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TMI Blog2011 (9) TMI 883X X X X Extracts X X X X X X X X Extracts X X X X ..... honourable Supreme Court in Gannon Dunkerley's case. WP allowed. - W.P. (C) No. 4377 of 2008 - - - Dated:- 15-9-2011 - GOPALA GOWDA V. C.J. AND MAHPATRA B.N. J. V. Raman, Senior Advocate, M/s. Satyajit Mohanty, R.R. Swain, P.K. Muduli and M. Banaji for the petitioner R.P. Kar, Standing Counsel, for the respondents JUDGMENT This writ petition has been filed with a prayer to declare section 11(2)(c) of the Orissa Value Added Tax Act, 2004 (for short, the OVAT Act ) as well as rule 6(e) of the Orissa Value Added Tax Rules, 2005 (for short, the OVAT Rules ) unworkable for the reasons stated in the writ petition. Mr. V. Raman, learned senior advocate appearing on behalf of the petitioner, submits that while section 11(2)(c) of the OVAT Act provides for deduction towards labour, service charges and other like charges, rule 6(e) of the OVAT Rules provides for deduction towards labour and service charges only from the gross turnover to arrive at the taxable turnover in respect of works contract. Both these provisions, do not provide for other deductions prescribed by the honourable Supreme Court in the case of Gannon Dunkerley and Co. v. State of Rajasthan (1993] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct to. The law itself except in certain situations does not envisage vacuum. On rival contentions raised by the parties, the only question that falls for consideration by this court is as to whether section 11(2)(c) read with rule 6(e) should provide for various deductions as set out/prescribed by the honourable Supreme Court in Gannon Dunkerley's case [1993] 88 STC 204 (SC) for the purpose of determining taxable turnover in case of a works contract. To deal with the above question, it is necessary to know what is contemplated in section 11(2)(c) of the OVAT Act and rule 6(e) of the OVAT Rules. The said provisions are extracted below:- 11. Levy of tax on sale:- (1) ...... (2) For the purposes of sub-section (1), the expression 'taxable turnover of sales' shall mean, in relation to a dealer liable to pay tax on sale of goods under sub-section (1) of section 10, that part of the gross turnover of sales during any period which remains after deducting therefrom:- (a) and (b) ... (c) in case of turnover of sales in relation to works contract, the charges towards labour, services and other like charges subject to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nourable Supreme Court held that the value of goods involved in execution of works contract will have to be determined by taking into account the value of the entire works contract and deducting therefrom the charges towards labour and services which would cover:- (a) labour charges for execution of the works; (b) amount paid to a sub-contractor for labour and services; (c) charges for planning, designing and architect's fees; (d) charges for obtaining on hire or otherwise machinery and tools used for execution of the works contract; (e) cost of consumables such as water, electricity, fuel, etc., used in the execution of the works contract the property which is not transferred in the course of execution of a works contract; (f) cost of establishment of the contractor to the extent it is relatable to supply of labour and services; (g) other similar expenses relatable to supply of labour and services; (h) profit earned by the contractor to the extent it is relatable to supply of labour and services. The amounts deductible under these heads will have to be determined in the light of the facts of a particular case on the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o labour and service charges only. Therefore rule 6(e) must provide various deductions set out/prescribed by the Constitution Bench of the honourable Supreme Court in Gannon Dunkerley's case [1993] 88 STC 204 (SC). We are unable to accept the contention of Mr. Kar that in view of the fact that various deductions are provided by the Constitution Bench of the honourable Supreme Court in Gannon Dunkerley's case [1993] 88 STC 204 (SC) neither the taxing authority nor the assessee-dealer faces any difficulty in allowing/availing of such deductions from the gross turnover irrespective of the fact that such deductions are not provided in rule 6(e) of the OVAT Rules. Law is well-settled that in the field of taxation, law must be certain, clear and unambiguous. In the matter of taxation, either the statute or the Rules framed under the statute must cover the entire field. The honourable Supreme Court in the case of Govind Saran Ganga Saran v. Commissioner of Sales Tax [1985] 60 STC 1 (SC), held as under:- ...The first is the character of the imposition known by its nature which prescribes the taxable event attracting the levy, the second is a clear indication of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e courts in India which is the mandate of article 141 of the Constitution of India. In the said judgment, this court further held that section 2(e) and section 29(2)(e) of the Orissa Sales Tax Act, 1947 make it clear that Rules are contemplated under the Act for the purpose of ascertaining deduction in the case of taxable turnover in respect of works contract ; but necessary Rules have not been framed. In the absence of any statutory prescription for calculation of taxable turnover the Act remains unworkable. Therefore, absence of provisions for various deductions in section 11(2)(c).and rule 6(e) in line with the judgment of the honourable Supreme Court in Gannon Dunkerley's case [1993] 88 STC 204 (SC) certainly creates uncertainty, so far levy of tax on works contract is concerned. To avoid such uncertainty, the State Government is directed to amend rule 6(e) to bring in line with judgment of the honourable Supreme Court in Gannon Dunkerley's case [1993] 88 STC 204 (SC) vis-a-vis section 11(2)(c) of the OVAT Act. Till such amendment is made to rule 6(e) of the OVAT Rules, the Commissioner of Sales Tax is directed to issue suitable instructions to all the taxing authori ..... X X X X Extracts X X X X X X X X Extracts X X X X
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