Despite the repeal of the VAT Act, collection of VAT amount is without authority of law.
Deduction of VAT under Works Contract in GST Regime – The petitioner prayed for direction to the respondents, to reimburse GST at 12% on the value of construction work done under the agreement dated 05.08.2017 entered into with the 5th respondent; and also direct the respondents not to deduct VAT amount of Rs. 11,93,172/- and 1% of CGST and SGST while releasing the final bill and direct refund of the VAT amount deducted. The petitioner submitted that the 5th respondent had floated a tender for civil construction work in April, 2017 and awarded the contract on 05.08.2017. The petitioner submitted that despite the repeal of TSVAT Act, the 5th respondent, instead of applying the applicable rate of GST had added VAT at the rate of 5% and deducted such VAT added to the bills, and remitted the same to the 8th respondent, who also continued to receive such payment, despite the work having been performed post GST and the VAT Act having been repealed. The respondent submitted that the 5th respondent in respect of work executed added and deducted VAT at the rate of 5% while settling the RA bills and remitted to the 8th respondent as tax liability instead of TDS; the VAT component remitted by the 5th respondent with the 8th respondent can be refunded under Section 38(9) of the Telangana VAT Act, 2005 to the 5th respondent, since the said remittance relates to the work executed during GST regime and not the amount remitted as tax liability under VAT Act; though the 5th respondent filed an application seeking refund of the amount of Rs. 11,93,172/- since, the same has been preferred beyond the time prescribed under the provisions of the Telangana VAT Act, 2005, the refund could not be processed within the period prescribed under the Act. The court observed that the work executed by the petitioner is after the introduction of GST and after the repeal of VAT Act. Therefore, there existed no liability on petitioner to pay TOT/VAT at the rate of 5% on the contract. The respondents could not have added and deducting TOT/VAT to the running bills. The amount received by the 7th and 8th respondents is without any authority of law and is thus in contravention of Article 265 of Constitution of India. The action of the 7th and 8th respondents in not granting refund to the 5th respondent on the pretext that application for refund was filed beyond the period specified under the Act cannot be countenanced, and the respondent ought to have granted refund of the amount being the amount collected without authority of law.
Held that:- The Hon’ble High Court allowed the Petition and directed the 1st to 6th respondents to reimburse to the petitioner GST at 12% on the value of the work executed without adjusting/deducting the VAT amount of Rs. 11,93,172/- and also the CGST and SGST of 1% from the final bill; the final bill shall be released to the petitioner within a period of two weeks, failing which, the respondent shall be liable to pay interest at the rate of 8% per annum; and the 7th and 8th respondents are directed to process the refund application filed by the 5th respondent for the amount of the VAT paid mistakenly within a period of three weeks.
Despite the repeal of the VAT Act, collection of VAT amount is without authority of law.
Deduction of VAT under Works Contract in GST Regime – The petitioner prayed for direction to the respondents, to reimburse GST at 12% on the value of construction work done under the agreement dated 05.08.2017 entered into with the 5th respondent; and also direct the respondents not to deduct VAT amount of Rs. 11,93,172/- and 1% of CGST and SGST while releasing the final bill and direct refund of the VAT amount deducted. The petitioner submitted that the 5th respondent had floated a tender for civil construction work in April, 2017 and awarded the contract on 05.08.2017. The petitioner submitted that despite the repeal of TSVAT Act, the 5th respondent, instead of applying the applicable rate of GST had added VAT at the rate of 5% and deducted such VAT added to the bills, and remitted the same to the 8th respondent, who also continued to receive such payment, despite the work having been performed post GST and the VAT Act having been repealed. The respondent submitted that the 5th respondent in respect of work executed added and deducted VAT at the rate of 5% while settling the RA bills and remitted to the 8th respondent as tax liability instead of TDS; the VAT component remitted by the 5th respondent with the 8th respondent can be refunded under Section 38(9) of the Telangana VAT Act, 2005 to the 5th respondent, since the said remittance relates to the work executed during GST regime and not the amount remitted as tax liability under VAT Act; though the 5th respondent filed an application seeking refund of the amount of Rs. 11,93,172/- since, the same has been preferred beyond the time prescribed under the provisions of the Telangana VAT Act, 2005, the refund could not be processed within the period prescribed under the Act. The court observed that the work executed by the petitioner is after the introduction of GST and after the repeal of VAT Act. Therefore, there existed no liability on petitioner to pay TOT/VAT at the rate of 5% on the contract. The respondents could not have added and deducting TOT/VAT to the running bills. The amount received by the 7th and 8th respondents is without any authority of law and is thus in contravention of Article 265 of Constitution of India. The action of the 7th and 8th respondents in not granting refund to the 5th respondent on the pretext that application for refund was filed beyond the period specified under the Act cannot be countenanced, and the respondent ought to have granted refund of the amount being the amount collected without authority of law.
Held that:- The Hon’ble High Court allowed the Petition and directed the 1st to 6th respondents to reimburse to the petitioner GST at 12% on the value of the work executed without adjusting/deducting the VAT amount of Rs. 11,93,172/- and also the CGST and SGST of 1% from the final bill; the final bill shall be released to the petitioner within a period of two weeks, failing which, the respondent shall be liable to pay interest at the rate of 8% per annum; and the 7th and 8th respondents are directed to process the refund application filed by the 5th respondent for the amount of the VAT paid mistakenly within a period of three weeks.