TaxTMI 
TaxTMI 
2010 (10) TMI 942
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....to be deducted represents the tax and payment is of taxable turnover. The entire payment not being the taxable turnover either on account of part of turnover being towards service element in a composite works contract or on account of its being turnover of inter-state sale and purchase, sales outside the State or sales in the course of import. The contention is based on judgments of the Hon'ble Supreme Court in Steel Authority of India Limited v. State of Orissa and others, AIR 2000 SC 946 and Rapti Commission Agency v. State of UP and others, (2006) 6 SCC 522. 3. We may make a brief reference to the averments in the writ petitions. 4. In CWP No.14797 of 2010, relating to the State of Haryana, case of the petitioner is that it is a construction company undertaking execution of works contract for different clients including the State and Central Governments and Public Sector Undertakings. Nature of its work includes laying of roads, construction of bridges, flyovers, refineries, power projects on turnkey basis as per contract documents. One of the contracts entered with respondent No.5 National Fertilizer Limited has been annexed as Annexure P.3. Total payment to be made to the co....
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....hall be calculated by multiplying the amount paid in any manner with such rate not exceeding ten per cent, as the State Government may, by notification in the Official Gazette, specify and different rates may be specified for different works contracts or class or classes of dealers, and that such person shall keep record, of the payments made and, of the tax deducted in advance therefrom, for a period of five years from the close of the year when the payments were made and shall produce such record before the prescribed authority when so required for carrying out the purposes of this Act. (2) The provisions of sub-section (1) shall not apply where the amount or the aggregate of the amounts paid or likely to be paid during a year by any person to a dealer does not or is not likely to exceed one lakh rupees or such other amount as may be prescribed. (3) Every person who is required to deduct tax in advance under sub-section (1) shall furnish such returns at such intervals by such dates in such manner to such authority as may be prescribed and shall pay the tax deducted according to such returns to the State Government in such manner as may be prescribed. (4) Every person referred ....
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....sideration shall not include the amount of tax, if any, forming part of the consideration. (3) The provisions of sub-rules (1) and (2) shall not apply where the amount or the aggregate of the amounts paid or likely to be paid during a year to the supplier of grains or the contractor, as the case may be, does not or is not likely to exceed one lakh rupees. (4) The provisions of sub-rule (2) shall not apply where both the contractee and the contractor are dealers registered under the Act and the contract relates to manufacture or processing of goods for sale. (5) The amount, which any person is required to deduct in a month under the foregoing sub-rules, shall be paid by him within fifteen days of the close of the month into the appropriate Government Treasury in challan in Form VAT-C1 separately for each payee in the manner laid down in rule 35. The person making the payment shall affix the original copy of the challan with the return filed by him and shall furnish the fifth copy to the payee concerned as a certificate of tax deduction and payment, who shall affix it with his return. Provided that the Commissioner may by order in writing permit such person to pay by grouping a n....
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....f the work undertaken by the contractor, shall, at the time of such payment or discharge, in cash or by cheque or draft or by any other mode, deduct an amount, equal to two per cent of such payment or discharge, purporting to be a part of the tax, payable under this Act on such transfer, from the bills or invoices raised by the sub-contractor, as payable by the contractor. (3)Every person liable to deduct tax at source under sub-section (1) or sub-section (2), as the case may be, shall make an application in the prescribed manner to the designated officer for allotment of Tax Deduction Number. The designated officer, after satisfying that the application is in order, shall allot Tax Deduction Number. (4)The amount deducted under sub-section (1) or sub-section (2), as the case may be, shall be deposited into the Government Treasury by the person making such deduction in the prescribed manner and shall also file a return of tax deduction and payment thereof in such form and in such manner, as may be prescribed. (5)Any deduction made in accordance with the provisions of this section and credited into the Government Treasury, shall be treated as payment towards the tax payable on be....
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.... furnish to the commissioner or the designated officer, particulars of such contract in Form VAT-25 within a period of thirty days from the date of entering into such contract. (2) A person entering into a contract with a contractor or a contractor entering into a contract with a sub-contractor for transfer of property in goods for execution of a works contract, who is also liable for deduction of tax, shall within a period of thirty days of accruing his liability to deduct the tax, make an application, complete in all respects to the designated officer in Form VAT-26, for allotment of tax deduction number. The designated officer shall allot tax deduction number to the person concerned within a period of seven days from the receipt of the application. (3) The tax deducted under the Act, shall be deposited by the person deducting the tax through a challan in Form "VAT-2" in the appropriate Government Treasury within a period of fifteen days from the close of each month. (4) A monthly statement of the deposits made under sub-rule (3), shall be furnished by the persons concerned in Form "VAT-27" alongwith the proof of payment within a period of fifteen days after the date of deposi....
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....as the sales tax liability of the contractor thereon was eight per cent. It was contended that this requirement proceeded on the assumption that half of the amount was not liable to tax being in respect of inter-State sales, outside sales and export sales. No such assumption based on the rate of tax at any given point of time can be made. Section 13-AA should have been precisely drafted to make it clear that no tax was levied on that part of the amount credited or paid that related to inter-State sales, outside sales and sales in the course of import, particularly after the previous Section 13-AA had been struck down by the Orissa High Court for the reason that it was couched in terms wider than were permissible to the State Legislature and that judgment was accepted." 11. Similarly in Nathpa Jhakri Jt. Venture v. State of HP and others, (2000) 118 STC 306, judgment in Steel Authority was followed in respect of corresponding provisions of Bihar Sales Tax Act. The relevant observations are:- "4. A bare perusal of the two provisions will make it clear that in either provision there is an obligation to deduct from transact....
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....ng thereon. In the circumstances of the case, there shall be no orders as to costs." 12. Apart from the above two judgments, reliance has been placed on behalf of the petitioners on following judgments:- i) Rapti Commission Agency v. State of U.P. and others 2006 (6) SCC 522 Holding that Section 8E of the UP Trade Tax Act, 1948 which was identical to the impugned provision should be held to be subject to what has been stated in Steel Authority of India Limited and Nathpa Jhakri Joint Venture. View taken by the Allahabad High Court in merely reading down that provision was disapproved. ii) BSNL v. Union of India (2006) 3 SCC 1 Holding that service component in a works contract could not be subjected to sales tax. iii) Keshob Plants v. Bharat Sanchar Nigam Limited and others, (2009) 22 VST 422 (P&H) Holding that Section 10C of the Punjab General Sales Tax Act, 1948 was ultravires the Constitution being beyond the competence of State legislature. iv) Jaiparkash Associates Limited v. State of MP and others, (2007) 6 VST 1 (MP) Holding that Section 35 of the Madhya Pradesh Commercial Tax Act, 1994 which was identical to impugned provision was ultravires the Constitution. v) L....