JUDGMENT
S.C. Malte, J.
1. Petitioner is seeking the quashing of a letter Annexure P-6 which the Assistant Excise and Taxation Officer, Assessing Authority, Jagadhri, has directed to intimate the amount of payment received by the petitioner against the execution of the contract undertaken by the petitioner, so that the amount of sales-tax due can be assessed. Further, the petitioner seeks a direction of a writ of mandamus for the refund of Rs. 16,75,000/- with interest at the rate of 24% from the respondents on the ground that said amount was not liable to deducted at the time of making advance towards the mobilisation advance.
2. The petitioner is an Engineering and Construction concern. By an agreement dated 19.9.96 with the Governor of Haryana acting through Chief Engineer, Construction Unit (1), Haryana, the petitioner undertook, the construction of Hathni Kund Barrage, and its appurtenant works. One of the terms of the agreement was Sub-clause 60.7 at Annexure P-3 its caption is “advance payment”. Thus clause is divided into Clauses (a), (b) and (c). Clause (a) stated that the employer (respondent No. 3) will make an advance at the rate of 12% interest to the contractor (petitioner), exclusively for the costs of mobilisation in respect of the works in an amount equivalent to 5% of the contract price named in the Letter of Acceptance. The subsequent portion of that clause further give the details as to the manner in which such an advance shall be paid against the bank guarantee. Sub-clause (b) of that clause provides regarding another type of advance on the same terms, and conditions as above, for meeting the price of plant, and equipments by the contractor. Sub-clause (c) of the clause makes a provision regarding the repayment of such advance payment, which is to be made by way of deduction from the interim payments certified by the Engineer. The concluding portion of Clause (c) deserves attention. Therefore, its reproduces below :-
“The deductions so affected in pursuant to this Clause will be first adjusted towards capital. The interest so occurred will be recovered at the rate to be fixed by the Engineer with the approval of the Employer so that there will be no outstanding dues by the time 90% of the work is completed.”
3. The perusal of the above mentioned Sub-clause 60.7 of the agreement clearly indicates that it is an advance by way of monetary accommodation. In other word, it is nothing but a loan at the rate of interest. Such loan given to the contractor is liable to be recovered by way of adjustment against the running account bills by the contractor in respect of the work or construction done by him from time to time. The amount of advance thus is recoverable against the amount payable to the contractor in respect of the work done. With this position on hand. I proceed to consider the clause under which the deduction was sought at the time of making the advance itself. For ready reference, relevant portion of Section 25-B of the Haryana General Sales Tax Act is reproduced below :-
“25B(1) – Notwithstanding anything to the contrary contained in any provisions of this Act, any contractee responsible for making any payment of discharging any liability on account of valuable consideration payable for the execution of a works contract involving Transfer of property in goods (whether as goods or in some other form), shall, at the time of credit to the account of or payment to the payee of such valuable consideration in case, by cheque, by adjustment or in any other manner whatsoever, deduct tax therefrom at the rate not exceeding ten percentum of the amount paid on credited, as the case may be as may be specified by notification by the Government.”
4. Assistant Advocate General, Haryana, for the respondent has contended that the advance thus given to the petitioner is an advance payment towards the intended performance of the contract, and the amount was meant to make provision as a mobile resources for the execution of work by the contractor. He has, further, submits that as the petitioner has received a valuable consideration for the execution of the work, he is liable to pay the sales tax.
5. In this writ petition, the real question raised pertains to the time of payment of sales-tax. The main contention by the petitioner is that sales tax, if due, cannot be deducted at the stage when advance is made as per clause mentioned above. A plain reading of Section 25-B of the General Sales Tax Act indicated that contractee is under obligation to deduct the sales tax, and pay it to the State if there is an occasion to pay an amount in order to discharge a liability on account of valuable consideration payable for the execution of a work contract involving transfer of property in goods. In the present case, deduction of the sales-tax was made at the time of the advance as per Clause 60.7 of the Contract. I have already observed that that clause pertains to payment given as a loan so as to enable the contractor to obtain machinery, equipments, and other resources for the purpose of executing the work undertaken. The inference that it is a loan, is further forfeited on finding that such an advance is at a rate of interest, and the recovery of the capital amount and the interest on it, is to be effected from the payments to be made in respect of work executed from time to time. The liability to deduct the sales tax under Section 25-B of the said Act would arise at the time of making payment towards the running account bill of the work executed upto the date of payment. The recovery of the advance amount would be by way of deduction or adjustment of accounts as per Clause (c). Nonetheless, an occasion for making payment of discharging the liability on account of valuable consideration for execution of work of the contract, would arise in respect of the work then executed. The value of the work executed till then would be assessed as per the terms of the contract and that would be the liability on account of valuable consideration for execution of the work. In my opinion, therefore, no deduction can be effected at the time of giving advance as per Clause 60.7 of the agreement, as reproduced in Annexure P-3.
6. The question, therefore, remains as to the relief that can be granted. In this case, an amount of Rs. 16,25,000/- had already been deducted towards the tax liability, That deduction was deposited on 31.10.1996. Since that event has already taken place, now it would be convenient if that amount is adjusted towards the tax that would be payable now in respect of liability as per Clause (c) of Sub-clause 60.7 of the agreement. That deduction had been made on the bonafide interpretation of the provisions of the said Act. Clause 5 of Section 258 of the said Act casts a penal responsibility if a person fails to comply with the provisions of Section 25-B, it appears that the deduction was made by way of cautious approach lest there should arise any occasion to face the penalty for non-complying with those provisions. In vies of that, I do not find any justification to grant any interests on the amount thus so far deducted. I, therefore, direct that a deduction of Rs. 16,75,000/- be adjusted towards the running account of the contractor, and the adjustment is to be done in accordance with Sub-clause 60.7, referred above.
7. The petitioner seeks quashing of the letter Annexure P-6. That letter is only a direction to intimate the payment received in respect of the work executed. In view of my observation made above, it follows that the information to be supplied would be in respect of payment received for the work executed so far, and, thereafter, from time to time. Thus, the position having been made clear, it would not be now necessary to quash, annexure P-6. The petition is allowed in the manner and to the extent as stated above.