1956 (3) TMI 20 - HC - VAT and Sales Tax

Issues:
Challenge to sales tax assessments for 1950-51 and 1951-52 on works contracts under Travancore-Cochin General Sales Tax Act, 1125.

Analysis:

1. Assessment Orders Challenged:
The petitioner contested the assessments for 1950-51 and 1951-52 under the Travancore-Cochin General Sales Tax Act, challenging orders by various authorities. The Deputy Commissioner's order upheld the calculation of taxable turnover at 30% of the contract amount, justifying the assessments.

2. Background and Contention:
The Deputy Commissioner's order provided the background for the contentions, stating that the Appellate Assistant Commissioner did not deduct the cost of 'pure labour' in the works contracts. The petitioner argued that the cost of both material and labour was included in the contracts, supporting the authorities' calculation of taxable turnover.

3. Definition of "Sale" and "Works Contract":
Section 2(j) of the Act defined "sale" to include a transfer of property in goods in a works contract, which involves construction, fitting out, or repair of property. This definition was crucial in determining the tax applicability to works contracts.

4. Determination of Turnover:
The Act defined "turnover" in relation to works contracts, allowing deductions for the cost of labour to the cost of materials used. However, the absence of fixed percentages by the Board of Revenue raised questions on the validity of deductions and the levy of sales tax.

5. Fixation of Percentages by Board of Revenue:
The absence of fixed percentages by the Board raised concerns about the validity of deductions and the applicability of sales tax on works contracts. The Court deliberated on whether the provision for fixation of percentages was a condition precedent to the levy of tax.

6. Assumption of Fixed Percentages:
The arguments proceeded on the assumption of fixed percentages for deductions. The Court refrained from expressing a definite opinion on this point and proceeded with the case based on this assumption.

7. Contention on Legislative Power and Ultra Vires:
The petitioner contended that the Act's provisions on determining sale price for works contracts were ultra vires as they went beyond the State Legislature's power to levy tax on the sale of goods. The Court cited a similar decision and held the provisions ultra vires.

8. Declaration of Ultra Vires:
Based on the reasoning presented, the Court declared sub-rule (3) of rule 4 and the relevant portion of the turnover definition supporting it as ultra vires the State Legislature's powers.

9. Consideration of Ultra Vires Issue:
The Court addressed the argument that the ultra vires issue was not raised before the Sales Tax Authorities, clarifying that it could be raised under Article 226 of the Constitution.

10. Quashing of Orders:
Due to the provisions being declared ultra vires, the Court ordered the quashing of the impugned orders based on predetermined proportions for deductions.

11. Non-Consideration of Other Issues:
The Court decided not to address other arguments and cited relevant decisions, emphasizing the focus on the ultra vires issue in the judgment.

12. Dismissal and Future Filing:
The petition was allowed to the extent indicated, with costs awarded to the petitioner. A subsequent question regarding the Act's enforcement date was deferred for further consideration.

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