Works contract deductions must fully reflect taxable turnover principles, or the levy becomes uncertain and unworkable.

Section 11(2)(c) of the Orissa VAT Act, read with rule 6(e), was treated as unworkable for works contracts because the Rules provided only labour and service deductions and omitted other like charges recognised in the law on taxable turnover. The analysis applies Gannon Dunkerley and the binding effect of Supreme Court law under Article 141, stressing that a tax measure must be certain and the deductible base must be clearly ascertainable. On that reasoning, the provision was considered unworkable to the extent it failed to capture the full deduction scheme required for works contracts, and the recognised deductions were to be applied until the Rules were amended.

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Issues: Whether section 11(2)(c) of the Orissa Value Added Tax Act, 2004 read with rule 6(e) of the Orissa Value Added Tax Rules, 2005 is unworkable for works contracts because it does not provide for all deductions recognised in the law governing determination of taxable turnover.

Analysis: Section 11(2)(c) permits deduction of labour, service and other like charges, subject to prescription in the Rules, but rule 6(e) allows only labour and service expenditure and remains silent on other like charges. The decision in Gannon Dunkerley requires deduction of all expenses relatable to labour and services in works contract valuation, and the law declared by the Supreme Court is binding under Article 141 of the Constitution of India. In taxation, the charging scheme must be certain and the measure of levy must be clearly ascertainable; if the Act and Rules do not cover the field, the levy becomes uncertain. Since the Rules do not supply the deductions contemplated by the statute, section 11(2)(c) read with rule 6(e) was held to be not workable in its present form.

Conclusion: The provision was held to be unworkable to the extent it failed to provide the required deductions for works contracts, and the assessee succeeded.

Final Conclusion: The writ petition was allowed, and the authorities were directed to apply the deductions recognised for works contracts until the Rules are amended to conform to the governing Supreme Court decision.

Ratio Decidendi: In taxation, where a statute contemplates deductions to be prescribed by rules, the levy is not workable unless the Rules provide the full and clear measure of deduction required to determine taxable turnover.

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