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TMI Blog1998 (2) TMI 556X X X X Extracts X X X X X X X X Extracts X X X X ..... rection directing the opposite parties Nos. 1 to 3 to certify and send up to this honourable Court all papers and documents in connection with passing of orders in annexures 1 and 1/A, so that the same can be examined and if necessary quashed; (b) issue a writ in the nature of mandamus quashing section 13AA(1) of the Orissa Sales Tax Act; (c) pass such other order/orders and/or directions as this honourable Court deems fit and proper; and (d) allow this petition with costs. 3.. It is placed on record that the petitioner is one of the units of a public sector undertaking registered as a company. It has taken up modernisation of its plant. It has engaged contractors either to supply goods or services, or both. The contractors are alleged to be most indigenous. There are also foreign contractors. Some of the contractors are entirely engaged for supplies and some for services alone. There are also some contractors who have been engaged for both. 4.. The petitioner contends that each of the contracts depending on the nature of the work, i.e., whether supplies or services, or both, prices are mentioned giving the break-ups, and in certain cases when the goods supplied are in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on examining the Orissa Act, section 5(2)(A) and 5(2)(AA) has held that it does not transgress the constitutional limitations and therefore section 13AA in order to become valid should only aim and be directed to tax or deduct at source that tax, and no further, and cannot include turnover on which tax is impermissible. It does not require for that purpose certification comparable to section 194C of the Income-tax Act or sub-section (5) of section 13AA of the Act. 9.. The present amendment, firstly as an Ordinance and later on by an Act, replaced the old section 13-AA(1) in its entirety. The new sub-section introduced being (5) contains provision for certification somewhat similar to section 194C(4) of the Income-tax Act. The re-numbered sub-section (6) provides for penalty and sub-section (3) of the Validation Ordinance/Act validated the actions as if the provisions of sub-sections (1), (2), (3), (4) and (6) of section 13-AA of the principal Act as introduced. 10.. The grievance of the petitioner is as follows: (a) Section 13-AA(1) inasmuch as it has a potential and mischief to include supplies covered under section 3 or 5 of the Central Act which is ultra vires the State po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were reflected as transactions in course of inter-State trade and export. The contractors are taking delivery of goods brought from outside the State during the course of execution of the work and the materials processed and erected. A list of materials remains with the contractors until the final acceptance of the erected plant and equipments by the contractee. At any rate, the nature of contract executed by the contractors remains as works contracts and as such the provisions of section 13-AA are attracted. The purported interpretation of the decision of the honourable Supreme Court by the petitioner and taking recourse to the same as to applicability of section 13-AA is denied. 16.. The contention of the petitioner that the State law would be ultra vires for the reasons given is seriously opposed. It is submitted on the contrary that the very language of the statute clearly gives a mandate that any person responsible for paying any sum to any contractor for carrying out any works contract, which involves transfer of property in goods, in pursuance of a contract between the contractor and contractee, shall deduct an amount towards sales tax equal to 4 per cent of such sum in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned notice under annexure 1/A and the final order that may be passed will be subject to the result of the writ petition. It is made clear that a reasonable opportunity should be given to the petitioner to answer to the show cause notice, and the matter shall be disposed of by complying with the principles of natural justice. 20.. There is subsequent development of the matter. Pursuant to order of this Court, the petitioner filed its reply to the impugned show cause notices. Final orders have been made and the petitioner has challenged the final orders by filing a separate and independent writ application in this Court. In the said separate writ application the petitioner has prayed for stay of the impugned demand and in the present case the opposite parties, the sales tax authorities have asked for leave of the court to realise the amount as per the demand. 21.. Mr. Mohanti, learned Senior Counsel appearing for the writ petitioner, has made a very lengthy and eruditing argument by referring to a large number of reported decisions. His main point of argument is as to the vires of the provisions of section 13-AA of the Orissa Sales Tax Act as substituted by Orissa Or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i), different from the existing provision in section 5(2)(A)(i). It is submitted that the vice of section 13-AA(1) continues. The ratio of the decision in 2nd Gannon Dunkerley s case [1993] 88 STC 204 (SC) was simple. It stated that for the purpose of information of computation of demand the assessee is to provide figures. 25.. Mr. Mohanti has stressed on developments of points of law when there is a challenge as to constitutional validity of a statutory provision by referring to a good number of decisions and the assessee of his argument is that much before the Gannon Dunkerly s case [1993] 88 STC 204 (SC), in the case of Fernandez v. State of Kerala [1957] 8 STC 561 (SC), the effect of article 286 was considered as to turnover and the charging section. Such view was taken in State of Assam v. Ramesh Chandra Dey [1961] 12 STC 441 (SC). It is argued with great emphasis that the amended provisions of the Act are absolutely arbitrary, inasmuch as the question of deduction cannot arise unless there is a liability. If there is no liability, the procedural mechanism as made available by the amending Orissa Act is contrary to and inconsistent with the scheme of the entire Act, and part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of imposing a tax.... . (e) In this view of the matter, section 13-AA is not restricted by any constitutional restrictions created under article 286 of the Constitution. 27.. He has further developed his point by submitting that the decisions of the honourable Supreme Court in Gannon Dunkerly s case [1993] 88 STC 204 and Builders Association case [1989] 73 STC 370 as also the decision of this Court in BHEL s case [1996] 102 STC 324; (1995) 1 OLR 567 are on the question of liability to pay tax for the taxable turnover of works contract. It concerns assessment or liability of a dealer or it relates to tax imposed. It is submitted that these decisions do not deal with TDS, a machinery provision like section 13-AA of the OST Act, nor do the same distinguish what is tax imposed and what is not tax imposed under article 286 of the Constitution. 28.. Mr. Lal submits that by enacting section 13-AA of the OST Act providing for TDS, the Legislature in its wisdom was aware of the fact that a payer in respect of any sum paid towards the transfer of property in goods in works contract is not to be saddled with an impossible burden of making an assessment about the deductibility of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Association of India v. State of Kerala [1995] 98 STC 490 (Ker), Bharat Heavy Electricals Ltd. v. State of Orissa [1996] 102 STC 324 (Orissa); [1995] 1 OLR 567, Hitendra Nath Goswami v. State of Assam [1994] 92 STC 23 (Guahati), State of Kerala v. Builders Association of India [1997] 104 STC 134 (SC), Commissioner of Income-tax v. Saraya Sugar Mills (P) Ltd. [1993] 201 ITR 181 (All.), 1925 Appeal Cases 37, Associated Cement Co. Ltd. v. Commissioner of Income-tax [1993] 201 ITR 435 (SC); AIR 1993 SC 2281, Bengal Immunity Company Limited v. State of Bihar [1955] 6 STC 446 (SC); AIR 1955 SC 661, Sundararamier Co. v. State of Andhra Pradesh [1956] 9 STC 298 (SC); AIR 1958 SC 468, Ram Krishna Dalmia v. Justice S.R. Tendolkar AIR 1958 SC 538, Chaturbhai M. Patel v. Union of India AIR 1960 SC 424, Khyerbari Tea Co. Ltd. v. State of Assam AIR 1964 SC 925, Venkata Subbarao v. State of Andhra Pradesh AIR 1965 SC 1773, Janapada Sabha Chhindwara v. Central Provinces Syndicate Ltd. AIR 1971 SC 57, Misrilal Jain v. State of Orissa AIR 1977 SC 1686, R.K. Garg v. Union of India AIR 1981 SC 2138, Union of India v. Bombay Tyre International Ltd. AIR 1984 SC 420, Commissioner of Incometax v. J.H. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of tax so far as works contract is concerned. The argument is that advance tax cannot be asked for when there is no liability becomes fallacious. The liability is there and the realisation has its certain punctuation. Realisation can be made provided the obligations are proved. In this regard the show cause notices are issued. Replies are invited. Adjudication by way of assessment is made. There is also scope for appeal. There is scope for revision. There is scope for challenging either in High Court or in the apex Court regarding the merit of the matter. We do not appreciate that the law, as it stands, so far as the impugned provisions are concerned, is ultra vires the Constitution. The points of law as raised in this case challenging the impugned provision are not sustained. For the foregoing reasons, we dismiss the writ application. 36.. We, however, make it clear that this writ petition becomes exhausted the moment, this Court finds that the challenge to the impugned provision of section 13-AA(1) of the Orissa Sales Tax Act fails. As the law takes its course, the interlocutory order loses all its force when the case is finally disposed of. This Court had passed an inte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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