, the contract having a value of more 27 crores actually constitutes of three different elements. The first one, to an extent of 90%, is in respect of material supply. The second one is in respect of the civil construction works and the third one is fabrication/installation. In respect of the first part, the entire materials have been supplied in the name of BPCL, against C forms, WPC.No.18827/2012 2 realising concessional rate of tax. After the consignment as above, the goods have been entrusted by the BPCL with the petitioner, who in turn completed the civil works and also the fabrication/installation works by engaging two sub contractors, as covered by Exts.P3 and P4. According to the petitioner, absolutely no tax liability is there in respect of the supply of materials under the KVAT Act and so also in respect of the fabrication work, which is nothing, but a labour contract. In the case of civil works, there is passing of some goods and in respect of such liability, sub-contractor has already cleared the tax, leading to issuance of certificates in the prescribed forms. 3. In connection with the work awarded as above, the petitioner, who is a registered dealer both under the KVAT Act and CST Act on the rolls of the 3[rd] respondent, filed 'Nil' returns, showing the full amount as exempted. On being served with Ext.P7 preassessment notice, the petitioner filed Ext.P8 reply, followed by Ext.P9 written submission, explaining the facts and figures. This however, did not turn to be fruitful and the third respondent passed Ext.P10 assessment order, which according to the petitioner is contrary to the WPC.No.18827/2012 3 actual facts and figures. Met with the situation, the petitioner has preferred Ext.P11 appeal along with Ext.P2 petition for stay before the second respondent. In the course of proceedings, the actual nature of contract involved, suggesting that it is nothing but an interstate works contract attracting no tax liability was sought to be highlighted with reference to Ext.P13 clarification issued by the concerned authority under the relevant provisions of law. But without appreciating the contention raised by the petitioner and also the mandate of Ext.P13, the appellate authority passed Ext.P14 order dated 20/07/2012 in quite a mechanical manner, directing the petitioner to make the deposit, which is under challenge in this writ petition. 4. Sri.A.K.Jayasankaran Nambiar, the learned senior counsel for the petitioner, with reference to the relevant materials, especially the contents of Ext.P9 submits that, the material supply constitutes an extent to the tune of Rs. 23,93,00,000/-, out of the total contract amount of Rs. 27,43,00,000/-. These supplies have been effected strictly in the name of BPCL Ltd., against C forms. It is also stated that, all other requirements have already been satisfied by obtaining WPC.No.18827/2012 4 Form 20(H) and such other materials from sub-contractors and they have also been produced. The particulars of the documents produced as above have been listed in Ext.P9. However, quite a distorted figure/ version has been given by the third respondent in Ext.P10 order in the following terms : “ The contract entered into by the appellant for designing, manufacturing, fabrication, installation and commissioning specified project is composite in nature. The assessee in order to carry out the contract, has purchased goods from outside the state from his own factory and from outside dealers. The invoice raised for the purchase is in the name of the assessee. The goods/materials are supported not in the name of the Awarder in Kerala, but it is a pure purchase by the assessee in his name and brings the goods into Kerala. No lien or inextricable link is established in this case between the movement of goods to the Awarder. The materials are dispatched from outside the State in favour of the assessee and not in favour of the Awarder. The goods so dispatched are not inspected and approved by the Awarder. The assessee then undertakes fabrication and erection/installation of such goods equipments with other goods for commissioning the projects. Since the entire work is carried out in Kerala at Awarders cite it is purely local sales and exigible WPC.No.18827/2012 5 to local tax since the plant is fabricated and erected in Kerala.” 5. The learned Special Government Pleader ( Taxes) appearing on behalf of the respondents submits that, despite the tall claim projected by the petitioner, the actual material supply was only to the tune of Rs. 48 lakhs. The observation made by the third respondent in Ext.P10 as to the exact nature of transaction, raising the bills by the petitioner “in their own name”, is a fact which cannot be disputed by the petitioner being part of the documentary evidence on record. Similar submission is made by the learned senior counsel for the petitioner as well that the authority cannot simply shut its eyes to make it dark. This is a disputed fact, which requires to be considered by the appellate authority, with reference to Ext.P13 as well, which however has not been done, while imposing the condition. The learned Government Pleader submits that, the nature of transaction is very much taxable at the hands of the State, in view of the law declared by a Division Bench of this Court in **Dosal Limited v. State of Kerala** ( 2010(18) KTR 211 (Ker.). 6. This Court finds that the factual position is vehemently WPC.No.18827/2012 6 disputed from both the sides, particularly with reference to the contents of the relevant documents forming part of the records. The proceedings can be finalised, no doubt, only after considering the entire materials on record. But, even for the purpose of imposing condition, while considering the I.A. for stay, it is necessary for the appellate authority to refer to the nature of the contentions and to arrive at a finding with regard to the course to be followed, to strike a balance. This is more so in view of the law declared by a Division Bench of this Court in **Supreme Electrical Engg. (P) Ltd. v. Commercial Tax Officer** ( 2008(3) KLT 805). 7. Going by the contents of Ext.P14, this Court finds that, but for the reference made to some precedents from 1994 to 2004, there is no such discussion with regard to the exact nature of the case projected by the petitioner and the reason for the inference arrived at. In short, Ext.P14 cannot be treated as a 'speaking order' at all and as such, the matter requires to be reconsidered. Accordingly, Ext.P14 is set aside and the second respondent is directed to reconsider Ext.P12 application for stay and pass a 'speaking order' thereon, in accordance with law, as WPC.No.18827/2012 7 expeditiously as possible, at any rate within 'one month' from the date of receipt of a copy of this judgment. Coercive proceedings shall be kept in abeyance till such time. 8. The petitioner shall produce a copy of this judgment along with a copy of the writ petition before the second respondent for further steps. Writ petition is disposed of. ## **P.R.RAMACHANDRA MENON JUDGE** sv. WPC.No.18827/2012 8