TMI Blog2001 (2) TMI 990X X X X Extracts X X X X X X X X Extracts X X X X ..... al of Writ Petition No. 4983 of 1999. The assessee, which is a company covered under the Companies Act and having its registered office at Okhla industrial area, Phase I, New Delhi entered into a turnkey contract with M/s. Sriganganagar Sugar Mills for design, manufacture, supply, transport, erection and supervision and undertook to construct one cane mud filter and one cane juice clarifier and for execution of this contract during the relevant period April 1, 1998 to December 31, 1998 brought various items directly purchased by its head office at Delhi from various places in the country in the course of inter-State trade by transfer of documents and such goods which were purchased by it during the course of execution of said work and were used for execution of the works contract within the State of Rajasthan. According to him no tax liability under Rajasthan Sales Tax Act or Central Sales Tax Act was attracted on transfer of property in such goods which resulted in movement of goods under the agreement under which works contract was being executed and was sold in the course of inter-State trade or commerce in which the goods have moved from outside State of Rajasthan to within S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this appeal, final assessment order came to be made by the assessing officer in the same terms in which provisional assessment order was made and writ petition was amended to challenge the final assessment order also on the same grounds, viz., the validity of Explanation II. Appeal No. 15 of 2000: 10.. This appeal arises out of the Writ Petition No. 4984 of 1999 filed by same petitioner in respect of assessment year 1998-99 subsequent to the assessment period 1997-98 in the identical facts and circumstances challenging the order passed by the Rajasthan Tax Board, Ajmer. However in the matter of assessment period 1998-99, it is stated by the learned counsel for the parties that no final assessment order has come into existence as yet. The petition has been dismissed by the learned single Judge vide order dated December 14, 1999. 11.. The learned counsel for the respondents has raised a preliminary objection that since the appeal against the impugned order is still pending before the Deputy Commissioner (Appeals), the writ petition ought not to be entertained as it amounts to pursuing two remedies simultaneously. However, as noticed above, the petitioner challenges constitution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce for Parliament to the exclusion of all other Legislatures and article 286 of the Constitution of India which prohibits the State from making any law for taxes on sale or purchase which takes place outside that State and sale or purchase which takes place in the course of import into or export out of India. The authority of State to legislate for imposition of tax on the sale or purchase where such sale or purchase of goods takes place in the course of inter-State trade and commerce or where such sale or purchase takes place in the course of import into or export out of India is excluded by the conjoint reading of entry 92A of List I of the Seventh Schedule and article 286(1). Clause (2) of article 286 further authorises the Parliament to make law formulating principles to tax sales taking place in the course of inter-State trade and commerce. 15. In view of aforesaid, provisions of the Constitution, it is apparent that the State Legislature by deeming provisions cannot extend its authority to impose tax on the sale and purchase which takes place in the course of inter-State trade or commerce or outside that State or in the course of import into or export out of India, with refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons-one flowing from the entry itself which makes the said power 'subject to the provisions of entry 92-A of List I', and the other flowing from the prohibition contained in article 286. Under entry 92-A of List I Parliament has the power to make a law in respect of taxes on sale or purchase of goods other than newspapers where such sale or purchase takes place in the course of inter-State trade or commerce. The levy and collection of such tax is governed by article 269. This shows that the legislative power under entry 54 of the State List is not available in respect of transactions of sale or purchase which take place in the course of inter-State trade or commerce. Similarly article 286(1) prohibits the State from making a law imposing or authorising the imposition of a tax on the sale or purchase of goods where such sale or purchase takes place (a) outside the State or (b) in the course of the import of goods into or export of the goods out of the territory of India. As a result of the said provision, the legislative power conferred 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 the course of interState 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 Act, 1956 and it did not take into account the conditions and restrictions imposed by section 15 of the Central Sales Tax Act, 1956 in respect of goods declared to be of special importance in inter-State trade or commerce under section 14 of the Central Sales Tax Act, 1956. Clause (i) of rule 29(2) of the Rajasthan Sales Tax Rules also suffered from the same infirmity and consequently section 5(3) of the Rajasthan Sales Tax Act, 1954 and rule 29(2)(i) of the Rajasthan Sales Tax Rules, 1955 were held to be ultra vires the provisions of the Constitution." 17.. The same view was expressed by the honourable Supreme Court in the case of Builders' Association of India v. State of Karnataka reported in [1993] 88 STC 248 while considering the provisions under the Karnataka Sales Tax Act, 1957. The provision which was before the hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be said that in fixing the situs in respect of deemed sales resulting from the transfer of property in goods involved in the execution of a works contract the State Legislature has included a sale in the course of inter-State trade or commerce or a sale outside the State or a sale in the course of import or export. 19.. These provisions were not held to be ultra vires because of expressed exclusion of a sale in the course of inter-State trade or commerce and a sale in the course of import or export of the goods outside the territory of India not to violate the provisions of the Constitution. 20.. We do not find in the impugned provision of Rajasthan enactment any such exclusion from the operation of the Act the sales which have taken place in the course of inter-State trade or commerce or in the course of export or import. On the contrary the provision says in no uncertain terms that notwithstanding that agreement for works contract has been wholly or in part entered into outside the State or that the goods have been wholly or in part moved outside the State, such sales which are deemed to take place within the State of Rajasthan shall be taxed on the basis of situs of sale o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Officer shall, after giving him an opportunity of being heard, by an order in writing, impose on such person penalty not exceeding twice the amount required to be deducted and deposited by him into Government treasury." 22.. The aforesaid provision was declared ultra vires by the High Court of Orissa in the case of Brajendra Mishra v. State of Orissa reported in [1994] 92 STC 17 for the reason that section 13-AA as it existed then, did not provide any mechanism to exclude a transaction from its purview even if ultimately, the transaction was not at all liable to levy of sales tax. In other words, even in the case of a pure and simple labour contract or service contract where the question of sale would not arise, the persons responsible for making any payment to a contractor had no option but to deduct 2 per cent of such sum towards sales tax. Though a transaction which might not be a sale at all was made liable for levy of sales tax, yet in respect of that transaction power had been conferred to make deduction of 2 per cent from the amount to be paid. The court held that in the absence of any discretion with the authority and in the absence of any mechanism by which the contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sdiction the works contract is executed. (3) The amount deducted from the bills or invoices shall be deposited into a Government treasury within one week from the date of deduction in such form or challan as may be prescribed. (4) Such deposit into Government treasury shall be adjusted by the Sales Tax Officer towards the sales tax liability of the works contractor and would also constitute a good and sufficient discharge of the liability of the deducting authority to the contractor to the extend of the amount deposited. (5)(a) Where, on an application being made by the contractor in this behalf, the Commissioner is satisfied that any works contract of the nature referred to in sub-section (1) involves both transfer of property in goods and labour or service, or involves only labour or service and, accordingly, justifies deduction of tax on a part of the sum in respect of the works contract or, as the case may be, justifies no deduction of tax, he shall, after giving the contractor a reasonable opportunity of being heard, grant him such certificate as may be appropriate, in the manner prescribed: Provided that nothing in the said certificate shall affect the assessment of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent upon of an inter-State sale, an outside sale 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 power of the State Legislature for the State Legislature may make no law levying sales tax on interState sales, outside sales or sales in the course of import." 26. If we see in the light of aforesaid dicta, we find that the impugned provisions in the present petition suffer from direct vice of violation of entry 92A of the Union List and article 286 and is beyond legislative competence of the State to enact law for imposition of tax on sale or purchase of goods in the course of inter-State trade or commerce. Sub-clause (2)(a) of article 286 makes it explicit clear that the power to tax sales taking place in the course of inter-State trade or commerce is within the exclusive compete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rce, State's power to tax would be subject to restriction and conditions imposed by Parliament if the sale relates to goods declared by Parliament to be of special importance in inter-State trade or commerce. Article 269 provides for levy and collection of such tax by Union and because of the restrictions, the State Legislature is not competent to enact law to impose tax on such sale or purchases which takes place in the course of inter-State trade or commerce according to law enacted by Parliament. The second inhibition on the power of State Legislature to enact law relating to sale or purchase tax is by virtue of clause (1) of article 286 under which State Legislature is precluded from making law to tax on sale or purchase which takes place outside that State and on sale or purchase which takes place in the course of import into or export out of India. Laying down principle for determining the question where sale or purchase takes place outside State or takes place in the course of export out of India or import from out of India is also within the domain of Parliament. Hence by artificially deeming any sale or purchase within the State by the State Legislature, the State cannot u ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
