1996 (12) TMI 365 - HC - VAT and Sales Tax

Issues Involved:
1. Constitutional validity of sections 5F, 5G, and 5H of the Andhra Pradesh General Sales Tax Act, 1957.
2. Validity of specific provisos within section 5F.
3. Validity of section 5G.
4. Validity of section 5H.
5. Validity of Rule 6(2) and Rule 6(3).

Summary:

1. Constitutional Validity of Sections 5F, 5G, and 5H:

The court examined the constitutional validity of sections 5F, 5G, and 5H of the Andhra Pradesh General Sales Tax Act, 1957. The petitioners argued that these sections led to double taxation, discrimination, and were contrary to the single point taxation system. The court held that section 5F was a conscious attempt to increase revenue and was valid despite departing from the single point system. The Legislature has the power to classify and treat works contracts differently, and the imposition of a separate tax on goods involved in works contracts was not discriminatory.

2. Validity of Specific Provisos within Section 5F:

- First Proviso: The court struck down the words "in the same form in which they were purchased by the contractor" as they went beyond the charging section and offended section 15 of the Central Sales Tax Act.
- Second Proviso: Similarly, the words "in the same form in which they were purchased by the contractor" were struck down to ensure that exempted goods continue to enjoy exemption during the taxable event.
- Third Proviso: The court held that the words "but does not include the goods either obtained or purchased from other States and used in the execution of works contract" would not apply to transactions assessed under the Central Sales Tax Act and in respect of which "C" forms have been issued.
- Last Proviso: The words "and that the turnover of such amount is included in the return of turnover filed by such sub-contractor" were struck down as unreasonable.

3. Validity of Section 5G:

The court upheld the validity of section 5G, which provided for the composition of tax payable under section 5F. The court noted that the composition is with reference to the prescribed tax on the amount payable in respect of works contracts and clarified that the condition requiring the turnover of sub-contractors to be included in their returns was unreasonable and should be omitted.

4. Validity of Section 5H:

The court upheld section 5H, which provided for the deduction of tax at source, subject to the Government instructing assessing officers to make provisional assessments and intimate the authorities required to deduct the tax at source. The court noted that the section did not exceed the charging section and that the rules provided a mechanism to ascertain the total turnover.

5. Validity of Rule 6(2) and Rule 6(3):

- Rule 6(2): The court upheld the validity of Rule 6(2) after omitting the words "and that turnover is included in the return filed by him before the assessing authority concerned" in sub-rule (b) and the words "provided that the goods are transferred in the same form as they were purchased" in sub-rules (i), (j), and (k).
- Rule 6(3)(i): The court held that Rule 6(3)(i) should be read as applicable only to the value of goods supplied or used in works contracts during the year.
- Rule 6(3)(ii): The court upheld the validity of Rule 6(3)(ii), which prescribed percentages for different kinds of contracts for estimating the value of goods supplied where it cannot be ascertained.

Conclusion:

The writ petitions were partly allowed, with specific words and phrases in the provisos and rules being struck down or read down to ensure constitutional validity. The court provided detailed guidance on how the provisions should be interpreted and applied to maintain their validity.

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