JUDGMENT :

JITENDRA JAIN, J.

1. Rule. Rule made returnable forthwith. Heard finally by consent of the parties.

2. This petition under Article 226 of the Constitution of India challenges review order dated 8th March 2021, passed by Respondent No. 3 under Section 25 of the Maharashtra Value Added Tax Act, 2002 (hereinafter referred as “MVAT Act”) and order dated 6th July 2021, passed by Respondent No. 3 on rectification application fled by the Petitioner, to rectify review order, under Section 24 of the MVAT Act for the financial year 2006-07.

3. Narrative of the relevant events:

(i) During the financial year 2006-07, the Petitioner executed two projects of electricity distribution line for Maharashtra State Electricity Distribution Company Limited (MSEDCL) and one works contract project for Gas Authority of India Limited (GAIL) for laying down the pipeline of gas between Dabhol to Panvel.

(ii) The Petitioner with respect to two contracts with MSEDCL claimed deduction from the contract price @ 25% as per Table prescribed in Rule 58 of the MVAT Rules for arriving at value of transfer of property in goods. However, with respect to contract with GAIL, the Petitioner claimed deduction under Rule 58(1)(a)-(h) on actual basis aggregating to Rs.30,59,93,405/-.

(iii) On 18th February 2013, Deputy Commissioner of Sales Tax issued a notice to the Petitioner for verification of books of accounts to examine discrepancies found in the course of the business audit conducted by the revenue. The said notice records discrepancies found by the revenue after verification of the books of accounts. The said notice was made returnable on 25th February 2013.

(iv) On 28th February 2013, the Petitioner replied to the aforesaid notice and annexed copies of ledger in support of its submission.

(v) On 18th March 2013, the Petitioner fled further submission pursuant to the above notice giving its explanation as to why the service tax of Rs.1,05,41,933/- should be allowed as a deduction under Rule 58.

(vii) On 27th April 2013, further submission was made wherein it is recorded that the Deputy Commissioner has verified all the documents fled by the Petitioner.

(viii) On 11th December 2015, an assessment order under Section 23 (3) came to be passed by the Assistant Commissioner of Sales Tax, Investigation Branch-A, Mumbai. In the assessment order, the Assistant Commissioner of Sales Tax records that the Petitioner has produced relevant books of accounts. The said order also records the contract executed by the Petitioner with GAIL. The Assistant Commissioner of Sales Tax also records that out of three contracts, the Petitioner has claimed deduction @ 25% under Rule 58 for two contracts issued by MSEDCL and for one contract of pipeline project with GAIL, the Petitioner has claimed deduction under section 58 of the MVAT Act on actual basis aggregating to Rs.30,59,93,405/-. The assessment order records that the deduction is allowed after verification of books of accounts i.e., trial balance, expenses, ledger copies, contract copies, sample copies, etc. The assessment order, however, raises a demand of Rs.8,27,465/- on some other issue.

(ix) On 22nd October 2018, Respondent No. 3 issued a notice in Form No. 309 under Section 25 of the MVAT Act to review the assessment order passed under Section 23(3) of the Act. The relevant extract of the show-cause notice dated 22nd October 2018, reads as under:

“For the period 2006-2007, wrongful deduction u/r 58 of MVAT Act allowed in assessment order in respect of M/s. GAIL Project on profit of Supply of labour and services at Rs.9,41,22,626/-. This profit on sale of labour only permissible [if there were two contract agreement by the dealer for the work with principal]. One for labour supply for which deduction of Rs.22,42,00,786/- was allowed and another for rest of the work for which deduction for profit on supply of labour & servi