2026-VIL-83-P&H
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VAT High Court Cases

Punjab VAT Act, 2005 - The petitioner is a construction company that entered into a contract with the Rail Coach Factory (RCF). Under the Punjab VAT Act, 2005, the contractee (RCF) was required to deduct tax at source from the payments made to the contractor (petitioner) at the rate of 2%, which was later increased to 4% by the State Government. However, RCF continued to deduct tax at the old rate of 2%, unaware of the enhanced rate. The Department later informed RCF about the enhanced rate of 4% and directed it to recover the differential amount of Rs.10,70,328/- from the petitioner's running and final bills - Whether RCF was required to recover the differential amount of tax from the petitioner's bills – HELD - The petitioner had duly filed its quarterly and annual VAT returns, and the tax liability was assessed and paid. The non-deduction of tax at the enhanced rate by RCF merely resulted in a slight delay in the receipt of the differential tax amount by the State Government, which was ultimately deposited by the petitioner. The object of tax deduction at source is to ensure the payment of tax, and since the petitioner had already paid the total tax liability, there was no revenue loss to the State. The RCF, being a public sector undertaking, had no mala fide intention, and the non-deduction of tax at the enhanced rate was a mere lapse on its part. The Excise and Taxation Department is directed to calculate the interest, if any, and recover it from the person liable to pay, and prohibited RCF from recovering the alleged differential amount from the petitioner - The petitions are disposed of
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