TaxTMI 
TaxTMI 
1996 (8) TMI 453
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....ppeal. It is averred that all these contentions were indeed urged before the High Court. Be that as it may, having regard to the importance of the questions raised herein, which is said to be arising in that court frequently, it has become necessary to refer to the contentions urged. The respondent-Bridge & Roof Company (India) Limited-is a public sector corporation. It entered into a works contract with the Government of Uttar Pradesh for rehabilitation and improvement of a certain stretch of road in Uttar Pradesh. The tender notice was issued on September 1, 1990. The date of opening the tenders was specified as December 17, 1990. The tenders were opened and the respondent's tender was accepted on May 1, 1991. The work has since been completed. The dispute is only about certain payments which the respondent claims are due to it whereas the appellant-Government of Uttar Pradesh-says that it is entitled to retain. According to the terms of the contract, the rates quoted by the contractor were deemed to be inclusive of the sales tax, if any, on the constructional plant, material and supplies required for the purposes of the contract. The relevant clause [sub-clause (4a) of cla....
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....g the records provided by the claimant and shall be paid by or credited to the employer and the contract price adjusted accordingly. Notwithstanding the foreign input, such additional or reduced cost shall not be separately paid or credited if the same shall already have been taken into an account in the indexing of any input to the price adjustment formula in accordance with sub- clauses (1), (2) and (3) of this clause". Section 3 of the U.P. Sales Tax Act, 1948 (the Act) creates the liability to tax at the specified rates on the turnover of sales or purchases, or both, of every dealer. Section 3-F introduced by U.P. Act 25 of 1985 pursuant to the Constitution (46th Amendment) Act provides for rate of tax on the goods used or involved in the execution of a works contract. It reads: "3-F. Rate of tax on the right to use any goods or goods involved in the execution of a works contract.-Notwithstanding anything contained in section 3-A, or section 3-AAA, or section 3-D, [words "or section 3-G", omitted by U.P. Act No. 28 of 1991, section 6 (with effect from February 19, 1991) and deemed to have been omitted (with effect from September 13, 1985)], the turnover relating to the b....
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....ay be imposed for his failure to deduct and/or remit. It would be appropriate to read sub-section (1) of section 8-D along with its proviso: "8-D. Tax deduction from the amount payable to works contractor.-(1) Notwithstanding anything contained in sub-section (2) of section 8-A, every person responsible for making payment to any dealer (hereinafter in this section referred to as the contractor) for discharge of any liability on account of valuable consideration payable for the transfer of property in goods (whether as goods or in any other form) in pursuance of a works contract, not being a building contract of such class or value as may be notified by the State Government in public interest in this behalf, shall, at the time of making such payment to the contractor, either in cash or in any other manner, deduct an amount equal to four per centum of such sum towards part or, as the case may be, full satisfaction of the tax payable under this Act on account of such works contract: Provided that the Commissioner of Sales Tax may, if satisfied, that it is expedient in the public interest so to do and for reasons to be recorded in writing, order that in any case or class of cases....
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....the rest to the respondent and the sales tax authorities. The respondents in the writ petition (appellants herein) filed a counter disputing the several contentions raised in the writ petition and justifying the retention of the sum of Rs. 82,24,969. According to appellants, the said amount need not be paid to the sales tax department also. By virtue of the composition agreement between the respondent and the Sales Tax Department under section 7-D, read with the order of the Deputy Commissioner under the proviso to section 8-D(1), the tax liability of the respondent has been reduced with respect to the works contract between them, within the meaning of clause 70(4) of the contract and, therefore, they submitted, the benefit of said reduction should go to the Government, as provided by the contract. The High Court did not deal with the several contentions aforesaid. It disposed of the writ petition observing that inasmuch as "the Commissioner in his order has accepted the prayer for composition as requested by the petitioner and has directed the deduction of one in lieu of four per cent (and) only that amount is to be deducted from the amount required to be paid to the pet....
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.... to one per cent by an order made under the proviso to section 8-D(1), the Government should deduct only at the rate of one per cent and pay over the balance of the contract amount rest to the respondent. The Government is not concerned with the order of composition made under section 7-D(1). What all has happened under the composition order is that instead of ascertaining the value of the goods transferred in the execution of the works contract and levying tax thereon at 4 per cent, the department has agreed to levy one per cent on the entire value of the contract. Counsel say that this has been done in the interest of simplification of assessment procedure and as a measure of Government policy. This does not result in reduction in the rate of tax; it is only a convenient and simplified formula for quantifying the tax. Hence, they submit, there is no question of the Government getting the benefit of any reduction in the rate of tax. In our opinion, the very remedy adopted by the respondent is misconceived. It is not entitled to any relief in these proceedings, i.e., in the writ petition filed by it. The High Court appears to be right in not pronouncing upon any of the severa....
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....he law on the subject has been discussed fully.] The writ petition ought to have been dismissed on this ground alone. We must mention in this behalf that the order of composition of tax liability, if any, under section 7-D of the Act has not been placed before us. [We presume that it is an order separate from the order dated May 27, 1992. But, even if it is not, it makes no difference to what we were saying hereafter.] Whether such composition agreement results in reduction of tax liability within the meaning of clause 70(4) of the contract is again a matter concerning the interpretation of a term of the contract. Accordingly, the question "to whom the benefit of reduction in tax should go" is not a matter for a writ petition, for the very same reasons as are mentioned hereinbefore. Now coming to the order made by the Deputy Commissioner under the proviso to section 8-D(1) of the Act, all that it says is that the Government shall deduct tax at source only at the rate of one per cent instead of at the rate of 4 per cent. The said order, having been made under the statute, relieves the Government of its obligation to deduct at source at the rate of 4 per cent. In other words, b....