TaxTMI 
TaxTMI 
2002 (5) TMI 639
X X X X Extracts X X X X
X X X X Extracts X X X X
....nataka Sales Tax Act, 1957 (hereinafter referred to as "the Act") as amended by Act No. 5 of 1996 is unconstitutional, and secondly, whether the amendment brought in clause (i) of sub-section (6) of section 17 of the Act by Act No. 7 of 1997 retrospectively is also unconstitutional. The High Court of Karnataka has answered both these questions in the negative and against the appellants. The main judgment was rendered in the writ petition preferred by the appellant in Civil Appeal No. 902 of 1999. The remaining matters were disposed of by the High Court following the aforesaid judgment. 3.. To determine the questions that arise for consideration, it is necessary to notice the legislative history of sub-section (6) of section 17 of the Act. We may first notice section 5-B of the Act which provides for levy of tax on transfer of property in goods involved in the execution of works contract which reads as follows: "5-B. Levy of tax on transfer of property in goods (whether as goods or in some other form) involved in the execution of works contracts.-Notwithstanding anything contained in sub-section (1) or sub-section (3) or sub-section (3-C) of section 5, but subject to sub-se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rescribed, the assessing authority of the area may, if a dealer liable to tax under section 5-B so elects, accept in lieu of the amount of tax payable by him during the year, under this Act, by way of composition an amount on the total consideration for the works contracts executed by him in that year in the State in respect of works contract specified in column (2) of the Sixth Schedule at the rates specified in the corresponding entries in column (4) of the said Schedule." 8.. Sub-section (6) was further amended by Act No. 7 of 1997 with effect from April 1, 1997. Clause (i) of sub-section (6) of section 17 of the Act as amended reads as follows: (a) for the words and brackets 'on his total turnover relating to transfer of property in goods (whether as goods or in some other form) involved in the execution of such works contract' the words 'on the total consideration received or receivable by him in respect of such works contract executed by him in that year in the State', shall be deemed to have been substituted with effect from the first day of April, 1988; (b) for the words, brackets and figure, 'at the rates specified in the corresponding entries in column (4) of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 14 of the Constitution of India. 11. The State of Karnataka on the other hand relied upon the decision of this Court in State of Kerala v. Builders Association of India (1997) 2 SCC 183* and contended that the question was no longer res integra and the validity of sub-section (6) of section 17 as amended must be upheld. As to the retrospective operation of the amended provision, it was submitted that the Legislature had competence not only to enact a law prospectively, but also retrospectively, subject to its being consistent with the constitutional provisions. It was submitted that the rights of the petitioners guaranteed under articles 14 and 19 were not breached at all. In fact the Legislature always intended to levy tax on total consideration of works contract so far as assessment under the scheme of composition was concerned, and for this he relied upon the Budget speech of the Finance Minister wherein a reference was made to the levy at an average rate of 2 per cent on the total turnover in lieu of all taxes payable under the Act. The legislative intent was not truly reflected in the amendment effected in the Act which gave rise to some controversy on the subject. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....view that the judgment of this Court in the State of Kerala v. Builders Association of India (1997) 2 SCC 183 [1997] 104 STC 134 (SC). fully covers the case. The judgment of the division Bench is impugned before us by special leave in Civil Appeal No. 902 of 1999. In the remaining appeals the High Court followed its aforesaid judgment, and dismissed the writ petitions. 15.. Mr. Raju Ramachandran, Senior Advocate appearing on behalf of some of the appellants placed before us the judgment of this Court in State of Kerala v. Builders Association of India (1997) 2 SCC 183*. We have carefully read the aforesaid judgment. Fairly Mr. Raju Ramachandran submitted that he was unable to point out any distinction between the provisions of the Kerala Act and the Karnataka Act which may have a bearing on the question of interpretation. We have also considered the matter and we are also of the view that so far as the scheme of composition of tax is concerned, the relevant provisions of both the Acts even if not identical, are vastly similar. On the question of the constitutional validity of sub-section (6) of section 17 the same argument was advanced before this Court in the State of Kerala v.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to this alternate method of taxation cannot complain against the said sub-sections, for he is in no way affected by them. Nor can the contractor who has opted to the said alternate method of taxation, complain. Having voluntarily, and with the full knowledge of the features of the alternate method of taxation, opted to be governed by it, a contractor cannot be heard to question the validity of the relevant sub-sections or the rules. Sub-sections (8), (11) and (12) of section 7 are incidental and ancillary to sub-sections (7) and (7A) and cannot equally be faulted. Secondly, it is true that the goods transferred in the course of execution of the works contract may be chargeable at different rates under different Schedules appended to the Kerala Act; it may also be that some of them may be 'declared goods', the levy of tax upon which is subject to certain restrictions specified in sections 14 and 15 of the Central Sales Tax Act; it may also be that sale of some of the goods may also be subject to Central sales tax. It must yet be remembered that the method of taxation introduced by sub-sections (7) and (7A) is in the nature of composition of tax payable under section 5(1)(iv). The im....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es Tax Act is constitutionally valid and the challenge on the ground of lack of legislative competence of the State Legislature must be repelled. 17.. Learned counsel then submitted that even while evolving a simplified method for assessment of tax, such as the scheme of composition in the instant case, the law cannot give an option to the assessees which is in the teeth of constitutional provisions. This argument does not survive in view of the principles laid down by the Supreme Court in State of Kerala v. Builders Association of India (1997) 2 SCC 183*. He made a faint attempt to draw a distinction between the Kerala Act and the Karnataka Act by reference to the background in which the provisions were enacted. He submitted that under the Kerala Act the composition scheme was introduced by the amendments in the years 1991 and 1992. So far as State of Karnataka is concerned sub-section (6) of section 17 which gave option to the assessees to pay tax at a fixed rate on the value of the goods, the property in which was transferred in the course of execution of works contract came into effect in the year 1988 and continued till the year 1996. The appellants had taken benefit of the....