TaxTMI 
TaxTMI 
2009 (11) TMI 835
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....certainable, the tax was levied at the rates applicable to the goods and where the goods incorporated in the works contract are not separately ascertainable, at the rate of 12.5 per cent at all points of sale. Though the grounds urged in these writ petitions are similar except one or two additional grounds are raised in some writ petitions. Since the grounds urged are all against the provision as amended, all these matters were taken together and heard. W.A. No. 566 of 2007 arises out of the judgment of the learned single judge in W. P. (C) No. 4568 of 2007, where also the petitioner challenged mainly the retrospectivity given to the provision. The learned single judge dismissed the writ petition on the basis of the submission made by the learned Government Pleader that the Bills proposing to amend the various fiscal statutes were presented in the form of Finance Bill on July 1, 2006, wherein it was provided that the tax proposals contained therein will have effect from July 1, 2006 and though the Act was enforced only on October 24, 2006 everyone knew that the revised proposals will have effect from July 1, 2006 in view of the specific clause contained in the Finance Bill. It w....
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....ate at 12.5 per cent on works contract irrespective of the various goods incorporated in the same which is assessable at a lower rate bad in law? (iii) In so far as the amendment has been given retrospective effect, is it violative of article 19(1)(g) of the Constitution of India? (iv) Even assuming that the Legislature has got power to legislate it with retrospective effect, will the retrospectivity given in the present case give rise to great hardship and therefore, impose unreasonable restriction on the freedom to carry on trade guaranteed under article 19(1)(g) of the Constitution? (v) In respect of the declared goods, in the light of the provisions contained in sections 14 and 15 of the Central Sales Tax Act read with article 286 of the Constitution of India, is the levy of tax on such declared goods at 12.5 per cent unconstitutional and illegal? (vi) Whether sale as simplicitor or in execution of the works contract cannot be subjected to different disciplines and is the classification without any intelligible differentia and discriminatory? Before we consider the arguments advanced on both sides, we may state the brief facts relevant for the disposal of these c....
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.... virtue of Explanation IV that a transfer of property of goods gets involved in execution of a works contract and is deemed to be a sale. In case of such deemed sales, there may be transfer of property in goods either as goods or in some other form, and the agreement entered into for the execution of the works contract itself could be classified as divisible contracts (where materials supplied can be segregated from the labour), indivisible contracts, labour contract, etc., and according to him, as per the rates prior to the amendment, he has undertaken to execute works contract under the agreement between the parties and he had been submitting returns and paying quarterly tax at such rate as prescribed under the earlier enactments. A modification was made to the VAT Act by an amendment brought about in 2006 with effect from July 1, 2006 as a result of which excessive taxation is made. According to him, the tax which would have been payable, had not the amendment been brought about retrospectively, in the previous quarter would be Rs. 52,058. Now that tax had been increased under the Kerala General Sales Tax Act, the total tax would have been Rs. 1,14,153 whereas now the tax amo....
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....to the extent of its being repugnant to the Central Act and being violative of the principle laid down in Builders Association of India v. Union of India [1989] 73 STC 370 (SC) and also the decision in Gannon Dunkerley & Co. v. State of Rajasthan [1993] 88 STC 204 (SC), besides being violative of articles 14 and 19(1)(g) of the Constitution. It is not necessary to refer to the facts in the other writ petitions and the above facts will be sufficient for the purpose of dealing with the contentions raised by the parties. We may now consider the contention against the amendment made to section 6(1)(f) to the extent uniform rate of tax at 12.5 per cent is imposed even in the case of declared goods governed by the provisions under the Central Sales Tax Act. As already noticed while stating the facts, the Legislature, by an amendment brought about in 2008, has inserted the ninth proviso to section 6(1)(f) whereby the declared goods are to be taxed only at the rate prescribed under the respective Schedules. In the case of declared goods the rate provided is only four per cent (as of now). Therefore, the vires if any, attached to the application of a uniform rate even in the ca....
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....es under article 366(29A) of the Constitution. The apex court, in unambiguous terms held thus (at page 398 of 73 STC): ". . . We are of the view that all transfers, deliveries and supplies of goods referred to in clauses (a) to (f) of clause (29A) of article 366 of the Constitution are subject to the restrictions and conditions mentioned in clause (1), clause (2) and sub-clause (a) of clause (3) of article 286 of the Constitution and the transfers and deliveries that take place under sub-clauses (b), (c) and (d) of clause (29A) of article 366 of the Constitution are subject to an additional restriction mentioned in sub-clause (b) of article 286(3) of the Constitution." The restriction imposed under section 15 of the Central Sales Tax Act is applicable to all sales tax laws which, inter alia, provides that every sales tax law of a State shall, in so far as it imposes or authorizes the imposition of a tax on the sale or purchase of declared goods, be subject to the restrictions and conditions stipulated under clauses (a) to (d) thereunder. As per clause (a) the tax payable under the sales tax law of the State in respect of any sale or purchase of such goods inside the State sha....
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....he rate of tax it is permissible to fix a uniform rate of tax for the various goods involved in the execution of a works contract which rate may be different from the rate of tax fixed in respect of sales or purchase of those goods as a separate article." This squarely answers the contentions advanced by the petitioners herein that merely because in the case of goods involved in works contract, the rate of tax if assessed separately may be different, there is no reason to hold that a uniform rate for the works contract cannot be prescribed since the works contract by itself forms a class and irrespective of the rate of tax as may be applicable to the goods incorporated in the works contract, it is permissible for the Legislature to prescribe a uniform rate for the works contract. Therefore, we negative the contention raised by the petitioners in this regard. The next point to be considered is as to whether section 6(1)(f) as amended is violative of article 207 of the Constitution of India, so long as the amendment is not contained in the Bill proposed originally. We may refer to article 207(1) of the Constitution of India as per which a Bill or amendment making provision f....
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....ecome void by reason of the said infirmity; it may be said to be unenforceable until the assent is secured. . . Besides, it is plain that the Legislature may, in a suitable case, adopt the course of passing a subsequent law reintroducing the provisions of the earlier law which had not received the assent of the President, and obtaining his assent thereto as prescribed by the Constitution. . ." The same position has been reiterated in A.B. Abdul Kadir v. State of Kerala AIR 1976 SC 182 wherein also similar observation was made that the requirement of the provision regarding sanction of the President has been satisfied. It was held thus: ". . . It is no doubt true that the assent of the President was given subsequent to the passing of the Bill by the Legislature, but that fact would not affect the validity of the impugned Act in view of the provisions of article 255 of the Constitution." In State of Karnataka v. Hansa Corporation [1980] 4 SCC 697 in paragraph 36, while considering as to whether the proviso to article 304(b) was satisfied or not, because of the obligation imposed by the proviso to obtain Presidential sanction before introducing the Bill or amendment for th....
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....o. Ltd. v. State of Bihar [1958] 9 STC 267; [1958] SCR 1355 and negatived. The apex court held as follows (at page 268 of STC): "From the point of view of the economist and as an economic theory, sales tax may be an indirect tax on the consumers, but legally it need not be so. Under the 1947 Act the primary liability to pay the sales tax, so far as the State is concerned, is on the seller. . ." Though in the earlier enactment, the seller had no authority to collect sales tax, subsequently, the dealer is enabled to collect the sales tax and in the present case, section 30 of the VAT Act provides such collection, thus enabling the seller to pass on the tax liability to the consumer. But that circumstance by itself could not prevent the sales tax imposed on the seller to be levied on the sale of goods. Further, the fact that the registered dealer need not, if he so pleases or chooses, collect the tax from the purchaser and sometimes by reason of competition with other registered dealers he may find it profitable to sell his goods and to retain his old customers even at the sacrifice of the sales tax. Therefore, it is not as though the sales tax need be passed on to the purchaser....
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....contended that in so far as the right to pass on the liability to the consumer as enabled by the provisions contained in section 30 of the VAT Act is virtually taken away when the provision is given retrospective effect and therefore, it imposes unreasonable restriction to carry on the trade as guaranteed under article 19(1)(g) of the Constitution of India. There is nothing to show that the right as such is taken away as contended, to which aspect we will refer to later. The apex court, in paragraph 25 of the very same decision cited above held as follows (at page 772 of 50 ITR): ". . . We have already stated that the power to make laws involves the power to make them effective prospectively as well as retrospectively, and tax laws are no exception to this rule. So, it would be idle to contend that merely because a taxing statute purports to operate retrospectively, the retrospective operation per se involves contravention of the fundamental right of the citizen taxed under article 19(1)(f) or (g). It is true that cases may conceivably occur where the court may have to consider the question as to whether excessive retrospective operation prescribed by a taxing statute amounts to....
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.... harshly as to violate the fundamental rights under article 19(1)(g), the factors considered relevant include the context in which retroactivity was contemplated such as whether the law is one of validation of taxing statutes struck down by courts for certain defects; the period of such retroactivity, and the degree and extent of any unforeseen or unforeseeable financial burden imposed for the past period, etc. Having regard to all the circumstances of the present case this court in Empire Industries case [1987] 64 STC 42 (SC); [1986] 162 ITR 846 (SC); [1985] Supp. 1 SCR 292 held that the retroactivity of the amending provisions was not such as to incur any infirmity under article 19(1)(g). . ." In State of Rajasthan v. J. K. Udaipur Udyog Ltd. [2004] 137 STC 438 the Supreme Court had occasion to consider as to whether availing of exemption scheme already involved prohibits collecting tax from the customers or that they had not collected the sales tax from customers by itself is a ground for holding that there is any unreasonable restriction or undue hardship caused. In that context, it was held as follows (at page 457): "The mere circumstances that the respondent-c....
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.... in Bradford Union v. Wilts [1868] 3 QB 604 at page 616, if the language of the statute shows that the Legislature thinks it expedient to authorise the making of retrospective rates, it can fix the period as to which the rate may be retrospectively made. 16.. This court had occasion to examine the validity of the retrospective levy of sales tax in Tata Iron and Steel Co. Ltd. v. State of Bihar [1958] 9 STC 267 (SC); 1958 SCR 1355 and it was held that that was not beyond the legislative competence of the State Legislature. 17.. Nor can the choice of April 1, 1973 as the date of imposition of the building tax be assailed as discriminatory with reference to article 14 of the Constitution. It will be enough for us to refer in this connection to the following passage from this court's decision in Union of India v. Parameshwaran Match Works [1975] 2 SCR 573 which was a case under the Central Excises and Salt Act, 1944,- 'The choice of a date as a basis for classification cannot always be dubbed as arbitrary even if no particular reason is forthcoming for the choice unless it is shown to be capricious or whimsical in the circumstances. When it is seen that a line or a....
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....07, it is stated that the contract is for a period of four years. But the contract as such is not produced. Whether the contract is inclusive or exclusive of the tax itself is a matter which would have been proved by producing a copy thereof. In a contract where the rate agreed upon is exclusive of the tax it has to be further shown that within this three months period right to recover tax from the awarder is lost. When the enactment was passed and got assent of the Governor, in October, 2006, if it was prospectively valid, the retrospectivity could have been urged to be imposing any hardship only if it is further shown that these three months period, was very relevant and credible in the factual situation so as to impose additional burden on the taxpayer. No such attempt is made. In these circumstances, we do not find that the retrospectivity given to section 6(1)(f) imposing the tax at the rate of 12.5 per cent is imposing any undue hardship to the dealer. In the case of other writ petitions also, we do not find any plea as such is taken up that virtually the right to pass on the tax liability or to recover the same from the buyer is taken away by the amendment. Be that as it ....
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....rom July 1, 2006 to October 24, 2006 does not impose any unreasonable restriction in the matter of freedom of trade or impose any undue hardship, and (iii) merely because section 6(1)(f) was introduced without a previous Bill being introduced with the recommendation of the Governor, the infirmity, if any, stands cured once the assent is obtained under article 200 of the Constitution of India in the light of the specific provision contained in article 255 of the Constitution, (iv) that in so far as the rate of tax in respect of declared goods in excess of the rate as provided under section 15 of the Central Sales Tax Act will be unconstitutional, we hold that the ninth proviso added to section 6(1)(f) being clarificatory in nature and in that context it will be effective from the date on which section 6(1)(f) was brought into force and thus save the provision from being ultra vires of the Constitution and consequently we declare the rate of tax applicable to declared goods shall always be at the same rate as provided under the CST Act and that (v) prescription of uniform rate of tax in the transfer of goods and execution of works contract where transfer is not in the form of goods b....