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TMI Blog1993 (4) TMI 294X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Officer within whose jurisdiction the works contract is executed. The deduction in question will be adjusted by the Sales Tax Officer towards the sales tax liability of the works contractor. Contravention of the provision authorises the Sales Tax Officer to impose penalty not exceeding twice the amount required to be deducted by the person responsible for making the payment to the contractor and deduction therefrom. For a proper appreciation of the grounds of challenge, it is appropriate to extract the provision of section 13AA of the Orissa Sales Tax Act in extenso: "13AA. Deduction of tax at source from the payment to works contractor.-(1) Notwithstanding anything contained in section 13 or any other law or contract to the contrary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ales tax liability of the works contractor and would also constitute a good and sufficient discharge of the liability of the deducting authority to the contractor to the extent of the amount deposited. (5) If any person contravenes the provisions of sub-section (1) or subsection (2) or sub-section (3) of this section, the Sales Tax Officer shall, after giving him an opportunity of being heard, by an order in writing, impose on such person penalty not exceeding twice the amount required to be deducted and deposited by him into Government treasury." 2.. The power to levy sales tax has been conferred upon the State Legislature under entry 54 of the State List. By the 46th Amendment of the Constitution introducing clause (29A)(b) in artic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the execution of a works contract are subject to the restrictions and conditions mentioned in each clause or sub-clause of article 286 of the Constitution. 3.. Mr. Mohanty, the learned counsel for the petitioner, in assailing the constitutional validity of section 13AA contends that the very fact that no attempt has been made to make any classification and no power has been conferred upon the authority on whom the liability to deduct tax from the sum payable to the contractor to decide whether the impugned transaction is liable for levy of sales tax, infringes the equality clause in article 14 and makes the provision confiscatory in character and effect and, therefore, the provision is liable to be struck down. He further contends that w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the question of deduction would arise only when the transaction constitutes a sale and, therefore, the provision cannot be said to be confiscatory in nature. The rival contentions require a careful examination of the provisions in question as well as the points urged by the counsel for parties. 4.. In view of the decision of the apex Court in Builders Association case [1989] 73 STC 370; AIR 1989 SC 1371, a "works contract " in which transfer of property in goods takes place is liable to be taxed is not in dispute. But the question that arises for consideration is whether by conferring power on the person who has to make payments to the contractor to deduct two per cent from the sum due where the contract relates to a works contract, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two opinions that it does not provide any mechanism to exclude a transaction from its purview, even if ultimately the transaction is not at all liable to levy of sales tax. In other words, even in case of a pure and simple labour contract or service contract where question of sale will not arise, yet the person responsible for making any payment to the contractor has no other option than to deduct two per cent of such sum towards sales tax. Thus though a transaction which may not be "sale" at all is liable for levy of sales tax, yet in respect of the said transaction power has been conferred to make deduction of two per cent from the amount which should be paid. In the absence of any discretion with the authority or in the absence of any me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edies so that deduction under section 194C(1) may not become confiscatory in nature. But under the Orissa Sales Tax Act in the absence of any such provision and by conferring arbitrary, unbridled and unchannellized power on the person concerned, to deduct two per cent from the sum payable to the contractor irrespective of the question whether ultimately the transaction is liable for payment of any sales tax at all or not, cannot be held to be a levy of tax under any valid legal provision. It is no doubt true that the said deduction of two per cent under section 13AA is to be ultimately adjusted where the transaction in question is liable for levy of sales tax, but where the transaction is not at all liable for levy of sales tax, there the q ..... X X X X Extracts X X X X X X X X Extracts X X X X
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