TaxTMI 
TaxTMI 
2011 (9) TMI 887
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.... of the petitioner falls under the category "works contract", and the petitioner opted, to pay at compounded rate of tax, as per section 7C of the TNGST Act. Section 7C of the TNGST Act, reads as under:- "7C. Payment of tax at compounded rates by works contractor:- (1) Notwithstanding anything contained in section 3B, every dealer referred to in item (vi) of clause (g) of section 2, may, at his option, instead of paying tax in accordance with section 3B, pay, either on the total value of each works contract or on the total value of all works contract, executed by him in a year, tax calculated at the following rate, namely:- (i) Civil works contract Two per cent of the total contract value of the civil works executed (ii) All other works contracts Four per cent of the total contract value of the works executed. (2) Any dealer who executes works contract may apply to the assessing authority along with the first monthly return for the financial year, his option to pay the tax under sub-section (1) and shall pay the tax during the year in monthly instalments and for this purpose, he shall furnish such return within such period and in such manne....
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....plied or otherwise disposed of in any of the ways referred to in clause (n), by a dealer either directly or through another, on his own account or on account of others whether for cash or for deferred payment or other valuable considetation, provided that the proceeds of the sale by a person of agricultural or horticultural produce, other than tea and rubber (natural rubber, latex and all varieties and grades of raw rubber), grown within the State by himself or on any land in which he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, shall be excluded from his turnover." The scheme of the Act, therefore, provides that for the purpose of levy of tax under section 3 of the TNGST Act, and other charging section require determination of total, and taxable turnover for the assessment. Whereas for levy of tax at the compounded rate under section 7C of the TNGST Act, it is not necessary to work out the taxable turnover as it has to be paid on the total value of works contract or contracts. The State Legislature also enacted "the Act", to levy additional sales tax on sale or purchase of goods. Section 2(1)(aa) of the Act, reads as under:- "2. Lev....
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....ermined under clause 5A, of the Sugarcane (Control) Order, 1966 and such turnover shall be included in the total turnover of the dealer and the taxable turnover shall be arrived at accordingly for the purpose of this clause. Explanation III:- 'Taxable turnover' for the purpose of this clause in respect of a dealer liable to pay tax under section 3G of the said Act shall be the total turnover. Explanation IV:- 'Taxable turnover' for the purpose of this clause does not include the turnover of resale taxable under section 3H of the said Act. Explanation V:- 'Taxable turnover' for the purpose of this clause in respect of a dealer liable to pay under section 7C of the said Act for the financial years commencing on the 1st day of April, 1993, shall be the total value referred to in the said section. (aaa) On any amount of additional tax or penalty imposed by the assessing authority remaining unpaid under this Act, the dealer referred to in clause (aa) shall pay interest as specified in sub-section (3) of section 24 of the said Act, in addition to such amount of additional tax or penalty due." The assessing authority under the....
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.... of the dealer liable to pay tax on the transfer of goods involved in the works contract in respect of which option has been exercised by the dealer. ...... 12. The Act does not anywhere provide that the total value of the works contract in respect of which a dealer has exercised the option to pay the prescribed percentage towards tax instead of paying in accordance with section 3B, shall be deemed to be either the turnover of such dealer or the taxable turnover of such dealer in so far as the works contract in which he is engaged is concerned. ........ 15. As the additional tax is thus levied at the prescribed percentage on the taxable turnover of the dealer that percentage varying from 1.5 to 3 depending on the turnover of the assessee for the purpose of levy of this additional tax, the determination of the taxable turnover is crucial. Despite the declared intention to levy additional tax on the sale or purchase of goods, the tax levied under that Act having been linked solely to the taxable turnover, mere payment of tax under the principal enactment would not render the dealer liable for the additional sales tax unless taxable turnover of that dealer is determinable ....
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....ra vires, the power of the State Legislature, and also contrary to section 2(1)(aa) of the Act, which prescribes additional sales tax to be payable on the taxable turnover, which is defined under section 2(p) of the TNGST Act, 1959. The contention of the learned counsel for the petitioner is that the contract value cannot be taken to be taxable turnover, as given in Explanation V to section 2(1)(aa) of the Act, therefore Explanation V to section 2(1)(aa) of the Act be declared ultra vires. In support of this contention, the learned counsel for the petitioner placed reliance on the judgment of this court in South India Corporation Ltd. v. Commercial Tax Officer, Coimbatore [2001] 124 STC 654 (Mad). The honourable Supreme Court in the case of Rajiv Savin v. State of Uttarakand [2011] 3 RCR (Civil) 946 (SC), has been pleased, to lay down when there is challenge, to legislative competence of an Act, enacted by the Legislature, the courts are bound, to try to ascertain the pith and substance of such enactment, on a scrutiny of the Act in question. In this process, it is also necessary for the courts, to examine the true nature and character of the enactment, its objects, its sc....
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....red under entry 54 of the State List does not extend to imposing tax on a sale or purchase of goods which takes place outside the State or which takes place in the course of import or export of goods. In view of the aforesaid limitations imposed by the Constitution on the legislative power of the States under entry 54 of the State List, it is beyond the competence of the State Legislature to make a law imposing or authorising the imposition of a tax on transfer of property in goods involved in the execution of a works contract, with the aid of sub-clause (b) of clause (29A) of article 366, in respect of transactions which take place in the course of inter-State trade or commerce or transactions which constitute sales outside the State or sales in the course of import or export. Consequently, it is not permissible for a State Legislature to frame the legislative enactment in exercise of the legislative power conferred by entry 54 in State List in such a manner as to assume the power to impose tax on such transactions and thereby transgress these constitutional limitations. As a result of the Forty-sixth Amendment, the contract which was single and indivisible has been altered by ....
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....licability of sections 3, 4 and 5 and sections 14 and 15 of the Central Sales Tax Act to such transfers. In view of sub-clause (b) of clause (29A) of article 366, the State Legislatures are competent to impose tax on transfer of property in goods involved in the execution of a works contract and under sub-clause (b) of clause (3) of article 286, Parliament has been empowered to make a law specifying restrictions and conditions in regard to the system of levy, rates or incidence of such tax. This does not mean that the legislative power of the State Legislatures cannot be exercised till the. enactment of a law under sub-clause (b) of clause (3) of article 286 by Parliament. It only means that in the event of a law having been made by Parliament under article 286(3)(b) the exercise of the legislative power of the State Legislatures under entry 54 in List II to impose a tax of the nature referred to in sub-clauses (b), (c) and (d) of clause (29A) of article 366 would be subject to restrictions and conditions in regard to the system of levy, rates and other incidents of tax contained in the said law. The existence of a law enacted under article 286(3)(b) cannot, therefore, be regard....
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....lace when the goods are incorporated in the works, the value of the goods which can constitute the measure for the levy of the tax has to be the value of the goods at the time of incorporation of the goods in the works and not the cost of acquisition of the goods by the contractor. We are also unable to accept the contention urged on behalf of the States that in addition to the value of the goods involved in the execution of the works contract the cost of incorporation of the goods in the works can be included in the measure for levy of tax. Incorporation of the goods in the works forms part of the contract relating to work and labour which is distinct from the contract for transfer of property in goods and, therefore, the cost of incorporation of the goods in the works cannot be made a part of the measure for levy of tax contemplated by article 366(29A)(b). The value of the goods involved in the execution of a works contract will, have to be determined by taking into account the value of the entire works contract and deducting therefrom the charges towards labour and services which would cover:- (a) Labour charges for execution of the works; (b) amount paid to....
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....gislature to tax all the goods involved in the execution of a works contract at a uniform rate which may be different from the rates applicable to individual goods, because the goods which are involved in the execution of the works contract when incorporated in the works can be classified into a separate category for the purpose of imposing the tax. The Supreme Court should not, except when it is demonstrated beyond all reasonable doubt that its previous ruling given after due deliberation and full hearing was erroneous, go back upon its previous ruling, particularly on a constitutional issue. Section 5(3) of the Rajasthan Sales Tax Act, 1954, transgresses the limits of the legislative power conferred on the State Legislature under entry 54 of the State List inasmuch as it enables tax being imposed on deemed sales resulting from transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract which take place in course of inter-State trade or commerce, or which take place outside the State or which take place in the course of import and export within the meaning of sections 3, 4 and 5, respectively of the Central Sales Tax A....
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....ssary changes. This is a phrase of frequent practical occurrence, meaning that matters or things are generally the same, but to be altered when necessary, as to names, offices, and the like'. Extension of an earlier Act 'mutatis mutandis' to a later Act brings in the idea of adaptation, but so far only as it is necessary for the purpose, making a change without altering the essential nature of the thing changed, subject of course to express provisions made in the later Act. Section 3(2) of the Act shows that the State Legislature intended not to depart substantially from the principal Act except with regard to matters in respect of which express provision had been made in the Act. The assumption made by the High Court that the Act was an independent Act having nothing to do with the principal Act is not correct. The Act only levied some extra sales tax in addition to what had been levied by the principal Act. The nature of the taxes levied under the Act and under the principal Act was the same and the Legislature expressly made the provisions of the principal Act mutatis mutandis applicable to the levy under the Act. The additional sales tax was in the nature of a surch....
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....e series of sales is a single point levy which is distinguishable from a multi-point levy. If the State Legislature wanted that the new levy, i.e., the additional tax, should be a multi-point tax which had to be paid by every dealer irrespective of the fact that the entire annual gross turnover in his hands may not be liable to bear the tax under the principal Act, it would have expressly said so as it would have amounted to a substantial departure from the general scheme of the principal Act as set out in the proviso to section 8 thereof which stipulated that no goods should suffer tax which could be passed on to the purchaser at more than one point in the same series of sales or purchases by successive dealers to which the people of the State of Orissa had become accustomed. If the object of the amendment was to make the additional tax a multi-point levy, nothing was easier than using the appropriate words in the Act by excluding the application of section 8 of the principal Act expressly in section 3(2) of the Act. In the absence of any such words in the Act, by reason of section 3(2) of the Act, we have to construe that section 8 of the principal Act which is given an overridin....
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....ment the High Court had held that sales tax could not be collected on excise duty and cesses imposed on arrack and the High Court had issued writs directing the State Government to forbear from collecting such sales tax and to refund to the appellant the amounts which might have been collected from it by way of sales tax on items of excise, health cess and education cess. That judgment became final on the Government withdrawing its appeal therefrom to the Supreme Court. The Amendment Act did not proceed to cure the defect or lacunae by bringing in an amendment providing for exigibility of sales tax on excise duty, health cess and education cess. Instead of remedying the defect or removing the lacunae the Amendment Act had merely sought to raise the rate of tax from 6 ½ per cent to 45 per cent, with retrospective effect from April 1, 1966, to avoid the liability of refunding the excess amounts collected and had further purported to nullify the judgment and order passed by the High Court which had become conclusive and become binding on the parties. Thus, the only object of enacting the Amendment Act was to nullify the effect of the judgment of the High Court and to enable the....
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....f Rajasthan [1993] 88 STC 204 (SC). It was, therefore, with the consent of the dealer that such a method could be adopted. The honourable Division Bench further held that the contract value includes many things, besides the value of goods agreed to be transferred in the course of execution of works contract. All such amounts are not exigible to tax and therefore, collecting the percentage of total contract value was obviously a convenient mode, which was left to the option of the dealer either to accept or to reject. The imposition of sales tax, on the total contract value, therefore, is not within the competence of the State Legislature, as it is only the transfer of goods, on which tax can be imposed. The impugned Explanation V to section 2(1)(aa) of the Act, thus, expands, the scope of the charging section, which is not permissible, in view of the law, laid down by the honourable Supreme Court, in the case of S. Sundaram Pillai v. V. R. Pattabiraman AIR 1985 SC 582, wherein the honourable Supreme Court was pleased, to lay down as under:- "45. We have now to consider as to what is the impact of the Explanation on the proviso which deals with the question of wilful default. ....
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....ia Ltd. v. Commercial Tax Officer [1960] 11 STC 764 (SC) ; [1961] 1 SCR 902 ; AIR 1961 SC 315 a Constitution Bench decision, Hidayatullah, J., speaking for the court, observed thus:- 'Now, the Explanation must be interpreted according to its own tenor, and it is meant to explain clause (1)(a) of the article and not vice versa. It is an error to explain the Explanation with the aid of the article, because this reverses their roles.' 49. In Bihta Co-operative Development Cane Marketing Union Ltd. v. Bank of Bihar [1967] 37 Comp Cas 98 (SC) ; [1967] 1 SCR 848 ; AIR 1967 SC 389, this court observed thus:- 'The Explanation must be read so as to harmonise with and clear up any ambiguity in the main section. It should not be so construed as to widen the ambit of the section.' 50. In Hira Lal Rattan Lal case [1973] 31 STC 178 (SC) ; AIR 1973 SC 1034, this court observed thus:- 'On the basis of the language of the Explanation this court held that it did not widen the scope of clause (c). But from what has been said in the case, it is clear that if on a true reading of an Explanation it appears that it has widened the scope of the main sec....