Ultra vires tax rule excluded from pending assessment; deductions in works contract claims to be examined on transfer-of-goods basis.

Pending sales tax assessment under the Bihar Sales Tax Rules was required to proceed without applying rule 13-A, because that rule had already been declared ultra vires. The assessing authority was directed to examine the petitioners' claims on deductions and exemptions, including tax-paid items such as cement and steel, in the light of governing Supreme Court decisions. Claims relating to inter-State sale and purchase in execution of the works contract, and exemption for goods supplied free of cost, were left open for consideration before the assessing authority. The discussion on rule 26-A emphasised that deductions in a works contract assessment must be confined to the consideration referable to transfer of property in goods and not labour charges.

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Issues: Whether the pending assessment had to proceed ignoring rule 13-A of the Bihar Sales Tax Rules, 1983, which had been held ultra vires, and whether the assessing authority was required to consider the claim relating to deductions under rule 26-A and other connected tax exemptions in the light of the governing judgments.

Analysis: Rule 13-A had already been declared ultra vires in an earlier decision, and the pending assessment was therefore required to be completed without applying that rule. The assessing officer was also directed to examine the petitioners' grievance concerning tax-paid items such as cement and steel in the light of the Supreme Court decisions. The petitioners were left free to raise claims regarding inter-State sale and purchase in the execution of the works contract, as well as exemption for goods supplied free of cost, before the assessing authority. On the question of rule 26-A, the petitioners' submission was noticed that deductions must be confined to the consideration referable to the transfer of property in goods and should not include labour charges.

Conclusion: The assessment was to proceed without applying rule 13-A, and the remaining claims were left to be considered by the assessing authority in accordance with law.

Ratio Decidendi: A provision already declared ultra vires cannot be applied in pending assessment proceedings, and deductions in a works contract assessment must be examined on the basis of the legal incidence of the transfer of property in goods rather than labour charges.

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