TaxTMI 
TaxTMI 
2014 (12) TMI 870
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....erson responsible for making payment to the selling dealer, for discharge of liability on account of valuable consideration payable on sale of goods in such cases as may be specified, shall, at the time of making such payment to the seller, either by credit or in cash or in any other manner, towards satisfaction of tax payable by the dealer on account of sale of any taxable goods, deduct an amount determined in the manner specified: Provided that where in case of a works contract, the contractor has awarded a sub-contract and the notification provides for deduction of amount by the contractee from the payments made to contractor, the contractor responsible for making any payment or discharge of any liability to any subcontractor, in pursuance of a contract with the subcontractor, shall, while making payment to the subcontractor, deduct amount of tax referred to above. Provided further that where in case of a works contract, the contractor has already made deduction from the payments made to his sub-contractor, the amount of such payments shall be deducted from the amount on which deduction is to be made by the contractee to the contractor. Sub-sections (2) to (14) of section 34 ....
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....ischarge, furnish to the selling dealer a certificate of amount deducted in such form and manner and within such period as may be prescribed and shall submit such statement of all such purchases, payments and deductions made and certificates issued by him, in such manner and within such time, as may be prescribed. (8) If any person referred to in sub-section (1) fails to make the deduction or after making deduction fails to deposit the amount so deducted as required by sub-section (6), 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 deductible under this section but not so deducted and, if deducted, not so deposited into the Government Treasury. (9) Without prejudice to the provisions of subsection (8), if any such person, after deducting, fails to deposit the amount so deducted, he shall be liable to pay simple interest at the rate of fifteen percent per annum on the amount not so deposited from the date on which such amount was deducted to the date on which such amount is actually deposited. (10) Where the amount has not been d....
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...." In exercise of powers conferred by sub-section (1) of section 34, a notification has been issued on 7 October 2013 in the following terms : "In exercise of the powers under sub-section (1) of section 34 of the Uttar Pradesh Value Added Tax Act, 2008 (U.P. Act No.5 of 2008), the Governor is pleased to direct that with effect from October 08, 2013, every person responsible for making payment to the selling dealer, for discharge of liability on account of valuable consideration payable on sale of goods shall, at the time of making such payment to the seller, either by credit or in cash or in any other manner, towards the satisfaction of tax payable by the dealer on account of sale of any taxable goods, deduct an amount equal to four percent of the value of goods : Provided that this notification shall not be applicable except in the cases of the transactions between the dealer and, - (a) a Department of the Central Government or of any State Government; or (b) a Local Authority under any Act for the time being in force in the State of Uttar Pradesh; or (c) a Corporation or Undertaking established or constituted by or under a Central Act or a Uttar Pradesh Act; or (d) a Univer....
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....nments, some of them being statutory authorities and hence there was no reason or justification to bring private educational institutions within the ambit of the notification. This, it has been submitted, would amount to a violation of Article 14 of the Constitution. It has been submitted that no material has been placed on record by the State to justify either the reason for enacting section 34 or for bringing private educational institutions within the fold of sub-section (1) of section 34 by the notification dated 7 October 2013. In the alternative, it has been urged that the expression "educational institution" should be read as ejusdem generis and should be confined to aided institutions of the State by excluding from the purview of the notification, private unaided institutions. Private unaided institutions, it has been submitted, are not dealers within the meaning of the VAT Act and hence should be excluded from the liability to deduct tax at source. On the other hand, it has been urged on behalf of the State by the learned Standing Counsel that : (i) there is a presumption of constitutional validity which is attracted where the vires of a legislation is sought to be questi....
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....lection of tax. It is well settled that whereas the charging provision of a fiscal legislation has to be construed strictly, provisions for machinery and collection are meant to achieve the purpose of the fiscal levy and have to be construed so as to effectuate that objective. Sub-section (1) of section 34 empowers the State to issue a notification. The provisions which follow, make it clear that the legislature has indicated several safeguards. Under sub-section (2), several situations have been envisaged. The first is where a dealer, who makes a sale of any taxable goods and in whose case a notification under sub-section (1) applies, claims on such sale that he is either not liable to pay tax or is liable to pay tax at a lesser amount than the amount of deduction computed in the manner provided. The second situation is where the person responsible for making payments to the dealer selling the goods is unable to ascertain the turnover of any goods sold. In either of these situations the person responsible for making payment has to require the selling dealer to produce a direction issued in this behalf by the assessing authority of the selling dealer and shall act in accordance wi....
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....ity to the extent possible. It should strike down the enactment only when it is not possible to sustain it. The Court should not approach the enactment with a view to pick holes or to search for defects of drafting, much less inexactitude of language employed. Indeed, any such defects of drafting should be ironed out as part of the attempt to sustain the validity/constitutionality of the enactment. After all, an Act made by the Legislature represents the will of the people and that cannot be lightly interfered with. The unconstitutionally must be plainly and clearly established before an enactment is declared as void. .........." The general principles governing a constitutional challenge on the ground of a violation of Article 14 have been formulated in the judgment of the Constitution Bench of the Supreme Court in In re: Special Courts Bill, 1978 ((1979) 1 SCC 380). Classification, it is well settled, does not require an exact or scientific exclusion or inclusion of persons or things. The Supreme Court held thus : "The constitutional command to the State to afford equal protection of its laws sets a goal not attainable by the invention and application of a precise formula. Ther....
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....than in other areas where fundamental human rights are involved. ................. ................. The Court must always remember that "legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry" that exact wisdom and nice adoption of remedy are not always possible and that "judgment is largely a prophecy based on meagre and un-interpreted experience". Every legislation particularly in economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and therefore it cannot provide for all possible situations or anticipate all possible abuses. There, may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid. .................. The Court must therefore adjudge the constitutionality of such legislation by the generality of its provisions and not by its crudities or inequities or by the possibilities of abuse of any of its provi....
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....he legislature or for the administrative authority to bring in every conceivable transaction in order to sustain a provision for recovery of tax at source. A statutory provision and, for that matter a notification issued thereunder, does not cease to be valid nor would it suffer from the vice of arbitrariness, merely because it has not imposed a liability to deduct tax at source on other entities or transactions. These principles are indeed well settled and we may at this stage refer to the decision of the Constitution Bench of the Supreme Court in Federation of Hotel & Restaurant Vs. Union of India & Ors.(AIR 1990 SC 1637) where it was held as follows : "It is now well settled though taxing laws are net outside Article 14, however, having regard to the wide variety of diverse economic criteria that go into the formulation of a fiscal-policy legislature enjoys a wide latitude in the matter of selection of persons, subject-matter, events, etc., for taxation. The tests of the vice of discrimination in a taxing law are, accordingly, less rigorous. In examining the allegations of a hostile, discriminatory treatment what is looked into is not its phraseology, but the real effect of it....