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of <h1>Court strikes down Section 57B of Sales Tax Act for exceeding state's powers</h1> <h3>Larsen & Toubro Ltd. Versus Commissioner of Sales Tax, Gujarat and others</h3> Larsen & Toubro Ltd. Versus Commissioner of Sales Tax, Gujarat and others - [2001] 124 STC 162 (Guj) Issues Involved:1. Constitutional Validity of Section 57B of the Gujarat Sales Tax Act, 19692. Legislative Competence of the State Legislature3. Comparison with Other State Laws and Supreme Court JudgmentsSummary of Judgment:1. Constitutional Validity of Section 57B of the Gujarat Sales Tax Act, 1969:The petitioner, a leading engineering concern, challenged the constitutional validity of Section 57B of the Gujarat Sales Tax Act, 1969, which mandates a 2% deduction at source on the total value of works contracts. The petitioner argued that this provision was beyond the legislative competence of the State Legislature.2. Legislative Competence of the State Legislature:The court noted that originally, neither the State nor Union Legislature had the power to levy sales tax on the sale and supply of material under composite works contracts. This power was conferred by the Constitution (Forty-sixth Amendment) Act, 1982. The petitioner contended that most goods and machinery for the works contract were imported or brought from other states, and only a small percentage were purchased from registered dealers in Gujarat. Despite this, a total sum of Rs. 41,68,380 was deducted as tax.The court observed that the impugned provisions in Section 57B impose an obligation on the employer to deduct 2% of the bill amount as tax, assuming all transactions are intra-State sales. This was seen as an encroachment on the legislative field exclusively assigned to the Union Legislature under entry 92-A of List I of the Seventh Schedule to the Constitution of India.3. Comparison with Other State Laws and Supreme Court Judgments:The court compared the provisions of the Gujarat Act with similar provisions in the Orissa, Karnataka, Bihar, and Himachal Pradesh Sales Tax Laws, which were struck down by the Supreme Court on similar grounds. The court noted that the Gujarat Act's provisions, despite some distinctions, still failed to avoid the legislative incompetence issue.The court referred to the Supreme Court's judgment in Steel Authority of India Ltd. v. State of Orissa [2000] 118 STC 297, which struck down similar provisions in the Orissa Sales Tax Act. The court concluded that the Gujarat Act's provisions were an unauthorized piece of colorable legislation, attempting to legislate on a field exclusively assigned to the Union.Conclusion:The court struck down Section 57B of the Gujarat Sales Tax Act, 1969, holding it beyond the legislative competence of the State Legislature. The amount deducted as TDS from the petitioner was ordered to be refunded within one month, and the petitioner was awarded costs of Rs. 2,000. The petition was allowed, and the rule was made absolute.
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