9911796707
TMI Blog2004 (6) TMI 598X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in a works contract. By introducing the third proviso, what the State Legislature had attempted to do, is to meet those objections indicated in [ 1992 (11) TMI 254 - SUPREME COURT] (Larsen and Toubro Ltd. v. State of Bihar), or, in other words, to remove the foundation of the decision in[ 1999 (7) TMI 646 - PATNA HIGH COURT] (Larsen and Toubro Ltd. v. State of Bihar) so as to make this section legislatively competent and enforceable. The occasion to test its validity in the context of the third proviso newly introduced has arisen for the first time only now. Therefore, we are of the view that the challenge of the petitioner to section 25A(1) of the Act with a particular reference to the third proviso thereto, cannot be shut out on the ground that the said challenge is barred by res judicata. We, therefore, overrule the contention raised in that behalf, by learned counsel for the respondents. We may also notice that there is a challenge to the notification dated June 19, 1993 issued in the year 1993, which has been adapted or which is to be deemed to be valid, by virtue of section 85 of the Bihar Reorganisation Act, 2000 and that challenge has to be tested in the context of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suance of the notification dated January 2, 2002 is to make the deduction arbitrary, which is anathema to the Constitution. We are, therefore, inclined to hold that section 25A(1) of the Act read with the notification dated June 19, 1993 is not workable and, consequently, arbitrary and unreasonable. The addition of the third proviso to section 25A(1) of the Act has failed to remove the defects in section 25-A of the Bihar Finance Act. The vices noted by the division Bench in [ 1992 (11) TMI 254 - SUPREME COURT] (Larsen and Toubro Ltd. v. State of Bihar) still remain. The provision as amended, remains unworkable and arbitrary. Section 25A(1) of the Jharkhand Finance Act, 2001 and the notification dated June 19, 1993 are hence struck down as unconstitutional. Conclusion: The court held that Section 25A(1) of the Jharkhand Finance Act, 2001, read with the notification dated June 19, 1993, remained arbitrary and unworkable. The addition of the third proviso failed to rectify the defects. Consequently, Section 25A(1) and the notification were struck down as unconstitutional. The State and authorities were restrained from collecting tax u/s 25A from the assessment year commencing on Apri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to the extent the section provided for deduction from payment made on account of labour charges and other services towards sales tax, the provision must be held to be ultra vires entry 54 of the State List read with article 366(29A)(b) of the Constitution of India. This decision was challenged in the Supreme Court by the State of Bihar without success. 2.. The decision of the Patna High Court was rendered on July 19, 1999. On November 15, 2000, the Bihar Reorganisation Act, 2000 came into force and the State of Bihar was divided into re-constituted State of Bihar and the State of Jharkhand. Under section 85 of the Reorganisation Act, the State of Jharkhand had power to adopt the Bihar Finance Act and the Rules made thereunder. The Bihar Finance Act and all statutory forms, circulars, and notifications which were in force on November 15, 2000, were adapted by the State of Jharkhand. We may incidentally notice that the Bihar Legislature after the Reorganisation enacted a Validation Act and re-introduced section 25A by trying to remove the defects which formed the foundation of the judgment reported in [2000] 117 STC 41 (Larsen and Toubro Ltd. v. State of Bihar). We are not concerne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration, board, authority, co-operative society, undertaking or any other body constituted or formed under any Act and of any firm or association of persons and organisation." 4.. Thus, an attempt was made by introducing a proviso to take out of the purview of the Act, sales outside the taxing power of the State either as covered by the Central Sales Tax Act, or as forming part of a works contract. 5.. The petitioner has filed the present writ petition as amended, in effect, seeking a declaration that the section remains unenforceable notwithstanding the insertion of the third proviso, in view of the fact that on the day it was adapted by the State of Jharkhand, section 25A stood struck down in its entirety by the decision in [2000] 117 STC 41 (Larsen and Toubro Ltd. v. State of Bihar) and consequently, there was no section in existence to which the proviso in question could be added. Alternatively, it was contended that all the vices pointed out by the Patna High Court in the earlier decision making section 25-A of the Act unreasonable, arbitrary and unconstitutional, remain and consequently, the section was liable to be struck down by this Court even if it were to be held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 of the Central Sales Tax Act and the imposition of tax on amounts covered by labour charges and other services, in a works contract. But what is argued by learned counsel for the petitioner is that the division Bench had found substantial infirmities in the provision as can be seen from the judgment and it found the provision to be arbitrary and unreasonable and understood in the light of the reasons given by the division Bench, it must be taken that the section was struck down as a whole. We do see some force in this submission, especially when we advert to paragraphs 23, 32 39, 40 and 43 of the said judgment. In paragraph 39, the learned Judges have referred to the practical difficulties that may arise in giving effect to section 25A of the Act by pointing out the absence of any mechanism or guidelines in that section to enable a person to determine the amount. The court also noticed that the question whether a "sale" was one within the realm of inter-State trade or commerce or an outside sale or a sale in the course of import or export within the meaning of the Central Sales Tax Act, was a ticklish question which even the courts had difficulty in deciding and it will be very d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions that fell under the Central Sales Tax Act and transactions which are outside the competence of the State Legislature to tax in a works contract as explained in the Gannon Dunkerley case [1993] 88 STC 204 (SC). 10.. To the independent challenge made by the writ petitioner to section 25A of the Act, read with the third proviso introduced on January 2, 2002, a preliminary objection was raised by learned counsel for the respondents to the effect that the challenge to the validity of the section as sought to be raised, was barred by res judicata by virtue of the decision in [2000] 117 STC 41. The argument was that the validity of the very section was earlier challenged by the petitioner itself and the said challenge was not fully upheld by the division Bench of the Patna High Court, which in the abovesaid decision, only declared that the section would not hit transactions coming under the Central Sales Tax Act and the labour and other components involved in a works contract. It was, therefore, not permissible for the petitioner to reiterate now the contentions not accepted by the division Bench earlier. The contentions in that behalf were barred by res judicata. This was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dation of the decision in [2000] 117 STC 41 (Larsen and Toubro Ltd. v. State of Bihar) so as to make this section legislatively competent and enforceable. The occasion to test its validity in the context of the third proviso newly introduced has arisen for the first time only now. Therefore, we are of the view that the challenge of the petitioner to section 25A(1) of the Act with a particular reference to the third proviso thereto, cannot be shut out on the ground that the said challenge is barred by res judicata. We, therefore, overrule the contention raised in that behalf, by learned counsel for the respondents. 12.. We may also notice that there is a challenge to the notification dated June 19, 1993 issued in the year 1993, which has been adapted or which is to be deemed to be valid, by virtue of section 85 of the Bihar Reorganisation Act, 2000 and that challenge has to be tested in the context of the third proviso to section 25A(1) of the Act as a whole. That question arose for consideration only on the introduction of the third proviso by way of an amendment and that challenge also, therefore, cannot be said to be barred by res judicata by virtue of the decision in [2000] 117 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Joint Commissioner, who is authorised to issue such certificates under section 25A(1) of the Act. At this stage, we must point out that though the Joint Commissioner is to issue a certificate indicating the excludable part of the turnover as sales coming under sections 3, 4 and 5 of the Central Sales Tax Act, as sales coming under sections 14 and 15 of the Central Sales Tax Act, the amounts paid by a contractor to a sub-contractor who is a registered dealer and labour, service and other charges referred to therein, there is no machinery provided for ascertaining these amounts even on a rough basis by the Joint Commissioner. We must remember that the certificate is required to be issued even before payment under the contract has commenced. It is not provided that a fresh certificate has to be issued each time, as part to the bill is accepted by the principal contractor and the amount therein is disbursed to the works contractor. If it is understood as one-time certificate to be issued by the Joint Commissioner, then, obviously, it is to be issued immediately after the contract has been entered into and the whole calculation will depend upon a mere understanding of the terms of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regular monthly or quarterly returns and paying taxes on the amount received by it under the works contract, which, in its reckoning, becomes liable to tax under the State Finance Act. It was, therefore, not as if there was no adequate protection for the State in the matter of collecting tax due from a contractor. After all, section 25A(1) of the Act is intended to be a machinery to facilitate the collection of tax due to State and to protect the interests of the State in the matter of collection. From that point of view, a provision for deduction at source, as it were, could not be said to be beyond the power of the State. But when the provision is so indefinite and might lead to considerable difficulties, the court has necessarily to consider its validity in the context of those facts. Even in this case, though we passed an interim direction to the Joint Commissioner to issue a certificate in terms of the third proviso to section 25A of the Act by our order dated June 20, 2003, it was submitted at the time of hearing that no such certificate had been issued by the Joint Commissioner even at the time of the hearing of the writ petition. 17.. We do not find much merit in the conte ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
