Newsco International Energy Services vs State Of Tripura And Ors

Sanjay Karol, CJ

[1] The sole issue which arises for consideration in the present petition is as to whether petitioner is entitled to receive the amount unauthorisedly deducted as tax, in the currency agreed upon by the parties or not.

[2] In the present petition, petitioner lays challenge to the Memorandum dated 16th June, 2017 issued by the Joint Secretary to the Government of Tripura, Finance Department according administrative approval for a refund of Rs.1,08,61,531/-(Rupees One crore eight lakhs sixty one thousand five hundred thirty one) only in favour of the petitioner. Such amount is towards deduction of tax deducted under the provisions of the Tripura Value Added Tax, Act, 2004 (for short, TVAT Act) directed to be refunded, for having deducted without any authority of law.

[3] That petitioner is entitled to refund of the amount is no longer in dispute. The only issue being as to whether, it has to be in U.S. Dollars or Rupees.

[4] Here only it be observed that at one stage this Court had impressed upon the parties for amicable settlement, to which the petitioner was ready and willing but their proposal was not acceptable to respondent ONGC. In fact on 12th September, 2019, we had recorded that petitioner was ready to settle the matter by receiving an additional amount of Rs.45,00,000/-(Rupees forty five lakhs) on lump sum basis. Today, Ms. Paramita Dhar, learned counsel for the respondent-ONGC states that the same is not acceptable to her clients.

[5] On 28th June, 2013, respondent ONGC entered into an agreement with the petitioner company for hiring 01 set of MWD- SDMM tool with Directional Driller and MWD Engineer for Tripura Asset of ONGC. The currency stipulated under the agreement in relation to all payments was agreed to be in US Dollars which was so provided in (Annexure-III), termed as „Price Schedule‟. Bank guarantee in terms of performance bond, being the security deposit, was also furnished by the petitioner in the said currency i.e. US Dollars.

[6] It is not in dispute that petitioner, successfully carried out the conditions and obligations set out under the agreement. However, while releasing payment, which also was in the currency notified under the agreement, respondent ONGC deducted certain payments towards the incidence of tax under the TVAT Act and deposited it with the statutory authority (State).

[7] Contending that transactions entered into by the petitioner are not exigible to tax under the TVAT Act, petitioner company laid challenge to the same by way of CRP No.15 of 2015 titled as M/s. Newsco International Energy Services Inc. versus State of Tripura & others. Vide judgment dated 29th February, 2016, while upholding the petitioner‟s contention this Court allowed the petition, quashing the action of the authorities, directing refund of the amount deducted and received by the State along with statutory interest. The operative portion of the judgment reads as under :

"In view of the above discussion, we are clearly of the view that in the present case the transactions do not amount to sale within the meaning of the TVAT Act, 2004. Therefore, the petition has to be allowed. The State is entitled to levy any sales tax or Value Added Tax on the transactions in question. Since the petition has been allowed, it is directed that the amount of tax, already deducted and received by the State shall be refunded to the petitioner along with statutory interest latest by 31st May, 2016. In case the amount is not refunded by that date then the State shall be liable to pay interest @ 12% per annum with effect from 1st March, 2016."

[8] Such findings stand affirmed by the Apex Court in Civil Appeal No(s) 1499/2017 arising out of SLP (C) No.1106/2016 titled as The State of Tripura versus M/S. IOT Infrastructure & Energy Services Limited & Another with the dismissal of the appeal preferred by the State vide order dated 1st February, 2017.

[9] Subsequent thereto, the State Government issued Memorandum dated 16th June, 2017, subject matter of challenge in the instant petition, which reads as under:

"No.F.V-2(3)-TAX/2017-18(P-2)/5380-85

"GOVERNMENT OF TRIPURA FINANCE DEPARTMENT (TAXES & EXCISE)

Dated, Agartala the 16th June, 2017

MEMORANDUM

The Administrative approval and Expenditure Sanction is hereby accorded for an amount not exceeding Rs.1,08,61,531/- (Rupees One crore eight lakhs sixty one thousand five hundred thirty one) only under Non-Plan as "Refund" for payment to M/S. Newsco International Energy Services Inc. Gurgaon, Haryana, in connection with civil appeal No.1454 of 2017 arising out SLP (C) 27299/2016 against the judgment and order of the Hon'ble High Court of Tripura dated 29-02-2015.

The expenditure involved is debitable under the Head of Account 2040-00-101-05-10-50 (Refund) under Demand No.45 (Non-Plan) during the year 2017-18.

This is issued as per approval of the Principal Secretary to the Government of Tripura, Finance Department vide U.O. No.1979/Pri.Secy/Finance, dated 19-05-2017.

Sd/-

(Dr. B. Kaur, IAS) Joint Secretary to the Government of Tripura, Finance Department."

[10] Significantly, in the instant petition, State has not filed any reply and the only meaningful stand taken by ONGC, of whatever its worth, is that deductions made at source under the Tripura VAT, on the contract with the Petitioner‟s company, was based on the Instruction bearing No.F.160515780883/Ch-V/2005/11834-36 dated 28-11-2008 issued by the State.

[11] Orally it stands submitted on behalf of the State that since the amount deposited by ONGC towards statutory deduction was in Indian currency and that State has taken action for refund thereof, nothing else is required to be done on its part, thus the dispute is primarily between petitioner and ONGC.

[12] It is nobody‟s case that the State had directed ONGC to mandatorily carry out deductions under the TVAT Act. Such deductions were carried out by ONGC of its own interpretation of the statute. It could have released the amount to the petitioner. It could have sought clarification from the experts /authorities in that regard. But it did not do so and contractual obligation insofar as petitioner is concerned, in fact all contractual liabilities, are only between ONGC and the petitioner and none else.

[13] Hence, to contend that the only currency acceptable by the State towards deposit of tax being Indian currency, ONGC had no option but to deposit the tax amount by converting US Dollars to Indian currency at the prevailing rates and thus ONGC had no role in the collection and deposit of the tax is not correct.

[14] Also the amount towards the incidence of tax was deducted and deposited, after conversion, by way of Indian currency i.e. Rupees and not US Dollars.

[15] We find the question of law posed in the present petition, to be no longer res integra. In Forasol versus Oil and Natural Gas Commission, 1984 (Supp) SCC 263 (2 Judge Bench) the Apex Court, under similar circumstances, directed the very same respondent i.e. ONGC to refund the amount in terms of currency agreed upon by the parties by making the following observations :

"16. From the nature of things, the foreign party would not desire payment for the services to be rendered and the equipment to be supplied by it in a currency with which it had no connection and of the continuous stability of which it could not be certain. The foreign party would, therefore, naturally desire ad bargain for payment in the currency of its own country, namely, in French currency.

For the reasons set out above, we hold that the learned Single Judge rightly took the date of the decree as the date of conversion. In his order on the said execution application he has, however, given a direction that ONGC could satisfy the judgment debt by making payment in French francs or if they so preferred by paying the equivalent sum in rupees at the rate of exchange prevailing on the date of the decree. He was in error in not qualifying this direction by making the option given to ONGC to make payment in French francs subject to the permission of the concerned authorities under the Foreign Exchange Regulation Act, 1973. To this Extent, the order passed by the learned Single Judge requires to be modified."

[16] The principle stands reiterated in Meenakshi Sexena and another versus ECGC Limited (Formerly known as export credit guarantee corporation of India Limited) and another, (2018) 7 SCC 479 (2 Judge Bench) in the following terms:

"21. In a contractual matter, when the decree is silent with regard to the reckoning date of conversion of foreign currency in to Indian rupees, what would be the methodology to be followed by the executing court is no more res integra, as this court has an occasion to deal with elaborately in Forasol v. ONGC, 1984 (Supp.) SCC 263, the facts of that case revolved around a contract entered into between ONGC and Forasol for carrying out structural drilling in relation to the exploration of oil in the Jaisalmer area. The contract mandated a part payment in the foreign currency i.e., French francs. Due to belligerent situation prevalent between India and Pakistan in 1965, the contract was suspended. In the meanwhile the Indian currency was devalued resulting in Forasol claiming higher conversion rate.

As the dispute was not settled, the matter was referred to an arbitration. For the present, it is sufficient to note that by the award of the arbitrator/Umpire mandated conversion at the rate of FF 1000 equal to 1517.80 instead of exchange rate of FF 1.033 equal to Re. 1.000. The aforesaid award was filed before the Delhi High Court, which accordingly passed the decree on 07.05.1975 without any objections from the parties as to the form."

[17] It is seen that the order impugned (Annexure-7), dated 16th June, 2017 was issued pursuant to the direction rendered by this Court in Newsco International Energy Services (supra) and as such, the said order cannot be quashed. But that would not mean that the petitioner is not entitled for refund of the amount in terms of the currency agreed upon by the parties to the agreement. As such, petition is disposed of in the following terms:

(i) The petitioner shall be entitled to take credit of the amount in terms of Memorandum dated 16th June, 2017 (Annexure-7).

(ii) The difference in the exchange rate in terms of fluctuation in the Dollar vis-a-vis Indian Rupee, shall however be made good by ONGC. This also has to be in US Dollars, and the rate prevalent as on the date of payment.

(iii) It further stands clarified that, save and except what we have held, petitioner shall be entitled to interest in terms of judgment rendered by this Court in M/s. Newsco International Energy Services (supra) but from the date of dismissal of the Civil Appeal No(s) 1499/2017 arising out of SLP (C) No.1106/2016 titled as The State of Tripura versus M/S. IOT Infrastructure & Energy Services Limited & Another.

(iv) The dispute inter se ONGC and the State is left open to be adjudicated in an appropriate proceeding, if so required and desired.

(v) The ONGC shall release the amount to the petitioner within a period of three months from today failing which, the petitioner shall be entitled to interest in terms of judgment rendered by this Court referred (supra).

Pending application(s), if any, also stands disposed of.