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TMI Blog2021 (12) TMI 523X X X X Extracts X X X X X X X X Extracts X X X X ..... in extenso and burden the judgment with all the citations. Reference to the judgment of the Supreme Court in UNION OF INDIA ORS. VERSUS VKC FOOTSTEPS INDIA PVT LTD. [ 2021 (9) TMI 626 - SUPREME COURT] would be sufficient to appreciate the law on constitution of a proviso in different circumstances. Proviso was dealing with the contractors executing works contracts of government, KWA and the local bodies. The contractors covered by the proviso, in the considered view of this Court, would continue to be relevant inasmuch as subclause (ii) does not include the contractors who are before the Court in the batch of appeals. The proviso, in the case on hand, could be interpreted both as a situation providing for the excepting of the application of subclause (ii) and/or, as noted by the Supreme Court, can also be treated as an independent provision. Either way, if it is construed as excepting something out of the enactment or qualify something enacted in subclause (ii) then the proviso is independently having scope and applicability in respect of contractors executing government works. The argument of the appellants, though not intended to import something into the enacting part, is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the draftsman or want of imagination in not providing for conceivable situations, or due to an inept use of language. Lack of legislative simplicity or clarity leads to interpretative complexity and confusion. I am the parliamentary draftsman I compose the Country s laws, And of half the country's litigation I am undoubtedly the Cause. A Cynic describes the Draftsman as assigning the above lines to himself and expects the legal profession to be grateful to such Draftsman. 2. The circumstances relevant to the above narrative are stated thus: Writ Appeal No.710/2015 has been treated as a representative appeal for the purpose of factual narration and legal grounds raised by the appellants. This Court, after perusing the pleadings in the other matters, is of the view that referring to the details, circumstances and grounds of challenge in W.A. No.710/2015 filed against W.P.(C) No.24838/2013 would be sufficient for disposing of the batch of appeals. 2.1 Chapter III of Act 2003 deals with incidence and levy of tax. Section 6 provides for levy of tax on sale or purchase of goods. Section 7 provides for trade discount etc, on deemed to be sale in certain cases. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an amendment is briefly stated hereunder: The State Legislature through Finance Act, 2008 introduced an amendment to clause (a) of Section 8 resulting in the substitution of sub-clauses (i) and (ii), and the proviso was introduced. Through Finance Act, 2009 the State Legislature, by way of substitution, amended Section 8(a)(ii) alone and the proviso remained intact. Thereby, Section 8 as stands after amendment through Finance Act, 2009 reads thus; 8. Payment of tax at compounded rates:- Notwithstanding anything contained in Section 6- (a) (i) any works contractor not being a dealer registered under the provisions of the Central Sales Tax Act, 1956 (Central Act 74 of 1956), and who is not an importer may, at his option, instead of paying tax in accordance with the provisions of the said section, pay tax at three per cent of the whole contract amount; (ii) any works contractor not falling under clause (i) above may, at his option, instead of paying tax in accordance with the provisions of the said section, shall pay tax at three per cent of the contract amount after deducting the purchase value of goods excluding freight and gross profit element consigned into the Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payable by the other works contractors under sub-clause (ii). The proposed recovery of compounded tax is contrary to the stipulated rate of compounded tax at 3% in sub-clause (ii). 3.2 The petitioner contends that the Kerala Finance Act, 2009 stipulated the rate of tax payable under clause (ii) at 3% on works contracts awarded to private contractors without making any amendment to proviso to sub-clause (ii) of Section 8(a) of Act 2003. The result of not making amendment to proviso is that contractors executing the works awarded by Government, KWA and other contractors have become liable to pay 4% tax which is higher than the tax payable by Government of India awarded contractors, private contractors, Airport Authorities of India contractors etc. This differential rate of tax payable by the contractors executing government works and the contractors executing works contracts entrusted by other agencies is hit by Article 14 of the Constitution of India. 3.3 The respondent filed counter and justified the levy and demand of Value Added Tax (VAT) under the proviso to sub-clause (ii) of Section 8(a) of KVAT Act for the works contracts awarded by the State Government, KWA or local a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the other hand, the Legislature, in its wisdom and purpose of operating compounding rate of tax, continued to retain proviso to Section 8(a)(i) and (ii) of the Act. 3.5 The batch of cases has been disposed of by the learned Single Judge through the common judgment dated 20.12.2014. 4. We have heard learned Senior counsel Mr Raju Joseph, Adv. Harishankar for appellants and learned Special Government Pleader Mr Mohammed Rafiq for respondents. 5. The learned counsel appearing for the appellants prefaced the arguments by contending that the appellants challenge proviso to clause (ii) of Section 8 of Act 2003 as arbitrary, discriminatory and unconstitutional. The challenge raised before the Court is not for the purpose of reading down proviso to clause (ii) of Section 8 of the Act. The observation of the learned Single Judge, in this behalf, is not in line with the challenge laid by the appellants. The legal argument against the proviso is that the proviso does not have independent standing with the substitution of clause (ii) of Section 8(a) of Act 2003 through Finance Act 2009. The proviso cannot expand the scope of the main section. The appellants, being a contractor, exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h levy of tax on sale or purchase of goods. Section 8 provides for compounding rate of tax in respect of contractors executing works contracts of Government, KWA or local authorities. The State Legislature through Finance Act, 2008 has provided for payment of tax by the contractors executing works contract in the following method: (i) any works contractor not being a dealer registered under the provisions of the Central Sales Tax Act, 1956 (Central Act 74 of 1956), and who is not an importer may, at his option, instead of paying tax in accordance with the provisions of the said section, pay tax at three per cent of the whole contract amount; (ii) any works contractor not falling under clause (i) above may, as his option, instead of paying tax in accordance with the provisions of the said sections, pay tax at eight per cent of the whole contract amount: Provided that notwithstanding anything contained in subclause (ii) above, the compounded tax payable by any works contractor under this clause in respect of works contracts awarded by Government of Kerala, Kerala Water Authority of Local Authorities shall be four per cent of the whole contract amount: 6.1 The Legislature, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by subclause (ii) is 8%. When it comes to contractors who are executing works contracts for and on behalf of the Government of Kerala, KWA, local authority, 4% of the whole contract amount is the tax payable. The Finance Act, 2009 has substituted sub-clause (ii). According to sub-clause (ii), as it stands, tax is payable at 3% of the contract amount after deducting the purchase value of goods and for the purchase value of goods so deducted, shall pay tax at the scheduled rate applicable to such goods. Therefore, subclause (ii) deals with payment of tax in two slabs: one, at 3% on the specified goods, and another, tax at the scheduled rate applicable to such goods deducted by the contractor. Therefore, the rate of tax payable in subclause (ii) is more than what is provided for by proviso. 7.1 He further contends that Section 8 deals with payment of compounding rate of tax, subject to satisfying the criteria stipulated by Section 8. Section 8 is an option available to the dealer for payment of tax under the Act. Within Section 8 several independent stages of application are provided for. The dealer, having opted to pay tax at a compounded rate, cannot be allowed to argue that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a section the natural presumption is that, but for the proviso, the enacting part of the section would have included the subject matter of the proviso. In the words of LORD MACMILLAN: The proper function of a proviso is to except and to deal with a case which would otherwise fall within the general language of the main enactment and its effect is confined to that case. The proviso may, as LORD MACNAGHTEN laid down, be a qualification of the preceeding enactment which is expressed in terms too general to be quite accurate . The general rule has been stated by HIDAYATULLAH, J., in the following words: As a general rule, a proviso is added to an enactment to qualify or create an exception to what is in the enactment, and ordinarily, a provisc is not interpreted as stating a general rule . And in the words of KAPUR, J.: The proper function of a proviso is that it qualifies the generality of the main enactment by providing an exception and taking out as it were, from the main enactment, a portion which, but for the proviso would fall within the main enactment. (emphasis supplied) 80. But then these principles are subject to other principles of statutory interpretation which m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng clause, as distinct from its main enactment, this is true only of a real proviso and the draftsperson of the statute may have intended for the proviso to be, in substance, a fresh enactment: To read a proviso as providing something by way of an addendum or as dealing with a subject not covered by the main enactment or as stating a general rule as distinguished from an exception or qualification is ordinarily foreign to the proper function of a proviso. However, this is only true of a real proviso. The insertion of a proviso by the draftsman has not always strictly adhered to its legitimate use and at times a section worded as a proviso may wholly or partly be in substance a fresh enactment adding to and not merely excepting something out of or qualifying what goes before. 81. Perhaps the most comprehensive and oft-cited precedent governing the interpretation of a proviso is the decision of this Court in S. Sundaram Pillai v. V.R. Pattabiraman, Justice S Murtaza Fazal All speaking for a three judge Bench of this Court held: 43. ...To sum up, a proviso may serve four different purposes: (1) qualifying or excepting certain provisions from the main enactment: (2) i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of contractor, namely dealers registered under the CST Act.. Subclause (ii), as it stands now, deals with contractors executing works contracts but not falling under clause (i). 8.5 Proviso was dealing with the contractors executing works contracts of government, KWA and the local bodies. The contractors covered by the proviso, in the considered view of this Court, would continue to be relevant inasmuch as subclause (ii) does not include the contractors who are before the Court in the batch of appeals. The proviso, in the case on hand, could be interpreted both as a situation providing for the excepting of the application of subclause (ii) and/or, as noted by the Supreme Court, can also be treated as an independent provision. Either way, if it is construed as excepting something out of the enactment or qualify something enacted in subclause (ii) then the proviso is independently having scope and applicability in respect of contractors executing government works. The argument of the appellants, though not intended to import something into the enacting part, is definitely attempting to delete what is expressly provided by the proviso. The Court cannot read anything into a statutor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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