TaxTMI 
TaxTMI 
1991 (8) TMI 303
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....der the unamended section 25A. 4.. Section 25A of the Act as introduced in the Act by Bihar Finance Act, 1984, reads as follows: "Notwithstanding anything contained in section 26 every person making any payment or discharge of any liability on account of valuable consideration payable for the transfer of property in goods, whether as goods or in some other form, involved in the execution of works contract shall be lawfully competent to deduct an amount not exceeding four per centum purporting to be a part or full of the tax payable on such sales, from the bills or invoices raised by the works contractor as payable by the person: Provided that no such payment or discharge of any bill raised by a works contractor shall be made without deduction referred to in subsection (1): Provided further that if the State Government is satisfied that it is necessary to do so in the interest of the State revenue it may notify the names/posts of such persons who shall be lawfully competent person to make such deduction as referred to in sub-section (1). (2) The deduction referred to in sub-section (1) shall be made in the manner which may be prescribed. (3) The payment of such deduct....
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....vernment is satisfied that it is necessary to do so in the interest of the State revenue it may notify the names/posts of such persons who shall be lawfully competent person to make such deduction as referred to in sub-section (1). (2) The deduction referred to in sub-section (1) shall be made in the manner which may be prescribed. (3) The payment of such deduction into the Government Treasury shall be the responsibility of the person making such deduction. (4) The person making such deduction shall issue deduction certificate in the prescribed manner to the person or dealer from whose bill or invoice such deduction has been made. (5) If any person contravenes any or all of the provisions of subsections (1), (3) and (4), the prescribed authority shall, after giving an opportunity of being heard, by an order in writing, direct that such person shall pay by way of penalty, a sum not exceeding twice the amount of tax deductible under sub-section (1). (6) The provisions of section 27 for recovery of any amount of tax due from a dealer shall, mutatis mutandis, apply for recovery of any amount of tax, deducted and/or any penalty imposed but not deposited under this section....
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....are: (i) Whether section 25A of the Act is ultra vires on the ground that unguided, uncanalised and arbitrary power has been given to the executive to fix the rate and also because it is in conflict with section 15 of the CST Act? (ii) Whether the State Government was required to issue a fresh notification under amended section 25A or the notification issued on 7th November, 1984, can be said to be in force? (iii) If it is in force, whether the rate at which deduction is to be made is arbitrary? (iv) As transfer of property in goods takes place only when the contract is executed and the work is handed over, is no tax payable during the execution of the work? 9.. In Banarsi Das Bhanot v. State of Madhya Pradesh [1958] 9 STC 388 (SC); AIR 1958 SC 909, it was held that fixation of rates of tax not being an essential legislative function could be validly delegated to a nonlegislative body but when it is left to such a body, the Legislature must provide guidance for such fixation. The law laid down in Banarsi Das [1958] 9 STC 388 (SC); AIR 1958 SC 909, has been consistently followed by the Supreme Court in all subsequent judgments. A number of decisions on this point were....
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.... may be, by every dealer. Section 4 provides the situation or circumstance when a dealer is liable to pay purchase tax. Section 5 provides for surcharge. Section 6 provides for charge of additional tax. Section 12 provides the rate of tax, which reads as follows: "12. Rate of tax.-(1) The sales tax or purchase tax payable by a dealer under section 3 or 4 shall be levied at the rate of eight per centum of his taxable turnover: Provided that the State Government may, from time to time, by notification and subject to such conditions and restrictions as it may impose, fix higher rate not exceeding twenty five per centum or any lower rate not below two per centum in respect of such class of dealers or such goods, class or description of goods, or such sales, category or description of sales as may be specified in the notification. (2) Notwithstanding anything contained in this part the levy of the tax payable by a dealer under this part on sales or purchases of declared goods made by him inside Bihar shall be subject to the restrictions and conditions contained in section 15 of the Central Sales Tax Act, 1956 (LXXIV of 1956)." 13.. It is not in dispute and could not h....
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....in the prescribed manner and for prescribed period shall, unless the goods are taxable at a lower rate under section 12 be subject to sub-section (2) leviable to tax at such rate or rates as may be notified by the State Government in this behalf not exceeding 4 per centum." Section 13(1)(b)(ii) dealt specifically with works contract and the same was deleted by the Amendment and Validation Act. This was necessary as the power to fix the rate was left to the State Government under the amended section 25A of the Act. 17.. It will be noticed that in sections 12 and 13 rates of tax have been mentioned. As clause (b)(ii), sub-section (1) of section 13 has been deleted, it must be held that section 13 does not provide any guideline for fixing the rate under section 25A. All sales and purchases except those covered by section 13 must be held to be within the purview of section 12. 18.. It was submitted on behalf of the petitioners that the Legislature has completely effaced itself by delegating the power to the State Government. It was urged that section 61 of the Act provides for laying of certain notifications on the table of the State Legislature. The provision of laying notifi....
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....mmerce. Section 14 enumerates various goods which are declared to be of special importance in inter-State trade or commerce. Section 11 of the Act provides that sales tax on goods shall be levied only at that point or points in the series of sales as may be specified by the State Government by a notification published in the Official Gazette. If the notification specifies any goods, class or description of the goods that the sales tax shall be levied at the first point of sale in Bihar either by an importer or manufacturer or a wholesaler, subsequent sale of the same goods shall not be levied to tax, if the dealer making the subsequent sale produces before the prescribed authority under section 17 original copy of the cash memo or invoices or bill issued to him and files a true and complete declaration in the form and in the manner prescribed. In the execution of works contract for construction of building and/or other civil engineering works declared goods within the meaning of section 14 of the CST Act are used. Every sales tax law of State so far as it imposes or authorises imposition of tax on the sale or purchase of declared goods be subject to restrictions and conditions ment....
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....n 11 of the Act provides that if sales tax has been levied at the first point of sale, no tax shall be levied again on subsequent sale of such goods if the dealer making the subsequent sale produces before the prescribed authority at the time of assessment original copy of cash memo or invoices or bill issued to him and files true and complete declaration in the form and in the manner prescribed. The form prescribed for this is form IX-C, as provided in rule 12(2) of the Bihar Sales Tax Rules, 1983. Nothing has been provided in section 25A that the person making any payment to works contractor shall not make any deduction from bills or invoices, sales tax on the ground that payment of it has been made at the first point. Rather non-deduction of sales tax by the person making the payment has been made penal under section 25A(5). The result is that the works contractor shall have to pay sales tax again from his bills or invoices on taxpaid declared goods. In Bhawani Cotton Mills Ltd. v. State of Punjab [1967] 20 STC 290 (SC); AIR 1967 SC 1616 it was held that as some provision of the Punjab General Sales Tax Act was in conflict with section 15 of the CST Act, such provision was void.....
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....27 does not apply. Consequently notification dated 7th November, 1984, does not survive. 31.. In the present case, amendment has been made in section 25A. The question is whether "repeal" in section 27 of the General Clauses Act will include "amendment". No decision of this Court or of the Supreme Court on this point was brought to our notice. The decisions of different High Courts which could be found out on this point has taken a broader view of the matter and has held that "repeal" will include "amendment". Reference may be made to Allied Exports & Imports v. State of Andhra Pradesh [1971] 28 STC 175 (AP) [FB]; AIR 1971 AP 218 (FB), Issa Yacub Bichara v. State of Mysore AIR 1961 Mys 7, Poona Electric Supply Co. Ltd. v. State AIR 1967 Bom 27 and Chunilal Vallabhaji Gandhi v. State AIR 1959 Bom 554. I am in respectful agreement with the view. I am of the opinion that notification dated 7th November, 1984, is in force. This disposes of question No. (ii). 32.. Learned counsel for the petitioners submitted that deduction of tax at 4 per cent under section 25A has no nexus with the actual rate at which person executing works contract in which transfer of property in goods tak....
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....nded over. It was urged that unless there is a transfer of property in goods, there is no question of payment of any tax. According to him, deduction of sales tax in the purported exercise of power under section 25A is, in fact, recovery of advance tax which the Act does not provide. 37.. Article 366, clause (29-A) was introduced by the 46th Amendment of the Constitution and clause (29-A)(b) deals with works contract. It provides that tax on the sale or purchase of goods will include a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract. Clause (29-A), inter alia, provides that such transfer of any goods shall be deemed to be a sale of those goods by a person making the transfer and a purchase of those goods by a person to whom such transfer is made. 38.. In none of the writ petitions, agreement has been made part of the brief. Nothing has been brought to our notice to show that it was agreed between any of the person executing works contract and the principal for which it is being executed that there was any term which stipulated the time when the title shall pass in the goods to the principal. In Bu....
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....reiterate the same. However, it may be mentioned that in terms of the provision of section 25A of the said Act, respondent No. 3 (Commissioner, Commercial Taxes) had issued two notifications bearing Nos. 1210 and 1212 dated 7th November, 1984, whereby and whereunder various persons and authorities were authorised to deduct tax at source and the rate of such deduction was fixed at 4 per cent. The said notifications are contained in annexures 3 and 4 to the said writ petition. 45.. Before proceeding to consider the points involved in this case in details, the provisions of the said Act which are relevant for the purpose of this case may be noticed: Section 2(j) defines "gross turnover" to mean: (i) for the purposes of levy of sales tax, in respect of sale of goods, aggregate of sale prices received and receivable by a dealer, including the gross amount received or receivable for execution of works contract or for the transfer of right to use any goods for any purpose (whether or not for a specified period) during any given period (and also including the sale of goods made outside the State and in the course of inter-State trade or commerce or export) but does not include sal....
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....ns contained in section 15 of the Central Sales Tax Act, 1956." (Underlining* is mine) *Here italicised. Section 13 provides for special rate of tax on certain sales or purchases. Section 14 provides for registration of dealers. Section 16 provides for return, rebate and payment of admitted tax. In terms of sub-section (5) of section 16, provisions have been made for filing monthly abstract statement of sales and purchases on or before the last date of the month following the month to which the statement relates, in such form and in such manner as may be prescribed by the dealers whose monthly amount of tax exceeds two thousand five hundred. Section 21 deals with taxable turnover. Section 25 provides for payment and recovery of tax. Section 26 provides for restrictions on collection of tax by dealers. It states that as no person except a registered dealer can recover tax from the customers, in order to obviate such a situation, section 25A of the Act contains a non obstante clause overriding the provisions of section 26. 46.. However, by reason of section 25A of the Act, the authority to recover tax has been vested in the buyer or its representative. 47.. As in....
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....cations dated 7th November, 1984 (annexure 3) would be entitled to exercise his power thereunder irrespective of the fact as to whether in respect of any particular bill or bills any amount involving the consideration payable for the transfer of property in goods involved in the execution of the works contract or not or whether any tax at all is payable or not. The persons who have been authorised to deduct tax from the bills or invoices submitted by a works contractor have not been given nor could be given any adjudicatory function even for the purpose of prima facie determining the extent of transfer of goods involved in the execution of the works contract and the amount of tax that would be payable by the contractor. It will therefore, not be correct to say that deduction is to be made from the value of the property in goods transferred and not from the total value of the works contract. The questions posed in this application have, thus, to be answered in the aforementioned background. 52. The nature of tax, the incidence of tax, the taxable event, and the quantum thereof would vary from case to case. Giving thus a literal meaning to section 25A of the Act, r....
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....ia [1989] 73 STC 370; AIR 1989 SC 1371. It need not be pointed out that sub-rule (2) of rule 26A cannot cover a field beyond prescribed by section 25A and article 366(29-A)(b) of the Constitution." 56.. The attitude on the part of the State with regard to the imposition of tax on works contract will be evident from the stand taken by the State before the Supreme Court of India in Builders Association of India's case [1989] 73 STC 370; AIR 1989 SC 1371, wherein the court held: "We are surprised at the attitude of the States which have put forward the plea that on the passing of the 46th Amendment the Constitution had conferred on the States a larger freedom than what they had before in regard to their power to levy sales tax under entry 54 of the State List." 57.. It is, therefore, clear that the amount of deduction at the rate of 4 per cent from the bills or invoices was considered to be reasonable in view of the law as it then stood and as it was understood by the State which would be evident from its stand in Builders Association case [1989] 73 STC 370 (SC); AIR 1989 SC 1371, as also the decision of this Court in Geeta Prasad Singh and Co. v. State of Bihar reported in [....
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....4% of Rs. 78, i.e., Rs. 3.12, say Rs. 3.50 3.5% b. Material component: I. Consumable: i. Petrol, oil and lubricants (POL)--6% of Rs. 78, i.e., Rs. 4.68, say Rs. 5 5% ii. Centring, shuttering, scaffolding, ballies, nails, strings, shuttering, i.e., Rs. 4.68, say 4.50 4.5% II. Materials component: i. Materials used on which sales tax paid at first point like cement, steel, glass, paints, varnishes, plywood, timber, asbestos, cement products, sanitary fittings, mosaic tiles, bitumens, refractory products, stone chips, boulders, etc.-38% of Rs. 78, i.e., Rs. 29.64, say 30 30% ii. Materials of which sales tax is to be paid at end point like sand, bricks, etc.-6% of Rs. 78, i.e., Rs. 4.68, say Rs. 5 5% ... Total variable elements: 78% Elements on which sales tax may be levied-5% of the total value of contract of Rs. 100, i.e., on Rs. 5 only. Considering rate of sales tax as 8% amount of sales tax on works contract: =8% of Rs. 5=0.40 paise+1% TOT=0.44 paise. Total liability of sales tax on works contract of Rs. 100 may be 0.44 paise i.e., 0.4% of the value of works contract." 63.. According to the petitioners, these figures are based on Indian Practical Ci....
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.... in respect of goods which are subjected to tax at the last point of sale because in respect to such goods he is entitled to file declarations submitted by the departments." 65.. The contentions raised on behalf of the petitioners are: A. Section 25A confers uncanalised, unguided and arbitrary power on the State Government and, thus, the same is ultra vires the Constitution of India. B. From the chart as contained in annexure 6 it will be evident that in a building contract, 35 per cent to 40 per cent of the total value of contract involved in transfer of goods upon which tax can be levied and it has, therefore, been contended that deduction at 4 per cent of tax at source is arbitrary and unreasonable when the total liability towards sales tax would not exceed 1 per cent of the gross value. C. As despite amendment in section 25A by reason of the Act 2 of 1990 no new notification has been issued, the respondents have no jurisdiction to deduct any amount form the bills and/or invoices. The notifications dated 7th November, 1984 as contained in annexures 3 and 4 to the writ application are not saved under section 27 of the Bihar and Orissa General Clauses Act, 1917. In ....
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....jee Prasad v. State of Bihar [1991] 1 PLJR 363. 71.. The question which, however, arises for consideration in this case is as to whether there are in-built safeguards in the Act so as to save it form the wrath of article 14 read with article 265 of the Constitution. 72.. According to the learned Advocate-General, the in-built safeguard has to be found out in section 12 of the Bihar Finance Act, by reason whereof power to fix rate of tax in terms of the aforementioned provision has been fixed at 8 per cent subject to the proviso appended thereto as a result whereof the rate of tax can be varied form 2 per cent to 25 per cent. Section 13 of the Act also provides for the rate of tax in respect of certain specified matters which come within the purview thereof. 73.. Section 25A of the said Act, has got nothing to do with fixation of rate of tax. It is merely a recovery provision. The question, therefore, which would arise for consideration is as to whether section 12 of the said Act can be taken recourse to for the purpose of finding out as to whether the same provides for the necessary guidelines with regard to the fixation of rate for the purpose of deduction from the bil....
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.... of the works contract, no sales tax at all would be payable inasmuch as tax has already been paid in respect of the goods transferred in the execution of the works contract or the tax has to be paid by the purchaser. It is also possible that tax may have to be levied at the rate of 95 per cent of the entire bill or invoice in view of the nature of the works contract involved. While constructing an earthen dam, the value of the materials by way of bricks, sand or cement would be negligible which may be to the extent of 5 per cent of the entire value of works contract and the labou and other element would be to the extent of 95 per cent; whereas in the case of installation of a transformer the costs of transformer itself may cover 95 per cent of the total value of the works contract; 5 per cent being the cost of labour and other elements. No guideline has thus been provided to the State to deal with such extreme situations. From wha has been stated hereinbefore, it would also appear that rate of tax fixed by the State under section 12 of the Act will thus, have no direct and immediate nexus, as the rate of tax would vary from goods to goods sought to be transferred in exec....
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.... as follows: "Under section 5 of the Punjab General Sales Tax Act, 1948, as it originally stood, an uncontrolled power was conferred on the Provincial Government to levy every year on the taxable turnover of a dealer a tax at such rates as the said Government might direct. Under that section the Legislature practically effaced itself in the matter of fixation of rates and it did not give any guidance either under that section or under any other provisions of the Act-no other provision was brought to our notice. The argument of the learned counsel that such a policy could be gathered from the constitutional provisions cannot be accepted, for, if accepted, it would destroy the doctrine of excessive delegation. It would also sanction conferment of power by Legislature on the executive Government without laying down any guidelines in the Act. The minimum we expect of the Legislature is to lay down in the Act conferring such a power of fixation of rates clear legislative policy or guidelines in that regard. As the Act did not prescribe any such policy, it must be held that section 5 of the said Act, as it stood before the amendment, was void." (Underlining* is mine) 84.. The other....
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....thority is constituted and empowers it to levy a tax that statute necessarily contains a guidance to fix the rates; it depends upon the provisions of each statute." (Underlining* is mine) *Here italicised. 86.. In N.K. Papiah and Sons v. Excise Commissioner reported in AIR 1975 SC 1007, the Supreme Court although noticed the Devi Dass case [1967] 20 STC 430; AIR 1967 SC 1895, but, did not distinguish the same. In that case, it was, however, held that the Legislature may also retain its control over its delegate by exercising its power of repeal. With utmost respect, in my opinion, the same runs counter to the decision of the Constitution Bench in Devi Dass case [1967] 20 STC 430 (SC); AIR 1967 SC 1895. It was further held that a delegation of legislative power may be held to be good when the delegated legislation itself may have to be placed before the Parliament. There is no such provision in the said Act. In Devi Dass case [1967] 20 STC 430; AIR 1967 SC 1895, the Supreme Court repelled the contention to the effect that whenever a statute defines purpose or purposes for which a statutory authority is constituted and empowers it to levy tax, that statute neces....
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.... sustain an arbitrary power conferred on executive authorities. It is the duty of the court to strike down without any hesitation any arbitrary power conferred on the executive by the Legislature." (Underlining* is mine). It was further held: "While it is true that the tax cannot be realised without it being quantified, the non-quantification of the liability will not destroy the liability under the charging section." 88.. In Babu Ram Jagdish Kumar and Co. v. State of Punjab reported in [1979] 44 STC 159; AIR 1979 SC 1475 also the Supreme Court held that there cannot be any abdication of the essential legislative power. It said: "Even in matters relating to taxation laws, it has been consistently held that the Legislature can delegate the power to fix rates of tax provided there are necessary guidelines regarding such fixation on the ground that, in a modern society, taxation is one of the methods by which economic and social goals of the State can be achieved and the power to tax, therefore, should be a flexible power and capable of being easily altered to meet the exigencies of circumstances. Such delegation has been held to be not amounting to delegation of essential....
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....on 60 with a power to relax the occasional rigour of the provision 's of the Act and to advance the objects of the Act. Section 60 empowers the State Government to exempt a registered society from any of the provisions of the Act or to direct that such provision shall apply to such society with specified modifications. The power given to the Government under section 60 of the Act is to be exercised so as to advance the policy and objects of the Act, according to the guidelines as may be gleaned from the preamble and other provisions which we have already pointed out, are clear." (Underlining* is mine). This decision, thus has also no application to the facts of the present case. 91.. In Harackchand Ratanchand Banthia v. Union of India reported in AIR 1970 SC 1453, the Supreme Court struck down the Gold Control Act. The said decision was followed by the Supreme Court in A.N. Parasuraman v. State of Tamil Nadu reported in AIR 1990 SC 40. It held that as Tamil Nadu Private Educational Institution (Regulation) Act does not lay down any guideline for the exercise of the power by the delegated authority, as a result of which the authority is in a position to act according to his wh....
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.... the impugned legislation at all. In Devi Dass case [1967] 20 STC 430 (SC); AIR 1967 SC 1895, it has been held that when the rate of tax to be fixed has such a wide gap the same cannot be said to be providing for a guideline. 94.. In my considered view, therefore, section 12 of the Act which provides for only rate of tax and that too from 2 per cent to 25 per cent does not provide guideline for recovery of the tax. 95.. The learned Advocate-General contended that section 25A required an amendment as the matter relating to fixation of the amount in terms of section 25A had to be made flexible keeping in view the rate of tax which may be imposed from time to time. This may be so but while delegating its power to fix the rate with regard to recovery of tax from the bills or invoice, it was also obligatory upon the Legislature to give sufficient guidelines to the executives for the purpose of fixing different rates depending upon the nature of works contract, the value of the goods which is sought to be transferred in execution of the works contract and other relevant factors. In this context it was all the more necessary to delegate power to make guideline to fix tax so that the....
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....e executive. As indicated hereinbefore, irrespective of the nature of the works contract and irrespective of the fact as to whether any tax is payable or not, the contractor will have to pay tax. Such a provision will also be violative of article 14 of the Constitution. 101.. In the matter of levy of tax, a very wide latitude is available to the Legislature in the matter of classification of object, persons and things for purpose of taxation. However, the provision for recovery of tax stands on a different footing. Recovery of tax is permissible only when it becomes due except in the case of advance tax. Recovery of tax denotes recovery of tax assessed or assessable. A power to recover tax without any guideline cannot be sustained. As noticed hereinbefore, even the maximum rate at which recovery can be made has not been specified which provision existed in unamended section 25A of the Act. There is also no provision for laying down the notification before the Legislative Assembly. No check, thus, at all has been provided with regard to the power of the State to issue notification fixing the rate at which recovery is to be made from the bills/invoices. 102.. In similar situ....
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....te of Uttar Pradesh [1980] 45 STC 36 (SC); AIR 1980 SC 286; [1980] 1 SCR 769, also it has been held that in the matter of taxation laws the court permits a greater latitude to the discretion of the Legislature and in Khyerbari Tea Co. Ltd. v. State of Assam AIR 1964 SC 925 it has been held that in tax matters the State is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it does so reasonably. In Twyford Tea Co. Ltd. v. State of Kerala AIR 1970 SC 1133; [1970] 3 SCR 383, it has been observed that when a statute divides the objects of tax into groups or categories, so long as there is equality and uniformity within each group, the tax cannot be attacked as violative of article 14, although due to fortuitous circumstances or a particular situation some included within a group may get some advantage over others provided of course they are not sought out for special treatment. It has repeatedly been held, for example in Khyerbari Tea Co. Ltd. v. State of Assam AIR 1964 SC 925, Gopal Narain v. State of U.P. AIR 1964 SC 370 and the Steelworth v. State of Assam [1962] 13 STC 233 (SC); [1962] Supp 2 SCR 589, and Venugopala Ravi Varma Raja v. Uni....
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....ation dated 7th November, 1984, as contained in annexure 3 would have no option but to deduct 4 per cent from each bill or invoice in view of the scheme of the Act itself. 111.. In Geeta Prasad Singh and Co. v. State of Bihar reported in [1986] 63 STC 337 (Pat); [1986] PLJR 451, however, it was held that deduction of 4 per cent from the entire bill cannot be said to be confiscatory. The Division Bench held that if the tax paid is excessive he may be entitled to some interest as well. But unfortunately there exists no such provision. The Division Bench in that case did not take into consideration the matter relating to reasonableness of the rate fixed on the touchstone of the facts and the provisions of law as have been raised in these writ applications. 112.. As indicated hereinbefore, the rate notified has to be applied in respect of each bill or invoice irrespective of the fact as to what extent the works contractor is liable for payment of tax. 113.. While judging this matter, it is to be considered that a registered dealer is bound to submit monthly statements in respect of his turnover. A registered dealer is also liable to submit quarterly return and along wit....
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....s contracts as if there was a sale of such goods and materials. It was held that the power of the State to levy tax on sales and purchases of goods include "deemed sale" and purchase of goods under clause (29A) of article 366 of the Constitution, falls under entry 54 and not outside it. 117.. The reasonableness of the fixation of rate of 4 per cent in terms of the impugned notification is required to be judged in the aforementioned context. 118.. Rule 26A of the Bihar Sales Tax Rules, 1983, provided for the matter relating to deduction of tax from the bills/invoices of works contractor under section 25A. Sub-rule (2) of rule 26A provides that the deduction referred to under sub-section (1) of section 25A shall be made at the rate notified in this behalf from time to time by the Government. Sub-rule (2) provides that such deduction shall be made from all payments made in respect of all works contracts executed whether in part or in full after 1st April, 1984, provided total value of the works contract or contracts exceed Rs. 25,000. 119.. From the provisions aforementioned, it would be evident that whereas the notification fixing the rate was to be made from ti....
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....371, as also of this Court in Jamshedpur Contractors' Association case [1989] 75 STC 132; [1989] BLT 381; [1990] 1 PLJR 407 it is now firmly settled that sales tax will be payable only on the valuable consideration of the goods transferred by the contractor to the employer involved in the works contract. 126.. This is not the case of the State that after the decision of the Supreme Court in Builders' Association case [1989] 73 STC 370; AIR 1989 SC 1371, the rate of tax has been enhanced. 127.. It may be mentioned that taxes payable on the value of goods transferred in the execution of the works contract would be subject to all incidence of tax and/or exemptions therefrom as provided for in the notifications issued under sections 11 and 13 of the Act also in terms of sections 14 and 15 of the Central Sales Tax Act. 128.. Prima facie, therefore, the petitioners have been able to show that what was reasonable at one point of time was no longer reasonable in view of the decision of the Supreme Court of India in Builders' Association case [1989] 73 STC 370; AIR 1989 SC 1371. The petitioners, therefore, have prima facie discharged the onus that the rate of tax once considered to....
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....d provision does not confer arbitrary, unguided, unrestricted and uncanalised power without any guidelines on the authority to terminate the services of an employee without conforming to the principles of natural justice and equality as envisaged in article 14." Sawant, J., held: "The doctrine of reading down or of recasting the statute can be applied in limited situations. It is essentially used, firstly, for saving a statute from being struck down on account of its unconstitutionality. It is an extension of the principle that when two interpretations are possible one rendering it constitutional and the other making it unconstitutional, the former should be preferred. The unconstitutionality may spring from either the incompetence of the Legislature to enact the statute or from its violation of any of the provisions of the Constitution. The second situation which summons its aid is where the provisions of the statute are vague and ambiguous and it is possible to gather the intentions of the Legislature from the object of the statute, the context in which the provision occurs and the purpose for which it is made. However, when the provision is cast in a definite and unambiguous ....
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....ould be ultra vires. 135.. However, with greatest respect to S. Ray, J., I am constrained to observe that section 25A in its entirety is not in conflict with section 15(1) of the Central Sales Tax Act. 136.. From the scheme and object of section 25A of the said Act, it is evident that the same is a recovery provision. Such a recovery provision has got nothing to do with the leviability of the tax at all. Section 12(2) of the said Act also provides that the rate of tax so fixed by the State shall be subject to the provisions of section 15 of the Central Sales Tax Act. 137.. In Bhawani Cotton Mills Ltd. case [1967] 20 STC 290 (SC); AIR 1967 SC 1616, the majority held that the purchase tax imposed by reason of the Punjab General Sales Tax Act is ultra vires section 15 of the Central Act inasmuch as thereby tax can be levied at more than one stage. Such is not the position of law in the instant case. In that case it was further held that section 15 of the Central Sales Tax Act does not make any distinction between a registered dealer and an unregistered dealer . In that case the dealer claimed exemption under section 5(2)(a)(vi) and rule 27A of the Rules made unde....
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....hat taxes are to be collected in terms of section 25A of the Act irrespective of the fact as to whether some goods transferred involving works contract are declared goods or not. 143.. In a given case, it is possible that in view of the taxable turnover of the works contractor, no sales tax at all would be payable, but so far as person authorised to deduct tax in terms of section 25A is concerned, in view of the provision for penalty as contained in sub-section (5) thereof, such an authority will have no other option but to deduct 4 per cent from all invoices or bills submitted by the contractor irrespective of the fact as to whether tax in relation to the commodities in-question is leviable or not. 144.. In Bhawani Cotton Mills case [1967] 20 STC 290 (SC); AIR 1967 SC 1616, with regard to the argument advanced on behalf of the Revenue to the effect that even if a person who is not liable to pay tax in respect of a declared goods, he may obtain refund in respect thereof, it was held: "If the Central Act makes it mandatory that the tax can be collected only at one stage, in our opinion, it is not enough for the State to say that a person, who is not liable to pay tax, must,....
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....l be had to the terms of the contract, the conduct of the parties and the circumstances of the case. (3) Unless a different intention appears, the rules contained in sections 20 to 24 are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer." "20. Specific goods in a deliverable state.-Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment of the price or the time of delivery of the goods, or both, is postponed." What, therefore, would be the deliverable stage would depend upon the nature of the works contract itself. 150.. The Supreme Court in Builders' Association of India v. Union of India reported in [1989] 73 STC 370; AIR 1989 SC 1371 held that in view of clause (29A) of article 366 of the Constitution, the provision imposing sales tax on works contract is valid. 151.. In paragraphs 33 to 39 (at pages 398-402 of STC) of the said judgment, the Supreme Court was considering the effect of the submission made on behalf of the S....
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....either on delivery or on delivery being certified by the architect or engineer. Where this is so, the property in them will pass to the employer, either on payment or as soon as the condition as to the certificate has been fulfilled. It should be borne in mind that in those cases where the ownership of materials or plant is effectively transferred to the building owner, whether by express provision or otherwise, the transfer is never quite absolute since it will usually be subject to a right express or implied for the builder to remove the plant, or any excess of materials if they have not been used and fixed, on completion of the work." "Effect of provisions for payment: Even where no explicit provisions for passing the property in materials or plant exist, there may be provisions in a contract for payments which include the value of materials or plant brought on to the site. Such provisions will normally pass the property to the building owner upon payment, or if the contract so provides upon the issue of any relevant certificate." "Time of vesting: Where the vesting of property is stipulated to occur only on the occurrence of an event, the fact as to whether this event ....
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....nvolved in the execution of the works contract has passed onto him or not. In certain cases despite the fact that materials are affixed to building or other erection, the contractor will have a right to take it out for replacement and for other purposes. 160.. In Emden and Gill's Building Contracts and Practice, it has been observed: "Building materials: In the case of a building contract where the property in the materials on the site has, by a vesting clause, become vested in the employer, it has been held that the materials are in the possession, order and disposition of the builder with the consent of the true owner, until the building is finished, so as to make the contractor the reputed owner thereof, and therefore on bankruptcy of the contractor the property in them passes to his trustee." See Re Fox ex parte Oundle and Thrapston Rural District Council v. Trustee [1948] 1 All ER 849. 161.. There cannot be any doubt as has been observed by the Supreme Court in Builders' Association case [1989] 73 STC 370; AIR 1989 SC 1371, that ordinarily unless there is a contract to the contrary in the case of works contract, the property in goods used in the construction of the....
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....e expression 'purchase', in section 2(ff) in 1960." 164.. The learned Advocate-General contended that in Bhawani Cotton Mills case [1967] 20 STC 290; AIR 1967 SC 1616, the Supreme Court did not consider the meaning of the word "repeal". In G. Ekambarappa v. Excess Profits Tax Officer reported in [1967] 65 ITR 656 (SC); AIR 1967 SC 1541, it was held: "To put it differently, the Act was repealed so far as the area of Bellary district was concerned. Repeal of an Act means revocation or abrogation of the Act and, in our opinion, section 6 of the General Clauses Act applies even in the case of a partial repeal or repeal of part of an Act." 165.. In Firm A.T.B. Mehtab Majid & Co. v. State of Madras reported in [1963] 14 STC 355 (SC); AIR 1963 SC 928, it was held: "It has been urged for the respondent that if the impugned rule be held to be invalid, old rule 16 gets revived and that the tax assessed on the petitioner will be good. We do not agree. Once the old rule has been substituted by the new rule, it ceases to exist and it does not automatically get revived when the new rule is held to be invalid." 166.. In article 178 of Francis Bennion's Statutory Interpretati....
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....the enactment repealed, in so far as it could be made under the provision re-enacted, has effect as if made under that provision. Commentary: This derives from section 17(2)(b) of the Interpretation Act, 1978. The restriction to post-1978 Acts derives from the Interpretation Act, 1978, section 22(1). As to the type of Acts for which this is intended see commentary on section 184 of this Code." It is, therefore clear that the word "modification" only refers to "minor modification" and not to "major modification". 168.. By reason of section 25A of the Finance Act as it stood prior to enactment of Act 2 of 1990 merely prescribed the maximum rate. In terms of rule 26A, the notification was to be issued fixing a rate from time to time. However, by reason of section 25A as it now stands, the maximum rate fixed by reason of the statute has been deleted and in its place the words "as may be fixed" from time to time have been inserted. This, in my opinion, is not a minor modification. 169.. In Bhavani Cotton Mills Ltd. v. State of Punjab reported in [1967] 20 STC 290; AIR 1967 SC 1616, the Supreme Court was considering the amendment in the definition of "purchase" which was in t....
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....n made, which will enable this Court to sustain the notification. Inasmuch as no fresh notification had been issued, under section 5(1) till September 26, 1961, the assessment for the years 1960-61 and 1961-62, on the basis of the notification issued in 1958, cannot be sustained, on this additional ground also." 170.. It is, therefore clear that the amendment made in section 25A by reason of Act No. 2 of 1990 was not by way of a "minor modification". The aforementioned decision has been followed by the Supreme Court in State of Punjab v. Shakti Cotton Co. reported in [1972] 29 STC 706; AIR 1972 SC 1458 and in State of Punjab v. Subhash Trading Company reported in [1976] 37 STC 530; AIR 1976 SC 769. 171.. The defect pointed out in Bhawani Cotton Mill's case [1967] 20 STC 290 (SC); AIR 1967 SC 1616, was rectified by the Punjab General Sales Tax Act (as amended by Act 7 of 1967), validity whereof was upheld in Rattan Lal and Co. v. Assessing Authority reported in [1970] 25 STC 136 (SC); AIR 1970 SC 1742. The matter again came up in State of Punjab v. Shakti Cotton Co. reported in [1972] 29 STC 706 (SC); AIR 1972 SC 1458 wherein the following direction was given: "The appel....
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.... any rate for such deduction can be fixed by the State Government. The two provisions are not, therefore, consistent with each other. In that situation, in my opinion, it was obligatory on the part of the State, to make a fresh notification. 175.. In Bhawani Cotton Mills Ltd. case [1967] 20 STC 290 (SC); AIR 1967 SC 1616 Vaidialingam, J., held that amended definition of purchase being inconsistent with the unamended definition of the expression "purchase", section 22 of the Punjab General Clauses Act was not applicable. 176.. This aspect has also been considered recently by the Supreme Court in Poonjabhai Vanmalidas v. Commissioner of Income-tax reported in [1990] 186 ITR 572 (SC); AIR 1991 SC 1 wherein it has been held: "The effect of section 24 of the General Clauses Act, 1897, in so far as it is material, is that where the repealed and re-enacted provisions are not inconsistent with each other, any order made under the repealed provision is deemed to be an order made under the re-enacted provisions." 177.. By reason of the unamended provision of section 25A, maximum rate at 4 per cent was fixed, but by reason of the amended provision, the State Government has been confe....
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....verned by article 286 while levying sales tax on sale of goods involved in a works contract? They cannot do so. When the law creates a legal fiction such fiction should be carried to its logical end. There should not be any hesitation in giving full effect to it. If the power to tax a sale in an ordinary sense is subject to certain conditions and restrictions imposed by the Constitution, the power to tax a transaction which is deemed to be a sale under article 366(29A) of the Constitution should also be subject to the same restrictions and conditions." By reason of legal fiction created in terms of clause 29A of article 366 of the Constitution of India, a works contractor becomes a dealer within the meaning of the said Act, he in my opinion, would also be entitled to have all the privileges conferred thereunder. 181.. Section 13(1)(b)(ii) as it stood prior to enactment of Act 2 of 1990 has been quoted by brother S. Roy, J., in paragraph 16. The word "works contract" by reason of the amendment carried out in section 13(1)b)(ii) has been deleted. Brother Roy, J., has rightly observed that the same was necessary as the power to fix rate was given to the State Government under th....
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.... the rate of tax to be deducted under section 25A and, therefore, the provisions of section 25A cannot be unguided, uncanalised and so on. I would only like to add that having regard to the migratory nature of the business of works contract and mobility of "dealers", i.e., works contractors engaged in such business it is necessary to provide for the machinery for collection of the tax in advance by way of deduction at source, as under the Income-tax Act, which will be subject to final quantification during the assessment proceeding. The decisions, which have been cited on behalf of the petitioners, deal with cases of excessive delegation on the point of the leviability of tax, i.e., while dealing with the charging provisions of the relevant statutes. Section 25A is in the nature of machinery provision. Whether sufficient guidelines have been prescribed in the statute or not has to be examined with reference to the charging provision and not the machinery provision. 187.. As regards the question of section 25A of the Bihar Act being in conflict with section 15 of the Central Act, I have some reservations in agreeing to the conclusion arrived at by brother S. Roy, J., which I shal....
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....en out of the assessment orders under the State Act determining the tax liability under State law at particular rates though being in conflict with the mandate of section 15 (a) of the Central Act, and, thus, it is apparent that the decision in those cases was rendered on the facts of the case. 189.. Another aspect to be noticed is that in terms of section 15 of the Central Act, it is not permissible to levy tax at more than one point of sale inside the State and to provide for a subsequent refund (now reimbursement, after amendment) of the tax collected at more than one point, but when the goods purchased and sold are not the same and in between they have undergone manufacture or processing to produce a commercially different article, it cannot be said that the said goods are taxed at two stages. In State of Tamil Nadu v. Pyare Lal Malhotra [1976] 37 STC 319; AIR 1976 SC 800, the Supreme Court had the occasion to consider the tax liability in cases where the goods in question after the necessary manufacturing process have undergone a definite metamorphosis as to the commercial identity of the new product, and in that connection after following the dictum laid down in Devi Dass ....