1987 (8) TMI 411 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Constitutionality of the levy of tax on works contracts under Article 286(3)(b) of the Constitution.
2. Validity of tax levied prior to the amendment of the Andhra Pradesh General Sales Tax Rules, 1957.

Issue-wise Detailed Analysis:

1. Constitutionality of the levy of tax on works contracts under Article 286(3)(b) of the Constitution:

The petitioners contended that the levy of tax on works contracts was unconstitutional as the Parliament had not specified the conditions, restrictions, and other incidents under Article 286(3)(b) of the Constitution. The court referred to the Division Bench ruling in Padmaja Commercial Corporation v. Commercial Tax Officer No. 1, Vijayawada [1987] 66 STC 26, which held that the State Legislature was competent to enact Act 18 of 1985. This Act amended definitions such as "dealer," "sale," "turnover," "tax," and "works contract" to include the transfer of property in goods used in works contracts. The court emphasized that Article 286(3)(b) is an enabling provision, allowing Parliament to specify conditions if it chooses to do so. The absence of such specifications does not invalidate the State Legislature's power to levy tax on works contracts. The court concluded that the power of the State to levy sales tax on goods used in works contracts is not dependent on Parliament's exercise of power under Article 286(3)(b). Therefore, the first contention of the petitioners was rejected.

2. Validity of tax levied prior to the amendment of the Andhra Pradesh General Sales Tax Rules, 1957:

The petitioners argued that no tax could be levied or collected on the transfer of property in goods used in works contracts before the amendments to the Andhra Pradesh General Sales Tax Rules, 1957, introduced by G.O. Ms. No. 1445, dated 5th November 1986, and published on 25th November 1986. They contended that the amended rules had no retrospective effect and that the liability to tax could only commence from the date of publication of the amended rules. The court examined the provisions of the APGST Act, particularly the amended definitions of "dealer," "turnover," and "works contract." The court noted that the essential components for levying tax-taxable event, levy point, and rate of tax-were already present in the Act. The measure or value of goods used in works contracts could be determined from the accounts of the assessee or as assessed by the assessing authority, even in the absence of specific rules. The court referred to the Supreme Court decision in Govind Saran Ganga Saran v. Commissioner of Sales Tax [1985] 60 STC 1, which outlined the four essential ingredients for the levy of tax. The court held that the determination of the measure or value of goods used in works contracts was possible even before the amendment of the rules. The court dismissed the contention that the charging section was incomplete and inoperative until the amended rules came into force. The court affirmed that procedural aspects like registration and submission of returns do not affect the liability to pay tax. Therefore, the second contention of the petitioners was also rejected.

Conclusion:

The court dismissed the writ petitions, holding that both contentions raised by the petitioners lacked merit. The decision of the Division Bench in Padmaja Commercial Corporation's case [1987] 66 STC 26 (AP) was upheld, and the writ petitions were dismissed without any order as to costs. Advocate's fee was set at Rs. 300 in each case.