1997 (5) TMI 397 - HC - VAT and Sales Tax

Issues Involved:
1. Constitutional validity of Section 12-A of the Himachal Pradesh General Sales Tax Act, 1968.
2. Constitutional validity of Rule 31-A of the Himachal Pradesh General Sales Tax Rules, 1968.
3. Interpretation and application of Section 6(3)(a)(iii) of the Act.
4. Validity of the provisions for deduction of tax at source.
5. Validity of provisions for payment of lump sum in lieu of tax by way of composition.

Detailed Analysis:

I. Constitutional Validity of Section 12-A of the Himachal Pradesh General Sales Tax Act, 1968:
The petitioners challenged Section 12-A, arguing it was a charging section imposing tax on sales excluded under Section 6 and violated Article 265 of the Constitution. The court held that Section 12-A is not a charging provision but a machinery for collection in advance of tax payable under the Act. The section directs the deduction of an amount from the consideration payable for the transfer of property in goods involved in the execution of works contracts. It does not levy or impose any additional tax beyond the charging section (Section 6). The court concluded that Section 12-A is constitutionally valid and does not suffer from the vices found in the Rajasthan Act as per the Supreme Court's judgment in Gannon Dunkerley & Co. v. State of Rajasthan.

II. Constitutional Validity of Rule 31-A of the Himachal Pradesh General Sales Tax Rules, 1968:
The petitioners argued that Rule 31-A goes beyond Section 12-A by referring to "all payments being made in respect of all works contracts executed." The court clarified that Rule 31-A should be read in conjunction with Section 12-A. The phrase "all payments" in Rule 31-A(2) refers only to payments on account of valuable consideration payable for the transfer of property in goods. The rule does not extend beyond the section and is thus valid.

III. Interpretation and Application of Section 6(3)(a)(iii) of the Act:
The petitioners sought a declaration that they are not liable to pay tax under the Act per Section 6(3)(a)(iii), which provides for deductions from the gross turnover for sales to an undertaking supplying electrical energy for use in the generation or distribution of such energy. The court held that the applicability of Section 6(3)(a)(iii) must be determined by the assessing authority based on the facts of each case. The court found the pleadings and materials insufficient to decide the issue in the writ petitions and left it to the assessing authority.

IV. Validity of the Provisions for Deduction of Tax at Source:
The court reviewed various judgments from other High Courts and the Supreme Court. It upheld the validity of Section 12-A and Rule 31-A, distinguishing them from provisions struck down in other states like Orissa and Karnataka. The court emphasized that Section 12-A and Rule 31-A provide a mechanism for advance tax collection and are consistent with the constitutional framework and the Supreme Court's guidelines in Gannon Dunkerley & Co. v. State of Rajasthan.

V. Validity of Provisions for Payment of Lump Sum in Lieu of Tax by Way of Composition:
The court noted that provisions for payment of lump sum in lieu of tax by way of composition, as upheld in other cases like Tirath Ram Ahuja Limited v. State of Haryana, are valid. These provisions facilitate tax assessment and are optional for the contractors.

Conclusion:
The court dismissed the writ petitions, holding that Section 12-A and Rule 31-A are constitutionally valid. The question of applicability of Section 6(3)(a)(iii) must be decided by the assessing authority based on the facts of each case. The court found no merit in the petitioners' arguments and vacated any interim orders.

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