PRODAIR AIR PRODUCTS INDIA PRIVATE LIMITED v. DEPUTY COMMISSIONER OF STATE TAX, SPECIAL CIRCLE II, KERALA SGST DEPARTMENT

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS** **THURSDAY, THE 6[TH] DAY OF JANUARY 2022 / 16TH POUSHA, 1943** ## **W P(C) NO. 17451 OF 2021** ## **PETITIONER:** **PRODAIR AIR PRODUCTS INDIA PRIVATE LIMITED AMBALAMEDU, ERNAKULAM, REPRESENTED BY ITS FINANCE EXECUTIVE MR.G.MALLIKARJUNA REDDY** **BY ADVS. SRI.P.S.SREE PRASAD SRI.N.PRASAD** ## **RESPONDENT:** **THE DEPUTY COMMISSIONER OF STATE TAX SPECIAL CIRCLE II, KERALA SGST DEPARTMENT, THEVARA, ERNAKULAM-682015** **ADV. THUSHARA JAMES, SR.GOVT. PLEADER** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 13.12.2021, ALONG WITH WP(C)NO.18783/2021, THE COURT ON 06.01.2022 DELIVERED THE FOLLOWING:** W.P.(C) Nos.17451 & 18783/21 ## **-:2:-** ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS** **THURSDAY, THE 6[TH] DAY OF JANUARY 2022 / 16TH POUSHA, 1943** **WP(C) NO. 18783 OF 2021** ## **PETITIONER:** **PRODAIR AIR PRODUCTS INDIA PRIVATE LIMITED AMBALAMEDU, ERNAKULAM, REPRESENTED BY ITS FINANCE EXECUTIVE MR.G.MALLIKARJUNA REDDY.** **BY ADV P.S.SREE PRASAD** **SRI.N.PRASAD** ## **RESPONDENT:** **THE DEPUTY COMMISSIONER OF STATE TAX SPECIAL CIRCLE II, KERALA SGST DEPARTMENT, THEVARA, ERNAKULAM - 682 015.** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 13.12.2021, ALONG WITH WP(C)NO.17451/2021, THE COURT ON 06.01.2022 DELIVERED THE FOLLOWING:** W.P.(C) Nos.17451 & 18783/21 ## **-:3:-** ## **BECHU KURIAN THOMAS, J.** **-----------------------------------------------W.P.(C) No.17451 & 18783 of 2021 -----------------------------------------------** Dated this the 6[th] day of January, 2022 ## **JUDGMENT** Despite the existence of an alternative remedy of appeal, petitioner has approached this Court, challenging assessment orders issued under section 25 of the Kerala Value Added Tax Act, 2003 (for short the Act). While W.P.(C) No.17451 of 2021 challenges the assessment orders for three years, W.P.(C) No.18783 of 2021 challenges the rejection of claim of input tax credit for tax paid on capital goods in terms of Rule 13 of the Kerala Value Added Tax Rules, 2005 (for short 'the Rules'). The assessment years involved in the former writ petition are 2015-16, 201617 and 2017-18. 2. Petitioner is a company engaged in the business of manufacture and sale of industrial gases and is a dealer registered under the Act. As part of increasing the refining capacity of the Kochi Refineries of the Bharat Petroleum Corporation Ltd. (for short 'BPCL), it was decided to implement a project for constant and uninterrupted supply of industrial gases like hydrogen, nitrogen and HP steam. Pursuant to an invitation for tender floated by BPCL to supply industrial gases, an agreement was W.P.(C) Nos.17451 & 18783/21 ## **-:4:-** entered into on 21.08.2013 between petitioner and BPCL by virtue of which petitioner agreed to Build, Own, Operate (BOO) and maintain a hydrogen and nitrogen manufacturing plant and to maintain exclusive and continuous supply of industrial gases to BPCL. 3. Petitioner further contends that as per the agreement, petitioner was to build, own, operate and maintain the plant at the cost of the petitioner, on the land allocated by BPCL on a lease basis and to ensure an exclusive and continuous supply of the requisite industrial gases to BPCL for 15 years, subject to extensions. 4. According to the petitioner, pursuant to penalty orders imposed under section 67 of the Act for the assessment year 2016-17 and 2017-18, which is the subject matter of a writ appeal pending before this Court, the assessing officer initiated proceedings under section 25 of the Act for the assessment years 2015-16, 2016-17 and 2017-18 and by the impugned orders in W.P.(C) No.17451 of 2021, produced as Ext.P21, Ext.P22 and Ext.P23, the respondent imposed a huge liability on the petitioner running to more than a hundred crores, as alleged tax due from the petitioner. Tax was imposed assuming that the supply of industrial gases under Ext.P1 agreement is part of the works contract. A show cause notice under section 25(1) of the Act for the assessment year 2014-15 has also been challenged in this writ petition. W.P.(C) Nos.17451 & 18783/21 ## **-:5:-** 5. In W.P.(C) No.18783 of 2021, petitioner challenges the rejection of claim for input tax credit of the tax paid on capital goods, alleging that the rejection was on a wrong assumption that the agreement under which the petitioner supplies industrial gases to BPCL, is a works contract. 6. I have heard Sri. P.S.Sreeprasad, the learned counsel for the petitioner as well as Dr.Thushara James, the learned Senior Government Pleader for the respondent. 7. Adv. Sreeprasad vehemently argued that the assessment orders were issued without jurisdiction, warranting interference under Article 226 of the Constitution of India. According to the learned counsel, the condition precedent for levy of tax under section 6(1)(f) of the Act is transfer of property in the execution of works contract, which is nonexistent in the instant case. The learned counsel further contended that, the agreement never contemplated transfer of title in the plant and that the assessing officer completely went on a wrong tangent in rejecting the contentions raised by the petitioner. Relying upon the decisions in **Deputy** **Commissioner, Central Excise and Another v. Sushil and Company** [(2016) 13 SCC 223] **Arun Kumar and Others v. Union of India and Others** [(2007) 1 SCC 732] and **Paradip Port Trust v. Sales Tax Officer and Others** [(1998) 4 SCC 90] It was contended that, the jurisdictional fact of transfer of property does not exist to enable fastening of liability upon W.P.(C) Nos.17451 & 18783/21 ## **-:6:-** the petitioner. It was also contended that, when a jurisdictional fact has been erroneously decided, this Court under Article 226 of the Constitution of India can interfere, instead of relegating the parties to the alternative remedy of an appeal. 8. Smt.Thushara James, learned Senior Government Pleader on the other hand contended that in the circumstances of the instant case, the jurisdictional fact of transfer of property in the alleged works contract can be decided only on an appreciation of disputed questions of fact. Various factors in the impugned assessment orders were referred to justify the contention that this Court under Article 226 cannot consider seriously disputed questions of fact. 9. On a consideration of the rival contentions, this Court is of the opinion that this is not a fit case for invoking the writ jurisdiction under Article 226 of the Constitution of India. There is no dispute that if an authority acts without jurisdiction or in excess of jurisdiction, this Court can, in exercise of its powers under Article 226 of the Constitution of India interfere and issue a writ of certiorari. The jurisdictional fact, as held in **Arun Kumar and Others v. Union of India and Others** [(2007) 1 SCC 732] is a fact which must exist before the authority assumes jurisdiction over a particular matter. When the existence of the jurisdictional fact can be decided only by an appreciation of disputed questions of fact, W.P.(C) Nos.17451 & 18783/21 ## **-:7:-** necessarily the parties are to be relegated to the appellate remedy under the statute. 10. A reading of the impugned assessment orders reveal that the assessing officer has referred to various circumstances for arriving at the conclusion that the work executed by the petitioner on the basis of Ext.P1 agreement to build, own, operate and supply industrial gases, exclusively for BPCL, comes within the purview of works contract and the alleged consideration for the work executed, amounts to works contract receipt, taxable at 14.5% instead of 5% on supply of industrial gases. 11. The question whether Ext.P1 agreement is a composite agreement for a works contract or whether it is purely an agreement without any transfer of property involved in it, is a mixed question of fact and law. Though the agreement is termed as an agreement for the supply of Hydrogen, Nitrogen and Steam, the assessing officer has relied on various circumstances to regard the agreement as a works contract. The correctness or otherwise of the circumstances relied upon by the assessing officer in the impugned assessment orders, certainly require a detailed appreciation of facts. Merely because the amount involved in the order of assessment is large or merely because the nomenclature used in the agreement is as an agreement for supply, those by themselves are not sufficient justification to invoke the jurisdiction under Article 226 of the W.P.(C) Nos.17451 & 18783/21 ## **-:8:-** Constitution of India. 12. Similarly, the issue involved in W.P.(C) No.18783 of 2021 also requires appreciation of disputed facts. The rejection of input tax credit of tax paid on capital goods has been rejected for the reason that petitioner had executed the works contract for BPCL. The finding is intrinsically connected with the question involved in W.P.(C) No.17451 of 2021 and hence in the said case also, petitioner must be relegated to the statutory remedy of appeal. 13. As held in the decisions in **Union of India and Another v. Guwahati Carbon Limited** [(2012) 11 SCC 651] and **Assistant Commissioner of State Tax and Others v. Commercial Steel Limited** [(2021) SCC Online 884] existence of alternative remedy is a factor to be considered by the writ court before exercising its jurisdiction. The remedy of an assessee against an assessment order is to prefer a statutory appeal and pursue remedies available under law and not to invoke the jurisdiction under Article 226 under the guise of a proclaimed jurisdictional question. On a consideration of the circumstances, this Court does not find any reason to exercise the writ jurisdiction under Article 226 of the Constitution of India. 14. In this context, it is relevant to observe that the impugned assessment orders were issued on 15.07.2021 and W.P.(C) No.17451 of W.P.(C) Nos.17451 & 18783/21 ## **-:9:-** 2021 was filed on 13.08.2021 while W.P.(C) No.18783 of 2021 was filed on 03.09.2021. Both these writ petitions were pending consideration before this Court at the admission stage itself, from the aforesaid date till today. Since this Court has expressed its disinclination to entertain these two writ petitions, the period spent by the petitioner before this Court, in these two writ petitions, must be permitted to be excluded while calculating the limitation period for filing the appeals as directed. Hence, It is declared that petitioner will be entitled to seek exclusion of time for the period spent by the petitioner pursuing these two writ petitions while pursuing the statutory remedy of appeals. 15. With the above observations, I find no reason to interfere with the impugned orders in the exercise of jurisdiction under Article 226 of the Constitution of India. However, the liberty of the petitioner to pursue the statutory remedy of appeal stands reserved, and the petitioner will be entitled to seek exclusion of time as directed while preferring the appeals. The writ petitions are dismissed. Sd/- **BECHU KURIAN THOMAS JUDGE** vps W.P.(C) Nos.17451 & 18783/21 ## **-:10:-** ## **APPENDIX OF WP(C) 17451/2021** ## **PETITIONER'S EXHIBITS:** **EXHIBIT P1 TRUE COPY OF THE AGREEMENT DATED 21.08.2013 WITH M/S. BHARATH PETROLEUM CORPORATION LIMITED (BPCL) EXHIBIT P2 TRUE COPY OF THE PENALTY ORDER FOR THE ASSESSMENT YEAR 20916-17 DATED 06.07.2020 EXHIBIT P3 TRUE COPY OF THE JUDGMENT DATED 23.10.2020 OF THIS HON'BLE COURT IN WPC NO.18443 OF 2020 EXHIBIT P4 TRUE COPY OF THE ORDER OF THIS HON'BLE COURT IN REVISION PETITION NO.1015/202 IN WPC NO.18443/2020 DATED 11.02.2021 EXHIBIT P5 TRUE COPY OF THE MEMORANDUM OF WRIT APPEAL FILED BEFORE THIS HON'BLE COURT IN WA NO.374/2021 EXHIBIT P6 TRUE COPY OF THE ORDER DATED 23.02.2021 OF THIS HON'BLE IN WA NO.374/2021 EXHIBIT P7 TRUE COPY OF THE NOTICE UNDER SECTION 25(1) OF THE KVAT ACT, 2003 DATED 01.10.2020 EXHIBIT P8 TRUE COPY OF THE NOTICE UNDER SECTION 25(1) OF THE KVAT ACT, 2003 DATED 01.12.2020 EXHIBIT P9 TRUE COPY OF THE NOTICE UNDER SECTION 25(1) OF THE KVAT ACT, 2003 DATED 25.11.2020 EXHIBIT P10 TRUE REPLY OF PETITIONER DATED 15.01.2021 EXHIBIT P11 TRUE REPLY OF PETITIONER DATED 29.01.2021** W.P.(C) Nos.17451 & 18783/21 ## **-:11:-** - **EXHIBIT P12** - **TRUE COPY OF THE REPLY DATED 03.02.2021 FILED FOR THE ASSESSMENT YEAR 2016-17** - **EXHIBIT P13 TRUE COPY OF THE REPLY DATED 03.02.2021 FILED BY THE PETITIONER FOR THE ASSESSMENT YEAR 2017-18** - **EXHIBIT P14 TRUE COPY OF THE REVISED NOTICE, ISSUED BY THE RESPONDENT DATED 22.03.2021 FOR THE ASSESSMENT YEAR 2015-16** - **EXHIBIT P15 TRUE COPY OF THE REVISED NOTICE, ISSUED BY THE RESPONDENT DATED 19.03.2021 FOR THE ASSESSMENT YEAR 2016-17** - **EXHIBIT P16 TRUE COPY OF THE REVISED NOTICE, ISSUED BY THE RESPONDENT DATED 19.03.2021 FOR THE ASSESSMENT YEAR 2017-18** - **EXHIBIT P17 TRUE COPY OF THE REPLY FOR 2015-16 DATED 21.04.2021** - **EXHIBIT P18 TRUE COPY OF THE REPLY FOR 2016-17 DATED 21.04.2021** **EXHIBIT P19 TRUE COPY OF THE REPLY FOR 2017-18 DATED 21.04.2021** - **EXHIBIT P20 TRUE COPY OF THE ADDITIONAL GROUNDS DATED 14.07.2021 FILED BY THE PETITIONER** - **EXHIBIT P21 TRUE COPY OF ASSESSMENT ORDER DATED 15.07.2021 FOR THE ASSESSMENT YEAR 201516** - **EXHIBIT P22 TRUE COPY OF ASSESSMENT ORDER DATED 15.07.2021 FOR THE ASSESSMENT YEAR 201617** - **EXHIBIT P23 TRUE COPY OF ASSESSMENT ORDER DATED 15.07.2021 FOR THE ASSESSMENT YEAR 201718** - **EXHIBIT P24 TRUE COPY OF SHOW CAUSE NOTICE DATED 16.07.2021 FOR THE ASSESSMENT YEAR 201415** W.P.(C) Nos.17451 & 18783/21 ## **-:12:-** ## **APPENDIX OF WP(C) 18783/2021** ## **PETITIONER'S EXHIBITS:** |**EXHIBIT P1**|**TRUE COPY OF THE AGREEMENT WITH**|**BPCL**| |---|---|---| ||**DATED 21/08/2013.**|| |**EXHIBIT P2**|**TRUE COPY OF THE PENALTY ORDER FOR THE**|| ||**ASSESSMENT**<br>**YEAR**<br>**2016-17**|**DATED**| ||**06/07/2020.**|| |**EXHIBIT P3**|**TRUE COPY OF JUDGMENT DATED 23/10/2020**|| ||**OF THIS HON'BLE COURT IN WP(C) NO.18443**|| ||**OF 2020.**|| |**EXHIBIT P4**|**TRUE COPY OF THE ORDER DATED 11/02/2021**|| ||**OF**<br>**THIS**<br>**HON'BLE**<br>**COURT**|**IN**| ||**R.P.NO.1015/2020 IN WP(C) NO.18443/2020.**|| |**EXHIBIT P5**|**TRUE COPY OF THE MEMORANDUM OF**|**WRIT**| ||**APPEAL FILED BEFORE THIS HON'BLE**|**COURT**| ||**IN WA 374/2021.**|| |**EXHIBIT P6**|**TRUE COPY OF THE ORDER DATED 23/02/2021**|| ||**PASSED BY THIS HON'BLE IN **|**WA**| ||**NO.374/2021.**|| |**EXHIBIT P7**|**TRUE COPY OF ASSESSMENT ORDER **|**DATED**| ||**15/07/2021 FOR THE ASSESSMENT YEAR**|**2017-**| ||**18.**|| |**EXHIBIT P8**|**TRUE COPY OF APPLICATIONS **|**DATED**| ||**12/04/2017 FOR GRANT OF INPUT TAX CREDIT**|| ||**OF**<br>**CAPITAL**<br>**GOODS**<br>**AMOUNTING**|**TO**| ||**RS.57,63,764/-.**|| |**EXHIBIT P9**|**TRUE COPY OF APPLICATION **|**DATED**| ||**19;/06/2017 FOR GRANT OF ITC OF CAPITAL**|| ||**GOODS AMOUNTING TO RS.12,17,637/-.**|| |**EXHIBIT P10**|**TRUE COPY OF IMPUGNED ASSESSMENT**|**ORDER**| ||**DATED 16/07/2021.**||