2004 (9) TMI 624 - HC - VAT and Sales Tax

Summary

Issues involved:
Interpretation of section 27 of the Assam General Sales Tax Act, 1993 regarding deduction of taxes at source for works contracts involving property transfer in goods, specifically on labour components, declared goods, and goods obtained in inter-State trade.

Analysis:
The High Court of Gauhati addressed a batch of writ petitions concerning the interpretation of section 27 of the Assam General Sales Tax Act, 1993. The core issue revolved around whether government departments could deduct taxes at source for works contracts involving property transfer in goods, including labour components, declared goods, and goods obtained in inter-State trade. The petitioners argued that despite legal precedents upholding the validity of section 27, the State authorities continued to tax them unreasonably, infringing upon their fundamental right to carry on trade or business as per the Constitution of India.

In previous cases such as Allied Traders v. State of Assam, the court upheld the provisions of section 27 by reading it down, ensuring that only goods liable to tax were subject to deduction at source. The court also emphasized the applicability of deductions and exemptions provided under sections 7 and 8 of the Act to works contracts. The judgment clarified that contractors could use declaration form A to shift the tax liability to them when purchasing goods, thereby making them eligible for deductions. The court concluded that the provisions of section 27 and rule 8(3)(iv) were not ultra vires and permitted deduction of tax at source within legal boundaries.

Considering the settled legal position in previous cases like Eleco Construction Co. v. State of Assam, the High Court ruled in favor of the petitioners in the present batch of writ petitions. It issued a writ of mandamus directing the respondents not to deduct taxes at source from the petitioners' bills related to works contracts involving labour components, declared goods, and goods obtained in inter-State sale. Furthermore, the respondents were instructed to refund any amount already deducted from the petitioners' bills in accordance with the law. The court allowed the batch of writ petitions, emphasizing that no costs would be awarded based on the facts and circumstances of the case.