JUDGMENT Rajes Kumar, J.
1. These two revisions Under Section 11 of the U.P. Sales Tax-Act,-1948 (hereinafter referred to as "the Act") are directed against the order of Tribunal dated April 11, 1994 relating to the assessment year 1988-89. Revision No. 620 of 1994 relates to the penalty Under Section 8-D(6) of the Act and Revision No. 621 of 1994 relates to the payment of interest Under Section 8-D(7) of the Act.
2. Brief facts of the case are that the applicant entered into contract with National Thermal Power Corporation (hereinafter referred to as "NTPC") for the construction 220 KVA sub-station at Mandaula, Ghaziabad, U.P. Offer was given on December 28, 1988, which was accepted on January 12, 1989. It appears that towards advance a sum of Rs. 8 crores was paid on February 21, 1989 and Rs. 4 crores was paid on March 31, 1989 by the applicant to NTPC.
Admittedly, work had not been started and the goods had not been transferred to the applicant during the year under consideration. Assessment was made by the assessing authority Under Section 7(3) in respect of the payment made by the applicant but the same has been quashed by the Tribunal on the ground that the payment was made towards the advance and no material was supplied during the year under consideration. However, penalty levied by the assessing authority Under Section 8-D of the Act has been sustained by the Tribunal on the ground that in pursuance of the contract, payment was made by the applicant and therefore, amount should have been deducted Under Section 8-D(l) of the Act. For the non-deduction Under Section 8-D(l) of the Act and for non-deposit of the amount within specified period interest Under Section 8-D(7) of the Act has also been charged, which has been upheld by the Tribunal.
3. Heard learned Counsel for the parties.
4. Learned Counsel for the applicant submitted that since the work had not been executed and the goods had not been transferred to the applicant during the year under consideration, there was no liability of tax and, therefore, provision of Section 8-D(l) was not applicable and hence the penalty levied Under Section 8-D(6) of the Act and demand of interest Under Section 8-D(7) is illegal and unjustified. Learned Standing Counsel supported the order of Tribunal.
5. Section 8-D(l), 8-D(6) and 8-D(7) reads as follows:
8-D. Tax deduction from the amount payable to works contractor.--(1) Notwithstanding anything contained in Sub-section (2) of Section 8A, every person responsible for making payment to any dealer (hereinafter in this section referred to as the 'contractor') for discharge of any liability on account of valuable consideration payable for the transfer of property in goods (whether as goods or in any other form) in pursuance of a works contract, not being a building contract of such class or value as may be notified by the State Government in public interest in this behalf, shall, at the time of making such payment to the contractor, either in cash or in any other manner, deduct an amount equal to four per cent of such sum towards part or, as the case may be, full satisfaction of the tax payable under this Act on account of such works contract:
Provided that the Commissioner may, if satisfied that it is expedient in the public interest so to do and for reasons to be recorded in writing, order that in any case or class of cases no such deduction shall be made or, as the case may be, such deduction shall be made at a lesser rate:
Provided further that where any deduction has been made by a contractor from the payments made to his sub-contractor in accordance with Sub-section (2) the amount of such payments shall be deducted from the amount on which deduction is to be made under this Sub-section.
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(6) If any such person as is referred to in Sub-section (1) or Sub-section (2) fails to make the deduction or, after deducting, fails to deposit the amount so deducted as required by Sub-section (3), the assessing authority may, after giving to such person an opportunity of being heard, by order in writing, direct that such person shall pay, by way of penalty, a sum not exceeding twice the amount deductible under this section but not so deducted and, if deducted, not so deposited into the Government treasury.
(7) Without prejudice to the provisions of Sub-section (6), if any such person fails to make the deduction or, after deducting, fails to deposit the amount so deducted, he shall be liable to pay simple interest at the rate of eighteen per cent per annum on the amount deductible under this section but not so deducted and, if deducted, not so deposited from the date on which such amount was deductible to the date on which such amount is actually deposited.
6. Section 8-D(l) contemplates that every person responsible for making payment to any dealer for discharge of any liability on account of valuable consideration payable from the transfer of property in goods in pursuance of a works contract shall at the time of making such payment to the contractor deduct amount equal to 4 per cent. Section 8-D(l) does not apply to all payments but applies to only those payments, which are for the discharge of any liability on account of valuable consideration payable for transfer of property in goods. If there was no transfer of property in goods and the payment is not towards the discharge of any liability towards valuable consideration payable for the transfer of property in goods provisions of Section 8-D(l) do not apply. In the present case, admittedly payment was in the nature of advance payment and it was not towards the discharge of any liability on account of valuable consideration for transfer of property in goods, in as much as goods had not been transferred to the applicant during the year under consideration. Since the goods have not been transferred nature of payment was not as a valuable consideration and therefore, provisions of Section 8-D(l) do not apply.
7. Since on the facts and circumstances of the case provisions of Section 8-D(l) were not applicable, applicant was not under obligation to deduct and deposit any amount Under Section 8-D(l) of the Act. Therefore, penalty levied Under Section 8-D(6) of the Act is wholly illegal, and in as much as demand of interest Under Section 8-D(7) of the Act is also illegal and liable to be set aside.
8. In the result, both the revisions are allowed and the order of Tribunal is set aside and penalty Under Section 8-D(6) and demand of interest Under Section 8-D(7) of the Act are quashed.