TMI Blog1991 (8) TMI 303X X X X Extracts X X X X X X X X Extracts X X X X ..... 1984, reads as follows: "Notwithstanding anything contained in section 26 every person making any payment or discharge of any liability on account of valuable consideration payable for the transfer of property in goods, whether as goods or in some other form, involved in the execution of works contract shall be lawfully competent to deduct an amount not exceeding four per centum purporting to be a part or full of the tax payable on such sales, from the bills or invoices raised by the works contractor as payable by the person: Provided that no such payment or discharge of any bill raised by a works contractor shall be made without deduction referred to in subsection (1): Provided further that if the State Government is satisfied that it is necessary to do so in the interest of the State revenue it may notify the names/posts of such persons who shall be lawfully competent person to make such deduction as referred to in sub-section (1). (2) The deduction referred to in sub-section (1) shall be made in the manner which may be prescribed. (3) The payment of such deduction into the Government Treasury shall be the responsibility of the person making such deduction. (4) The per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h persons who shall be lawfully competent person to make such deduction as referred to in sub-section (1). (2) The deduction referred to in sub-section (1) shall be made in the manner which may be prescribed. (3) The payment of such deduction into the Government Treasury shall be the responsibility of the person making such deduction. (4) The person making such deduction shall issue deduction certificate in the prescribed manner to the person or dealer from whose bill or invoice such deduction has been made. (5) If any person contravenes any or all of the provisions of subsections (1), (3) and (4), the prescribed authority shall, after giving an opportunity of being heard, by an order in writing, direct that such person shall pay by way of penalty, a sum not exceeding twice the amount of tax deductible under sub-section (1). (6) The provisions of section 27 for recovery of any amount of tax due from a dealer shall, mutatis mutandis, apply for recovery of any amount of tax, deducted and/or any penalty imposed but not deposited under this section." 6.. It will be noticed that in original section 25A, the rate at which tax was required to be deducted from the bills or invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cutive to fix the rate and also because it is in conflict with section 15 of the CST Act? (ii) Whether the State Government was required to issue a fresh notification under amended section 25A or the notification issued on 7th November, 1984, can be said to be in force? (iii) If it is in force, whether the rate at which deduction is to be made is arbitrary? (iv) As transfer of property in goods takes place only when the contract is executed and the work is handed over, is no tax payable during the execution of the work? 9.. In Banarsi Das Bhanot v. State of Madhya Pradesh [1958] 9 STC 388 (SC); AIR 1958 SC 909, it was held that fixation of rates of tax not being an essential legislative function could be validly delegated to a nonlegislative body but when it is left to such a body, the Legislature must provide guidance for such fixation. The law laid down in Banarsi Das [1958] 9 STC 388 (SC); AIR 1958 SC 909, has been consistently followed by the Supreme Court in all subsequent judgments. A number of decisions on this point were cited at the Bar but it is not necessary to encumber this judgment by noticing all these decisions. The two decisions which in point of time are la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Section 6 provides for charge of additional tax. Section 12 provides the rate of tax, which reads as follows: "12. Rate of tax.-(1) The sales tax or purchase tax payable by a dealer under section 3 or 4 shall be levied at the rate of eight per centum of his taxable turnover: Provided that the State Government may, from time to time, by notification and subject to such conditions and restrictions as it may impose, fix higher rate not exceeding twenty five per centum or any lower rate not below two per centum in respect of such class of dealers or such goods, class or description of goods, or such sales, category or description of sales as may be specified in the notification. (2) Notwithstanding anything contained in this part the levy of the tax payable by a dealer under this part on sales or purchases of declared goods made by him inside Bihar shall be subject to the restrictions and conditions contained in section 15 of the Central Sales Tax Act, 1956 (LXXIV of 1956)." 13.. It is not in dispute and could not have been disputed that no stereo type rules can be laid down to find out whether any guidance has been provided by the Legislature to be followed by the delegate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or rates as may be notified by the State Government in this behalf not exceeding 4 per centum." Section 13(1)(b)(ii) dealt specifically with works contract and the same was deleted by the Amendment and Validation Act. This was necessary as the power to fix the rate was left to the State Government under the amended section 25A of the Act. 17.. It will be noticed that in sections 12 and 13 rates of tax have been mentioned. As clause (b)(ii), sub-section (1) of section 13 has been deleted, it must be held that section 13 does not provide any guideline for fixing the rate under section 25A. All sales and purchases except those covered by section 13 must be held to be within the purview of section 12. 18.. It was submitted on behalf of the petitioners that the Legislature has completely effaced itself by delegating the power to the State Government. It was urged that section 61 of the Act provides for laying of certain notifications on the table of the State Legislature. The provision of laying notification on the table of the Legislature according to the learned counsel for the petitioners has a check on the delegate because the Legislature has retained its power to modify or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levied only at that point or points in the series of sales as may be specified by the State Government by a notification published in the Official Gazette. If the notification specifies any goods, class or description of the goods that the sales tax shall be levied at the first point of sale in Bihar either by an importer or manufacturer or a wholesaler, subsequent sale of the same goods shall not be levied to tax, if the dealer making the subsequent sale produces before the prescribed authority under section 17 original copy of the cash memo or invoices or bill issued to him and files a true and complete declaration in the form and in the manner prescribed. In the execution of works contract for construction of building and/or other civil engineering works declared goods within the meaning of section 14 of the CST Act are used. Every sales tax law of State so far as it imposes or authorises imposition of tax on the sale or purchase of declared goods be subject to restrictions and conditions mentioned in section 15 of the CST Act. For properly appreciating the rival contentions, it is necessary to notice section 15 of the CST Act, which reads as follows: "15. Restrictions and con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es before the prescribed authority at the time of assessment original copy of cash memo or invoices or bill issued to him and files true and complete declaration in the form and in the manner prescribed. The form prescribed for this is form IX-C, as provided in rule 12(2) of the Bihar Sales Tax Rules, 1983. Nothing has been provided in section 25A that the person making any payment to works contractor shall not make any deduction from bills or invoices, sales tax on the ground that payment of it has been made at the first point. Rather non-deduction of sales tax by the person making the payment has been made penal under section 25A(5). The result is that the works contractor shall have to pay sales tax again from his bills or invoices on taxpaid declared goods. In Bhawani Cotton Mills Ltd. v. State of Punjab [1967] 20 STC 290 (SC); AIR 1967 SC 1616 it was held that as some provision of the Punjab General Sales Tax Act was in conflict with section 15 of the CST Act, such provision was void. 24.. Section 42 of the Act provides for refund of tax paid in excess. The learned Advocate-General has taken shelter under this section. Merely because there is a provision for refund, the Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the General Clauses Act will include "amendment". No decision of this Court or of the Supreme Court on this point was brought to our notice. The decisions of different High Courts which could be found out on this point has taken a broader view of the matter and has held that "repeal" will include "amendment". Reference may be made to Allied Exports Imports v. State of Andhra Pradesh [1971] 28 STC 175 (AP) [FB]; AIR 1971 AP 218 (FB), Issa Yacub Bichara v. State of Mysore AIR 1961 Mys 7, Poona Electric Supply Co. Ltd. v. State AIR 1967 Bom 27 and Chunilal Vallabhaji Gandhi v. State AIR 1959 Bom 554. I am in respectful agreement with the view. I am of the opinion that notification dated 7th November, 1984, is in force. This disposes of question No. (ii). 32.. Learned counsel for the petitioners submitted that deduction of tax at 4 per cent under section 25A has no nexus with the actual rate at which person executing works contract in which transfer of property in goods takes place, shall be found ultimately liable to pay. He urged with reference to the statements made in paragraph 17 of the supplementary affidavit that if the value of works contract is Rs. 100, taxable event ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is, in fact, recovery of advance tax which the Act does not provide. 37.. Article 366, clause (29-A) was introduced by the 46th Amendment of the Constitution and clause (29-A)(b) deals with works contract. It provides that tax on the sale or purchase of goods will include a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract. Clause (29-A), inter alia, provides that such transfer of any goods shall be deemed to be a sale of those goods by a person making the transfer and a purchase of those goods by a person to whom such transfer is made. 38.. In none of the writ petitions, agreement has been made part of the brief. Nothing has been brought to our notice to show that it was agreed between any of the person executing works contract and the principal for which it is being executed that there was any term which stipulated the time when the title shall pass in the goods to the principal. In Builders Association of India v. Union of India [1989] 73 STC 370; AIR 1989 SC 1371, the Supreme Court observed: "Ordinarily unless there is a contract to the contrary in the case of a works contract, the property in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th November, 1984, whereby and whereunder various persons and authorities were authorised to deduct tax at source and the rate of such deduction was fixed at 4 per cent. The said notifications are contained in annexures 3 and 4 to the said writ petition. 45.. Before proceeding to consider the points involved in this case in details, the provisions of the said Act which are relevant for the purpose of this case may be noticed: Section 2(j) defines "gross turnover" to mean: (i) for the purposes of levy of sales tax, in respect of sale of goods, aggregate of sale prices received and receivable by a dealer, including the gross amount received or receivable for execution of works contract or for the transfer of right to use any goods for any purpose (whether or not for a specified period) during any given period (and also including the sale of goods made outside the State and in the course of inter-State trade or commerce or export) but does not include sale prices of goods which have borne the incidence of purchase tax under section 4. (ii) for the purposes of levy of purchase tax, aggregate of purchase prices paid or payable by a dealer during any given period in respect of pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 16 provides for return, rebate and payment of admitted tax. In terms of sub-section (5) of section 16, provisions have been made for filing monthly abstract statement of sales and purchases on or before the last date of the month following the month to which the statement relates, in such form and in such manner as may be prescribed by the dealers whose monthly amount of tax exceeds two thousand five hundred. Section 21 deals with taxable turnover. Section 25 provides for payment and recovery of tax. Section 26 provides for restrictions on collection of tax by dealers. It states that as no person except a registered dealer can recover tax from the customers, in order to obviate such a situation, section 25A of the Act contains a non obstante clause overriding the provisions of section 26. 46.. However, by reason of section 25A of the Act, the authority to recover tax has been vested in the buyer or its representative. 47.. As indicated hereinbefore, section 25A provides for deduction of tax from bills or invoices from the works contractor. Section 42 provides for the manner in which the application for refund should be dealt with. Section 43 provides for grant of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds involved in the execution of the works contract or not or whether any tax at all is payable or not. The persons who have been authorised to deduct tax from the bills or invoices submitted by a works contractor have not been given nor could be given any adjudicatory function even for the purpose of prima facie determining the extent of transfer of goods involved in the execution of the works contract and the amount of tax that would be payable by the contractor. It will therefore, not be correct to say that deduction is to be made from the value of the property in goods transferred and not from the total value of the works contract. The questions posed in this application have, thus, to be answered in the aforementioned background. 52. The nature of tax, the incidence of tax, the taxable event, and the quantum thereof would vary from case to case. Giving thus a literal meaning to section 25A of the Act, rule 26A of the Rules and the notifications dated 7th November 1984, it is evident that thereby a statutory liability has been fastened upon every person in making any payment or discharge of any liability on account of valuable consideration payable for the transfer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x on works contract will be evident from the stand taken by the State before the Supreme Court of India in Builders Association of India's case [1989] 73 STC 370; AIR 1989 SC 1371, wherein the court held: "We are surprised at the attitude of the States which have put forward the plea that on the passing of the 46th Amendment the Constitution had conferred on the States a larger freedom than what they had before in regard to their power to levy sales tax under entry 54 of the State List." 57.. It is, therefore, clear that the amount of deduction at the rate of 4 per cent from the bills or invoices was considered to be reasonable in view of the law as it then stood and as it was understood by the State which would be evident from its stand in Builders Association case [1989] 73 STC 370 (SC); AIR 1989 SC 1371, as also the decision of this Court in Geeta Prasad Singh and Co. v. State of Bihar reported in [1986] 63 STC 337; 1986 PLJR 451. In the latter case it has been held that the scheme of section 25A of the Act authorises deduction from the entire bill. 58.. From the decisions aforementioned it is, therefore, now wellsettled that rule 13-A of the Bihar Sales Tax Rules is ultra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onent: i. Materials used on which sales tax paid at first point like cement, steel, glass, paints, varnishes, plywood, timber, asbestos, cement products, sanitary fittings, mosaic tiles, bitumens, refractory products, stone chips, boulders, etc.-38% of Rs. 78, i.e., Rs. 29.64, say 30 30% ii. Materials of which sales tax is to be paid at end point like sand, bricks, etc.-6% of Rs. 78, i.e., Rs. 4.68, say Rs. 5 5% ... Total variable elements: 78% Elements on which sales tax may be levied-5% of the total value of contract of Rs. 100, i.e., on Rs. 5 only. Considering rate of sales tax as 8% amount of sales tax on works contract: =8% of Rs. 5=0.40 paise+1% TOT=0.44 paise. Total liability of sales tax on works contract of Rs. 100 may be 0.44 paise i.e., 0.4% of the value of works contract." 63.. According to the petitioners, these figures are based on Indian Practical Civil Engineers Hand Book, 5th Edition, by Sri P.N. Khanna. 64.. With regard to the transfer of property in goods involved in a building contract, it has been stated: "that it is further stated that goods involved in the execution of the works contract are mainly the following items: i. Cement. ii. Steel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, thus, the same is ultra vires the Constitution of India. B. From the chart as contained in annexure 6 it will be evident that in a building contract, 35 per cent to 40 per cent of the total value of contract involved in transfer of goods upon which tax can be levied and it has, therefore, been contended that deduction at 4 per cent of tax at source is arbitrary and unreasonable when the total liability towards sales tax would not exceed 1 per cent of the gross value. C. As despite amendment in section 25A by reason of the Act 2 of 1990 no new notification has been issued, the respondents have no jurisdiction to deduct any amount form the bills and/or invoices. The notifications dated 7th November, 1984 as contained in annexures 3 and 4 to the writ application are not saved under section 27 of the Bihar and Orissa General Clauses Act, 1917. In any event, the said notification dated 7th November, 1984, fixing the rate of deduction at 4 per cent from every bill or invoices must be declared ultra vires in view of the changed situation. D. As the works contractors are also registered dealers, they are entitled to all the benefits conferred upon all other registered dealers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e found out in section 12 of the Bihar Finance Act, by reason whereof power to fix rate of tax in terms of the aforementioned provision has been fixed at 8 per cent subject to the proviso appended thereto as a result whereof the rate of tax can be varied form 2 per cent to 25 per cent. Section 13 of the Act also provides for the rate of tax in respect of certain specified matters which come within the purview thereof. 73.. Section 25A of the said Act, has got nothing to do with fixation of rate of tax. It is merely a recovery provision. The question, therefore, which would arise for consideration is as to whether section 12 of the said Act can be taken recourse to for the purpose of finding out as to whether the same provides for the necessary guidelines with regard to the fixation of rate for the purpose of deduction from the bills/ invoices by way of recovery of the tax. 74.. On a plain reading of section 25A of the Act read with the notification dated 7th November, 1984, as contained in annexure 4 to the writ application, it would be evident that the authorities named in the notification dated 7th November, 1984, as contained in annexure 3 to the writ application are under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... works contract involved. While constructing an earthen dam, the value of the materials by way of bricks, sand or cement would be negligible which may be to the extent of 5 per cent of the entire value of works contract and the labou and other element would be to the extent of 95 per cent; whereas in the case of installation of a transformer the costs of transformer itself may cover 95 per cent of the total value of the works contract; 5 per cent being the cost of labour and other elements. No guideline has thus been provided to the State to deal with such extreme situations. From wha has been stated hereinbefore, it would also appear that rate of tax fixed by the State under section 12 of the Act will thus, have no direct and immediate nexus, as the rate of tax would vary from goods to goods sought to be transferred in execution of the works contract which in turn would depend upon the nature of the contract itself. 79.. In C.W.J.C. No. 828 of 1990 (R), the petitioner thereof has contended that in respect of the contracts entered into by it with the State, except one part of the contract, no materials are to be used at all and in relation to that part of the contract which necess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and it did not give any guidance either under that section or under any other provisions of the Act-no other provision was brought to our notice. The argument of the learned counsel that such a policy could be gathered from the constitutional provisions cannot be accepted, for, if accepted, it would destroy the doctrine of excessive delegation. It would also sanction conferment of power by Legislature on the executive Government without laying down any guidelines in the Act. The minimum we expect of the Legislature is to lay down in the Act conferring such a power of fixation of rates clear legislative policy or guidelines in that regard. As the Act did not prescribe any such policy, it must be held that section 5 of the said Act, as it stood before the amendment, was void." (Underlining* is mine) 84.. The other provisions of the Act which are said to be supplying the requisite guidelines to the executive, must have a reasonable nexus with the power sought to be delegated by the Legislature in favour of the executive. As section 12 deals with the fixation of rate of tax which has got nothing to do with the fixation of rate at which recovery shall be made from the bills, the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 895, but, did not distinguish the same. In that case, it was, however, held that the Legislature may also retain its control over its delegate by exercising its power of repeal. With utmost respect, in my opinion, the same runs counter to the decision of the Constitution Bench in Devi Dass case [1967] 20 STC 430 (SC); AIR 1967 SC 1895. It was further held that a delegation of legislative power may be held to be good when the delegated legislation itself may have to be placed before the Parliament. There is no such provision in the said Act. In Devi Dass case [1967] 20 STC 430; AIR 1967 SC 1895, the Supreme Court repelled the contention to the effect that whenever a statute defines purpose or purposes for which a statutory authority is constituted and empowers it to levy tax, that statute necessarily contains a guidance to fix a rate. It further repelled the contention that the doctrine of constitutional and statutory objectives would afford reasonable guideline for the Government to fix rate. It was held: "Conferment of reasonable area of discretion by a fiscal statute has been approved by this Court in more than one decision: see Khandige Sham Bhat v. Agricultural Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty under the charging section." 88.. In Babu Ram Jagdish Kumar and Co. v. State of Punjab reported in [1979] 44 STC 159; AIR 1979 SC 1475 also the Supreme Court held that there cannot be any abdication of the essential legislative power. It said: "Even in matters relating to taxation laws, it has been consistently held that the Legislature can delegate the power to fix rates of tax provided there are necessary guidelines regarding such fixation on the ground that, in a modern society, taxation is one of the methods by which economic and social goals of the State can be achieved and the power to tax, therefore, should be a flexible power and capable of being easily altered to meet the exigencies of circumstances. Such delegation has been held to be not amounting to delegation of essential legislative function." 89.. In that case, the Supreme Court was considering the provisions of section 31 of the Punjab General Sales Tax Act, 1948, section 31 whereof reads as follows: "Power to amend Schedule C.-The State Government, after giving by notification not less than three months' notice of its intention so to do, may by notification add to, or delete from, Schedule C any goods, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so as to advance the policy and objects of the Act, according to the guidelines as may be gleaned from the preamble and other provisions which we have already pointed out, are clear." (Underlining* is mine). This decision, thus has also no application to the facts of the present case. 91.. In Harackchand Ratanchand Banthia v. Union of India reported in AIR 1970 SC 1453, the Supreme Court struck down the Gold Control Act. The said decision was followed by the Supreme Court in A.N. Parasuraman v. State of Tamil Nadu reported in AIR 1990 SC 40. It held that as Tamil Nadu Private Educational Institution (Regulation) Act does not lay down any guideline for the exercise of the power by the delegated authority, as a result of which the authority is in a position to act according to his whims and is, thus, discretionary and arbitrary. *Here italicised. 92.. In Gopal Narain v. State of Uttar Pradesh reported in AIR 1964 SC 370, the Supreme Court upheld the authority to fix rate of tax by the Municipal Board under the provisions of the U.P. Municipalities Act stating that the law provides for a detailed guidelines which held: "It will be seen from the aforesaid provisions that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax. 95.. The learned Advocate-General contended that section 25A required an amendment as the matter relating to fixation of the amount in terms of section 25A had to be made flexible keeping in view the rate of tax which may be imposed from time to time. This may be so but while delegating its power to fix the rate with regard to recovery of tax from the bills or invoice, it was also obligatory upon the Legislature to give sufficient guidelines to the executives for the purpose of fixing different rates depending upon the nature of works contract, the value of the goods which is sought to be transferred in execution of the works contract and other relevant factors. In this context it was all the more necessary to delegate power to make guideline to fix tax so that the State may not impose flat rate as has been done in the instant case without having any reasonable nexus with the payability of the tax by individual works contractor. In this connection it may be mentioned that not only there is no provision for grant of interest in respect of excess tax deposited, the period of limitation for making an assessment under the Bihar Finance Act is 8 years as provided for under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of taxation. However, the provision for recovery of tax stands on a different footing. Recovery of tax is permissible only when it becomes due except in the case of advance tax. Recovery of tax denotes recovery of tax assessed or assessable. A power to recover tax without any guideline cannot be sustained. As noticed hereinbefore, even the maximum rate at which recovery can be made has not been specified which provision existed in unamended section 25A of the Act. There is also no provision for laying down the notification before the Legislative Assembly. No check, thus, at all has been provided with regard to the power of the State to issue notification fixing the rate at which recovery is to be made from the bills/invoices. 102.. In similar situation in Devi Dass' case [1967] 20 STC 430; AIR 1967 SC 1895, the Supreme Court struck down the provisions of the Punjab Sales Tax Act. In view of the aforementioned authoritative pronouncement of the Supreme Court, in my opinion, section 25A of the said Act has to be struck down. 103.. Re. Question B. It is well-known that a taxing statute is not wholly immune from attack on the ground that it infringes the equality clause under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ford Tea Co. Ltd. v. State of Kerala AIR 1970 SC 1133; [1970] 3 SCR 383, it has been observed that when a statute divides the objects of tax into groups or categories, so long as there is equality and uniformity within each group, the tax cannot be attacked as violative of article 14, although due to fortuitous circumstances or a particular situation some included within a group may get some advantage over others provided of course they are not sought out for special treatment. It has repeatedly been held, for example in Khyerbari Tea Co. Ltd. v. State of Assam AIR 1964 SC 925, Gopal Narain v. State of U.P. AIR 1964 SC 370 and the Steelworth v. State of Assam [1962] 13 STC 233 (SC); [1962] Supp 2 SCR 589, and Venugopala Ravi Varma Raja v. Union of India AIR 1969 SC 1094; [1969] 3 SCR 827; [1969] 74 ITR 49 (SC) that as to what articles should be taxed is a question of policy and there cannot be any complaint merely because the Legislature has decided to tax certain articles and not others. In D.S. Nakara v. Union of India [1983] 1 SCR 305, Desai, J. even expressed that too microscopic a classification may also be violative of article 14." 106.. It further held: "Whether a partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entitled to some interest as well. But unfortunately there exists no such provision. The Division Bench in that case did not take into consideration the matter relating to reasonableness of the rate fixed on the touchstone of the facts and the provisions of law as have been raised in these writ applications. 112.. As indicated hereinbefore, the rate notified has to be applied in respect of each bill or invoice irrespective of the fact as to what extent the works contractor is liable for payment of tax. 113.. While judging this matter, it is to be considered that a registered dealer is bound to submit monthly statements in respect of his turnover. A registered dealer is also liable to submit quarterly return and along with which it must deposit the admitted tax. It is true as has been submitted by the learned Advocate-General that in the event tax is deducted by the principal in excess of the limited liability determined as being payable, there is a provision for refund thereof in terms of section 42 of the Act. 114.. In Bhawani Cotton Mills Ltd. v. State of Punjab reported in [1967] 20 STC 290 (SC); AIR 1967 SC 1616, the Supreme Court repelled such a contention and held: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Bihar Sales Tax Rules, 1983, provided for the matter relating to deduction of tax from the bills/invoices of works contractor under section 25A. Sub-rule (2) of rule 26A provides that the deduction referred to under sub-section (1) of section 25A shall be made at the rate notified in this behalf from time to time by the Government. Sub-rule (2) provides that such deduction shall be made from all payments made in respect of all works contracts executed whether in part or in full after 1st April, 1984, provided total value of the works contract or contracts exceed Rs. 25,000. 119.. From the provisions aforementioned, it would be evident that whereas the notification fixing the rate was to be made from time to time by the Government in terms of rule 26A such a notification has now to be made in terms of section 25A as amended. It is further evident that in terms of sub-rule (2) of rule 26A of the Rules deductions have got to be made from all payments and not from a particular bill or bills or invoice or invoices which represent the value of the transfer of goods involved in the execution of the works contract. 120.. The fixation of rate of 4 per cent from the bills/invoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anced. 127.. It may be mentioned that taxes payable on the value of goods transferred in the execution of the works contract would be subject to all incidence of tax and/or exemptions therefrom as provided for in the notifications issued under sections 11 and 13 of the Act also in terms of sections 14 and 15 of the Central Sales Tax Act. 128.. Prima facie, therefore, the petitioners have been able to show that what was reasonable at one point of time was no longer reasonable in view of the decision of the Supreme Court of India in Builders' Association case [1989] 73 STC 370; AIR 1989 SC 1371. The petitioners, therefore, have prima facie discharged the onus that the rate of tax once considered to be reasonable can no longer be said to be reasonable. The Supreme Court in many decisions struck down a law which was once considered to be reasonable, but owing to passage of time was held to be unreasonable. Reference in this connection may be made to Motor General Traders v. State of A.P. reported in AIR 1984 SC 121 and in Rattan Arya v. State of Tamil Nadu reported in AIR 1986 SC 1444. 129.. Although in Construction Construction [1990] 77 STC 405 (Pat); [1990] 1 PLJR 413, the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an extension of the principle that when two interpretations are possible one rendering it constitutional and the other making it unconstitutional, the former should be preferred. The unconstitutionality may spring from either the incompetence of the Legislature to enact the statute or from its violation of any of the provisions of the Constitution. The second situation which summons its aid is where the provisions of the statute are vague and ambiguous and it is possible to gather the intentions of the Legislature from the object of the statute, the context in which the provision occurs and the purpose for which it is made. However, when the provision is cast in a definite and unambiguous language and its intention is clear, it is not permissible either to mend or bend it even if such recasting is in accord with good reason and conscience. In such circumstances, it is not possible for the court to remake the statute. Its only duty is to strike it down and leave it to the Legislature if it so desires, to amend it. What is further, if the remaking of the statute by the courts is to lead to its distortion that course is to be scrupulously avoided. One of the situations further where t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be subject to the provisions of section 15 of the Central Sales Tax Act. 137.. In Bhawani Cotton Mills Ltd. case [1967] 20 STC 290 (SC); AIR 1967 SC 1616, the majority held that the purchase tax imposed by reason of the Punjab General Sales Tax Act is ultra vires section 15 of the Central Act inasmuch as thereby tax can be levied at more than one stage. Such is not the position of law in the instant case. In that case it was further held that section 15 of the Central Sales Tax Act does not make any distinction between a registered dealer and an unregistered dealer . In that case the dealer claimed exemption under section 5(2)(a)(vi) and rule 27A of the Rules made under the Punjab General Sales Tax Act and the Rules framed thereunder. Repelling that contention, it was held that these provisions apply only to registered dealers, whereas section 15 of the Central Act is not restricted to the registered dealers. If an unregistered dealer intends, there is no machinery by which a dealer can ascertain whether his vendor of the declared goods has paid the tax. In that decision it was held: "The orders of assessment could not be sustained on the basis of provisions for a refu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but to deduct 4 per cent from all invoices or bills submitted by the contractor irrespective of the fact as to whether tax in relation to the commodities in-question is leviable or not. 144.. In Bhawani Cotton Mills case [1967] 20 STC 290 (SC); AIR 1967 SC 1616, with regard to the argument advanced on behalf of the Revenue to the effect that even if a person who is not liable to pay tax in respect of a declared goods, he may obtain refund in respect thereof, it was held: "If the Central Act makes it mandatory that the tax can be collected only at one stage, in our opinion, it is not enough for the State to say that a person, who is not liable to pay tax, must, nevertheless, pay it in the first instance, and then claim refund at a later stage. We may state that the question as to how far a party can ask for refund, without the order of assessment being set aside, by appropriate proceedings, is highly doubtful; because, at the time when the actual order of assessment is passed, in certain cases, it may not be possible for a party to say whether he is entitled to exemption or not, under sub-clause (vi) of section 5(2)(a) of the Act. If a person is not liable for payment of tax at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is immaterial whether the time of payment of the price or the time of delivery of the goods, or both, is postponed." What, therefore, would be the deliverable stage would depend upon the nature of the works contract itself. 150.. The Supreme Court in Builders' Association of India v. Union of India reported in [1989] 73 STC 370; AIR 1989 SC 1371 held that in view of clause (29A) of article 366 of the Constitution, the provision imposing sales tax on works contract is valid. 151.. In paragraphs 33 to 39 (at pages 398-402 of STC) of the said judgment, the Supreme Court was considering the effect of the submission made on behalf of the State that the properties that are transferred to the owner in the execution of a works contract are not goods in the execution of the works contract but a conglomerate, that is, entire building that is actually constructed. The Supreme Court, therefore, in that decision was not called upon to answer as to at what stages, the property used in the execution of works contract passes unto the principal. 152.. There cannot be any doubt that the same depends upon the terms of contract. 153.. Sales tax can be recovered, except in a case covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or any excess of materials if they have not been used and fixed, on completion of the work." "Effect of provisions for payment: Even where no explicit provisions for passing the property in materials or plant exist, there may be provisions in a contract for payments which include the value of materials or plant brought on to the site. Such provisions will normally pass the property to the building owner upon payment, or if the contract so provides upon the issue of any relevant certificate." "Time of vesting: Where the vesting of property is stipulated to occur only on the occurrence of an event, the fact as to whether this event has or has not happened must be ascertained in the ordinary way, unless the architect or engineer, or an arbitrator has been by the agreement of the parties constituted judge of the event. The time of vesting must be gathered from the contract, it may be made to depend on the engineer's opinion or certificate, or upon a default by the builder, after notice given by the building owner. As against a trustee or liquidator, it would seem that unless perhaps there has been disclaimer, the time of vesting or seizure is immaterial, since the trustee will o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der and disposition of the builder with the consent of the true owner, until the building is finished, so as to make the contractor the reputed owner thereof, and therefore on bankruptcy of the contractor the property in them passes to his trustee." See Re Fox ex parte Oundle and Thrapston Rural District Council v. Trustee [1948] 1 All ER 849. 161.. There cannot be any doubt as has been observed by the Supreme Court in Builders' Association case [1989] 73 STC 370; AIR 1989 SC 1371, that ordinarily unless there is a contract to the contrary in the case of works contract, the property in goods used in the construction of the building passes to the owner of the land when the goods or materials used or incorporated in the building and thus the contractor becomes liable to pay tax till final bill is prepared for the entire work. But as noticed hereinbefore, there may be a case where there may be a contract to the contrary and/or running bills and invoices are not prepared on the basis of the materials incorporated in the building but on other basis. Even in relation to the category of the case not falling within the ordinary cases as mentioned by the Supreme Court in Builders' Assoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applies even in the case of a partial repeal or repeal of part of an Act." 165.. In Firm A.T.B. Mehtab Majid Co. v. State of Madras reported in [1963] 14 STC 355 (SC); AIR 1963 SC 928, it was held: "It has been urged for the respondent that if the impugned rule be held to be invalid, old rule 16 gets revived and that the tax assessed on the petitioner will be good. We do not agree. Once the old rule has been substituted by the new rule, it ceases to exist and it does not automatically get revived when the new rule is held to be invalid." 166.. In article 178 of Francis Bennion's Statutory Interpretation, page 429, the learned author has stated that "to repeal an Act is to cause it to cease to be a part of corpus juris or body of law. To 'repeal' an enactment is to cause it to cease to be in law a part of the Act containing it. A repeal may be either express or implied. The repeal of an enactment constitutes the amendment of the Act containing it. Accordingly the rules applicable to amendments set out in sections 170 to 177 of this Code may also apply to a repeal." It is therefore clear that there can be a repeal in respect of a particular provision of the section. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of Act 2 of 1990 merely prescribed the maximum rate. In terms of rule 26A, the notification was to be issued fixing a rate from time to time. However, by reason of section 25A as it now stands, the maximum rate fixed by reason of the statute has been deleted and in its place the words "as may be fixed" from time to time have been inserted. This, in my opinion, is not a minor modification. 169.. In Bhavani Cotton Mills Ltd. v. State of Punjab reported in [1967] 20 STC 290; AIR 1967 SC 1616, the Supreme Court was considering the amendment in the definition of "purchase" which was in the following terms: "'Purchase' with all its grammatical or cognate expressions means the acquisition of goods specified in Schedule C for cash or deferred payment or other valuable consideration otherwise than under a mortgage, hypothecation, charge or pledge." "'Purchase' with all its grammatical or cognate expressions means the acquisition of goods other than sugarcane, foodgrains and pulses for use in the manufacture of goods for sale, for cash or deferred payment or other valuable consideration, otherwise than under a mortgage, hypothecation, charge or pledge." (Introduced in the Act by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in State of Punjab v. Subhash Trading Company reported in [1976] 37 STC 530; AIR 1976 SC 769. 171.. The defect pointed out in Bhawani Cotton Mill's case [1967] 20 STC 290 (SC); AIR 1967 SC 1616, was rectified by the Punjab General Sales Tax Act (as amended by Act 7 of 1967), validity whereof was upheld in Rattan Lal and Co. v. Assessing Authority reported in [1970] 25 STC 136 (SC); AIR 1970 SC 1742. The matter again came up in State of Punjab v. Shakti Cotton Co. reported in [1972] 29 STC 706 (SC); AIR 1972 SC 1458 wherein the following direction was given: "The appellants contested the writ petition on various grounds. But the material averment, which has to be noted is to the effect that the assessee was entitled to deduction only on the purchase of cotton sold by it as required under section 5(2)(a)(vi) of the Act and that too on the purchase value of the commodity sold and not on its sale price. It was further averred that cotton seeds are different from cotton and the price realised by the sale of the former does not qualify for deduction under the said provision of the Act as the cotton seeds are not the same commodity as cotton that had been originally purchased. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... malidas v. Commissioner of Income-tax reported in [1990] 186 ITR 572 (SC); AIR 1991 SC 1 wherein it has been held: "The effect of section 24 of the General Clauses Act, 1897, in so far as it is material, is that where the repealed and re-enacted provisions are not inconsistent with each other, any order made under the repealed provision is deemed to be an order made under the re-enacted provisions." 177.. By reason of the unamended provision of section 25A, maximum rate at 4 per cent was fixed, but by reason of the amended provision, the State Government has been conferred with the discretion to fix any rate as it may deem fit and proper. Both the provisions, therefore, are inconsistent with each other. Further in view of the provisions of section 2(oo) of the said Act as amended by Act No. 2 of 1990, now a notification has to be published in the Official Gazette which was not required under the old Act. 178.. In this case, unamended provision of section 25A was merely an enabling provision. It did not make any provisions for issuance of any notification. It merely fixed the maximum amount which can be deducted from the bills or invoices raised by the works contractor namely, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 366 of the Constitution of India, a works contractor becomes a dealer within the meaning of the said Act, he in my opinion, would also be entitled to have all the privileges conferred thereunder. 181.. Section 13(1)(b)(ii) as it stood prior to enactment of Act 2 of 1990 has been quoted by brother S. Roy, J., in paragraph 16. The word "works contract" by reason of the amendment carried out in section 13(1)b)(ii) has been deleted. Brother Roy, J., has rightly observed that the same was necessary as the power to fix rate was given to the State Government under the amended section 25A of the Act. 182.. By reason of the amendment, sales to or purchase by a registered dealer or goods required by him directly for use in the execution of a works contract did not attract special rate of tax fixed in terms of section 13 of the Act, but if the works contractor is a registered dealer and he intends to utilise the goods mentioned in one or the other clauses contained in section 13 thereof, in my opinion, he ipso facto becomes entitled thereto. If a works contractor is a registered dealer, he shall, in my considered opinion, be entitled to all the rights and privileges conferred upon any ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elegation on the point of the leviability of tax, i.e., while dealing with the charging provisions of the relevant statutes. Section 25A is in the nature of machinery provision. Whether sufficient guidelines have been prescribed in the statute or not has to be examined with reference to the charging provision and not the machinery provision. 187.. As regards the question of section 25A of the Bihar Act being in conflict with section 15 of the Central Act, I have some reservations in agreeing to the conclusion arrived at by brother S. Roy, J., which I shall briefly indicate. Before that, I would only point out that in the Builders' Association case [1989] 73 STC 370; AIR 1989 SC 1371, the Supreme Court has held that the State is competent to enact sales tax law levying taxes on the transfer of property in goods involved in the execution of works contract, subject to the restrictions and conditions mentioned in article 286 of the Constitution. Article 286 as amended, inter alia, provides that any law of State, in so far as it imposes or authorises the imposition of (a) a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-State tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in between they have undergone manufacture or processing to produce a commercially different article, it cannot be said that the said goods are taxed at two stages. In State of Tamil Nadu v. Pyare Lal Malhotra [1976] 37 STC 319; AIR 1976 SC 800, the Supreme Court had the occasion to consider the tax liability in cases where the goods in question after the necessary manufacturing process have undergone a definite metamorphosis as to the commercial identity of the new product, and in that connection after following the dictum laid down in Devi Dass Gopal Krishnan [1967] 20 STC 430 (SC); AIR 1967 SC 1895, in the following terms: *Here italicised. "That apart, it is clear that scrap iron ingots undergo a vital change in the process of manufacture and are converted into a different commodity, viz., rolled steel sections. During the process the scrap iron loses its identity and becomes a new marketable commodity. The process is certainly one of manufacture." Their Lordships stated the law in the following words: "No doubt, in the law dealing with the sales tax, the taxable event is the sale and not the manufacture of goods. Nevertheless, if the question is whether a new commercial ..... X X X X Extracts X X X X X X X X Extracts X X X X
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