BOT contracts qualify as works contracts under tax law, with deferred toll payments constituting a sale, thus validating tax assessments during construction prior to toll collection.

ORDER :

Vivek Rusia, J.

Since the controversies involved in the above cases are between the same parties, with the joint request of the parties, they are analogously heard and decided by this common order.

By way of these petitions filed under Article 226 of the Constitution of India, the petitioner has called into question the legality of assessment and revisional orders passed under the MADHYA PRADESH COMMERCIAL TAX ACT , 1994 treating its Build – Operate – Transfer (in short 'the BOT' scheme as works contracts and holding them liable to pay the commercial as well as entry tax. The challenge is on the ground that there was no actual sale or no transfer of property or goods during the relevant assessment years, and that there was no taxable turnover or business activity until the commencement of toll collection, which only started from 07.06.2001. These writ petitions relate to the assessment years 2000-2001.

FACTS OF THE CASE

2. The petitioner is a company engaged in the business of infrastructure development and in particular related to the construction and maintenance of roads and highways under the BOT scheme.

2.1. In the year 2000, the petitioner was awarded two separate infrastructure contracts by the State Authorities. The first project was granted by the Public Works Department (PWD), Katni Division, under Agreement No. 6/DL/2000-2001 vide Work Order dated 08.05.2000 for the construction of the Katni Bypass (Pureni– Khirehni) road having a length of 7.6 km. The second project was awarded by the Madhya Pradesh State Industrial Development Corporation (MPSIDC) vide letter dated 13.11.2000 for the development and maintenance of a 27 km road between Mhow and Ghatabillod.

2.2. Both contracts were under the BOT scheme, wherein the petitioner was to construct, operate and maintain the above two roads using its financial resources, with an authority to collect toll for a fixed concession period i.e. 3941 days for the Katni project and 3351 days for the Mhow-Ghatabillod project to recover its investment and expenditures. As per the terms of the concessional agreements, the completed road with the facility was to be transferred back to the respective authority at the end of the concession period without any payment or any further claim.

2.3. According to the petitioner, construction work on both projects was commenced during the financial year of 2000- 2001, but as on 31.03.2001, the construction work was ongoing and had not been completed. The completion certificate was issued later on, i.e. on 07.06.2001, only after which toll collection began, hence, no revenue from toll was earned during the Assessment Year 2000 – 2001. Despite this, the Commercial Tax Department initiated proceedings under the Madhya Pradesh Vanijyik Kar Adhiniyam, 1994, and the Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976, treating the BOT contracts executed by the petitioner as taxable "works contracts". The assessing officer held that during the execution of the road projects, there was a transfer of property in goods involved in the execution of the contract, which constituted a deemed sale and held that the petitioner is liable for commercial tax and entry tax.

2.4. In W.P. No. 373 of 2005 and W.P. No. 2180 of 2005, the assessment under challenge is related to commercial tax; the petitioner was subjected to assessment under the provisions of the Madhya Pradesh Vanijyik Kar Adhiniyam, 1994, for the assessment years 2000–01 and 2001–02. For the year 2000–01, the commercial tax officer, Indore, vide order dated 12.02.2004, treated the purchase and use of construction materials for its ongoing BOT projects as involving deemed sales. In the absence of any recorded sale or transfer of property in goods, the assessing authority estimated a turnover of Rs. 4,79,57,042/- applying profit margins of 10% on intra-State and 20% on inter-State purchases. On this basis, commercial tax of Rs. 8, 16,637/- was imposed along with a penalty of an equi