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TMI Blog1997 (9) TMI 571X X X X Extracts X X X X X X X X Extracts X X X X ..... s a proprietory firm was entrusted with the work, namely, for transportation of foodgrains, etc., from FSD railway sidings of Dharmanagar and Choraibari to FCI Godown complex at Agartala at a negotiated rate of 60 per cent above the scheduled rate. As per the work order issued on March 11, 1989 the petitioner-firm started carrying foodgrains, etc., from the aforesaid railway sidings to FCI godown complex at Agartala. To carry the foodgrains from the aforesaid railway sidings by trucks the petitioner made arrangement with respondent No. 6, viz., the Truck Owners Association, Motor Stand, Agartala for supplying trucks, the hiring charge of which was fixed at Rs. 23 per quintal. As per this arrangement, the petitioner used to place trucks at the disposal of the FCI on receipt of the requisition of its officials. But the trouble arose when the respondent No. 3, namely, District Manager, FCI, Agartala, issued a letter on October 24, 1990 asking the petitioner for payment of sales tax on hire charges of the vehicles which were provided for transportation of foodgrains. The respondent No. 3 while addressing this letter also referred to a letter of the Commissioner of Taxes, Government of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther contended that in view of the amendment of section 3 of the principal Act (4th Amendment), namely, TST Act, 1987 inserting the proviso, namely, Provided further that the rate of tax on any transfer of the right to use any goods for any purpose (whether or not for a specified period) shall be 4 per cent , the petitioner is liable to pay tax at the rate of 4 per cent. The respondents have, therefore, contended that the respondent No. 3 has committed no error of law in issuing the letter to the petitioner for deduction of sales tax from its bills submitted for transportation of foodgrains, etc., from FSD railway sidings, Dharmanagar and Choraibari to FCI godown complex at Agartala. 6.. Mr. B. Das, the learned Senior Counsel appearing on behalf of the petitioner, has contended that sales tax law, namely, the provision of rule 3A of the TST Rules passed by the State Legislature has ignored the restrictions and conditions incorporated in article 286 of the Constitution of India and as such levy of sales tax on the bills of the petitioner submitted to the FCI cannot be deemed to be a sale under article 366(29A) of the Constitution. But Mr. U.B. Saha, learned Government Advocate ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax payable under the Act, on account of such transfer of right: Provided that no such deduction shall be made from the bill(s) or invoice(s) of the transferor- (a) On account of such transfer where the transfer of right to use goods was agreed to before first day of January, 1989; (b) The amounts received as penalty for defaults in payment or as damages for any loss or damage caused to the goods by the person to whom such transfer was made; and (c) The amount representing the valuable consideration received for such transfer in respect of goods exempt for tax under sub-sections (2) and (3) of section 3 of the Act. (3) The amount deducted under sub-rules (1) and (2) shall be deposited into the Government treasury by challan in form XI by the person making such deduction within 7th day of the month following that in which the deduction is made. (4) The person making such deduction under sub-rules (1) and (2) shall at the time of payment or discharge, furnish to the person from whose bill(s) and invoice(s) such deduction is made a certificate specifying the amount deducted and the rate(s) at which it has been deducted. (5) A copy of the challan showing the deposit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 3 of the TST Act, 1987 (4th Amendment) reads: Provided further that the rate of tax on any transfer of the right to use any goods for any purpose (whether or not for a specified period) shall be 4 per cent. 7.. A perusal of the provisions quoted above shows that by the aforesaid provisions the State Legislature has made every person responsible for payment of sales tax at the rate of 4 per cent per annum on the expenditure he incurs in securing the services from the contractor for discharge of any liability on account of valuable consideration payable for the transfer of property in goods (whether in goods or in any other form). 8.. It is, however, not in dispute that powers to levy sales tax was conferred on the State Legislature by the Constitution by entry 54 of List II of the Seventh Schedule to the Constitution of India which as originally enacted reads thus: 54. Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92-A of List I of the Seventh Schedule. Entry 92A in List I of the Seventh Schedule pertaining to the Union of India reads as follows: 92A. Taxes on the sale or purchase of goods other than newspapers, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made. [Inserted by the Constitution (Forty-sixth Amendment) Act, 1982.] 10.. In the case of Builders Association of India v. Union of India [1989] 73 STC 370 (SC); AIR 1989 SC 1371 the question whether the power to impose tax on the transfer of property in goods involved in the execution of a works contract is to be found in entry 54 in List II or it is an independent taxing power squarely arose for consideration when the Supreme Court observed as under: After the 46th Amendment the works contract which was an indivisible one is by a legal fiction altered into a contract which is divisible into one for sale of goods and the other for supply of labour and services. After the 46th Amendment, it has become possible for the States to levy sales tax on the value of goods involved in a works contract in the same way in which the sales tax was leviable on the price of the goods and materials supplied i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herever such transfer, delivery or supply becomes subject to levy of sales tax. So construed the expression tax on the sale or purchase of goods in entry 54 of the State List, therefore, includes a tax on the transfer for property in goods (whether as goods or in some other form) involved in the execution of a works contract also. The tax leviable by virtue of sub-clause (b) of clause (29A) of article 366 of the Constitution thus becomes subject to the same discipline to which any levy under entry 54 of the State List is made subject to under the Constitution. The position is the same when one looks at article 286 of the Constitution. Clause (1) of article 286 says that no law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place- (a) outside the State; or (b) in the course of the import of the goods into, or export of the goods out of, the territory of India. Here again one has to read the expression a tax on the sale or purchase of goods found in article 286 as including the transfer of goods referred to in sub-clause (b) of clause (29A) of article 366 which is deemed to be a sale of goods and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deration, and includes- (i) any delivery of goods on hire-purchase or any system of payment in instalments, (ii) any transfer of the right to use any goods for any purpose whether or not for a specified period for cash, deferred payment or other valuable consideration, and such delivery or transfer of any goods shall be deemed to be a sale of those goods by the person making the delivery or transfer and a purchase of those goods by the person to whom such delivery or transfer is made, but does not include a mortgage, hypothecation, charge or pledge. 16.. In view of the insertion of clause (29-A) to article 366 of the Constitution by virtue of 46th Amendment to the Constitution and in view of the decisions of the Supreme Court as mentioned above I am of the view that the provisions of rule 3A of the TST Rules is not violative of the Constitution. 17.. In view of the decisions of the Supreme Court referred to above I hold that it is permissible for the State Legislatures to levy taxes on the goods involved in the execution of a works contract at the rate of 4 per cent per annum which was imposed by the provision. Admittedly the present case is not a case of interState trade ..... X X X X Extracts X X X X X X X X Extracts X X X X
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