AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2008 (8) TMI 824
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....straining the contractee from deducting the tax at source and for refund of the amount of tax already deducted from the bills of the petitioner. C.W.P. No. 1358 of 2003: The petitioners here are contractors working for various activities with Bharat Sanchar Nigam Ltd. The petitioners besides filing the present petition challenging the vires of section 10C of the Act also filed appeal before the appellate authority, who while accepting appeal remanded the case back to the Assessing Officer where the same is still pending. The prayer is for declaring section 10C of the Act as ultra vires to the Constitution of India and restraining the contractee from deducting the tax at source and for refund of the amount of tax already deducted from the bills of the petitioners. C.W.P. No. 1691 of 2003: The petitioners here are contractors working for various activities with Bharat Sanchar Nigam Ltd. The petitioners besides filing the present petition challenging the vires of section 10C of the Act also filed appeal before the appellate authority, who while accepting appeal remanded the case back to the Assessing Officer where the same is still pending. The prayer is for declaring sect....
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....itioner in the school. A contractor in the name of M/s. Builtech Jalandhar was engaged, as the petitioner failed to deduct tax at source on the payments made to the contractor, notice under section 10C of the Act was issued to the petitioner. Rejecting the replies filed by the petitioner, assessment for the years 1999-2000 and 2000-01 was framed vide orders dated April 15, 2004, raising a demand of tax at the rate of two per cent of the amount. Besides this penalty under section 10C(5) of the Act an interest under section 10C(6) of the Act also levied. The petitioner besides filing the present petition challenging the vires of section 10C of the Act also filed appeal before the Appellate Authority, who while accepting appeal remanded the case back to the Assessing Officer where the same is still pending. C.W.P. No. 15198 of 2004: The petitioner here is a contractor working for various activities with Bharat Sanchar Nigam Ltd. The petitioner besides filing the present petition challenging the vires of section 10C of the Act also filed appeal before the appellate authority, who while accepting appeal remanded the case back to the Assessing Officer where the same is still pendin....
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....rity for verification of the TDS certificates and passing a self speaking order within 90 days from the receipt of remand order and in case refund is due the same be granted to the petitioner. As the remand order was not passed within the period prescribed, the petitioner took the matter to the Sales Tax Tribunal, Punjab, who vide order dated April 27, 2005 directed the Assessing Authority to decide the case within, a period of one month. Though at the time of filing of the petition the proceedings were still pending before the Assessing Authority, however, during the pendency thereof vide order dated February 20, 2006 assessment was framed. By virtue of it a sum of Rs. 27,00,933 was found to be refundable to the petitioner. The prayer in the petition is for striking down provision of section 10C of the Act and also for grant of interest on the amount of tax retained by the official respondents without authority of law. C.W.P. No. 17611 of 2005: The petitioner-company was awarded two contracts bearing Nos. 331 and 333 by M/s. Power Grid Corporation of India Limited for supply of electric transmission towers in knocked down condition. Another set of contracts bearing Nos. 332 ....
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.... pending before the Assessing Authority, however, during the pendency thereof vide order dated February 20, 2006 assessment was framed. By virtue of it a sum of Rs. 12,80,387 was found to be refundable to the petitioner. The prayer in the petition is for striking down provision of section 10C of the Act and also for grant of interest on the amount of tax retained by the official respondents without authority of law. C.W.P. No. 17614 of 2005: The petitioner-company was awarded two contracts bearing Nos. 331 and 333 by M/s. Power Grid Corporation of India Limited for supply of electric transmission towers in knocked down condition. Another set of contracts bearing Nos. 332 and 334 were awarded for survey, optimization, design and construction of two 800 KV single circuit transmission lines from Kishanpura to Moga. The first set of contracts bearing Nos. 331 and 333 were purely for sale of material, the tower parts, were manufactured and supplied by M/s. Kalpataru Power Transmission Limited, Gandhi Nagar, Ahmedabad and M/s. Transpower Engineering Ltd., Mumbai, whereas the second set of contracts bearing Nos. 332 and 334 were works contract, described as "erection contracts". The....
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....31 and 333 by M/s. Power-Grid Corporation of India Limited for supply of electric transmission towers in knocked down condition. Another set of contracts bearing Nos. 332 and 334 were awarded for survey, optimization, design and construction of two 800 KV single circuit transmission lines from Kishanpura to Moga. The first set of contracts bearing Nos. 331 and 333 were purely for sale of material, the tower parts were manufactured and supplied by M/s. Kalpataru Power Transmission Limited, Gandhi Nagar, Ahmedabad and M/s. Transpower Engineering Ltd., Mumbai, whereas the second set of contracts bearing Nos. 332 and 334 were works contract, described as "erection contracts". The same were got executed through the sub-contractor, M/s. Mukand Engineering Ltd. The dispute raised in the writ petition is pertaining to the assessment year 1999-2000. M/s. Power Grid Corporation of India Limited for whom the petitioner was working deducted tax at source from the bills raised by the petitioner qua the works contracts and deposited the same with the State. During the year in question a sum of Rs. 12,60,813 was deducted at source. As the petitioner had also got the job executed through a sub-con....
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....gar, Ahmedabad and M/s. Transpower Engineering Ltd., Mumbai, whereas the second set of contracts bearing Nos. 332 and 334 were works contract, described as "erection contracts". The same were got executed through the sub-contractor, M/s. Mukand Engineering Ltd. The dispute raised in the writ petition is pertaining to the assessment year 1998-99. M/s. Power Grid Corporation of India Limited for whom the petitioner was working deducted tax at source from the bills raised by the petitioner qua the works contracts and deposited the same with the State. During the year in question a sum of Rs. 8,75,897 was deducted at source. As the petitioner had also got the job executed through a sub-contractor, a deduction of two per cent from the payment made to the sub-contractor was made and deposited with the Sales Tax Department. The certificates given to the petitioner by the Power Grid Corporation of India Limited on account of deduction at source on its behalf were submitted, along with returns, however, at the time of framing of assessment on April 24, 2002 the credit thereof was not given to the petitioner. In the assessment order the taxable turnover was determined as nil. The credit f....
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....e (c) or sub-clause (d) of clause (29A) of article 366, be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify." Entry 54 of List II of the Seventh Schedule to the Constitution of India authorises the State Legislature to enact law with respect to imposition of taxes on sale and purchase of goods other than newspapers. The power is subject to the provisions of entry 92A in List I of the Seventh Schedule to the Constitution of India, namely, "Union List". In State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. [1958] 9 STC 353; AIR 1958 SC 560, the honourable Supreme Court opined that the expression "sale of goods" in entry 54 has the same meaning as provided in the Sale of Goods Act, 1930. The State Legislature was, therefore, not competent to impose tax on the supply of material used in works contract treating them as sale under entry 54 of the "State List". To overcome the effect of the aforesaid judgment and to confer power on the State Legislature to make law for imposition of tax on sale and purchase of goods involved in the execution of works contract, clause (29A) was added i....
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....ard, in the assessment for the relevant assessment year. (5) If any such person as is referred to in sub-section (1) or subsection (2), fails to make the deduction or, after deducting such amount fails to deposit the amount so deducted, the assessing authority may, after giving to such person an opportunity of being heard, by order, in writing, direct that such person shall pay, by way of penalty, a sum not exceeding twice the amount deductable under this section but not so deducted and if deducted not so deposited into the Government treasury. (6) Without prejudice to the provision of sub-section (5), if any such person fails to make the deduction or, after deducting fails to deposit the amount so deducted, he shall be liable to pay simple interest at the rate of eighteen per centum per annum on the amount deductible under this section but not so deducted, and, if deducted, not so deposited from the date on which such amount was deductible to the date on which such amount is actually deposited. (7) Where the amount has not been deposited after deduction, such amount together with interest referred to in sub-section (6) shall be a charge upon all the assets of the person c....
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.... Tax Act, 1968, respectively, were struck down by the honourable Supreme Court. Further reliance is upon judgment of the Patna High Court in Larsen and Toubro Ltd. v. State of Bihar [2000] 117 STC 41, Gujarat High Court in Larsen & Toubro Ltd. v. Commissioner of Sales Tax [2001] 124 STC 162, Karnataka High Court in Larsen & Toubro Ltd. v. State of Karnataka [2003] 129 STC 401 and Jharkhand High Court in Larsen and Toubro Limited. v. State of Jharkhand [2005] 140 STC 134, where also various High Courts have struck down similar provisions providing for deduction of tax at source in the case of works contracts. Discussions: In Steel Authority of India Ltd.'s case [2000] 118 STC 297, the issue under consideration before the honourable Supreme Court was challenge to the vires of section 13AA of the Orissa Sales Tax Act, 1947 (for short, "the Orissa Act"). Section was initially inserted with effect from April 28, 1993, however, after the same was struck down by the Orissa High Court in the case of Brajendra Mishra v. State of Orissa [1994] 92 STC 17 it was replaced on October 4, 1993 with certain amendments. Section 13AA of the Orissa Act as stood after amendment and under conside....
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....me Court in Steel Authority of India Ltd.'s case [2000] 118 STC 297 opined that the section was beyond the competence of State Legislature and accordingly the same was struck down. The relevant paras from the judgment are extracted below: (at page 304 of 118 STC) "12. In Bhawani Cotton Mills Ltd. v. State of Punjab [1967] 20 STC 290 (SC); [1967] 3 SCR 577, this court said 'if a person is not liable for payment of tax at all, at any time, the collection of a tax from him, with a possible contingency of refund at a later stage, will not make the original levy valid; because, if particular sales or purchases are exempt from taxation altogether, they can never be taken into account, at any stage, for the purpose of calculating or arriving at the taxable turnover and for levying tax'. 13.. There can be no doubt, upon a plain interpretation of section 13AA, that it is enacted for the purposes of deduction at source of the State sales tax that is payable by a contractor on the value of a works contract. For the purposes of the deduction neither the owner nor the Commissioner who issues to the contractor a certificate under section 13AA(5) is entitled to take into account....
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....ision there is an obligation to deduct from transactions relating to works contract on bills or invoices raised by the works contractor an amount not exceeding four per cent or two per cent, as the case may be. Though the object of the provision is to meet the tax in respect of the transactions on all works contract on the valuable consideration payable for the transfer of property in goods involved in the execution of the works contract, the effect of the provision is that, irrespective of whether the sales are inter-State sales or outside sales or export sales which are outside the purview of the State Act and those transactions in respect of which no tax can be levied even in terms of the enactment itself, such deductions have to be made in the bills or invoices of the contractors. To say that if a person is not liable for payment of tax inasmuch as on completion of the assessment refund can be obtained at a later stage is no solace, as noticed in Bhawani Cotton Mills Ltd. v. State of Punjab [1967] 20 STC 290 (SC); [1967] 3 SCR 577. Further, there is no provision for certification of the extent of the deduction that can be made by the authority. Therefore, we must hold that arbi....