TMI Blog2007 (10) TMI 579X X X X Extracts X X X X X X X X Extracts X X X X ..... dance with the statutory prescription by framing Rules under its rule-making power under section 29 of the Act and the assessing authority can pass fresh orders of assessment on the basis of such statutory Rules. - W.P. (C) Nos. 94,2774 of 2007 - - - Dated:- 11-10-2007 - GANGULY A.K. C.J. AND MAHANTY I. , JJ. A.K. GANGULY C.J. Both these writ petitions were heard together as common questions of fact and law are involved. The petitioner is a company incorporated under the provisions of the Companies Act, 1956 and is engaged in the business of constructing/ executing road works throughout India and also in various other countries of the world. The petitioner is a registered dealer under the Orissa Sales Tax Act, 1947 as a works contractor under the Sales Tax Officer, Bhadrak Circle, Bhadrak. The petitioner secured the contracts for road construction in the State of Orissa, which were awarded by the National Highway Authority of India, Ministry of Surface Transport, New Delhi, for a price of Rs. 310.94 crores and Rs. 257.93 crores (inclusive of all rates and taxes). These two contracts are the subject-matter of W.P. (C) No. 94 of 2007 and W.P. (C) No. 2774 of 2007. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the instant case, challenge has been made in both the writ petitions to the vires of section 5(2)(AA)(i) of the Orissa Sales Tax Act, 1947. Section 5(2)(AA)(i) is as follows: (AA) Notwithstanding anything contained in sub-section (2)(A) 'taxable turnover' in respect of, (i) 'work contract' shall be deemed to be the gross value received or receivable by a dealer for carrying out such contract, less the amount of labour charges and service charges incurred for the execution of this contract. However, learned counsel for the petitioner in course of his argument did not press the aforesaid point about vires of the section. But the learned counsel has challenged validity of two circulars namely, Circular No. VIII(i)6/99-16715/CT dated July 30, 1999 and also circular No. III(1)/94/982935/CT dated February 9, 2001 issued by the Commissioner of Commercial Taxes. By raising the question of legality to those two circulars, the learned counsel urged that since those two circulars have been issued by the Commissioner of Commercial Taxes, Orissa, the assessing officer and statutory appellate authority as well are bound by those circulars. Therefore, no purpose wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , sometimes for the entire work on back-to-back basis. At time the sub-contractors further dissect their segment into portions and engage specialist executants for different portions. At the time of assessment in connection with such major projects, no uniform pattern is followed across the State. Sometimes, the sub-contractor or the execution agent is assessed leaving out the principal contractor. This is not legally correct as indicated in the paragraph 5 of the Circular No. 599/CT. dated January 9, 2001. As per the circular the principal contractor is liable to works contract tax as per the ratio in a number of judicial decisions. 2.. In this context, it has come to the notice of the undersigned that the main contractor sometimes asks for TDS no deduction certificate under the plea that the work has been assigned to the sub-contractors entire and such certificate is granted. Sometimes the subcontractor also asks for such certificate with the submission that it is the main contractor who is liable for TDS and the prayer is also entertained. The department's response in this matter varies from circle to circle and even at times from ward to ward. It is desirable that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned counsel submitted that in the matters of assessment in connection with works contract , sufficient guidelines have been given by the honourable Supreme Court in the case of Gannon Dunkerley Co. v. State of Rajasthan reported in [1993] 88 STC 204 and also in the judgment of the Supreme Court in the case of Builders Association of India v. Union of India reported in [1989] 73 STC 370, and that these circulars are in contravention of these judgments. Relying on the decision in the case of Gannon Dunkerley [1993] 88 STC 204 (SC), learned counsel for the petitioner submitted that at page 234 of the report it was clearly stated that the amounts which are to be deductible from the value of the goods involved in works contract have to be determined in the light of facts of each particular case and on the basis of materials produced by the contractor. In the said judgment, it has been made clear that the mode of determination of such value has been made clear by giving the following guidelines (at pages 234 and 235): . . . The value of the goods involved in the execution of a works contract will, therefore, have to be determined by taking into account the value of the entire w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that in the instant case there is no statutory basis. The entire question is left to the vagaries of the assessing authorities, who are exercising their discretion on the basis of circulars which are issued from time to time and that too without any authority of law. Learned counsel submitted that though under section 5(2)(B) it has been provided that for the purpose of ascertaining the deduction under sub-section meaning section 5(2)(AA) guidelines should be provided in the prescribed manner, but no rules have yet been framed under the said Act. Therefore, the mandate of the Supreme Court in the case of Gannon Dunkerley [1993] 88 STC 204 has not been followed and the assessment is sought to be carried out in a manner which is not the mandate of the Supreme Court. Learned counsel submitted that if the measure of tax is not provided either under the Act or under the Rules, the levy itself becomes uncertain and such uncertainty proves fatal to the validity of the taxing statute. Reference in this connection may be made to the decision of the Supreme Court in the case of Govind Saran Ganga Saran v. Commissioner of Sales Tax reported in [1985] 60 STC 1. At page 4 of the report, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. Similar is the position under section 2(e) in the said Act as quoted hereinabove. While construing those provisions, the Patna High Court held in paragraph 30 at page 375 of the report that in such situations the State is required to prescribe the manner and extent of deduction of the amount by statutory rule. The learned judges held: . . . If that is not done then the provisions become unworkable. . . The court held that the right of the State to recover the tax remains in tact, but in the absence of a workable provision it would not be possible for the State to assess the same. In paragraph 31 at page 375 of the report the following conclusions have been made: 31. In our considered opinion sub-clause (i) of clause (a) of section 21(1) read with rule 13A of the Rules did not make sub-clause (1) fully workable because the manner and extent of deduction relating to any other charges has not been provided/prescribed by the State. Similar view has been taken by the Madras High Court in the case of Larsen and Toubro Limited v. State of Tamil Nadu reported in [1993] 88 STC 289. The learned judges held that in the absence of sufficient provision either in the Act or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the appellate authority are bound to follow the instructions contained in the circulars. Therefore, no purpose would be served by filing appeal before the appellate authority. Learned counsel for the Revenue relied on a Division Bench decision of this court in the case of Bharat Heavy Electricals Ltd. v. Union of India reported in [1988] 71 STC 25. In the said judgment section 5(2)(AA)(i) was upheld by the Division Bench of this High Court. But it appears that the judgment of the Supreme Court in the case of Gannon Dunkerley [1993] 88 STC 204 (SC) was rendered later, i.e., on November 17, 1992 whereas the decision in Bharat Heavy Electricals Ltd. v. Union of India [1988] 71 STC 25 was rendered on May 12, 1988. After the decision in the case of Gannon Dunkerley [1993] 88 STC 204 (SC), the entire law on works contract has undergone a change and it is the governing judgment in the case of works contract. The law laid down in Gannon Dunkerley [1993] 88 STC 204 (SC) by the Supreme Court is binding on all courts in India. This is the mandate of article 141 of the Constitution. For the reasons aforesaid, this court is of the opinion that the circulars which have been impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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