1995 (4) TMI 252 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to the direction to deduct taxes at source by the tax authorities without prescribed manner and rate.

Analysis:
The civil rules involved common questions of facts and law, leading to a common judgment. The petitioners, railway contractors, challenged the letters directing deduction of Assam general sales tax at source with retrospective effect. The primary contention was that the tax authorities lacked jurisdiction to issue such notices without prescribed rates and manner, as required under the Assam General Sales Tax Act, 1993. The petitioners did not press the validity of certain sections of the Act but challenged the authority's power to direct tax deduction at source.

The key legal argument revolved around Section 27 of the Act, which mandates the authority to prescribe the rate and manner for tax deduction at source. The petitioners contended that since the respondents had not prescribed the rate and manner, the notices were without jurisdiction and should be struck down. On the other hand, the Government Advocate argued in support of the tax authorities, asserting that the law allowed for tax deduction at source as proposed by the respondents.

The court analyzed Section 27(b) of the Act, which deals with tax deduction at source in specific cases. It was observed that the authority must prescribe the rate and manner for such deductions. The court noted that neither the Act nor the relevant Schedule provided clear guidance on the rate of tax to be deducted at source. Rule 35 of the Assam General Sales Tax Rules, 1993, was also examined, revealing that no prescribed rate or manner for tax deduction at source was specified.

Consequently, the court held that in the absence of a prescribed rate and manner, the tax authorities had no jurisdiction to issue the notices directing tax deduction at source. The court set aside the impugned notice and directed the respondents not to deduct tax at source based on the said notice. However, the court clarified that once the authority prescribed the rate and manner, tax deduction at source could be carried out lawfully.

In conclusion, the court allowed the writ petitions, setting aside the notice for tax deduction at source, and directed the respondents not to proceed with such deductions without the prescribed rate and manner. No costs were awarded in the case.