The primary liability of the contractor to pay tax, the duty of the contractee to deduct tax at source, and the prohibition of double charging of tax on the same transaction.

Rajesh Bindal, J.

1. The assessee is in appeal against the order dated 9.8.2011 passed by the Value Added Tax Tribunal, Haryana, Chandigarh. The substantial questions of law as pressed at the time of final hearing are as under:-

i. Whether in the facts and circumstances of the case on combined reading of Section 14(6), Section 24 and Rule 33, can interest be charged from the contractor for late deposit of TDS by contractee ?

ii. Whether in the facts and circumstances of the case the liability of the contractor to deposit tax due according to the returns can be extended to mean that he is liable for timely deposit of TDS deducted by the contractee ?

2. Learned counsel for the appellant submitted that the appellant is a contractor executing works of various contractees. As per the provisions of the Haryana Value Added Tax Act, 2003 (for short, 'the Act'), the contractee is liable to deduct tax from the payment to be made to the contractors and deposit the same with the department. In terms of the certificate issued to the contractor by the contractees, the credit of the amount reflected therein is granted to the contractor out of the tax payable by him. The assessment of the appellant for the year 2006-07 was framed by the Assessing Authority vide order dated 23.3.2010. The works contract tax was determined at Rs. 95,02,695/-. The payments to the tune of Rs. 94,05,576/- were verified, the credit for which was given. In addition, interest was levied under Section 14(6) of the Act. Aggrieved against the order of assessment levying interest, the appellant preferred appeal before the Joint Excise & Taxation Commissioner (Appeals), Faridabad, who vide order dated 6.1.2011, dismissed the same. The order was upheld by the Tribunal vide order dated 9.8.2011. The matter was remanded back only for the purpose of re-computation of the interest liability, as the Tribunal opined that the interest is chargeable on quarterly basis and not on monthly basis.

3. It is the aforesaid order, which is under challenge in the present appeal.

4. Learned counsel for the appellant argued that Section 24 of the Act cast a liability on a contractee to deduct tax at the rate specified from any payment made to a contractor and deposit the same with the department. The contractee is liable to file periodic returns and deposit the amount of tax so deducted with the department. For any amount of tax deducted, a certificate is issued to the payee on whose account the deduction was made. On the strength of the certificate, the payee is entitled to get the credit from the tax payable by him. If a contractee fails to deduct whole or part of the tax or fails to deposit with the department whole or part of the tax, at any time within five years from the close of the year in which default occurred, penalty equal to the amount of tax can be levied. Rule 16 of the Haryana Value Added Tax Rules, 2003 (for short, 'the Rules'), provides for the period when the returns are to be filed by the contractees. Rule 33 of the Rules provides for procedure for deduction of tax at source and deposit with the department. The tax is to be deducted monthly and to be deposited with the department in next 15 days after the close of the month. Original copy of the challan is to be affixed with the return to be filed by the contractee and 5th copy is to be furnished to the contractor as a certificate of tax deduction and payment, who is to annex the same with his return to claim the credit thereof.

5. Section 14 of the Act provides for filing of return and payment of tax. On failure to make payment of tax in accordance with the provisions of the Act and the Rules, there is liability to pay interest under Section 14(6) of the Act.

6. As per Rule 49(3) of the Rules, a contractor opting to pay tax on lump sum basis is liable to make payment of tax calculated @ 4% of the payments received