1983 (11) TMI 265 - HC - VAT and Sales Tax

Court Invalidates Office Order, Grants Relief to Petitioners Over Sales Tax Issue

The court declared Office Order No. 120 as illegal, finding that the amendment directing separate payment of sales tax and non-acceptance of sales ... - Issues:Challenge to validity of Office Order No. 120 dated 28th December, 1981 amending clause 10 of special condition of contract No. 117, incorporation of the amendment in the contract, entitlement to exemption from sales tax, waiver of right to exemption through contract, arbitration clause in the contract, legality of amendment to special conditions of contract, proper remedy for relief.Analysis:The petitioners, successful tenderers for surplus stores, challenged the validity of Office Order No. 120 issued by the Director General, Supplies and Disposal, which directed that purchasers pay sales tax separately and not be entitled to exemption. The amendment to clause 10 of the contract, incorporating the office order, was contested. The respondents argued that the Act and Rules do not confer an exemption right on purchasing dealers and that the petitioners waived this right through the contract. They also raised the issue of arbitration clause in the contract limiting the court's jurisdiction.The court noted that purchasing dealers are entitled to deduction upon furnishing ST-1 form as per section 4(2)(a)(v)(B). The amendment directing separate payment of sales tax and non-acceptance of sales declaration forms was found to be in breach of the Act and Rule 7(1). Rule 7 outlines procedures for claiming exemption, not to negate the right created by the Act. Any term in a contract contrary to statutory provisions is void. The court held that the amendment was illegal and petitioners are entitled to exemption as if the conditions of the office order do not exist.The court emphasized that a citizen's right to expect the Government to adhere to statutory provisions in contracts. Challenges to the validity of contract terms that violate statutory provisions fall outside the scope of arbitration and are proper subjects for writ petitions. The court declared Office Order No. 120 as illegal in relation to non-taxable sales and granted relief to the petitioners, holding the rule absolute with costs.