Charging provisions cannot be expanded by explanation to create a fresh taxable base for works contract tax.

Explanation V to section 2(1)(aa) of the Tamil Nadu Additional Sales Tax Act sought to treat the total value of works contracts taxed under section 7C of the Tamil Nadu General Sales Tax Act as taxable turnover for additional sales tax. The text states that this went beyond clarification because an Explanation cannot enlarge a charging provision or create a new taxable base. It further notes that, for contractors under the compounded levy scheme, the statute did not require determination of taxable turnover in the ordinary sense. On that basis, the explanation was held unconstitutional and beyond the State Legislature's competence, and the additional sales tax demand could not be sustained.

---

---

Issues: Whether Explanation V to section 2(1)(aa) of the Tamil Nadu Additional Sales Tax Act, 1970, which treats the total value under section 7C of the Tamil Nadu General Sales Tax Act, 1959 as the taxable turnover of a works contractor, is constitutionally valid and within the legislative competence of the State.

Analysis: The charging scheme of the Tamil Nadu Additional Sales Tax Act linked additional tax to taxable turnover. Under section 7C of the Tamil Nadu General Sales Tax Act, a works contractor opting for compounded levy pays tax on the total value of the works contract, and the statute does not require determination of taxable turnover in the ordinary sense. Earlier judicial pronouncements had held that, absent such determination, additional sales tax could not be levied by treating contract value as taxable turnover. An Explanation may clarify an existing provision, but it cannot enlarge a charging section or create a fresh taxable base. Explanation V, by deeming the total value under section 7C to be taxable turnover, altered the substantive incidence of the levy and went beyond mere clarification. On the settled principles governing legislative competence and the limited office of an Explanation, such expansion of the charge was impermissible.

Conclusion: Explanation V to section 2(1)(aa) was held unconstitutional and beyond the competence of the State Legislature.

Final Conclusion: The additional sales tax demand could not be sustained against a dealer paying tax under the compounded works contract scheme, and the impugned explanation was struck down.

Ratio Decidendi: An Explanation cannot be used to expand the scope of a charging provision or to create a taxable base that the principal enactment does not authorise.

---