TMI Blog2010 (10) TMI 942X X X X Extracts X X X X X X X X Extracts X X X X ..... and with regard to assessment for the year 2010-11, a provisional assessment be made relating to TDS amounts within the same period - CWP No.14797 of 2010 - - - Dated:- 26-10-2010 - MR ADARSH KUMAR GOEL AND MR. AJAY KUMAR MITTAL, JJ. For the Petitioner : Mr. K.L.Goyal, Sr. Advocate, Mr. N.Venkataraman, Sr. Advocate with Mr. Sandeep Goyal, Mr. Mohammad Shaffiq and Mr. P.Puroshotham, Advocates, Mr. Gagandeep Singh Wasu, Addl.A. G.Haryana For the Respondent : Mr. Jagmohan Bansal, Advocate JUDGEMENT Adarsh Kumar Goel, J. 1. This order will dispose of CWP Nos. 14797 of 2010, 19981, 12582 of 2008 and 4940 of 2009 as common questions are involved in these petitions. 2. Challenge in all the petitions is to validity of statutory provisions in Sales Tax law in Punjab and Haryana for deduction of tax at source out of payment made to contractors for execution of works contracts involving transfer of property in goods at specified rate. Main objection against the said provisions is that percentage out of total payment could not be made basis of deduction of tax at source unless the amount to be deducted represents the tax and payment is of taxable turnover. The en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ryana, stand of the State of Punjab is also identical though no reply has been formally filed. 8. Thus, common question of law arising in all the petitions is whether the impugned provisions to the extent they provide for deduction of percentage of payment to be made under a works contract without limiting the deduction of tax to taxable turnover, can be held to be within the competence of State legislature. 9. In order to determine the said question, it will be appropriate to refer to the statutory provisions: Haryana VAT Act, 2003: Section 24. (1) The State Government may, having regard to the effective recovery of tax, require in respect of contractors or any other class or classes of dealers that any person making payment of any valuable consideration to them for the execution of a works contract in the State involving transfer of property in goods, whether as goods or in some other form or for sale of goods in the State, as the case may be, shall, at the time of making payment, whether by cash, adjustment, credit to the account, recovery of dues or in any other manner, deduct tax in advance therefrom which shall be calculated by multiplying the amount paid in any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grains in the State at the minimum support price (with or without bonus) fixed from time to time for such grains or any person authorised by such agency, undertaking or corporation in this behalf and acting as such, shall, at the time of making payment, whether by cash, adjustment, credit to the account, recovery of dues or in any other manner to the commission agent as valuable consideration for selling the grains, deduct tax in advance from such payment calculated by multiplying the amount paid in any manner with four per cent or such other rate, as notified under sub-section (1) of section 24. (2) Every contractee shall, at the time of making payment, whether by cash, adjustment, credit to the account, recovery of dues or in any other manner, deduct from the payment made to the contractor for execution of a works contract in the State involving transfer of property in goods, whether as goods or in some other form, tax in advance calculated by multiplying the amount paid in any manner with four per cent or such other rate, as notified under sub-section (1) of section 24. Explanation. For the purpose of the foregoing subrules, the valuable consideration shall not include t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall neither adversely effect nor delay the recovery of tax from him. Punjab VAT Act, 2005 Section 27(1) Notwithstanding anything contained in any of the provisions of this Act, every contractee responsible for making payment to any person (hereinafter in this section referred to as the contractor) for discharge of any liability on account of valuable consideration, exceeding rupees five lac in a single contract payable for the transfer of property in goods (whether as goods or in some other form) in pursuance of a works contract, shall, at the time of making such payment to the contractor either in cash or in any other manner, deduct an amount equal to two per cent of such sum towards the tax payable under this Act on account of such contract: Provided that any individual or Hindu undivided family not registered under this Act, shall not be liable for deduction of such tax. (2)Any contractor responsible for making any payment or discharge of any liability to any subcontractor or in pursuance of a contract with the sub-contractor, for the transfer of property in goods (whether as goods or in some other form) involved in the execution whether wholly or in part, of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date, on which such amount is actually deposited. (8)Where the amount has not been deposited after deduction, such amount together with interest referred to in sub-section (7), shall be a charge upon all the assets of the person concerned. (9)Payment by way of deduction in accordance with sub-section (1) or sub-section (2), shall be without prejudice to any other mode of recovery of tax, due under this Act from the contractor or the sub-contractor, as the case may be. (10) Where on an application being made by any contractor or sub-contractor, the Commissioner or designated officer is satisfied that no deduction of tax or deduction of tax at a lower rate is justified, he shall grant him such certificate permitting no deduction of tax or deduction of tax at a lower rate, as the case may be. On furnishing of such certificate, the person responsible for deduction of tax, shall comply with such certificate. Punjab VAT Rules, 2005 Rule 46 46. Liability of persons in case of works contract.--(1) 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 in execution of a w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale or a sale in the course of import. The owner is required by Section 13-AA(1) to deposit towards the contractor s liability to State sales tax four per cent of such amount as he credits or pays to the contractor, regardless of the fact that the value of the works contract includes the value of inter-State sales, outside sales or sales in the course of import. There is, in our view, therefore, no doubt that the provisions of Section 13-AA are beyond the powers of the State Legislature for the State Legislature may make no law levying sales tax on inter-State sales, outside sales or sales in the course of import. xx xx xx xx 15. It was then contended by learned counsel for the State that the Preamble of the Orissa Sales Tax Act took account of the fact that that statute was limited to the sale or purchase of goods in Orissa. Unfortunately, it would appear that the State Legislature overlooked its limitations, even as contained in the Preamble, when enacting Section 13-AA. It was also contended that the deduction that was required to be made under Section 13-AA(1) was of four per cent of the amount credited or paid by the owner to the contractor, whereas the sales tax liabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the works contractor irrespective of whether ultimately the transaction is liable for payment to any sales tax at all. In that view of the matter, we have no hesitation in rejecting the contention advanced on behalf of the State. 5. The learned counsel drew our attention to the decision in a case arising under the Bihar Sales Tax Act and the earlier decision under the Orissa Sales Tax Act, but in view of the decision of this Court in Steel Authority of India, (2000) 118 STC 297, it is wholly unnecessary to refer to the same. Following the decision in Steel Authority of India case, (2000) 118 STC 297 (SC) we allow this appeal and set aside the order made by the High Court by allowing the writ petition and quashing the aforesaid provisions as being beyond the purview of the Himachal Pradesh State Legislature. Such amount as has been collected from the appellant under provisions of Section 12-A read with Rule 31-A shall forthwith be refunded by the State. If any amount has been deposited in any bank pursuant to orders passed by this Court or the High Court, it shall be refunded to the appellant with interest accruing thereon. In the circumstances of the case, there shall be no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verification, the assessing authority can take appropriate action to avoid evasion of tax. 14. In the case of the State of Punjab, learned counsel for the State submitted that an amendment was being considered by adding a proviso to section 27 of the Act to the effect that no tax shall be deducted from the import or sale outside the State involved in the execution of works contract. There is also a proposal to amend Rule 46 to provide for making of an application for claiming lower rate or zero rate of tax deduction at source by making an application in form VAT 26A. 15. Argument on behalf of the petitioner is that in the case of State of Haryana, clarification does not take care of excluding service component of the turnover and mere clarification is not sufficient unless appropriate amendment is made in absence of which this Court may either declare the impugned provisions ultravires or may declare the rights of the petitioner in consonance with the judgment of the Hon ble Supreme Court in Steel Authoritiy BSNL based on constitutional scheme of taxing power of the State Legislature under Entry 54 of List II read with Articles 286 and 366 (29A) of the Constitution. For th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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