1997 (9) TMI 597 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of the proviso to section 6(1) of the Haryana General Sales Tax Act, 1973.
2. Validity of the proviso to section 18 of the Haryana General Sales Tax Act, 1973.
3. Validity of rule 24(i) and rule 39A(11) of the Haryana General Sales Tax Rules, 1975.
4. Assessment and inclusion of sub-contractor's turnover in the petitioner's taxable turnover.
5. Levy of tax on the purchase of bricks.
6. Denial of exemption for goods manufactured by an exempted industrial unit.

Detailed Analysis:

1. Validity of the Proviso to Section 6(1) of the Haryana General Sales Tax Act, 1973:
The petitioner challenged the constitutionality of the proviso to section 6(1) of the Act, which exempts a dealer executing a sub-contract from tax if the contractor is liable to pay tax for the works contract. The court upheld the proviso, stating it avoids double taxation and is in line with the legislative intent. The definition of "contractor" under section 2(ba) includes those executing works through sub-contractors, and thus, the sub-contractor is rightly excluded from tax liability.

2. Validity of the Proviso to Section 18 of the Haryana General Sales Tax Act, 1973:
The petitioner argued that the proviso to section 18, which requires a certificate (form S.T. 14) to claim exemption from tax at subsequent sale stages, invalidates the main provision. The court found the proviso valid, emphasizing that it ensures goods have suffered tax at the first stage and prevents tax evasion. The proviso is a condition for claiming exemption and does not contradict the main section.

3. Validity of Rule 24(i) and Rule 39A(11) of the Haryana General Sales Tax Rules, 1975:
The petitioner contended that rule 39A(11), which prohibits brick-kiln owners paying lumpsum tax from issuing form S.T. 14, is arbitrary and unjust. The court agreed, declaring rule 39A(11) invalid as it contradicts the scheme allowing lumpsum tax and the legislative intent. Rule 24(i), which allows deduction of tax-paid goods from gross turnover upon furnishing form S.T. 14, was upheld as valid.

4. Assessment and Inclusion of Sub-contractor's Turnover:
The petitioner argued against the inclusion of the sub-contractor's turnover in its taxable turnover, claiming it results in double taxation. The court ruled that the contractor (petitioner) is liable for the entire works contract, including parts executed by sub-contractors, as per the definitions in the Act. The sub-contractor is not independently liable for tax, and the contractor must pay tax on the whole contract.

5. Levy of Tax on the Purchase of Bricks:
The petitioner challenged the levy of tax on bricks purchased from brick-kiln owners who opted for lumpsum tax. The court held that bricks purchased from such owners are tax-paid goods and should not be taxed again. However, for bricks bought from unregistered dealers, the petitioner must pay tax as the goods had not suffered tax at the first stage. The court directed that form S.T. 14 should be provided to brick-kiln owners paying lumpsum tax to facilitate declarations for subsequent sales.

6. Denial of Exemption for Goods Manufactured by an Exempted Industrial Unit:
The petitioner claimed exemption for goods purchased from exempted industrial units but did not provide form S.T. 14-A. The court upheld clause (c) of sub-rule (4) of rule 28A, which requires this form to claim exemption. The court found no fault with the rule, emphasizing that the petitioner must obtain the necessary declarations from the selling dealers.

Conclusion:
The court upheld the validity of the provisos to sections 6(1) and 18 of the Act, as well as rule 24(i) and clause (c) of sub-rule (4) of rule 28A. However, it declared rule 39A(11) invalid. The court directed the respondents to provide form S.T. 14 to brick-kiln owners paying lumpsum tax to enable them to issue declarations to buyers. The writ petitions were partly allowed, with each party bearing its own costs.

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