9911796707
TMI Blog2010 (5) TMI 854X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 of 2009, CWJC Nos.13925, 14210, 14286, 14366, 15087, 15750 of 2007, 14411, 15105, 15256, 15813, 16386, 17061, 17062, 17253, 18769 of 2008, 1827, 1879, 1908, 3368, 4412, 6082, 681, 682, 699, 708 of 2009 and 5118 of 2010, CWJC Nos.9129, 10393 and 19038 of 2008, CWJC Nos.4305, 4898, 15105, 16364, 17373 of 2008 and 2795, 7124, 7767, 7768 and 9305 of 2009 CWJC Nos. 5202/2010, (For NHPC) CWJC Nos. 15046/2008 and 5860/2009, CWJC No. 6332 of 2009, CWJC No.13925 of 2007, CWJC Nos.6332 6725 of 2009, CWJC Nos.5861 10482 of 2009 (For Railways), CWJC No.14744 of 2008 (For NPCC), CWJC Nos.13585/2006, 17061/2008, 18092/2008, 1827/2009 and 6290 of 2009 (For NPCC), ,CWJC Nos.2580, 11878, 15506, 16887, 9344, 18196 of 2008 and 2795, 6725 of 2009 , CWJC Nos. 14210, 3954, 5413, 5495, 5600, 7402, 7470, 9099, 9133, 9236, 10072, 11846, 12087, 13571, 14744, 15105, 16020, 8016 of 2008 and 3513, 3515, 4715, 5860, 9307, 9309 of 2009, CWJC No.1518 of 2009 , CWJC No. 14411 17062 of 2008 (For NBCC), CWJC No.10393 of 2008 1505, 3365 of 2009 CHIEF JUSTICE THE HON BLE MR JUSTICE MIHIR KUMAR JHA Dr. Debi Pal, Senior Advocate Mr. S.D.Sanjay, Advocate, Mr. Raj Kishore Prasad, Advocate Mr. Tej Bahadu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Bihar VAT and, hence, it is not liable to pay any tax as the petitioner is entitled to input tax credit on the amount of tax paid on the purchase of inputs in the State of Bihar for use in the execution of the works contract. 4. It is averred that the VAT Act came into force with effect from 01.04.2005. The said Act provided for registration of dealers dealing in the items covered by the extent of eligibility under the Act. Section 3 of the VAT Act provides for charging of tax liability from the dealers including the works contractor and others. A reference has been made to Sections 4, 6, 7 16 to explain the scheme of the VAT Act. A reference has also been made to Chapter VI of the VAT Act which provides for filing of return by the registered dealers under the Act, the assessment and re-assessment of the dealers for finalization of the actual tax liability under the Act. It is asserted that Section 41 of Chapter VI of the VAT Act provides for advance recovery of tax by the government department or agency from the bills raised by the dealers against execution of the works contract assigned to him by such department as per the rates of tax liability prescribed under the VAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the items on which the State Legislature is not entitled in law to impose. 6. Dr. Devi Pal, learned Senior Counsel for the petitioners, has raised the following contentions: (a) That the determination as conceived under Section 41 of the Act cannot be made when the principal is making the payment of the bill with the principal contractor which is made at the pre-assessment stage in the absence of any mechanism or device for such process of determination and without proper determination by way of adjudication, the value of the transfer of property in goods involved in the execution of the works contract cannot be made. In fact, the principal is obliged to deduct sales tax at the rate of 4% on the entire bill or invoice and many of the items which do not form part of the components of the consideration for the goods which are transferred in the execution of the works contract and on which the State legislature is not competent to impose any tax are also included in the said composite price. No authority can impose tax without the sanction of law and Section 41 of the VAT Act stipulates collection of tax by way of advance tax which cannot be imposed by the State legislature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which provides the same has to be declared ultra vires as it travels beyond the constitutional provisions of the State Legislature inasmuch as imposition or deduction of tax on that portion of the gross amount of the bill or invoice which does not represent sale within the State of Bihar under Entry 54 of List II of the Seventh Schedule. (g) As per Section 16 of the VAT Act, input tax credit is claimed by a registered dealer, subject to such conditions and restrictions as may be prescribed, on sales of goods under certain circumstances. When a contractor purchases the goods from the market, he pays the input tax in Bihar and when he transfers the goods in the course of execution of the works contract to the principal which is to be used in the execution of a works contract, he is entitled to deduct from the input tax which he has paid for the purchase of the articles. He is liable to pay tax in terms of Section 13 (2) of the VAT Act but there is no machinery or mechanism for determining the amount which the principal is to pay when the goods have been purchased by the contractor on payment of input tax and transfer it in the execution of a works contract and, hence, the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said decision had a different contour and character and did not provide for any exclusion. (v) Section 41 is a self-contained provision and gets supplemented by Rule 29 of the VAT Rules as a result of which adequate guidance is provided which nullifies the submission that tax is imposed without legislative competence. (vi) There cannot be a full fledged assessment at the stage of deduction of tax at source and, therefore, the role ascribed to the Deputy Commissioner serves as a machinery provision to protect the interest of the assessee as the said authority has been clothed with the power to issue a certificate keeping in view the prescriptions in Section 41 and Rule 29 of the Act and it is open to the contractor to show materials that certain items are not excisable to tax. Thus, the decision rendered in Larson Toubro Limited (supra) by the Jharkhand High Court which has persuasive value, not being a binding precedent, should not be followed. (vii) The distinction between the earlier provision which commenced with the non-obstante clause and the present one has to be appreciated in proper perspective and on being appositely appreciated, it would be quite clear that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person from whose bill or invoice such deduction has been made. (5) If any person contravenes any or all of the provisions of sub-sections (1), (2), (3) and (4), the prescribed authority shall after giving a reasonable opportunity of being heard, by order in writing direct, that such person shall pay by way of penalty, a sum not exceeding twice the amount of tax deducted or deductible under sub-section (1). (6) The provisions of section 27 for recovery of any amount of tax due from a dealer shall, mutatis mutandis, apply for recovery of any amount of tax deducted and or any penalty imposed under this section but not deposited into Government treasury. (7) Notwithstanding any judgment, decree or order of any court, Tribunal or authority any deduction made purporting to be part or full amount of tax payable on the sale of goods from any bill or invoice raised by the works contractor by any person on or after 1st April, 1984 shall be adjusted against the amount of tax finally assessed or determined as being payable by the concerned works contractor and any amount deducted in excess to amount so assessed or determined shall be refunded in accordance with the provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of prima facie adjudication subject to the final determination of the rights at the stage of assessment of the tax liability. While the result of the adjudication in a regular assessment proceeding can be challenged by way of appeal/revision or reference, as provided under the Finance Act, summary adjudication made under section 25-A may be made final (subject, of course, to the writ jurisdiction of the High Court under articles 226/227 of the Constitution). Thereafter, the Bench noted the submissions of the learned Advocate General in State of Kerala v. Builders Association of India [1997] 104 STC 134 (SC) and held thus: ― 42. It has been pointed out that in terms of Notification S.O. No.214 dated June 19, 1993 (supra) only in cases covered by clause 2(a) where earthwork accounts for more than 33 per cent of the total value of the contract and is so mentioned in the estimates, that the deduction is to be made at 2 per cent but here also only the amount in excess of 33 per cent and not the whole of the amount of earthwork is excluded. In all other types of civil contract, described in sub-clause (b), deduction is to be made at the uniform rate of 2 per cent. In other c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce Act to the extent they relate to transfer of property in goods taking place in course of inter-State trade or commerce or a sale outside the State or in the course of import within the ambit of sections 3, 4 and 5 of the Central Sales Tax Act, or the ―declared goods‖ within the meaning of sections 14 and 15 of the said Act, must be held to be ultra vires entry 54 of the State List read with entry 92A of the Union List and article 286 of the Constitution. Further, to the extent they provide for deduction from payment made on account of labour charges and other services towards sales tax, the provisions must be held to be ultra vires entry 54 read with article 366(29A)(b) of the Constitution.‖ 10. At this juncture, it is worth noting that the said provision commenced with `Notwithstanding anything contained in Section 26 . Thus, it had a non-obstante clause. Section 41 commences with `Subject to Section 6 . In this backdrop, to appreciate both the provisions, a distinction between the non obstante clause and `subject to has to be drawn. 11. In A. V. Fernandez v. The State of Kerala, AIR 1957 SC 657(V 44 C 99 Oct.), it has been held as follows: ―36. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of limiting the ambit and scope of the operative part of the enactment. The result was that all immoveable properties which when the Defence of India Act expired were subject to any requisition effected under the Defence of India Act and Rules thereunder were to continue to be subject to requisition until the expiry of the Ordinance. 13. In V. C. Shukla v. State through C.B.I. AIR 1980 SC 962, it has been held thus: - 19. It was then contended by the learned counsel for the appellant that the non obstante clause should be interpreted according to the salutary principles laid down by this Court. In support of his submission, he relied on a decision of this Court in the case of Aswini Kumar Ghosh v. Arabinda Bose, 1953 SCR 1, where Sastri, C.J. observed as follows: It should first be ascertained what the enacting part of the section provides on a fair construction of the words used according to their natural and ordinary meaning, and the non obstante clause is to be understood as operating to set aside as no longer valid anything contained in relevant existing laws which is inconsistent with the new enactment. ...... . .. The true scope of the enacting clause must, as we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of Statutory Interpretation', 9th Edition by Justice G.P. Singh - Chapter V, Synopsis IV at pages 318 319] 47. Normally the use of phrase by the Legislature in a statutory provision like 'notwithstanding anything to the contrary contained in this Act' is equivalent to saying that the Act shall be no impediment to the measure [See Law Lexicon words 'notwithstanding anything in this Act to the contrary']. Use of such expression is another way of saying that the provision in which the non-obstante clause occurs usually would prevail over other provisions in the Act. Thus, non-obstante clauses are not always to be regarded as repealing clauses nor as clauses which expressly or completely supersede any other provision of the law, but merely as clauses which remove all obstructions which might arise out of the provisions of any other law in the way of the operation of the principle enacting provision to which the non-obstante clause is attached. [See Bipathumma Ors. v. Mariam Bibi; 1966(1) Mysore Law Journal page 162 and at page 165] 15. The term `subject to came to be interpreted by the Apex Court in State of Kerala v. M.K. Kunhikannan Nambiar Manjeri M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Board dated 28.6.1977, declining to implead respondents No. 3 and 4 (which stood confirmed in Revision) concludes the matter against respondents Nos. 3 and 4. 16. In M.V. Shankar Bhat Anr. V. Claude Pinto (D.) by L.Rs. and others, AIR 2004 SC 636, the view expressed is as follows: ― 31. When an agreement is entered into subject to ratification by others, a concluded contract is not arrived at. Whenever ratification by some other persons, who are not parties to the agreement is required, such a clause must be held to be a condition precedent for coming into force of a concluded contract. 32. The word 'subject to' has been defined in Black's Law Dictionary, Fifth Edition, at page 1278, inter alia, as subservient, inferior, obedient to; governed or affected by; provided that; provided; answerable for‖. In Collins' English the words 'subject to' has been stated to mean as : under the condition that : we accept, subject to her agreement . 33. The said agreement for sale, therefore, was not enforceable in a Court of law. 17. In Bar Council of India v. High Court of Kerala AIR 2004 SC 2227, it has been held as under: - ― 31. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery person, responsible for making any payment in discharge of any liability on account of valuable consideration payable in respect of transfer of property in goods (whether as goods or in some other form) vested in the execution of a works contract shall be lawfully competent to deduct an amount at the rate or rates, not exceeding four per cent, to be specified by the State Government, in a notification published in the Official Gazette, purporting to be a part or full amount of tax payable on the sale of such goods from every bill or invoice raised by the works contractor as payable by the person and no such payment or discharge of any such bill or invoice raised by a works contractor shall be made without deduction as aforesaid. Explanation: For the purposes of this section, the ―person in this section shall include all officers and authorities of the Central or the State Government or of a company, corporation, board, authority, co-operative societies, undertaking or any other body constituted or formed under any Act and of any firm or association of persons and organisation. Provided that, the State Government may prescribe the conditions subject to which no such deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been made and such certificate shall be deemed to be a valid discharge of liability in terms of provisions of sub-section (9) of section 24 to the extent of amount of deduction made under sub-section (1). (6) If any person contravenes any or all of the provisions of sub-sections (1), (2) and (5), the prescribed authority shall, after giving a reasonable opportunity of being heard, by order in writing direct that such person shall pay by way of penalty, a sum not exceeding twice the amount of tax deductible or deducted and not deposited in the Government Treasury. (7) The provisions of sections 39 and 47 shall, mutatis mutandis, apply for recovery of any amount of tax deducted but not deposited into the Government Treasury or any penalty imposed under this section. 20. Rule 29 of the VAT Rules reads as follows: ―29. Deduction of Tax at Source From the Bills of Work Contractors.- 1. The deduction referred to in sub-section (1) of section 41 shall be made at the rate notified in this behalf from time to time by the Government. 2. Such deduction shall be made from payments purporting to be the full or part payment of the sale price, being made in respect of all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Commissioner in this behalf in case of the office of the person making the deduction being situated outside the State of Bihar.‖ Provided that no cheque or draft, as aforesaid, shall be accepted by the concerned Circle In-charge unless the same is accompanied by the statement in Form RT-VI. (ii) Where the cheque or draft is on a bank other than a branch of the Reserve Bank of India or the State Bank of India or the bank specially authorized in this behalf, it shall also include an additional amount equal to the actual collection charges. (iii) Upon receipt of the cheque or draft specified in sub-clause (i) the concerned Circle-In-charge shall deposit the same in the concerned Treasury or the Bank, as the case may be. (iv) After the deposit is made, the portions of the challan marked ―Triplicate and ―Quadruplicate shall be handed over to the contractor from whose bills the deduction has been made. 4.(i) Every person deducting tax in accordance with sub-section (1) of section 41 shall, at the time of payment, whether in part or in full, issue to the person from whom such deduction is made, a certificate in Form C-II and furnish fully and correctly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssociation of India v. Union of India, [1989] 73 STC 370 (SC). In the said case, the Apex Court considered the scope and ambit of the legislative power to impose the said tax. Be it noted, in the Builders Association of India (supra), the Court was dealing with the contention that it was not open to the States to ignore the provisions contained in Article 286 of the Constitution and the provisions of the Central Sales Tax Act, 1956, while making assessment under the sales tax laws passed by the Legislatures of the States. Their Lordships had stated that Sales Tax Laws passed by the Legislatures of the States levying taxes on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract are subject to the restrictions and conditions mentioned in each clause or sub-clause of Article 286 of the Constitution. Their Lordships have further opined as follows: ― It may be that by virtue of sub-clause (b) of clause (3) of article 286 it is open to Parliament to impose some other restrictions or conditions which are not generally applicable to all kinds of sales. That however cannot make the other parts of article 286 inapp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned in items Nos. (vii) and (viii), the cost of establishment of the contractor as well as the profit earned by him to the extent the same are relatable to supply of labour and services will have to be excluded. The amounts so deductible would have to be determined in the light of the facts of a particular case on the basis of the material produced by the contractor. The value of the goods involved in the execution of a works contract will, therefore, 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 the 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 in which is not transferred in the course of execution of a works contract; and (f) cost of establishment of the contractor to the extent it is relatable to supply of lab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue of the goods involved in the execution of the works contract. It must, however, be ensured that the amount deductible under the formula that is prescribed for deduction towards charges for labour and services does not differ appreciably from the expenses for labour and services that would be incurred in normal circumstances in respect of that particular type of works contract. Since the expenses for labour and services would depend on the nature of the works contract and would not be the same for all types of works contracts, it would be permissible, indeed necessary, to prescribe varying scale for deduction on account of cots of labour and services for various types of works contracts.‖ 23. At this juncture, it is seemly to note that the State Legislature of Orissa brought in by way of amendment Section 13-AA of the Orissa Sales Tax Act, 1947 which dealt with deduction of tax at source from the payment of works contract. The High Court of Orissa in Brajendra Mishra v. State of Orissa, (1994) 92 STC 17 (Orissa) had struck down the said provision being grossly discriminatory and confiscatory in nature. It also held that the amplitude of the existence of tax had been wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a works contract has to be determined after making these exclusions from the value of the works contract. After so holding, their Lordships in paragraph 9 have held thus: ―9. With this background, we turn to analyse Section 13AA as it presently stands. By reason of sub-section (1) thereof, the person responsible for paying any sum to any contractor for carrying out any works contract which involves the transfer of property in goods (now, for convenience, referred to as ―the owner) is obliged to deduct, at the time of credit of that sum to the account of the contractor or payment thereof to him, an amount ―towards sales tax equal to four per cent of such sum in respect of the works contract, provided the value of the works contract exceeds rupees one lakh. The deduction, therefore, is towards the sales tax that is payable to the State upon the works contract and it is of four per cent of the value of the works contract. Sub-section (2) requires the owner to grant to the contractor a certificate in respect of such deduction. By reason of sub-section (3), the amount that the owner has deducted must be deposited by him into the Government treasury within a week o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale, an outside sale or a sale in the course of import. The owner is required by Section 13-AA(1) to deposit towards the contractors liability to State sales tax four per cent of such amount as he credits or pays to the contractor, regardless of the fact that the value of the works contract includes the value of inter-State sales, outside sales or sales in the course of import. There is, in our view, therefore, no doubt that the provisions of Section 13-AA are beyond the powers of the State legislature for the State legislature may make no law levying sales tax on inter-State sales, outside sales or sales in the course of import. 25. In Nethpa Jhakri Joint Venture (supra), the Apex Court was dealing with the validity of Section 12-A of the Himachal Pradesh General Sales Tax Act (24 of 1968) and Rule 31-A of the Rules framed under the said Act which provided for deduction of an amount from the bills or invoices raised by the works contractor purporting to be tax payable on the transfer of goods and invoices. Their Lordships referred to the decision in Steel Authority of India Limited (supra) and held as follows: ―4. A bare perusal of the two provisions will make it clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that the transaction was one of inter-State character. Its emphasis was on the validity of the provision vis-a-vis inter-State transactions. There was no necessity of any reading down as there was no dispute in the case at hand relating to intra-State sales. The question of appellant having liability to pay purchase tax was also not a relevant factor for determination of the basic question regarding validity of Section 8-E. The nature of a transaction cannot be decided on the basis of the provisions of a taxation statute. It has to be factually examined. The High Court instead of focussing on the factual aspects dealt with issues not relevant, and that too giving clearly indefensible interpretations. The factual aspects should have been asked to be dealt with by the authorities. By directing the authorities to do it after laying down the law, which as noted down was not the correct position in law, would really serve no purpose. On the facts of the case, there is no need to decide the question relating to validity of Section 8-E of the Act except stating that the provision is subject to what has been stated in Steel Authority's case (supra) and M/s Nathpa Jhakri's case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral or State Government or of a company, corporation, 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 organization. The said amendment that was made was treated as an attempt by the Court 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 an inter-State sale. 30. The Division Bench referred to the earlier decision rendered by the Patna High Court and came to hold as under: ―15. Of course, one way of getting out of it would be to say that the Joint Commissioner would simply accept any declaration that may be made by the principal contractor as regards the excludable components involved in a works contract. But as pointed out by learned counsel for the petitioner, even this may become impossible in the sense that the parties could not say with certainty that a particular sale of goods involved in a works contract would only be a local sale within the competence of the State Legislature to tax and would not be an outside sale or inter-State sale. Most of the works con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was only an officer subordinate to the Joint Commissioner. Issuance of a certificate under the third proviso to section 25A (1) of the Act is entirely different from the process of assessment to be completed by the assessing officer. It is not as if the assessing officer cannot go behind the certificate or beyond the certificate issued by the Joint Commissioner and complete the assessment based on the actual transactions disclosed before him at the time of assessment. It is not reasonable to expect that an assessing authority will complete the assessment not based on the materials available before him at the time of assessment, but would be guided by a certificate issued on estimate by the Joint Commissioner.‖ After so stating, their Lordships expressed the view that Section 25A(1)of the Act is not workable, arbitrary and unreasonable and 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, as has been pointed out by the Patna High Court in Larsen and Toubro Ltd. (supra). 31. In this context, it would not be out of place to quote a passage from Ganga Sugar Corpn. Ltd. v. State of U.P., ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the High Court in VTP Constructions v. State of Chhattisgarh Ors. [2006] 145 STC 185 referred to the decision rendered in Bhawani Cotton Mills Ltd. (supra) and discussed the controversy in paragraphs 9 and 10 and held thus: ―Thus, there can be no doubt, upon a plain interpretation of section 35 of the Adhiniyam, that section is enacted for the purposes of deduction at source of the State sales tax that is payable by a contractor on the value of a works contract. For the purposes of the deduction, the person letting out a works contract is entitled (sic) to take into account the fact that the works contract involves transfer of property in goods consequent upon of an inter-State sale, an outside sale or a sale in the course of import. In other words, the person letting out a works contact is required by sub-section (1) of section 35 of the Adhiniyam to deposit towards the contractor s liability to State sales tax of 2 per cent of such amount as he pays to the contractor, regardless of the fact that the value of the works contract includes the value of inter-State sales, outside sales or sales in the course of import. Thus, it is quite clear that the State Legislature in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urce of the State Sales Tax that is payable by the contractor on the value of a works contract. For the purposes of the deduction neither the owner nor the Commissioner who issues to the contractor a certificate under Section 13-AA (5) is entitled to take into account the fact that the works contract involves transfer of property in goods consequent upon of an inter-State sale, an outside sale or a sale in the course of import. The owner is required by section 13-AA(1) to deposit towards the contractor s liability to State Sales tax four per cent of such amount as he credits or pays to the contractor, regardless of the fact that the value of the works contract, includes the value of inter-State sales, outside sales or sale in the course of import. There is, in our view, therefore, no doubt that the provisions of section 13-AA are beyond the powers of the State Legislature for the State Legislature may make no law levying sales tax on inter-State Sales, outside sales or sales in the course of import.‖ After so stating, their Lordships opined thus: ―Section 13-AA should have been precisely drafted to make it clear that no tax was levied on that part of the amount credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales made outside the State of Madhya Pradesh, sales made in the course of inter-State trade and commerce and sales made in the course of export and import of goods. There are also no guidelines whatsoever in section 35A of the Act that while issuing a certificate in writing in the prescribed form in the prescribed manner by the prescribed authority, sales made outside the State of Madhya Pradesh, sales made in the course of inter-State trade and commerce and sales made in the course of export and import of goods will be excluded from the value of contract for the purpose of two per cent deduction at source. Thus, even if section 35 is read along with section 35A of the Act as suggested by Mr. Sanjay Yadav, section 35 of the Act, which does not provide for exclusion of the aforesaid categories of sales on which no sales tax can be levied by the State Legislature under entry 54 of List II of the Seventh Schedule to the Constitution of India, cannot be saved. 36. A Division Bench of this Court in Larsen and Toubro Ltd. (supra), while holding Section 25-A of the Bihar Finance Act, 1981 as ultra vires, has held that the said provision is ultra vires to the extent it relates to tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is relatable to the supply of labour and services, and goods or transactions exempted under Sections 6 or 7 of the Act. 39. The gravamen of submission of Dr. Pal is that there is no machinery provision and, in fact, it has been couched in such a manner that there is no determination and there can be collection of tax in respect of certain items which would be beyond the legislative competence of the State Legislature. 40. In this connection, we may refer with profit to the decision rendered in Cibatul Limited, P.O. Atul v. Union of India, (1979) ELT 407 wherein the High Court of Gujarat has held thus: ―It is true that when Parliament levies a tax, it also provides machinery for collecting it. Ordinarily, if the levy of a tax is constitutionally valid, the machinery provided to make it effective does not suffer from a constitutional vice. However, when, under the Constitution, the Parliament has legislative competence to levy a particular tax and when it does so, it cannot competently enact the machinery section which in the name of collecting that particular tax collects something else which is not within the legislative competence of Parliament to levy or collect. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as to effectuate the charging sections. The above principle was followed by this Court in Gursahai Saigal v. Commissioner of Income-tax, Punjab, [1963] 48 I.T.R.1(S.C.): [1963] 3 S.C.R.893, in which it was observed thus: ― Now it is well-recognised that the rule of construction on which the assessee relies applies only to a taxing provision and has no application to all provisions in a taxing statute. It does not, for example, apply to a provision not creating a charge for the tax but laying down the machinery for its calculation or procedure for its collection. The provisions in a taxing statute dealing with machinery for assessment have to be construed by the ordinary rules of construction, that is to say, in accordance with the clear intention of the legislature which is to make a charge levied effective.‖ In deciding Gursahai Saigal s case the court followed the observations made by the Privy Council in Commissioner of Income-tax v. Mahaliram Ramjidas [1940] 8 I.T.R. 442(P.C.):AIR 1940 P.C. 124 and by the House of Lords in Whitney v. Commissioners of Inland Revenue, [1926] A.C.37. In the case of Mahaliram Ramjidas, the Privy Council observed: ― Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conomic regulation cases, there are good reasons for judicial self-restraint if not judicial deference to legislative judgment. The Legislature after all has the affirmative responsibility. The courts have only the power to destroy, not to reconstruct. When these are added to the complexity of economic regulation, the uncertainty, the liability to error, the bewildering conflict of the experts, and the number of times the judges have been overruled by events-self-limitation can be seen to be the path to judicial wisdom and institutional prestige and stability. The court must always remember that ―legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry that exact wisdom and nice adaption of remedy are not always possible and that ―judgment is largely a prophecy based on meager and uninterpreted experience‖. Every legislation particularly in economic matter is essentially empiric and it is based on experimentation or what one may call trial an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xist, the court does well not to impose too rigorous a standard of scrutiny lest all local fiscal schemes become subjects of criticism under the equal protection clause.‖ 46. We have referred to the aforesaid decisions to understand the real distinction between a non obstante clause and `subject to . The Legislature has clearly excluded the taxes that are not imposable by the State Legislature subject to Section 6. That apart, sub-section (4) of Section 41 of the Act lays a postulate that the deduction referred to in sub-section (1) shall be made in the manner prescribed. Rule 29 of the Rules deals with the prescribed procedure. It clearly lays down that no deduction shall be made on account of payment pertaining to certain items which are really not excisable to tax by the State Legislature. Section 41(2)(b) of the Act lays down that if the dealer produces a certificate issued from the Deputy Commissioner, Commercial Taxes or the Assistant Commissioner, Commercial Taxes or the Commercial Taxes Officer, in-charge of the concerned Circle to the effect that the payment or any part thereof relates to such transfer of property in goods (whether as goods or in some other form) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion which has been provided in the Act and the Rules. The Deputy Commissioner, Commercial Taxes or the Assistant Commissioner, Commercial Taxes or the Commercial Taxes Officer, in-charge of the concerned Circle, have been authorized to give certificates which part is taxable and which is not. We really perceive no difficulty as to how a contractor cannot really satisfy anyone or the said authorities to have a prima facie view on the same. Needless to emphasize, the certificate issued would be subject to assessment. The colossal grievance that has been put forth by the learned Senior Counsel for the petitioners that the provision is unworkable as well as arbitrary cannot be given acceptation as there is adequate mechanism and the provision is reasonably and acceptably workable. What is to be seen is whether the provision in its very nature imposes such tax what is not permissible to be levied by the State Legislature. The dictum in Steel Authority of India Ltd. (supra), Neptha Jhakri Jt. Venture (supra) and M/s Bhawani Cotton Mills Ltd. (supra) are distinguishable as the provisions under assail were different. 49. In view of our preceding analysis we conclude and hold that Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
