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TMI Blog1989 (9) TMI 371X X X X Extracts X X X X X X X X Extracts X X X X ..... ature. According to the petitioner, the material contents involved in the works contract is about 25 per cent and 30 per cent of the entire works contract. The petitioner has further asserted that most of the materials specially steel and cement are supplied by the principal either free of cost or on cost recovery basis and the title of the said property at all times remains with the principal and never passes on to the petitioner. It is further alleged that the said contract jobs are performed by the hired labourers. It has further been asserted that sales tax payable by him on the whole contract is 8 per cent plus 1 per cent turnover plus 5 per cent surcharge on sales tax payable which is about 9.5 per cent in terms of the notification issued by the State of Bihar under the Bihar Finance Act, 1981 and rules framed thereunder. The petitioner has further asserted that his principal had been deducting 4 per cent from the amount payable to the petitioner from his running account bills in terms of section 25A of the Bihar Finance Act. 4.. The petitioner was assessed for the year 1985-86 and the total tax was assessed at Rs. 22,157.29 out of which the amount of Rs. 9,189 was deducted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the said provisions are ultra vires the Constitution inasmuch as the amount of the labour charges prescribed by reason of rule 13-A has also been included for the purpose of calculating taxable turnover. The Supreme Court in the case of Builders Association of India [1989] 73 STC 370; 1989 BLT 151, has clearly held that only such portion of works contract would come within the purview of clause (29A) of article 366 of the Constitution whereby and whereunder actual transfer of goods takes place from the contractor to the principal in execution of the works contract. 9.. The learned counsel further submitted that in this view of the matter labour charges involved in execution of works contract cannot be brought within the purview of the aforementioned Act and the Rules framed thereunder. 10.. "Gross turnover" has been defined in section 2(j) of the Bihar Finance Act, 1981, which reads as follows: "(i) For the purposes of levy of sales tax, in respect of sale of goods, aggregate of sale prices received and receivable by a dealer, including the gross amount received or receivable for execution of works contract or for the transfer of right to use any goods for any purpose (wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r cent (1) (a) Earthwork in all types of soil and in all works on 100 canals, roads, embankments, small dams, etc., by manual labour; and exclusive labour rate contracts. (b) Earthwork in all types of soil in all works on canals, 20 roads, embankments, dams, etc., by machines. (c) Construction of earth dams with earth moving machines. 25 (2) (a) Construction of masonry/concrete dams, barrages, 30 bridges of more than 15 metres length, water towers and P.H.E.D. installations and lift-irrigation installations, etc. (b) Stone masonry in dams and other such works. 35 (3) Construction of canal structures, bridges up to 15 30 metres length, all types of building and lining of canals. (4) (a) Construction of pucca roads (excluding earthwork) 15 (b) Construction of pucca roads (including earthwork in 25 formation of new roads) (5) River taming and flood protection works involving 40 boulder and brick pitching (excluding earthwork) (6) In the case of electrical contracts 20 (7) In the case of structural contracts 30 (8) In the case of sanitary contracts 33-1/3 (9) In the case of retreading contracts 50 (10) In the case of textile dyeing and printing works 50 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have intended to violate the provision of the Constitution, but the same does not mean that a statute will be read down, even if it be ultra vires. 16.. There is no doubt that section 21(1)(a)(i) of the said Act and rule 13-A of the Bihar Sales Tax Rules have brought within its purview even the element of labour charges within its sweep and the same must be held to be illegal and unenforceable. In view of the decision of the Supreme Court in Builders Association [1989] 73 STC 370; 1989 BLT 151, this aspect of the matter has recently been considered by a Division Bench of this Court in Jamshedpur Contractors' Association v. State of Bihar [1989] 75 STC 132 and other analogous cases being C.W.J.C. No. 1034 of 1984(R) and other analogous cases disposed of on 2nd August, 1989 [1989] 75 STC 132, wherein it has been held that rule 13-A is ultra vires the Constitution. In the aforementioned decision the Division Bench further referred to the decision of N.M. Goel Co. v. Sales Tax Officer [1989] 72 STC 368 (SC); AIR 1989 SC 285 and read the same in the light of the decision of the Constitution Bench in the Builders Association's case [1989] 73 STC 370 (SC); 1989 BLT 151 by hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Sales Tax Act. In view of this legal position, notwithstanding the submission made on behalf of the States in Builders Association [1989] 73 STC 370 (SC), it must be held that if there is an agreement between the contractor and the employer under which the employer agrees to supply building materials to the contractor to be used in the work, and the contractor is made liable to pay the price of those materials, there is sale of goods by the contractor and he shall be liable to pay tax on such sale. The legal position now is when there is a transfer of property in goods by the contractor in execution of works contract, sales tax law is attracted." True it is that in the aforementioned decision the provision of section 21 of the Bihar Finance Act was not taken note but this does not alter the ratio of the decision inasmuch as evidently rule 13-A was framed in terms of section 21(1)(a)(i). It is thus clear that the question of law raised by the petitioner has to be determined by the assessing authority keeping in view the aforementioned decisions of the Supreme Court and this Court. Needless to add that before the assessing authority, various questions which are peculia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by the statute. Those in charge of the affairs of the company in failing to register the company as a dealer acted in the honest and genuine belief that the company was not a dealer. Granting that they erred, no case for imposing penalty was made out." 21.. In this view of the matter I am of the opinion that annexure-4 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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