TMI Blog2006 (9) TMI 518X X X X Extracts X X X X X X X X Extracts X X X X ..... the said judgment in Punj Lloyd Ltd. v. State of M. P. [1996] 102 STC 299 (MP), the Supreme Court delivered the judgments in Steel Authority of India Ltd. v. State of Orissa [2000] 118 STC 297, and in Nathpa Jhakri Jt. Venture v. State of Himachal Pradesh [2000] 118 STC 306 striking down the provisions of the Orissa Sales Tax Act, 1947 and the Himachal Pradesh General Sales Tax Act, 1968 providing for the deduction of sales tax at source from the bills of the contractors. Thereafter, the present writ petition was filed before this court challenging the constitutional validity of sections 35 and 35-A of the Act and rule 42-A of the M. P. Commercial Tax Rules, 1995 (for short, the Rules ) and by order dated March 3, 2005, a division Bench of this court has referred the question of correctness of decision of the division Bench in Punj Lloyd Ltd. v. State of M. P. [1996] 102 STC 299 (MP) after the decisions of the Supreme Court in Steel Authority of India Ltd. v. State of Orissa [2000] 118 STC 297 and Nathpa Jhakri Jt. Venture v. State of Himachal Pradesh [2000] 118 STC 306. Mr. Kavin Gulati, learned counsel appearing for the petitioner, submitted that in Gannon Dunkerley Co. v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pradesh [2000] 118 STC 306, the Supreme Court relying on the decision in the case of Steel Authority of India Ltd. [2000] 118 STC 297, also struck down the provisions of section 12-A of the Himachal Pradesh General Sales Tax Act after holding that the said provision authorised the collection of sales tax on inter-State sales, outside sales and export and import sales, which are outside the purview of the State Act. Mr. Sanjay Yadav, learned Deputy Advocate-General appearing for the respondents, submitted that section 35 of the Act has to be read with section 35A and section 35A of the Act states that notwithstanding anything contained in sections 34 and 35, no deduction or deduction at a lower rate or deduction of a lump sum amount at source towards the tax payable shall be made under any of the said sections in the case of dealer or person, if such dealer or person furnishes to the person responsible for paying any amount in respect of the sale, supply or contract referred to in sections 34 and 35, as the case may be, a certificate in writing in the prescribed form issued in the prescribed manner by such authority as may be prescribed. He submitted that under section 35A of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntractor, a deduction at the rate of two per cent on the value of such works contract is to be made. There is no provision in section 35(1) of the Act quoted above for exclusion of sales outside the State of Madhya Pradesh, sales in the course of inter-State trade and commerce, sales in the course of export and import of goods covered. The opening words in section 35(1) of the Act further states that notwithstanding anything contained in any other provision of this Act , the deduction has to be made at the rate of two per cent of the value of works contract. Thus, even though a provision is made under section 79 of the Act that a tax on sale or purchase of goods shall not be imposed on sales which take place outside the State of Madhya Pradesh, in the course of inter-State trade and commerce or in the course of export and import of goods, there is no scope at all to exclude the categories of sale mentioned in section 79 of the Act from the value of the works contract for the purpose of deduction of sales Sections 35(1) and 35A of the Act are extracted hereinbelow: Section 35. Deduction at source of tax payable by a contractor. (1) Notwithstanding anything contained in any oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rks contract for the purpose of deduction of sales 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. Similarly in Nathpa Jhakri Jt. Venture v. State of Himachal Pradesh [2000] 118 STC 306, the Supreme Court relying on the aforesaid two earlier decisions in Bhawani Cotton Mills Ltd. v. State of Punjab [1967] 20 STC 290 and in Steel Authority of India Ltd. v. State of Orissa [2000] 118 STC 297, held in para 4: A bare perusal of the two provisions will make it clear that in either provision there is an obligation to deduct from transactions relating to works contract on bills or invoices raised by the works contractor an amount not exceeding 4 per cent or 2 per cent, as the case may be. Though the object of the provision is to meet the tax in respect of the transactions on all works contract on the valuable consideration payable for the transfer of property in goods involved in the execution of the works contract, the ef ..... X X X X Extracts X X X X X X X X Extracts X X X X
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