TaxTMI 
TaxTMI 
1996 (12) TMI 370
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....n the said section has to deduct tax at source at the rate and in the manner prescribed under the said Act. On the strength of section 27 the supplier on behalf of the buyer shall have the right to deduct tax at source. Section 27 is quoted below: "27(1). Notwithstanding anything contained in any other provisions of this Act,-(a) every person (not being an individual or a Hindu undivided family) responsible for making any payment or discharging any liability on account of any amount payable for the transfer of property in goods (whether as goods or in some other form) involved in a works contract specified in Schedule VI or for the transfer of the right to use any goods specified in Schedule VII for any purpose; or (b) every person responsible for paying sale price or consideration or any amount purporting to be the full or part payment of sale price or consideration in respect of any sale or supply of goods liable to tax under this Act to the Government or to a company, corporation, board, authority, undertaking or any other body by whatever name called, owned, financed or controlled wholly or substantially by the Government, or a public company shall, at the time of credit ....
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....id to the Government be deemed to be the tax paid by the payee. In all these process the person responsible for discharging these liabilities has to follow the procedure prescribed under section 27 of the Act and the rule 35 of the Rules. Petitioners in all the civil rules being "public companies" now as per the said section are under obligation to deduct tax at source and thereafter make deposit of it to the Government. The petitioners have challenged this provision of the Act, viz., the obligation to deduct tax at source by "the public companies" in respect of the sale and purchase of any goods and pay the same in the treasury every month and maintain records. According to the petitioners this procedure is onerous, expensive, besides arbitrary and unreasonable. Petitioners also challenged the validity of this piece of legislation, namely, section 27 requiring the public companies to deduct tax at source and deposit it to the Government in the manner prescribed therein, as violative of articles 14 and 19(1)(g) of the Constitution of India. 4.. Contention of the petitioners is that making them liable to deduct tax at source and thereafter deposit it to the Government are on t....
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....clared ultra vires on the ground of violation of the equality clause of the Constitution. Mr. Goswami further submits that putting obligation to deduct tax at source under the Act and to deposit it to the Government in the manner prescribed therein is unreasonable restrictions imposed on petitioners-company in carrying on their business, therefore, this provision violates the provisions of article 19(1)(g) of the Constitution. 7.. Dr. A.K. Saraf, learned counsel appearing on behalf of some of the writ petitioners, has adopted the arguments advanced by Mr. Goswami. Dr. Saraf, however, has made further submission that section 27 of the Act put obligation to the public companies to deduct tax at source while paying the sale price. This implies that whenever a purchase is made by a public company in the open market, the company must have with it the tax deduction certificate form which has to be issued to the seller as otherwise no seller will allow to deduct tax at source. According to Dr. Saraf this is an unreasonable restriction on the right of the petitioners to carry on their trade and violative of article 19(1)(g) of the Constitution. Under the Act levy of sales tax has bee....
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....strictions in carrying on the trade or business of the petitioners. Therefore, section 27 of the Act is not violative of article 19(1)(g) of the Constitution. 9.. On the rival contentions of the parties it is to be seen (a) whether the petitions are maintainable or not? and (b) whether provisions contained in section 27 of the Act so far the obligation of the public companies to deduct tax at source is sustainable in law? 10.. According to the learned Advocate-General the petitioners in their petitions nowhere mentioned that they are "public companies". In the absence of such averments it may not be accepted that the petitioners are "public companies" and liable to deduct tax and carry on the obligation pursuant to section 27 of the Act and rule 35 of the Rules. It is true that the petitioners have not specifically mentioned that they are public companies. Petitioners, however, in their petitions stated that the petitioners are "companies" registered under the Companies Act. In the cause title the petitioners described themselves as "Company Limited". Section 13 provides the procedure how a company is to be described. Section 13(1)(a) indicates the procedure, which I quote be....
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....whether incorporated or not, or a public sector undertaking." 11A. Section 7 of the Act imposes liability of tax. In exercise of power conferred by under section 72 of the Act, the Government of Assam has made Rules, known as "Assam General Sales Tax Rules, 1993" which was further amended as "Assam General Sales Tax (Amendment) Rules, 1996". Rule 35 of the Rules prescribes the procedure for depositing the tax so deducted into the account of the Government. I quote rule 35 hereinbelow: "35(1). The amount of tax payable shall be deducted by every person as referred to in clauses (a) and (b) of sub-section (1) of section 27 from the bill or cash memo in respect of sale and supply or works contract and deposited by him/her into the Government treasury by challan in form XII on behalf of the dealer. (2) No deduction shall be made under sub-section (1) of section 27 where the amount paid or credited by such person in a financial year does not exceed five thousand rupees. (3) The tax deducted shall be deposited into the account of the State Government in the following manner: (a) the person deducting the tax shall within ten days from the expiry of each English calen....
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...., food stuff, HSD, petrol, medicine, etc. In fact, the petitioners' tea companies have to purchase materials worth several lakhs in a year to maintain their gardens. Besides, the tea gardens are situated away from the treasury offices. The new provisions of deducting tax and depositing it within the period mentioned in the treasury would cause tremendous and unnecessary hardship to the petitioner-companies. Petitioners along with various other tea estates through the Assam Branch of Indian Tea Association submitted representations before the Government and prayed for amendment of section 27 of the Act. However, no definite decision was taken by the Government. But the Government considering the enormous difficulties pointed out by the industry did not insist on compliance of the provisions of the Act so far. According to the petitioners, they became the tax collecting authority, which otherwise, is not the job of the tea gardens. The tea gardens are maintained by few staff and these staff have to submit returns under various other Acts and Rules. Section 27 makes it obligatory on the part of the "public companies" to deduct tax at source and the staff working in the tea gardens hav....
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....itution. The principle of equality does not mean that every law must have universal application for all persons who are not by nature, attainment or circumstances in the same position, as the varying needs of different classes of persons often require separate treatment. The principle does not take away from the State the power of classifying persons for legitimate purposes. It is true that every classification is in some degree likely to produce some inequality, and mere existence of some inequality is not enough. Differential treatment does not per se constitute violation of article 14 of the Constitution. It denies equal protection only when there is no reasonable basis for the differentiation. Article 14 prohibits class legislation and not reasonable classification for the purpose of legislation. If the Legislature takes care to reasonably classify persons for legitimate purposes and if it deals equally with all persons belonging to a "well-defined class", it is not open to the charge of denial of equal protection on the ground that the law does not apply to other persons. When a law is challenged denying equal protection, the question for determination by the court is not whet....
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....people. But when on the face of a statute there is no classification at all, and no attempt has been made to select any individual or group with reference to any differentiating attribute peculiar to that individual or group and not possessed by others, this presumption is of little or no assistance to the State." 17.. Under section 27 of the Act, the Government, the Government companies and the public companies are under obligation to deduct tax at source and deposit it to the Government in the manner prescribed therein. Mr. Goswami in this connection has drawn my attention to the piece of legislation prior to the enactment of the Act. Under the previous Act the Government was empowered to notify the authority or persons who were to deduct tax at source. Pursuant to the provisions of the earlier legislation, notification had been issued by the Government. As per the said notification two categories of persons were required to deduct tax at source, viz., the Government and Government companies. But the present legislation has also included "the public companies". Now the "public companies" are also under obligation to deduct tax at source and deposit it to the Government in t....
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.... is challenged on the ground of violation of article 14, the scope of inquiry as to the reasonableness under article 14 is not the same as that under article 19. Of course, there is an area where the requirements of the two articles may converge, say for instance, where a statute vests unguided or uncanalised discretion in an administrative authority to affect the rights of citizens, the statute may be held to offend article 14 on the ground that the power to classify conferred by it is unreasonable. At the same time, the restriction imposed by the statute may be held to be an unreasonable restriction on the citizen's fundamental rights under article 19 because the power to restrict those rights has been conferred upon an administrative authority, acting upon his unfettered discretion. The statute which is unreasonable under article 14 may be held to constitute a reasonable restriction under article 19 because even where the statute offers a guidance to the administrative authority it may still be held to be an unreasonable restriction if the restraint which is sought to be imposed under the guidance offered by the statute is excessive or uncalled for or otherwise unreasonable havi....
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....expression of "in the interest of general public" is wide enough and may include within its ambit the interests of public health and morals, economic stability of the country, equitable distribution of essential commodities at fair prices, maintenance of purity in public life, prevention of fraud, improvement of the conditions of farmers or working class and also implementation of the provisions contained in Part IV of the Constitution and smooth realisation of tax. 20.. For a welfare State collection of taxes is an important aspect in the governance of a country. With tax, welfare activities are carried on, therefore, the State is required to see that tax is realised so that such tax can be utilised in the welfare activities of the State. While doing so, it has also the right to see that the authorities, who are responsible to collect tax are realising it efficiently without fail. The State should also to make endeavour to prevent tax evasion. If the payment of tax is evaded the State Government will not be able to carry out its activities and thereby the developmental works of the State is halted. In order to realise tax effectively, the State may pass orders imposing oblig....
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....he general public reasonable restrictions on the exercise of the right conferred by sub-clause (g) of clause (1) of article 19. Quite obviously it is left to the court, in case of dispute, to determine the reasonableness of the restrictions imposed by the law. In determining that question the court cannot proceed on a general notion of what is reasonable in the abstract or even on a consideration of what is reasonable from the point of view of the person or persons on whom the restrictions are imposed. The right conferred by sub-clause (g) is expressed in general language and if there had been no qualifying provision like clause (6), the right so conferred would have been an absolute one. To the person who has this right any restriction will be irksome and may well be regarded by him as unreasonable. But the question cannot be decided on that basis. What the court has to do is to consider whether the restrictions imposed are reasonable in the interests of the general public.........." The Supreme Court also reiterated the decision quoted above in State of Madras v. V.G. Row AIR 1952 SC 196. 24.. Again in Vrajlal Manilal and Co. v. State of Madhya Pradesh AIR 1970 SC....
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....the tax or for fraudulently evading the payment of it is an additional coercive process which is expected to be immediately effective and enables the State to realise its revenues which are necessary for carrying on the administration in the interest of the general public. The fact that in some cases restrictions may result in the extinction of the business of a dealer would not by itself make the provision as to cancellation of registration an unreasonable restriction on the fundamental right guaranteed by article 19(1)(g)." The Supreme Court while dealing with the aforesaid case also referred to a decision of the apex Court in Narendra Kumar v. Union of India AIR 1960 SC 430 wherein it was held thus: "...............the word 'restriction' in article 19(5) and 19(6) of the Constitution includes cases of 'prohibition' also; that where a restriction reaches the stage of total restraint of rights special care has to be taken by the court to see that the test of reasonableness is satisfied by considering the question in the background of the facts and circumstances under which the order was made, taking into account the nature of the evil that was sought to be remedied by....
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....ent. Violation of any of the rights guaranteed under article 19(1)(g) must be shown as not saved by any of the provisions of article 19(6). The apex Court in State of Andhra Pradesh v. McDowell & Co. (1996) 3 SCC 709 held that the court cannot sit in judgment over the wisdom of the Legislature and strike down an Act saying that it was unjustified. The Court shall have to be very cautious in deciding whether restriction put by the State is reasonable or not. It may some time lead to extinction of a particular industry but that does not mean that the restriction imposed by the State is unreasonable. The restriction will not be struck down unless it is shown that it is not covered by any of the provisions of article 19(2) to (6). As referred to above, if any restriction is put by a piece of legislation on any person this must be saved by the provisions of article 19(2) to (6). As referred to above, if any restriction is put by a piece of legislation on any person this must be saved by the provisions of article 19(2) to (6). The court shall not set aside merely because it is harsh, onerous or cumbersome. It is the wisdom of the Legislature. The Legislature is competent to make law as p....