A. K. Sikri, J.

(STA No. 2 of 2011 and C.M. No. 9435-9436 of 2011)

This appeal pertains to the tax period second quarter for the assessment year 2005-06. For that quarter, the appellant/assessee had filed its VAT return dated November 10, 2005. As per this return, he had shown the turnover in the sum of Rs. 15,36,120. Notice under section 59(3) dated December 14, 2005 under the Delhi Value Added Tax Act was issued to the appellant/assessee. The assessee filed the reply thereto. Thereafter, notice of default dated July 18, 2006 under section 32 of the Delhi VAT Act was issued creating a demand of tax of Rs. 4,52,126 and interest thereupon in the sum of Rs. 67,819.

We may note in this case that, as per the tax authorities, the assessee had deducted the tax at source in the sum of Rs. 61,30,514 and therefore, the work done/turnover was of the aforesaid amount and not Rs. 15,36,120 which led to issuance of default assessment notice. The assessee explained before the VAT Officer that the assessee was in the business of construction activities on contract basis and, therefore, as per the provisions of section 5(2) of the Act, he had right to disclose the turnover after excluding the charges towards labour, services and other like charges. His explanation was that the charges towards labour, services as well as consumables incurred by the assessee were deleted from the aforesaid amount of Rs. 61,30,514 thereby arriving at a turnover of Rs. 15,36,120 and, therefore, no default was committed. The figures furnished by the assessee in this behalf are as under :

The turnover disclosed in the return is Rs. 15,36,120, which was arrived at as under :

(1) Work done Rs. 61,30,514

(2) Less labour/services Rs. 28,61,766

(3) Less consumables Rs. 17,32,629

Rs. 15,36,119

The Value Added Tax Officer, however, confirmed the aforesaid demand and interest and also imposed penalty of Rs. 6,87,232 vide order dated July 18, 2006. Thereafter, the appellant filed the objections before the Objection Hearing Authority (OHA) on October 10, 2006, which was also rejected by the OHA vide order dated June 22, 2007. Against the order of the OHA, the appellant preferred an appeal before the Appellate Tribunal Value Added Tax, which has also been dismissed by the Tribunal vide order dated March 23, 2011. Challenging that order, the present appeal is preferred under section 81 of the Delhi Value Added Tax Act, 2004.

The aforesaid factors narrated would show that the claim of the appellant/assessee was that it had incurred the labour/services expenses to the extent of Rs. 28,61,766 and expenses on account of consumables in the sum of Rs. 17,32,629. Insofar as consumable is concerned, that was surrendered by the appellant even before the OHA. The question, therefore, which was gone into by the OHA was as to whether the assessee had, in fact, incurred the aforesaid expenses on account of labour/services and whether the assessee had been able to prove the said expenses. The assessee had shown justification for the aforesaid labour/services expenses by submitting a note before the OHA. In para 9 thereof, the labour/services as per rule 3(2) are mentioned. It shows that the appellant had debited the profit and loss account with expenses on account of wages, salaries and works expenses, equipment hiring charges, depreciation, etc., and this profit and loss account is the centralized account which relates to all India operation of the appellant. The total expenditure on account of wages, salaries and works, etc., is Rs. 11,83,11,570. From this expenditure to Delhi sales for second quarter is allocated in proportion arriving at a figure of Rs. 23,58,549.55. In a similar manner, some of the other expenditure incurred on account of machinery finance charges, staff welfare, motor car running and etc. expenses and motor car finance charges are proportionally assigned to Delhi sales and in this manner, figure of Rs. 28,61,765 is arrived at. This would show that no specific