Judgment:
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.M.JOSEPH & THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR FRIDAY, THE28H DAY OF MARCH20147TH CHAITHRA, 1936 WA.No. 279 of 2014 () IN WP(C).32871/2006 ------------------------------------------- (AGAINST THE ORDER
/JUDGMENT
IN WP(C) 32871/2006 of HIGH COURT OF KERALA DATED2405-2013) APPELLANT(S)/RESPONDENTS1TO3 ------------------------ 1. KERALA WATER AUTHORITY REPRESENTED BY ITS MANAGING DIRECTOR, JALA BHAVAN TRIVANDRUM.
2. SUPERINTENDING ENGINEER, PH CIRCLE, KERALA WATER AUTHORITY, KOTTAYAM.
3. EXECUTIVE ENGINEER KERALA WATER AUTHORITY, THIRUVALLA. BY ADV. SRI.GEORGE MATHEW, SC, KERALA WATER AUTH RESPONDENT(S)/PETITIONER: ---------------------------- BABU THOMAS, AGED48YEARS, S/O.THOMAS, THEKKUMMOOTTIL HOUSE, PIRAVOM P.O PIRAVOM. R BY SRI.JIJO JOSEPH THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON2803- 2014, ALONG WITH WA. 462/2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: K. M. JOSEPH & A.K.JAYASANKARAN NAMBIAR, JJ ---------------------------------------------------- W.A.Nos.279 & 462 of 2014 ---------------------------------------------------- Dated this the 28th day of March 2014
JUDGMENT
Jayasankaran Nambiar, J As both the writ appeals arise from a common judgment in W.P.(C) No.32871/2006, they are taken up together for disposal.
2. W.A.No.279/2014 is filed by the Kerala Water Authority who was the respondent in the writ petition filed by the appellant in W.A. No.462/2014. The writ petitioner- contractor had entered into an agreement for supply of material and execution of work for the Kerala Water Authority. The agreement is produced as Ext.P1 in the writ petition. It is significant to note that the said agreement does not contain any clause which deals with the impact of tax burden as between the parties to the contract. The petitioner, having quoted a lump sum price, was awarded the contract by the respondent authority. While purchasing materials for the purpose of implementing the work under the contract, the petitioner had availed the benefit of Ext.P2 notification, issued under the Central Excise Act,1944, which grants the benefit of exemption from Central Excise Duty on W.A.Nos.279 &462/2014 2 specified items of goods if they fell within the description of 'all items of machinery including instruments, apparatus and appliances auxiliary equipments and their components/parts required for setting up of water treatment plants." The exemption notification was a conditional one and was available subject to the production, by the person claiming exemption, of a certificate issued by the Collector/District Magistrate/Deputy Commissioner of the District in which the plant was located, before the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise having jurisdiction over the area. The certificate had to state that the goods in question were cleared for the intended use that was specified in the notification.
3. It would appear that the petitioner-contractor obtained the benefit of Ext.P2 notification while procuring materials for the purpose of execution of the contract. Thereafter, while the contractor submitted his bills for the work done, for payment by the respondent-Water Authority, the latter took the stand that the benefit of Ext.P2 exemption notification was to enure to the Water Authority and hence, the bills submitted by the petitioner-contractor was to be W.A.Nos.279 &462/2014 3 reduced by the amount availed as exemption under the notification. The consequent withholding of such amounts by the Water Authority was impugned by the petitioner in the writ petition.
4. In the counter affidavit filed by the respondent-Water Authority, the said authority took the stand that by virtue of an internal Circular dated 25/7/2003(Ext.R1), it had been clarified that for all on going contracts arranged before 6/9/2002 and after that, for which supply of pipes were not over, and if it was not specifically mentioned in the offer that 'the amount quoted does not include excise duty', Excise Duty for items for which certificate of exemption was issued had to be recovered. It is, therefore, the contention of the Water Authority that the above referred Circular authorised them to withhold the amounts covered by the exemption, as per Ext.P2 notification, that were otherwise due to the petitioner- contractor. The contention of the respondent did not find favour with the learned Single Judge who proceeded to allow the writ petition by holding that the withholding of the amount by the respondents cannot be sustained. Thereafter, the learned Single set aside the deduction of the amount from the W.A.Nos.279 &462/2014 4 bill of the petitioner and issued a direction to the respondent to refund the withheld amount within one month from the date of receipt of a copy of the judgment failing which, it was directed that, they should also pay interest at the rate of 18% per annum from the date of default till the date of payment. It was also made clear that other emoluments, if any, shall also be paid to the petitioner within the aforesaid period.
5. We heard the learned counsel Sri.Jijo Joseph appearing for the writ petitioner/appellant in W.A.No.462/2014 and the learned standing counsel Sri.George Mathew appearing for the respondents/appellant in W.A. No. 279/2014.
6. The main contention of the Kerala Water Authority, the appellant in W.A. No.279/2014, is that the intended beneficiaries of Ext.P2 exemption notification are essentially the Kerala Water Authority and the members of the public who receive the services rendered by the Water Authority. It was pointed out that any economic benefit that flowed from the grant of exemption had to be passed on to the ultimate beneficiaries namely, the general public who were receiving the services of the Kerala Water Authority. It is further contended that it was not open to the writ petitioner- W.A.Nos.279 &462/2014 5 contractor to have availed the benefit of Ext.P2 notification and not passed it on to the Kerala Water Authority. It is also pointed out that, at any rate, there is no justification for the direction in the impugned judgment, to pay interest on the delayed payment effected to the contractor, in the absence of any specific clause in the contract to that effect.
7. The above contentions of the Water Authority are met by the counsel for the writ petitioner, who is also the appellant in W.A. No.462/2014,by pointing out that the benefit of Ext.P2 notification was one that was available to the contractor and, in the absence of any specific clause in the agreement which stipulated the passing on the benefit of the notification to the Water Authority, there was no mandate in law for reducing any amount from the bills raised by the contractor on the Kerala Water Authority. It is also pointed out that despite the specific direction of the learned Sngle Judge in the impugned judgment, there has been no action on the part of the Water authority towards making the payments as directed by the learned Single Judge. The learned counsel also contends that the award of interest at the rate of 18% per annum, as directed by the learned Single Judge, was perfectly W.A.Nos.279 &462/2014 6 justified taking into account the conduct of the respondent as also the fact that the contractor had been deprived of the amounts that were due to him for a substantial period of time on account of the inaction of the Water Authority.
8. After considering the submissions of the learned counsel appearing on either sides, we feel that the contention of the Water authority that the contractor could not solely avail the benefit of Ext.P2 notification is wholly misplaced. It is trite that in matters of indirect taxation whenever there is a provision in the statute which enables the person paying the tax to recover the tax paid from the recipient of the services or the goods, the said arrangement is subject to the provisions of the contract entered into between the parties. In other words, the inter-se allocation of the burden of tax is always determined by the terms of the agreement between the parties. This principle would also apply to determine the intention of the parties in matters of availment of the benefit of any exemption notification. If the terms of the contract between the parties are silent on the issue of passing of the burden of tax or the benefit of an exemption, then it is deemed that there is no such arrangement between the W.A.Nos.279 &462/2014 7 parties or that the parties understood that the tax burden/exemption benefit will be borne by the person who paid/availed it. The benefit of the notification will not pass unless the contract expressly provides for such a situation. This is more so when the notification itself does not indicate that the exemption therein is intended for any particular end- user.
9. We note that, in the instant case, there was no provision either statutory or contractual on the basis of which the Kerala Water Authority could legally withhold the amounts due to the writ petitioner-contractor who had availed the benefit of beneficiary of Ext.P2 exemption notification. As a matter of fact, it is brought to our notice by the standing counsel for the Kerala Water Authority that in the contracts entered into, for the subsequent period, there are express provisions which contemplate the passing on of the benefits under exemption notifications to the Kerala Water Authority. The fact remains, however, that in the instant case there was no such clause in the contract and consequently the Water Authority cannot claim the benefit of Ext.P2 notification as of right. It is also relevant to note that in the writ petition the W.A.Nos.279 &462/2014 8 contention of the petitioner-contractor was that at the time of quoting for the work, the benefit of exemption from Central Excise Duty under the Notification had already been considered.
10. In this view of the matter, we see no reason to interfere with the finding of the learned Single Judge with regard to the setting aside of the deduction of the amount from the bill of the petitioner and the consequent direction to the Kerala Water Authority to pay the amount to him.
11. As regards the further direction of the learned Single Judge, to pay interest on the outstanding amounts to the contractor at the rate of 18% per annum , we note that the said direction limits the payment of interest at the aforementioned rates to the period from the date of default in complying with the directions of the learned Single Judge till the date of actual payment in compliance therewith. In order to breathe in a greater degree of clarity to the said direction and in partial notification thereof, we make it clear that the requirement of paying interest at the aforementioned rate would arise only if the Water authority fails to make payment of the principal amount covered by the impugned judgment W.A.Nos.279 &462/2014 9 within a further period of two months from today.
12. It is the contention of the contractor/appellant in W.A. No.462/2014, that the interest at the rate specified in the impugned judgment must accrue on the principal amounts which were due to the contractor from the date of default in payment of the same by the Water Authority. We see no merit in the said contention of the appellant for the reason that he has not been able to point out any clause in the contract which would support the claim for any interest much less at the exorbitant rate of 18% per annum. It is also significant to note that there is no ground urged or relief prayed for in the writ petition with regard to payment of interest. With the above observations, W.A. No. 279/2014 is dismissed subject to the grant of extension of time to comply with the directions of the learned Single Judge. W.A. No.642/2014 is also dismissed. There is no order as to costs. Sd/- K. M. JOSEPH, JUDGE . Sd/- A.K.JAYASANKARAN NAMBIAR, JUDGE. Dpk. /True copy/ P.S to Judge.