Works contract tax must follow the statutory rate; higher levy and surcharge were unsustainable under the sales tax law.

Tax on works contract was confined to the statutory rate expressly authorised under section 3(1)(b) of the Travancore-Cochin General Sales Tax Act, 1125. An assessment levying a higher rate was unsustainable, and the surcharge under the Kerala Surcharge on Taxes Act, 1957 was also not supportable in respect of works contract. The assessment was quashed, with liberty to make a fresh assessment in accordance with law.

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Issues: Whether tax on works contract could be levied only at the rate prescribed in section 3(1)(b) of the Travancore-Cochin General Sales Tax Act, 1125, and whether the assessment imposing a higher rate was sustainable.

Analysis: In view of the binding Supreme Court decisions referred to in the judgment, tax on works contract, if leviable at all, could be charged only at the statutory rate of 3 pies in the rupee under section 3(1)(b) of the Travancore-Cochin General Sales Tax Act, 1125. The assessment had been made at a higher rate of 2 nP. in the rupee, and the surcharge under the Kerala Surcharge on Taxes Act, 1957 was also not supported in respect of works contract. The proper course was to set aside the assessment and permit a fresh assessment in accordance with law.

Conclusion: The levy at the higher rate was unsustainable and the assessment was quashed; the matter was left open for fresh assessment according to law, in favour of the assessee.

Final Conclusion: The tax revision succeeded, with the assessment annulled and the department left at liberty to proceed afresh in accordance with law.

Ratio Decidendi: Tax on works contract can be levied only at the statutory rate expressly authorised by the governing sales tax provision, and an assessment made at a higher unauthorised rate is liable to be quashed.

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