TMI Blog2006 (2) TMI 607X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 35 of the Adhiniyam and the same is marked as annexure P1. 3.. In support of the writ petition, it is contended that section 35 of the Adhiniyam does not make any provision for deduction and ascertainment of value and nature of goods supplied during execution of works contracts. It is also contended that section 35 of the Adhiniyam does not make any provision for determination of value of goods supplied in the course of inter-State trade during execution of works contracts. 4.. The writ petition is opposed by the respondents by filing reply/statement of objections. In the reply statement, it is stated that the contractors who are engaged in the construction of buildings, roads, bridges, dams, etc., generally come from other States. The process of assessment of sales tax is very lengthy and before the assessment is completed, such contractors disappear from the scene after receiving full payment under contracts. In such situation, it was very difficult for the Commercial Tax Department to trace out such contractors and eventually sales tax payable by such contractors could not be recovered at all thereby causing heavy financial loss to the Government. In order to safe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the same provision again by this Court would not arise. In reply, Shri Neelabh Dubey would submit that the above judgment of the High Court of Madhya Pradesh, in the first place, did not consider at all the legislative competence of the Legislature of the undivided State of Madhya Pradesh to enact section 35 and it further overlooked the dictum of the judgment of the Supreme Court in Bhawani Cotton Mills Ltd. v. State of Punjab [1967] 20 STC 290. Shri Neelabh Dubey would contend that in view of the judgments of the Supreme Court referred to above, the judgment of the High Court of Madhya Pradesh in Punj Lloyd Ltd. v. State of M.P. [1996] 102 STC 299, being per incuriam is not a good law. 6.. By virtue of entry 54 of List II of the Seventh Schedule read with article 246 of the Constitution of India, the States are empowered to levy taxes on the sale or purchase of goods, other than newspapers. The Forty-sixth Amendment to the Constitution, inter alia, clause (29A)(b) in article 366 of the Constitution, as a result, tax on the purchase or sale of goods included a tax "on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that any person making a payment of the amount into the Government treasury as provided under sub-section (2) should be deemed to have made the payment thereof on the authority and on behalf of the contractor and the treasury receipt for such payment shall constitute a good and sufficient discharge of the liability of the person to the contractor towards the value of the contract to the extent of the amount specified in the receipt. By reason of sub-section (4), such deposit is required to be adjusted by the Sales Tax Officer towards the sales tax liability of the contractor and it constitutes good and sufficient discharge of the liability of the person letting out a works contract to the contractor to the extent of the amount deposited. Subsection (5) of section 35 of the Adhiniyam provides that where a person letting out a works contract contravenes the provisions of subsection (1) or sub-section (2) of section 35 he is liable to penalty of an amount which shall be 25 per cent of the amount required to be deducted under sub-section (1). The person letting out a works contract, therefore, should he contravene sub-section (1) of section 35, would be liable to a penalty of an amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a works contract. For the purposes of the deduction, the person letting out a works contract is entitled (sic) to take into account the fact that the works contract involves transfer of property in goods consequent upon of an inter-State sale, an outside sale or a sale in the course of import. In other words, the person letting out a works contract is required by sub-section (1) of section 35 of the Adhiniyam to deposit towards the contractor's liability to State sales tax of 2 per cent of such amount as he 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. Thus, it is quite clear that the State Legislature in enacting section 35 in the Adhiniyam acted beyond the power granted to it under article 246 of the Constitution read with List I, entry 92-A and List II, entry 54 of the Seventh Schedule. 10.. The provisions of section 13-AA (as replaced in 1993) of the Orissa Sales Tax Act, 1947 and that of section 12-A of the Himachal Pradesh General Sales Tax Act, 1968 which are substantially similar to the provisions of section 35 of the Adhiniyam are struck down by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (1), the deducting authority shall grant a certificate to the contractor in the form prescribed and shall send a copy thereof to the Sales Tax Officer within whose jurisdiction the works contract is executed. (3) The amount deducted from the bills or invoices shall be deposited into the Government treasury within one week from the date of deduction in such form or challan as may be prescribed. (4) Such deposit into the Government treasury shall be adjusted by the Sales Tax Officer towards the sales tax liability of the contractor and would also constitute a good and sufficient discharge of the liability of the deducting authority to the contractor to the extent 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les or sales in the course of import." 12.. In the case of Nathpa Jhakri Jt. Venture v. State of Himachal Pradesh [2000] 118 STC 306 (SC), the Supreme Court following the judgment in the case of Steel Authority of India Ltd. v. State of Orissa [2000] 118 STC 297, struck down section 12-A of the Himachal Pradesh General Sales Tax Act, 1968. Section 12-A of the said Act provided for deduction of an amount from the bills or invoices of the works contractors purporting to be tax payable towards transfer of goods involved in works contract. The Himachal Pradesh High Court had taken the view that the relevant amount is the valuable consideration payable for the transfer of property in goods and not the entire value or consideration for the entire works contract and what was directed to be deducted is only an amount not exceeding 4 per cent as may be prescribed purporting to be a part or whole of the tax payable on such sales which would necessarily mean tax payable under the charging provisions of the Act. Thus, the Himachal Pradesh High Court had upheld the validity of section 12-A on the ground that "all the payments being made in respect of all works contract executed" means and ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of sub-section (3) of section 5 by taking into account the provisions of sub-rule (2) of rule 29. But, while considering the said provisions the High Court has failed to notice that under clause (i) of sub-rule (2) of rule 29, transfer of property in goods involved in the execution of a works contract, on which no tax is leviable under section 5, are not required to be deducted from the turnover. The High Court also failed to attach importance to the use of the word 'turnover' (instead of word 'taxable turnover') in sub-section (3) of section 5 as a result of which the amplitude of the incidence of tax has been widened so as to include transactions which are outside the sphere of taxation available to the State Legislature under entry 54 of the State List. We are, therefore, unable to uphold the decision of the High Court in this regard and it must be held that sub-section (3) of section 5 transgresses the limits of the legislative power conferred on the State Legislature under entry 54 of the State List inasmuch as it enables tax being imposed on deemed sales resulting from transfer of property in goods (whether as goods or in some other form) involved in the execution of a wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Seventh Schedule of the Constitution of India empowers the State Legislature to enact the laws on sales tax and, therefore, so far as the competence of the State Legislature is concerned, the State Legislature is competent to enact the Sales Tax Act which is beyond any dispute". In the first place, the High Court of Madhya Pradesh has completely lost sight of the binding authority of the judgment of the Supreme Court in Bhawani Cotton Mills Ltd. v. State of Punjab [1967] 20 STC 290. Secondly, the High Court of Madhya Pradesh did not notice the fact that section 35 of the Adhiniyam obliges the person letting out a works contract to deduct and deposit tax at the rate of 2 per cent of such amount as he 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 course of import. It is needless to state that a judgment rendered forgetting to take account of a previous binding decision of the Supreme Court and in ignorance of legislation of which the court should have taken into account renders the judgment per incuriam. 16.. In Black's Law Dictionary (Eighth Edition) referring to the concept per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en given per incuriam are those decisions given in ignorance or forgetfulness of some inconsistent statutory provision or of some authority binding on the court concerned: so that in such cases some part of the decisions or some step in the reasoning on which it is based is found, on that account to be demonstrably wrong. This definition is not necessarily exhaustive, but cases not strictly within it which can properly be held to have been decided per incuriam must, in our judgment, consistently with the stare decisis rule which is an essential feature of our law, be of the rarest occurrence." 19.. The Supreme Court in Municipal Corporation of Delhi v. Gurnam Kaur AIR 1989 SC 38, has held that a decision should be treated as given per incuriam when it is given in ignorance in terms of a statute, or of a rule having the force of a statute. In view of the judgments of the Supreme Court in Punjab Land Development Reclamation Corporation Ltd. v. Presiding Officer, Labour Court (1990) 3 SCC 682, Commissioner for Hindu Religious and Endowments v. C. Lakshminarasinhaiah (1990) Supp. SCC 164, Union of India v. Indian Railways SAS Staff Association (1995) Supp 3 SCC 600 and A.R. Antulay v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TC 162, relying on the judgment of the Supreme Court in Steel Authority of India Ltd. v. State of Orissa [2000] 118 STC 297, held that the provision requiring deduction of advance tax from all payments to contractors in the absence of certificate from the Commissioner that no tax is deductible was ultra vires, since such a provision did not take into account the fact that the State Legislature has no power to impose tax on inter-State sales or sales in the course of import or outside sales. Thus, it is quite clear that any provision intended to collect advance tax can be sustained only if the State is competent to impose tax on such items. Looking from any angle, the Constitutional validity of the impugned provision cannot be upheld. 23.. In the result and for the foregoing reasons, we allow this writ petition. Section 35 of the Chhattisgarh Vanijyik Kar Adhiniyam, 1994 is struck down as being beyond the purview of the State Legislature. The amount collected from the petitioner under the provisions of section 35 of the Adhiniyam, if any, shall forthwith be refunded by the State to the petitioner. In the facts and circumstances of the case, the parties shall bear their respective ..... X X X X Extracts X X X X X X X X Extracts X X X X
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