Works-contract tax deduction requires transfer of property in goods; alternative statutory remedy need not be exhausted first.

Tax deduction from works-contract payments was held impermissible where the contracts involved no transfer of property in goods. Article 366(29A)(b) and the deduction provisions in the Punjab sales tax and VAT laws apply only to the value of goods transferred in execution of a works contract, so a mere contractual stipulation could not justify collection. The HC also treated the statutory certificate procedure as only an alternative remedy and refused to compel its prior use when the factual basis for deduction was absent. The deductions were declared unauthorised and refund of amounts already deducted was left open.

---

---

Issues: (i) Whether sales tax/value added tax could be deducted from payments made under the works contracts where no transfer of property in goods was involved; (ii) Whether the petitioners were required to first resort to the statutory certificate procedure before challenging the deductions.

Issue (i): Whether sales tax/value added tax could be deducted from payments made under the works contracts where no transfer of property in goods was involved.

Analysis: Article 366(29A)(b) of the Constitution of India contemplates tax on the transfer of property in goods involved in the execution of a works contract. The deduction provisions under Section 10C of the Punjab General Sales Tax Act, 1948 and Section 27 of the Punjab Value Added Tax Act, 2005 operate only where such transfer of property in goods is involved. In the absence of any sale or transfer of property in goods in the petitioners' contracts, mere contractual stipulation could not authorise collection of tax.

Conclusion: The deduction was held to be impermissible and the petitioners succeeded on this issue.

Issue (ii): Whether the petitioners were required to first resort to the statutory certificate procedure before challenging the deductions.

Analysis: The statutory remedy under Section 27 of the Punjab Value Added Tax Act, 2005 was treated as only an alternative remedy. In view of the admitted factual position that no transfer of property in goods was involved, the Court found no necessity to drive the petitioners to that procedure before granting relief.

Conclusion: The objection based on alternative remedy was rejected against the respondents.

Final Conclusion: The petitions were allowed, the impugned deductions were declared unauthorised, and the petitioners were left free to seek refund of amounts already deducted.

Ratio Decidendi: Tax can be deducted from works-contract payments only when the contract involves transfer of property in goods, and an alternative statutory remedy need not be exhausted where the factual basis for deduction is absent and the issue is purely one of legal entitlement.

---