9911796707
TMI Blog1997 (9) TMI 597X X X X Extracts X X X X X X X X Extracts X X X X ..... ding company was engaged in the work of colonization in the State of Haryana and carried out works contracts. Major part of the work was done by the holding company by entering into contracts with the petitioner-company. The holding company thus became the contractee and the petitioner-company became the contractor. The petitioner-company, in turn, executed some work itself and some work was got done through the sub-contractor. Material used in the work was arranged by the sub-contractor. The petitioner-company did some work for the parties other than its holding company also. The petitioner-company had three divisions, namely, Energy Systems Division, Electrical Division and the Construction Division. The petitioner-company maintained its headquarters at Gurgaon (Haryana) and was a registered dealer under the Act as also under the Central Sales Tax Act, 1956. The company filed quarterly returns for both the years and deposited tax due as per the returns. The Assessing Authority made certain additions at the time of assessment. 3.. The petitioner has challenged certain provisions of the Act and the Rules on the ground that, though the Supreme Court in Builders Association of Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sale took place. Sale of property in goods consumed in a works contract would take place at the time when the goods are consumed in the works contract. Tax would, therefore, be payable by the person consuming goods in the works contract. As per Mr. Sarin, if a sub-contractor consumed material, he should be held liable to pay tax. 6.. The petitioner s second challenge is against the levy of tax on the purchase of bricks. The petitioner had purchased bricks and used the same in the execution of works contract. Sales tax on bricks was leviable under the Act at the stage of first sale in the hands of the manufacturer or in the hands of the importer making first sale in the State of Haryana. The manufacturer has to issue a certificate in form S.T. 14 to the buyer declaring that tax had been paid on the goods. The brick-kiln owners were given option to pay tax in lumpsum under section 26 of the Act. Such owners are to sell their bricks as tax-paid goods. The petitioner-company purchased bricks from such brick-kiln owners who had opted to pay sales tax in lumpsum. Rule 39A(11) of the Rules, inserted with effect from October 1, 1992, laid down that the brick-kiln owners, who opted to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from his gross turnover the purchase value or the sale value of the goods if those goods had already been subjected to tax at the first stage of sale under section 17 or section 18 of the Act. The condition which is required to be fulfilled by a dealer claiming such deduction was that he would append to his return a copy of the certificate in form S.T. 14, duly filled in and signed by the selling registered dealer or a carbon copy of the cash memo or sale bill with a declaration as prescribed. The challenge by the petitioner against the addition made by the assessing authority is that tax was payable not by the petitioner on such goods but by the suppliers, whether a registered or an unregistered dealer under the Act. Bricks are one of the items notified under section 18 of the Act and tax was payable at the stage of first sale. Bricks have been shown at Serial No. 3 in the list given in the notification dated December 30, 1987 issued under section 18 of the Act. No declaration is prescribed if the purchase was made from an unregistered dealer. 9.. The petitioner has also challenged the validity of the proviso to section 18 of the Act on the ground that its provisions converted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as prescribed under section 13B of this Act; (ii) last purchase in all other cases except when the purchase is made on payment of tax: Provided that this sub-section shall not apply to a dealer who deals exclusively in goods specified in Schedule B or who executes a sub-contract with a contractor who is liable to pay tax in respect of works contract of which the sub-contract is a part:". It may be noticed that section 6(1) is a charging section and makes every dealer liable to pay tax if his gross turnover during a year exceeded the taxable limit. Under the proviso to sub-section (1), a dealer who executed a sub-contract with a contractor has been exempted from the liability of tax if the contractor was liable to pay tax in respect of works contract of which the sub-contract was a part. The case of the petitioner is that a sub-contractor cannot be exempted from the liability of tax under the proviso inasmuch as it runs counter to the main provisions of sub-section (1) of section 6 of the Act. 11.. Clause (ba) and clause (bb) of section 2 of the Act define the words "contractor" and "contractee" as under: "(ba) 'Contractor' means any person who executes either himself or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subcontractor. Part of the contract may be given for the purpose of execution to a sub-contractor but that would not absolve the contractor of his liability to pay tax. A sub-contract is a part of the works contract and is not an independent contract by itself. Therefore, a sub-contractor cannot be said to be liable to the contractee inasmuch as he has undertaken the execution of part of the works contract not from the contractee but from the contractor. In such a situation, the sub-contractor cannot be assessed on the value of goods used in the works done by him. Clause (ba) of section 2 of the Act included within its ambit a sub-contractor engaged for executing the whole or part thereof. A sub-contractor is, therefore not required to pay tax as an independent dealer. The Assessing Authority included the turnover of the work done by the sub-contractor in the turnover of the petitioner-company. The first proviso to section 6(1) of the Act excludes a dealer who executes a sub-contract inasmuch as sub-contract is a part of the works contract. 15.. Shri Parmod Goyal, learned Deputy Advocate-General, Haryana, has argued that the petitioner-company was not required to deduct ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or. The petitioner may seek refund of the amount paid to the Government by way of tax deducted at source from the sub-contractor. Provisions of the Constitution (Forty-Sixth Amendment) Act, 1982, have already been upheld by the Supreme Court in Builders Association of India's case [1989] 73 STC 370. The proviso to section 6(1) of the Act is not found to be contrary to the law laid down by the Supreme Court in the aforesaid case or to any other provision of the Constitution. 18.. The second challenge in the present petition is against the levy of tax on the bricks purchased by the petitioner. 19.. Section 18 of the Act relates to the levy of tax at the first stage of sale and it reads as under: "18. Tax at first stage of sale.-The State Government may, by notification, direct that in respect of such goods, other than the goods specified in Schedules C and D, and with effect from such date, as may be specified in the notification, the tax under section 15 shall be levied at the first stage of sale thereof, and on the issue of such notification the tax on such goods shall be levied accordingly: Provided that no sale of such goods at a subsequent stage shall be exempt from ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he first stage of sale and do not escape the levy of tax. If the goods have once suffered tax at the first stage of sale, levy of tax is not permissible at the subsequent stage under section 18. Therefore, the plea raised by Shri Sarin that the proviso to section 18 invalidated the scheme laid down in the main provision of section 18 cannot be accepted. It is correct that the charging of tax on the tax-paid goods is not permissible under section 18, but, at the same time, goods declared and notified under section 18 cannot be exempted unless such goods had suffered tax at the first stage of sale. If no proof is furnished showing the payment of tax on such goods at the first stage, there can be no case of double taxation if tax is levied at a subsequent stage. 21.. In the case of the petitioner, rebate of tax was not given inasmuch as declaration in form S.T. 14 was not filed as proof of payment of tax. The petitioner was assessed on the value of bricks on the ground that declaration in form S.T. 14 was not obtained from the selling dealer. 22.. Clause (i) of rule 24 and sub-rule (11) of rule 39-A are the relevant provisions and it would be necessary to read them: "24. Deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a brick-kiln owner shall pay lumpsum in lieu of sales tax have also been given in the Rules. The amount depended on the capacity of the brick-kiln and its category. The scheme contained in the Rules thus made it clear that the lumpsum payable in lieu of sales tax depended on the assessment of the capacity of the brickkiln and its category. For that purpose, the Excise and Taxation Officer may inspect the brick-kiln. The amount not paid in time is required to be recovered as arrears of land revenue. In such a situation, sub-rule (11), denying the benefit of form S.T. 14, appears to be totally contrary to the scheme of things and the intention of the law. 25.. Shri M.L. Sarin, learned Senior Counsel for the petitioner, has challenged the validity of sub-rule (11) of rule 39A on the ground that the petitioner was not at fault for not furnishing certificate/declaration in form S.T. 14 inasmuch as the supplier of the bricks failed to give form S.T. 14 to the petitioner. The Assessing Authority insisted on the furnishing of form S.T. 14 for bricks on which tax was leviable at the first stage. The petitioner had furnished complete details in respect of the purchase of bricks. Liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f bricks amounting to Rs. 20,75,985 in the year 1990-91. The Assessing Authority, however, added this amount to the taxable turnover of the petitioner on the ground that such purchases were made by the petitioner from unregistered suppliers and declaration forms in S.T. 14 were not furnished by the petitioner in respect of such purchases. In our view, since the goods had not suffered tax at the first stage of sale inasmuch as the dealer was an unregistered supplier under the Act, the petitioner is not entitled to get the benefit of exemption under section 18 of the Act. As has been seen, proviso to section 18 laid down a specific condition, for seeking exemption from the levy of tax at the subsequent stage of sale in respect of the declared goods, that such a dealer shall furnish a declaration in the prescribed form obtained from the selling dealer. Bricks are one of the items notified under section 18 of the Act and tax was indeed payable at the first stage of sale only. A subsequent dealer, on furnishing of proof regarding payment of tax at the stage of first sale, can seek exemption from the liability of tax. 29.. Shri M.L. Sarin, learned Senior Counsel for the petitioner, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Rules. 31.. The next challenge by the petitioner relates to the denial of exemption from the levy of tax in respect of the goods manufactured by an exempted industrial unit. 32.. Section 13-B of the Act empowers the State Government to exempt such class of industries from the payment of tax for such period and subject to such conditions as may be prescribed. Rule 28A of the Rules contained the scheme in respect of the exemption given under section 13-B of the Act. Clause (c) of sub-rule (4) of rule 28A is the relevant rule which is under challenge. It reads as under: "(c) The goods manufactured by an eligible industrial unit availing exemption under this rule shall be exempt from the levy of tax at all the successive stage(s) of sale or purchase subject to the condition that the dealer affecting the successive purchase or sale furnishes to the Assessing Authority a certificate in form S.T. 14-A to be obtained from the Assessing Authority against payment of such sum as may be fixed by the State Government from time to time, duly filled in and signed by the registered dealer by whom such goods were purchased." 33.. An industrial unit which is entitled to claim exemption fro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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