Works contract outside notified taxable schedule: no TDS obligation arises and penalty for non-deduction cannot be sustained.

Where a works contract is not covered by the taxable schedule notified under section 3-F of the U.P. Sales Tax Act, no tax deduction at source is required under section 8-D because the deduction obligation is linked to tax actually leviable on the contractor. Minor repairs, whitewashing, colour washing, and painting and polishing of doors and windows were outside the relevant notification, so non-deduction did not amount to default. In penalty proceedings, the explanation that the officials were unaware of the provision was accepted, and the penalty was treated as discretionary and unwarranted on the facts.

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Issues: Whether penalty under section 8-D(6) of the U.P. Sales Tax Act could be sustained for failure to deduct tax at source from payments made for works contracts consisting of minor repairs, whitewashing, colour washing, and painting and polishing, when such works were not covered by the notification issued under section 3-F.

Analysis: Section 3-F made transfer of property in goods in execution of a works contract taxable only to the extent and in the manner prescribed by notification. The works specified in the relevant notification did not include minor repairs, whitewashing, colour washing, or painting and polishing of doors and windows. Since deduction under section 8-D was linked to tax leviable on the contractor, no deduction was required where the turnover from the relevant works was not taxable. The explanation of the hospital officials that they were unaware of the provision was also treated as a satisfactory explanation in the penalty proceedings, and the levy of penalty was described as discretionary and unwarranted in the circumstances.

Conclusion: The revisionists were not in default under section 8-D(6), and the penalty orders were liable to be set aside.

Final Conclusion: The common appellate order was quashed and the penalties imposed on the revisionists were annulled.

Ratio Decidendi: Where the underlying works contract is not covered by the taxable schedule notified under section 3-F, no tax deduction at source can be required under section 8-D, and penalty for non-deduction cannot be imposed.

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