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TMI Blog1990 (6) TMI 212X X X X Extracts X X X X X X X X Extracts X X X X ..... plicable only up to March 31, 1984 and not beyond that date. At the same time, section 6D was enacted, making it possible to impose tax on sales by way of transfer of property in goods involved in the execution of works contracts with effect from April 1, 1984. This was done by virtue of the 46th Amendment of the Constitution which brought about amendments in article 366(29A). The applicant's liability to pay purchase tax under section 6C ceased with effect from April 1, 1984. The applicant, therefore, wrote a letter to the Commercial Tax Officer seeking advice as to the next course of action, if any, in the matter of registration as a dealer vis-a-vis the old purchase tax and the newly imposed sales tax. But instead of giving any reply, the Commercial Tax Officer issued notice for assessment for the period of four quarters ending March 31, 1985, without first ascertaining the date of liability to pay tax under section 6D. It is claimed that the applicant's business being wholly that of a building contractor, no liability to pay sales tax under section 6D would arise prior to April 1, 1985. The explanation 1 to section 6D and rule 48B are not retrospective in operation. As such, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion mentioned above. 5.. As regards the first point, by referring to the decision in [1989] 74 STC 102 (SC) (Federation of Hotel Restaurant Association of India v. Union of India), Mr. Chakraborty, learned State Representative, submitted that in taxation laws a certain degree of latitude in the matter of classification is allowed to the Legislature. He also referred to our judgment in the case of Nepal Chandra Bannerjee v. State of West Bengal, RN Case No. 30(T) of 1989, etc., rendered on April 26, 1990* and contended that the grouping of contractors, whose annual contractual transfer price *Reported in [1992] 86 STC 130 supra. exceeds rupees two lakhs, into a class different from that of contractors, whose annual contractual transfer price does not exceed that amount, is a reasonable classification, because it is founded on an intelligible differentia and the differentia has a rational nexus to the object sought to be achieved by the statute. The object of the legislation to leave the smaller contractors, whose contractual transfer price does not exceed rupees two lakhs in a year, out of the tax net, is achieved by such classification and, therefore, the differentia has a rati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view as expressed in the passage from our judgment dated April 26, 1990*, reproduced above and hold that there is no substance in the contention that section 6D is violative of article 14, because contractors having annual contractual transfer price above rupees two lakhs have been brought into the tax net, while others whose level of such price falls below that amount are left out of the measure. 6.. As regards the second point, Mr. Bose, appearing for the applicant, relied on several decisions in order to substantiate his challenge that clause (b)(i) of section 6D(1) is hit by the equality clause in article 14. He referred to [1951] 19 ITR 174 (SC); AIR 1951 SC 97 (Ramjilal v. Income-tax Officer), AIR 1967 SC 691 (Jalan Trading Co. Private Ltd. v. Mill Mazdoor Sabha), AIR 1983 SC 130 (D.S. Nakara v. Union of India), AIR 1958 SC 538 (R.K. Dalmia v. Justice Tendolkar), AIR 1978 SC 597 (Maneka Gandhi v. Union of India), AIR 1967 SC 1801 (New Manek Chowk Spg. Wvg. Mills Co. Ltd. v. Municipal Corporation of the City of Ahmedabad) and AIR 1967 SC 1301 (D.R. Nim v. Union of India). We do not feel it necessary to refer to the above cases individually, since it will be sufficient for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complained that such differentia is arbitrary and unreasonable. Mr. Chakraborty, appearing for the respondents, relied on [1989] 74 STC 102 (SC) (Federation of Hotel Restaurant Association of India v. Union of India) and submitted that the Legislature enjoys a certain degree of latitude in the matter of classification in fiscal statutes and according to him there has been actually no different and discriminatory treatment between the persons governed by clause (b)(i) and those governed by clause (b)(ii) of section 6D(1). He explained that tax was imposed under section 6D with effect from April 1, 1984, but different contractors have different years of accounting, for which different provisions were made in sub-clauses (i) and (ii) of clause (b) of section 6D(1) so that tax can be imposed and collected with effect from April 1, 1984, from all contractors, who fulfilled the qualifications laid down in section 6D. But Mr. Bose complained that the concepts of contractual transfer price and tax on sales by way of transfer of property in goods involved in the execution of works contracts would be effective only from April 1, 1984, in terms of the provisions of section 6D. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ext of the felt-needs of the times and societal exigencies informed by experience. Classification based on differences in the value of articles or the economic superiority of the persons of incidence are well-recognised. A reasonable classification is one which includes all who are similarly situated and none who are not. In order to ascertain whether persons are similarly placed, one must look beyond the classification and to the purposes of the law." (pages 126 and 127 of 74 STC) 10.. In this connection, we may refer to an older decision of the Supreme Court in the case of Khyerbari Tea Co. v. State of Assam AIR 1964 SC 925 (at pages 941 and 942). It was held that in tax matters, "the State is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it does so reasonably". It was also held that the power conferred on the Supreme Court to strike down a taxing statute for contravention of article 14, 19 or 301 has to be exercised with circumspection, bearing in mind that the power of the State to levy tax for the purpose of governance and for carrying out its welfare activities is a necessary attribute of sovereignty and in that sense it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings on or after April 1, 1962, between registered firms which had, and registered firms which had not, committed default attracting a penalty, was upheld. Similarly, in the case of Firm Nagappa Chettiar v. Income-tax Commissioner [1965] 56 ITR 569 (Mad.); AIR 1965 Mad. 424, a provision was upheld under article 14 which required a partnership firm to be registered before the close of the preceding year, but provided that in respect of a partnership firm coming into existence during the year, it should be registered within six months from the commencement of the firm or before the end of the year, whichever is earlier. 11.. For proper appreciation of the point agitated by Mr. Bose, we set out below the relevant portion of section 6D: "(1) Notwithstanding anything contained elsewhere in this Act,(a) Any transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract (hereinafter referred to as contractual transfer) shall be deemed to be a sale of those goods by the person making the transfer and the purchase of those goods by the person to whom such transfer is made; (b)(i) every dealer whose contractual transfer price during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired to pay tax from the first day of the year following the year in which the contractual transfer price exceeded or exceeds rupees two lakhs. We find considerable substance in this contention of Mr. Chakraborty. The provisions of section 6D imposed the tax with effect from April 1, 1984 and not before that date. That being so, tax under this provision cannot be imposed or collected for any period prior to April 1, 1984 and have to be imposed or collected with effect from that very date. But, the basic qualification for being liable to pay such tax is that the contractual transfer price must have exceeded or must exceed rupees two lakhs during the previous year. Since the tax was exigible with effect from April 1, 1984, the Legislature had to say that a dealer who has already fulfilled the qualification prior to April 1, 1984, will have to pay the tax with effect from April 1, 1984. Some of the dealers falling in this batch or category may even enjoy some advantage, because one will have to pay tax with effect from April 1, 1984 even though contractual transfer price had exceeded rupees two lakhs during his year of accounting ending sometime prior to 31st March, 1984. In other wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der clause (b)(i) of section 6D(1) ought to have been taxed on the basis of contractual transfer price of the year ending on or after April 1, 1984, i.e., with effect from the year immediately following the year closing on or after April 1, 1984. But this decision dealt with the withdrawal of an exemption from some, while others were allowed to continue to enjoy the exemption. Moreover, the ratio of this decision vis-a-vis article 14 does not support Mr. Bose's contention and rather fortifies the view taken by us. 14.. Mr. Bose contended that the expression "contractual transfer price" could not be operated retrospectively for any period prior to April 1, 1984, because the tax itself was exigible with effect from that date. We do not subscribe to this view. The law is to the effect that the tax is exigible with effect from April 1, 1984. That fundamental direction pervades both the sub-clauses of clause (b) of section 6D(1). But, as regards the dealers falling under sub-clause (i), the concept of contractual transfer price is applied also for the year ending before April 1, 1984. Since the Legislature itself has done so, the necessary intendment of the Legislature is that it want ..... X X X X Extracts X X X X X X X X Extracts X X X X
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