Works contract deductions limited to the goods component; labour and service charges cannot be subjected to deduction under the rule.

Rule 26A(2) of the Bihar Sales Tax Rules, 1983 was construed narrowly to preserve consistency with article 366(29A)(b) of the Constitution and section 25A of the Bihar Finance Act, 1981. The rule cannot authorise deductions from the entire amount payable under a works contract because the levy applies only to the transfer of property in goods involved in execution of the contract. Deductions are therefore confined to the goods component of the contract and do not extend to labour charges or other service-related payments.

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Issues: Whether rule 26A(2) of the Bihar Sales Tax Rules, 1983, insofar as it directed deduction from all payments in respect of works contracts, was ultra vires article 366(29A)(b) of the Constitution of India and section 25A of the Bihar Finance Act, 1981; and whether the expression "all payments" in the rule could be construed to apply only to payments for transfer of property in goods involved in the execution of a works contract.

Analysis: Article 366(29A)(b) permits levy only on the transfer of property in goods involved in the execution of a works contract. Section 25A of the Bihar Finance Act, 1981 likewise authorises deduction only from the consideration payable for such transfer of property in goods. A construction of rule 26A(2) that embraced labour charges and other service components would expand the rule beyond both the constitutional fiction and the parent provision. To preserve validity, the rule had to be read in harmony with section 25A and article 366(29A)(b), so that deductions were confined to the goods component of the contract.

Conclusion: Rule 26A(2) was upheld only on a read-down construction. Deductions could be made solely from payments attributable to the transfer of property in goods involved in the works contract, and not from labour charges or similar service payments.

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