[Bihar VAT Act] Pure Interstate Sale Of Goods Cannot Be Construed As Composite Contract Thereby Making It Not Exigible To Tax: Patna HC

While providing a major relief to PCM Cement Concrete (petitioner), the Patna High Court declared that the goods supplied by the petitioner to the Railways fell under the category of interstate sales, making them exempt from Bihar's sales tax.

Consequently, the High Court determined that the Railways was obligated to refund the tax amounts that were unlawfully deducted from the petitioner's bills.

The Division Bench comprising of Chief Justice K. Vinod Chandran and Justice Partha Sarthy observed 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”.

Advocate Satyabir Bharti appeared for the Petitioner, whereas CGC Anshay Bahadur Mathur appeared for the Respondent.

The brief facts of the case were that the petitioner had filed the present writ petition, seeking a refund of Rs. 38,22,897 from the Deputy Chief Engineer (Construction-I), East Central Railway, Darbhanga, the F.A. and C.A.O., East Central Railway, Patna, and the Deputy Chief Engineer (Construction), East Central Railway, Saharsa. The petitioner claimed that the deducted and recovered amounts were illegally taken from their bills as advance Value Added Tax (VAT) under Bihar Value Added Tax Act, 2005 (VAT Act). The petitioner argued that the VAT Act did not apply since the goods supplied by them to the Railways were part of an interstate sale, exempt from Bihar's sales tax.

After considering the submission, the Bench observed the nature of the contract was solely focused on the production and transportation of pre-stressed concrete slabs and RCC Ballast Retainers of precise specifications.

“There was no involvement of a works contract; instead, it constituted a sale of goods, manufactured by the petitioner as per the awarded contract. The goods were loaded and transported to the Railway site within Bihar, solely for their incorporation into the Railways' projects, a responsibility not borne by the petitioner”, added the Bench.

The High Court categorically defined the transaction as an interstate sale of goods, explicitly excluding any elements of a works contract or a sale subject to Bihar's taxation.

Consequently, the High Court held that the Railways had erroneously made a deduction based on the premise of it being a works contract, and furthermore, suggested that the Railways were well within their rights to seek a refund from the Bihar Value Added Tax Department in this regard.

Consequently, the High Court ordered for refund and instructed the Railways were to affect the refund, inclusive of a 6% interest rate, within a span of 4 months.

Cause Title: PCM Cement Concrete Pvt v. The Union of India and Ors.

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