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2012 Supreme(Del) 1572
High Court of Delhi
A.K. SIKRI & RAJIV SAHAI ENDLAW
M/S. Larsen & Toubro Ltd. & Another
Versus
Union Of India & Others
W.P.(C) 1907 to 1906, 1908 to 1928, 1933 to 1950, 1953 & 1957 OF 2012
Decided on : 01-06-2012
For the Appellants:N. Venkatramani, Sr. Adv. with P. Purushottam, Sanand Ramakrishnan, Rajeev Mishra, Arun Francies, M. Shaffique, Goerge Francis & Ms. Puja Jain, Advocates.
For the Respondents:Vivek Tankha, ASG with Rishabh Sancheti & H.C. Bhatia, Advocate.
The court upheld the legislative prerogative in granting deductions and exemptions and found that bad legislative drafting cannot furnish a ground for judicial review of legislative action.
Headnote:
DVAT Act - Assessment Orders - Section 32, Penalty Orders - Section 33 - Rectification Orders - Section 74B - Exemption and Exclusion on Labour and Service Charges - Vires of Section 5(2) of DVAT Act, 2004 and Rule 3(2) of DVAT Rules, 2005 - Violation of Principles of Natural Justice - Multiple Taxation - Legislative Prerogative - Validity of Provisions Upheld
Fact of the Case:
The petitioner, M/s Larsen & Toubro, filed 52 petitions challenging assessment orders, penalty orders, and rectification orders under the DVAT Act for the assessment year 2008-09. The primary issues raised were the vires of Section 5(2) of the DVAT Act, 2004 and Rule 3(2) of the DVAT Rules, 2005, and the validity of the impugned orders passed by the respondent no.3, alleging violation of the principles of natural justice.
Finding of the Court:
The court upheld the validity of the provisions of Section 5(2) of the DVAT Act, 2004 and Rule 3(2) of the DVAT Rules, 2005, and dismissed the writ petitions. The court found that the mechanism provided in the DVAT Act did not result in multiple taxation and that the manner in which deductions and exemptions are granted is a legislative prerogative. The court also noted that bad legislative drafting cannot furnish a ground for judicial review of legislative action.
Issues: The primary issues were the vires of Section 5(2) of the DVAT Act, 2004 and Rule 3(2) of the DVAT Rules, 2005, and the validity of the impugned orders passed by the respondent no.3, alleging violation of the principles of natural justice.
Ratio Decidendi: The court held that the absence of a mechanism in the rules for allowing the deduction of the sub-contractor turnover in the hands of the main contractor did not lead to multiple taxation. The court also upheld the legislative prerogative in granting deductions and exemptions and found that bad legislative drafting cannot furnish a ground for judicial review of legislative action.
Final Decision: The court dismissed the writ petitions and upheld the validity of the provisions of Section 5(2) of the DVAT Act, 2004 and Rule 3(2) of the DVAT Rules, 2005. The court also noted that the petitioners' contentions regarding the violation of the principles of natural justice could be taken up in the appeals filed by the petitioners against the impugned orders.
A.K. SIKRI, ACJ.
1. All these petitions, 52 in numbers, are filed by the same petitioner namely M/s Larsen & Toubro. The entire batch relates to the assessment year 2008-09 wherein the orders passed under Delhi Value Added Tax, 2004 (hereinafter referred to as the DVAT Act) read with Delhi Value Added Tax Rules, 2005 (in short ‘the DVAT Rules’) are questioned. The composition of these 52 writ petitions is as follows:-
(a) The 3rd respondent i.e. VAT Officer, (Ward 202) has passed separate orders of assessment demanding tax and interest under section 32 of the Act and penalty under Section 33 of the said Act for each month commencing from April 2008 to March, 2009. This resulted in 12 assessment orders dated 02.02.2012 and 12 penalty orders dated 02.02.2012 challenged by way of 24 writ petitions.
(b) The petitioners moved an application for rectification under Section 74B of the DVAT Act against both orders of assessment and penalty proceedings. The 3rd respondent, passed 12 orders of rectification dated 6.3.2012 against assessment orders demanding tax and interest and separate 12 orders for penal proceedings dated 6.3.2012. These are again challenged by way of 24 further writ petitions.
(c) Besides the above, the petitioners have filed 4 more writ petitions, two consolidated writ petitions (one for tax and interest and the other for penalty proceedings) against the original assessment orders and penalty proceedings and two more consolidated writ petitions - one for tax and interest and the other for penalty proceedings, against the rectification orders.
2. It is thus clear that in all these petitions, common issues have been raised. Precisely for this reason all these petitions were heard together and can conveniently be disposed of by a common judgment with which we are proceeding hereunder.
3. A gist of various petitions narrated herein above would disclose that primarily two issues arise for consideration namely;
(i) Vires of Section 5 (2) of the DVAT Act, 2004 and Rule 3 (2) of the DVAT Rules, 2005 which is challenged as unconstitutional, essentially on the ground that it does not provide for a proper mechanism to compute the taxable turnover after deducting ‘turnover of sub contractors’ and does not conform to the law laid down by the Supreme Court in the judgment titled ‘State of Andhra Pradesh Vs. Larsen & Toubro Limited’ reported in 2008 (9) SCC 1.
(ii) Validity of the impugned orders passed by the respondent no.3 which is questioned on the premise that have been passed in gross violation of the principles of natural justice inasmuch as respondent no.3 had neither issued notice nor afforded an opportunity of hearing in deciding the exemption and exclusion on labour and service charges, incurred by the petitioner in execution of the works contract.
4. In order to appreciate the controversy which has arisen in the form of aforesaid two issues, it would be apposite to scan through the material facts. We can cull out these facts from Writ Petition (C) 1907/2012 which was referred to at the time of arguments by the counsel for both the parties inasmuch as paper book of this writ petition contains all the material facts which form part of basis for filing other writ petitions as well:-
(a) The respondent no.3 issued notice dated 20.7.2011 irregular claim of exemption on branch transfer/incorrect claim of concessional rate of tax without ‘C’form, short payment of tax due to wrong determination of taxable turnover/wrong application of tax rate. As per the department there was irregular grant of exemption claimed by the petitioner on transit sale without furnishing E-I & II forms. It was premised on the assertion that Section 6(2) of CST Act 1956 read with rule 12(4) of the central Sales Tax (Registration and Turnover) Rules, 1957 provides that the dealer should obtain a certificate in form EI or EII as the case may be from the selling dealer and submit it along with evidence about the sale effected when th
