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TMI Blog2016 (9) TMI 968X X X X Extracts X X X X X X X X Extracts X X X X ..... . (C) No.16 of 2013, nobody has appeared on behalf of respondents No. 4 to 7, to whom notices were sent in the year 2013. Although there is no clear report of their service, but learned counsel for the petitioner has candidly submitted that against them, no relief on the principal aspects is being sought and they had only been the proforma parties herein. Put in a nutshell, the basic assertion of the petitioners in these writ petitions is that while making payments of bills against their works contracts, deduction at source, of Value Added Tax ['VAT'] payable to the State of Meghalaya per Section 106 of the Meghalaya Value Added Tax Act, 2003 [hereinafter referred to as 'the Act'/ 'the Act of 2003'], could only be on the 'taxable turnover' after providing for deduction as per Section 5 thereof and not on the 'total value of the work contracts'. Though learned counsel appearing for the parties are more or less ad idem that the issues raised in these petition could be concluded by the ratio of Division Bench decision of the then Shillong Bench of Gauhati High Court in MES Builders Association of India and others vs. Union of India and others: 2010 (2) GLT 310 and we are inclined to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter noticing the scheme of the Act of 2003 and inconsistency likely to result from the existing Section 106 therein, the High Court read down the provisions so as to make them workable; and settlement of the respective bills ought to be in accordance with the said decision in MES Builders Association's case. The learned Advocate General appearing for the State of Meghalaya does not dispute the position that the requirements of Section 106 of the Act of 2003 are to be met with reference to the decision in MES Builders Association (supra). However, learned Advocate General would submit that any deduction at source shall nevertheless remain subject to the final assessment by the concerned Assessing Officer under the Act of 2003. Mr. R Deb Nath, learned counsel appearing for the other respondents in W.P. (C) No.126 of 2013 would, however, submit that they were rightly seeking to make payment to the contractor after providing for such deductions as are permissible under Schedule-IV A of the Act of 2003. The position of law, more or less indisputable, is that in the scheme of the Act of 2003, while the incidence of tax is specified in Section 3 thereof, the charging provision is Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds or in some other form) involved in a work contract for the transfer of the right to use any goods for any purpose; or (2) Every person responsible for paying sale price or consideration or any amount purporting to be the full or part payment of sale price or consideration in respect of any sale or supply of goods liable to tax under this Act to the Government or to a company, corporation, board, authority, undertaking or any other body by whatever name called, owned, financed or controlled wholly or substantially by the Government shall at the time of credit to the account of or payment to the payee of such amount in cash, by cheque, by adjustment or in any other manner whatsoever, deduct tax therefrom in the prescribed manner at the rate specified in the Schedule to the Act in respect of sale or supply of goods or transfer of the right to use any goods and in respect of work contract at the rate of 12.5% after allowing percentage of deduction from the work value as prescribed in Schedule IV-A appended to the Act: Provided that no deduction shall be made under this sub-section where the amount paid or credited by such person in any financial year does not exceed the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issible for transfer of property in goods (whether as goods or in some other form) involved in the execution of works contract which will constitute a sale in the course of inter-State trade or commerce or sale outside the State of Meghalaya or a sale in the course of import into or export out of the territory of India. Section 8 of the Act exempts the sale of goods listed in Schedule I appended to the Act subject to conditions and exceptions set out therein, etc. from payment of sales tax. On the other hand, the charging section, namely, Section 5 (2) clearly provides that the taxable turnover must be arrived at after deducting from the gross turnover (a) sales of goods declared as exempted under Section 8(i)(a), (b) sales of goods in the course of inter-State trade or commerce, (c) and sales outside Meghalaya, (d) sales in the course of import and export and (e) charges towards labour services and other like charges if they are ascertainable from the terms and conditions of the contract. As indicated earlier, Section 106 is the mechanism section and is ancillary to the charging section, namely, Section 5. When the liability on tax under Section 5 is on taxable turnover, the deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat for the purpose of deduction of the State sales tax at source on the value of the works contract, neither the Commissioner nor the contractee, who issues the Tax Deduction Certificate is required or entitled to take into account the fact that the works contract involves transfer of property in goods consequent upon an inter-State sale, an outside sale or a sale in the course of import. In other words, there is no express provision in the impugned section obligating the contractee or the Commissioner to take into account the deductions mandated by the charging section, namely, Section 5(2)(a), (b) and (c) of the Act. All that the impugned section says is that the contractee is to deposit towards the contractor's liability to State sales tax at 12.5% of such amount as he credits or pays to the contractors, regardless of the fact that the value of the works contract may include the value of inter-State sales, outside sales or sales in the course of import. In the view that we have taken, we have no hesitation to hold that the provisions of Section 106 are beyond the legislative competence of the State Legislature since the State Legislature is prohibited by Entry 92-A of the Union ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision from the vice of unconstitutionality and not "to be trigger-happy shooting at sight every suspect law" as that would amount to "judicial legicide". If, on giving one interpretation, the statute becomes unconstitutional and, on another interpretation, it will be constitutional, then this Court should prefer the latter on the ground that the legislature is presumed not to have intended to have exceeded its legislative powers. Sometimes to uphold the constitutional validity, the statutory provision has to be read down. Thus, the apparent contradiction between Section 106(2) and Section 5(2) of the Act can be harmonized by reading the words "of the taxable turnover referred to in Section 5(2) of the work value" after the numerals/figures "12.5%" in Section 106(2) of the Act. This restrictive interpretation has become imperative so as to save the impugned provision from becoming violative of Entry 92-A of the Union List read with Article 286 of the Constitution, which prohibits imposition of sales tax by the State Legislature upon declared goods of special importance, sales in the course of inter-State trade or commerce, sales outside State and sales in the course of import i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as indicated in paragraph 17 of the decision in MES Builders Association, the resultant position may lead to inconsistency in relation to clause (c) of Section 5(2) of the Act, because therein, two alternative methods for turnover of sales in relation to works contract are provided: one in the principal provision whereby, the charges towards labour, services and other like charges (subject to such conditions as may be prescribed) are to be deducted; and second, in the proviso whereby, such percentages of the value of works contract as specified in Schedule IV-A is to be deducted in the cases where the amount of charges towards labour, services and other like charges are not ascertainable from the terms and conditions of the contract. If it is provided that in the first instance, the percentage as prescribed in Schedule IV-A shall be deducted and thereafter, taxable turnover shall be worked out with deductions as per Section 5(2) of the Act, an inconsistency is likely to occur in the cases where the amount of charges towards labour, services and other like charges are indeed ascertainable from the terms and conditions of the contract. If the deduction had already been made per Sched ..... X X X X Extracts X X X X X X X X Extracts X X X X
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