IN THE HIGH COURT OF KERALA AT ERNAKULAM
ST.Rev..No. 242 of 2007()
1. M/S.BHARATH HEAVY ELECTRICALS LTD.,
... Petitioner
Vs
1. STATE OF KERALA,
... Respondent
For Petitioner :SMT.S.K.DEVI
For Respondent :GOVERNMENT PLEADER
The Hon'ble MR. Justice C.N.RAMACHANDRAN NAIR
The Hon'ble MR. Justice K.SURENDRA MOHAN
Dated :31/03/2009
O R D E R
C.N.RAMACHANDRAN NAIR &
K.SURENDRA MOHAN, JJ.
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S.T. Rev. No.242 of 2007
....................................................................
Dated this the 31st day of March, 2009.
ORDER
Ramachandran Nair, J.
The revision case is filed by BHEL, a Government of India
Undertaking, which constructed a power plant for KSEB. The project
involved import of lion share of the equipments installed at the site.
Even though supply of foreign equipments were arranged by the
petitioner-company, under the terms of contract, the imported goods
were cleared on KSEB remitting customs duty. In the sales tax
assessment of the petitioner, the Assessing Officer declined exemption
on the value of imported goods claimed under Section 5(2) of the CST
Act. The assessment is sustained by the Tribunal and hence this
revision case. We have heard Senior counsel Sri.Sarangan appearing
for the petitioner, Special Government Pleader Sri.Vinod Chandran
appearing for the respondent-State and Sri.V.V.Asokan, appearing for
the KSEB, which is impleaded as additional respondent herein.
2. During initial hearing held today, we feel this is a matter which
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should be considered by the Government for the reason that ultimate
liability appears to be on KSEB because clause 5.5 of the agreement
between petitioner and the KSEB is as follows:
“Taxes and Duties: Owner shall be responsible for
any Indian customs duties assessed upon the Supplies from
foreign sources. Owner shall make direct payment to the
relevant Government Instrumentality of all customs duties
for which Owner is responsible hereunder. Similarly
variation in Excise Duty & CST and any other taxes &
duties like Works Contract Tax, Entry tax, Octroi, etc. shall
be reimbursed to the Supplier for the direct transaction
between Owner and Supplier.”
From the above clause it appears that the liability towards duty and
taxes on the petitioner is only existing rate of Excise Duty and Central
Sales Tax. Variations of such duty and tax are agreed to be borne by
KSEB which is the party styled as “Owner” in the agreement. Besides
the variations in excise duty and central sales tax, KSEB appears to
have undertaken to pay taxes and duties like Works Contract Tax,
Entry tax, Octroi etc. If this court confirms the order of the Tribunal,
then obviously BHEL will approach KSEB demanding the tax and
interest thereon and if they refuse to pay, another round of litigation
will start between a Central Government Undertaking and the KSEB
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which is under the control of the State Government. We do not think
we should encourage unnecessary litigation between the Government
agencies on the one side and the Government on the other side and
later between two entirely owned Government agencies. This is not
just a question of levy of sales tax on a dealer, but the issue to be
considered is whether the project cost of the KSEB should be enhanced
by another around Rs.20 crores and if it goes to that, whether the
Government is willing to give exemption of tax liability to the KSEB
or whether KSEB should pay it. If the Board has to meet the liability
about which we do not wish to express our view, then we do not think
the same should happen after protracted litigation leading to substantial
expenditure for the BHEL, for the KSEB and for the Government.
In order to prevent unnecessary litigation among parties, we close with
the following directions.
(i) The Chief Secretary to Government will constitute a
committee with himself as Chairman and Secretary, Department of
Electricity and Secretary, (Taxes) as Members and decide whether
under the contract KSEB is liable to reimburse the tax to BHEL for
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payment to the State and if they find the Board liable, then the
Committee should consider exemption on the tax payable for the
imported components of the project, keeping in mind the financial
position of KSEB and other tax incentives being granted by Govt. to
KSEB.
(ii) If the Committee finds liability for KSEB ad grants
exemption, then the demand confirmed by the Tribunal will not be
enforced against the petitioner.
(iii) If the Committee is of the view that the KSEB is either not
liable to reimburse tax to petitioner or even if it is liable, it should pay
it then the matter should be informed to petitioner and to KSEB for
petitioner to move this Court for reopening the case.
3. The Chief Secretary to Government is directed to constitute
committee and take decision, if required, after co-ordinating with the
KSEB and BHEL and communicate the same to the parties, within a
period of three months from date of receipt of copy of this judgment.
The stay granted by this court will continue until decision is
communicated by the Chief Secretary to Government. If ultimately
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Government fails to resolve the dispute, petitioner is given freedom to
file petition before this Court to revive this S.T. Revision Case closed
by us.
C.N.RAMACHANDRAN NAIR
Judge
K.SURENDRA MOHAN
Judge
pms