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TMI Blog1996 (11) TMI 355X X X X Extracts X X X X X X X X Extracts X X X X ..... K.V. Mohan, E.M.S. Anam, Advocates, and Roy Abraham, Advocate (for Ms. Baby Krishnan, Advocate) with him], for the respondents. A.S. Nambiar, Senior Advocate (M.T. George, Advocate, with him), for the appellants. -------------------------------------------------- The judgment of the Court was delivered by B.P. JEEVAN REDDY, J. -Leave granted. Section 5 of the Kerala General Sales Tax Act levies tax on sale or purchase of goods. Clause (iv) of sub-section (1) of section 5 provides for levy of tax on transfer of goods involved in the execution of the works contract. Sub- clause (a) of clause (iv) deals with a situation where "transfer is in the form of goods". In such a case, the rates and the point of levy are specified in the First, Second or Fifth Schedule to the Act. Sub-clause (b) deals with a situation where the "transfer of goods involved in the execution of works contract.......is not in the form of goods but in some other form". In such a case, the rate is specified in the Fourth Schedule to the Act. There are two provisos to clause (iv) which we need not refer to for the purpose of this case. Section 7 provides for payment of tax at compounded rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year or at the completion of the works contract and on receipt of final statement of accounts and return, if the tax on purchases is found to be in excess of the tax payable under the compounded rates, no refund of such excess tax paid shall be made". Rules have been made under and pursuant to the aforesaid sub-sections. We are concerned with two such rules, viz., rule 22A and rule 30A. They read as follows: "22A. Payment and recovery of tax in works contract.-(1) In the case of works contract on which tax is payable in accordance with the provisions of the Act whether an option under sub-section (8) of section 7 is made or not, the tax shall be paid either by the contractor in accordance with the rules or by the awarder. (2) Wherever payment is made by the awarder to the contractor either in lump sum for the whole contract or in instalments, the awarder shall withhold an amount equal to the tax due in accordance with the provisions of the Act from such payment or payments and shall remit it to the assessing authority with whom the contractor is registered as a dealer and if he is not so registered, to the assessing authority having jurisdiction over the place of works ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove provisions before us, it has yet become necessary to consider the issue relating to their validity in view of the fact that the said provisions have been struck down by the High Court, the correctness whereof is being questioned in these appeals preferred by the State of Kerala. Clause (29A) was inserted in article 366 of the Constitution by the Constitution (Forty-sixth Amendment) Act, 1982. It reads: "(29A). 'tax on the sale or purchase of goods' includes- (a) a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract." The main ground upon which the High Court has held sub-sections (7) and (7A) of section 7 to be void is that they levy tax at two per cent on the whole amount of the contract [sub-section (7)] or at a particular rate applied to the entire value of contract [sub-section (7A)] and not merely upon the value of the goods transferred in the course of execution of the works contract as contemplated by sub-clause (b) of clause (29A) i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-sections (7) and (7A) and cannot equally be faulted. Secondly, it is true that the goods transferred in the course of execution of the works contract may be chargeable at different rates under different Schedules appended to the Kerala Act; it may also be that some of them may be "declared goods", the levy of tax upon which is subject to certain restrictions specified in sections 14 and 15 of the Central Sales Tax Act; it may also be that sale of some of the goods may also be subject to Central sales tax. It must yet be remembered that the method of taxation introduced by sub-sections (7) and (7A) is in the nature of composition of tax payable under section 5(1)(iv). The impugned sub-sections have evolved a convenient, hassle-free and simple method of assessment just as the system of levy of entertainment tax on the gross collection capacity of the cinema theatres. By opting to this alternate method, the contractor saves himself the botheration of book-keeping, assessment, appeals and all that it means. It is not necessary to enquire and determine the extent or value of goods which have been transferred in the course of execution of a works contract, the rate applicable to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... true in case of legislation dealing with economic matters, where, having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowed to the Legislature. The court should feel more inclined to give judicial difference to legislative judgment in the field of economic regulation than in other areas where fundamental human rights are involved..... The court must always remember that 'legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry' that exact wisdom and nice adaption of remedy are not always possible and that 'judgment is largely a prophecy based on meagre and uninterpreted experience'. Every legislation particularly in economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and therefore it cannot provide for all possible situations or anticipate all possible abuses. There may be crudities and inequities in complicated experimental economic legisl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-rule (2) does not provide for deduction of tax at source like the one provided by section 194-C of the Income- tax Act, 1961. Sub-rule (2) merely says that where tax is due from a contractor, the awarder shall withhold an amount equal to the tax due while making payment to the contractor. In the case of a contractor who has not opted for the alternate method of taxation and is governed by section 5(1)(iv), this sub-rule means that where tax is due from him according to law and the awarder is apprised of the said fact, the awarder comes under an obligation to deduct the amount equal to the tax due and remit it to the assessing authority. It needs to be emphasised that the sub-rule speaks of "tax due". Of course, so far as the contractor who has opted for the alternate method of taxation under sub-section (7) or (7A) of section 7 is concerned, the deduction at the prescribed rate would be at the time of any and every payment by awarder to him, for in his case tax is due at the flat rate prescribed in the relevant sub-section even at the inception of the contract and at all times, until the tax due is satisfied. We fail to see how can any objection be taken to the sub-rule. Sub-rule ..... X X X X Extracts X X X X X X X X Extracts X X X X
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