The Patna High Court directed the Indian Railways to refund the Value Added Tax (VAT) which was illegally deducted by it.
“The Railways had made a deduction on the ground that it is a works contract; which we have negatived. The Railways is bound to refund the illegal tax deduction made from the bills to the petitioner contractor. The Railways could definitely apply for refund from the Bihar Value Added Tax Department,” the division bench of Chief Justice K. Vinod Chandran and Justice Partha Sarthy said.
The petitioner, PCM Cement Concrete Pvt. Ltd. has sought the refund of VAT from the Indian railways. The petitioner argues that the VAT Act has absolutely no applicability since the manufacture and supply of the goods by the petitioner to the Railways was an inter-state sale; which is not exigible to sales tax within the State of Bihar either as a sale of goods or as a works contract.
The issue is simplified insofar as the sale being mere manufacture and supply of goods which is a sale simplicitor of the goods; which goods have also been transported in pursuance to a prior contract of sale which is the reason for the movement of the goods from one State to the other; herein from the State of West Bengal to the State of Bihar.
The court held that The manufactured goods are loaded and stacked in a vehicle or railway wagon, by which it is transported into the site within the State of Bihar for accretion in the works of the Railways; which work or accretion is not the responsibility of the petitioner. The transaction is purely of an inter-state sale of goods and is not a works contract nor a sale of goods exigible to tax within the State of Bihar.
The court confined to the deductions made three years prior to the date of registration of the above writ petition which is on 14.05.2012; giving effect to the limitation as prescribed for recovery of money under the Limitation Act. The Railways shall refund the amounts with 6% interest within a period of 4 months from the date of receipt of the certified copy of this judgment. If the refund is not granted within that time then the interest shall run at the rate of 12% from the date of expiry of the 4 month period. The Railways can apply for refund or adjustment to future dues from the State of Bihar.