Tax deduction at source from railway contractors' running bills was ultra vires where no prescribed rate or deduction mechanism existed.

Section 27 of the Assam General Sales Tax Act permitted deduction of tax at source only in the prescribed manner and at the prescribed rate. Because neither the Act nor the Rules prescribed an operative rate or mechanism for deduction from running bills of railway contractors, and Rule 35 merely excluded exempted cases without creating a general deduction procedure, the issuing authority had no jurisdiction to compel such deduction. The direction to deduct tax at source was therefore held illegal and ultra vires, and the writ petitions succeeded.

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Issues: Whether, under section 27 of the Assam General Sales Tax Act, 1993 and rule 35 of the Assam General Sales Tax Rules, 1993, tax could be deducted at source from running bills of railway contractors in the absence of any prescribed rate and manner, and whether the impugned direction to deduct tax at source was without jurisdiction.

Analysis: Section 27(b) contemplates deduction of tax at source only in the prescribed manner and at the prescribed rate. Section 8(1)(e) and Schedule VI did not prescribe the rate for tax deduction at source, and the Rules also did not provide any operative mechanism for such deduction. Rule 35(1) merely prohibited deduction in exempted cases and did not lay down a manner for general deduction at source. In the absence of a prescribed rate and manner, the issuing authority could not compel deduction at source, and the direction lacked jurisdiction.

Conclusion: The direction for deduction of tax at source was illegal and ultra vires, and the writ petitions were entitled to succeed.

Ratio Decidendi: Where a taxing statute authorises deduction of tax at source only in the prescribed manner and at the prescribed rate, no deduction can be enforced unless the rule-making authority has validly prescribed both the rate and the manner of deduction.

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