TMI Blog2008 (8) TMI 824X X X X Extracts X X X X X X X X Extracts X X X X ..... e bunch of petitions is to the vires of section 10C of the Punjab General Sales Tax Act, 1948 (for short, the Act ). Facts: C.W.P. No. 19579 of 2002: The petitioner here is contractor working for various activities with Bharat Sanchar Nigam Ltd. The petitioner besides filing the present petition challenging the vires of section 10C of the Act, also filed appeal before the appellate authority, who while accepting appeal remanded the case back to the Assessing Officer where the same is still pending. The prayer is for declaring section 10C of the Act as ultra vires to the Constitution of India and restraining the contractee from deducting the tax at source and for refund of the amount of tax already deducted from the bills of the petitioner. C.W.P. No. 1358 of 2003: The petitioners here are contractors working for various activities with Bharat Sanchar Nigam Ltd. The petitioners besides filing the present petition challenging the vires of section 10C of the Act also filed appeal before the appellate authority, who while accepting appeal remanded the case back to the Assessing Officer where the same is still pending. The prayer is for declaring section 10C of the Act a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the Constitution of India and restraining the contractee from deducting the tax at source and for refund of the amount of tax already deducted from the bills of the petitioner. C.W.P. No. 13852 of 2004: The petitioner is a society set up with the object of establishing schools, colleges, libraries, reading rooms for providing education to the children. It is running school in the name of Victoria International Public School at Village Mauli, Tehsil Phagwara District Kapurthala. During the years 1999-2000 and 2000-01 certain construction activity of class rooms, etc., was undertaken by the petitioner in the school. A contractor in the name of M/s. Builtech Jalandhar was engaged, as the petitioner failed to deduct tax at source on the payments made to the contractor, notice under section 10C of the Act was issued to the petitioner. Rejecting the replies filed by the petitioner, assessment for the years 1999-2000 and 2000-01 was framed vide orders dated April 15, 2004, raising a demand of tax at the rate of two per cent of the amount. Besides this penalty under section 10C(5) of the Act an interest under section 10C(6) of the Act also levied. The petitioner besides filing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... source on its behalf were submitted along with returns, however, at the time of framing of assessment on April 24, 2002 the credit thereof was not given to the petitioner. In the assessment order the taxable turnover was determined as nil. The credit for the amount of tax deducted at source on behalf of the petitioner was not granted by the Assessing Authority. Aggrieved against the order of assessment the petitioner filed appeal before the Deputy Excise and Taxation Commissioner (Appeals), who vide order dated September 16, 2004 while accepting the appeal, remanded the case back to the Assessing Authority for verification of the TDS certificates and passing a self speaking order within 90 days from the receipt of remand order and in case refund is due the same be granted to the petitioner. As the remand order was not passed within the period prescribed, the petitioner took the matter to the Sales Tax Tribunal, Punjab, who vide order dated April 27, 2005 directed the Assessing Authority to decide the case within, a period of one month. Though at the time of filing of the petition the proceedings were still pending before the Assessing Authority, however, during the pendency thereo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated September 16, 2004 while accepting the appeal, remanded the case back to the Assessing Authority for verification of the TDS certificates and passing a self-speaking order within 90 days from the receipt of remand order and in case refund is due the same be granted to the petitioner. As the remand order was not passed within the period prescribed, the petitioner took the matter to the Sales Tax Tribunal, Punjab, who vide order dated April 27, 2005 directed the Assessing Authority to decide the case within a period of one month. Though at the time of filing of the petition the proceedings were still pending before the Assessing Authority, however, during the pendency thereof vide order dated February 20, 2006 assessment was framed. By virtue of it a sum of Rs. 12,80,387 was found to be refundable to the petitioner. The prayer in the petition is for striking down provision of section 10C of the Act and also for grant of interest on the amount of tax retained by the official respondents without authority of law. C.W.P. No. 17614 of 2005: The petitioner-company was awarded two contracts bearing Nos. 331 and 333 by M/s. Power Grid Corporation of India Limited for supply of el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a period of one month. Though at the time of filing of the petition the proceedings were still pending before the Assessing Authority, however, during the pendency thereof vide order dated February 20, 2006 assessment was framed. By virtue of it a sum of Rs. 2,55,308 was found to be refundable to the petitioner. The prayer in the petition is for striking down provision of section 10C of the Act and also for grant of interest on the amount of tax retained by the official respondents without authority of law. C.W.P. No. 17616 of 2005: The petitioner-company was awarded two contracts bearing Nos. 331 and 333 by M/s. Power-Grid Corporation of India Limited for supply of electric transmission towers in knocked down condition. Another set of contracts bearing Nos. 332 and 334 were awarded for survey, optimization, design and construction of two 800 KV single circuit transmission lines from Kishanpura to Moga. The first set of contracts bearing Nos. 331 and 333 were purely for sale of material, the tower parts were manufactured and supplied by M/s. Kalpataru Power Transmission Limited, Gandhi Nagar, Ahmedabad and M/s. Transpower Engineering Ltd., Mumbai, whereas the second set of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C.W.P. No. 17617 of 2005: The petitioner-company was awarded two contracts bearing Nos. 331 and 333 by M/s. Power Grid Corporation of India Limited for supply of electric transmission towers in knocked down condition. Another set of contracts bearing Nos. 332 and 334 were awarded for survey, optimization, design and construction of two 800 KV single, circuit transmission lines from Kishanpura to Moga. The first set of contracts bearing Nos. 331 and 333 were purely for sale of material, the tower parts were manufactured and supplied by M/s. Kalpataru Power Transmission Limited, Gandhi Nagar, Ahmedabad and M/s. Transpower Engineering Ltd., Mumbai, whereas the second set of contracts bearing Nos. 332 and 334 were works contract, described as erection contracts . The same were got executed through the sub-contractor, M/s. Mukand Engineering Ltd. The dispute raised in the writ petition is pertaining to the assessment year 1998-99. M/s. Power Grid Corporation of India Limited for whom the petitioner was working deducted tax at source from the bills raised by the petitioner qua the works contracts and deposited the same with the State. During the year in question a sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of the import of the goods into, or export of the goods out of, the territory of India. (2) Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1). (3) Any law of a State shall, 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 trade or commerce; or (b) a tax on the sale or purchase of goods, being a tax of the nature referred to in sub-clause (b), sub-clause (c) or sub-clause (d) of clause (29A) of article 366, be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify. Entry 54 of List II of the Seventh Schedule to the Constitution of India authorises the State Legislature to enact law with respect to imposition of taxes on sale and purchase of goods other than newspapers. The power is subject to the provisions of entry 92A in List I of the Seventh Schedule to the Constitution of India, namely, Union List . In State of Madras v. Gannon Dunkerley Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r invoices raised by the sub-contractor as payable by the contractor. (3) The amount deducted under sub-section (1) or sub-section (2), shall be deposited into the Government treasury by the person making such deduction in the manner prescribed. (4) Any deduction made in accordance with the provisions of this section and credited into the Government treasury, shall be treated as payment of tax on behalf of the person from whose bills and invoices the deduction has been made and credit shall be given to him for the amount so deducted on the production of certificate prescribed in this regard, in the assessment for the relevant assessment year. (5) If any such person as is referred to in sub-section (1) or subsection (2), fails to make the deduction or, after deducting such amount fails to deposit the amount so deducted, the assessing authority may, after giving to such person an opportunity of being heard, by order, in writing, direct that such person shall pay, by way of penalty, a sum not exceeding twice the amount deductable under this section but not so deducted and if deducted not so deposited into the Government treasury. (6) Without prejudice to the provision of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntractor gets himself registered. This is nothing else but unnecessary harassment and recovery of tax which is in complete violation of article 265 of the Constitution of India, besides beyond the legislative competence of the State. To buttress the arguments, learned counsel for the petitioners relied upon judgments of the honourable 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 where similar provisions under the Orissa Sales Tax Act, 1947 and the Himachal Pradesh General Sales Tax Act, 1968, respectively, were struck down by the honourable Supreme Court. Further reliance is upon judgment of the Patna High Court in Larsen and Toubro Ltd. v. State of Bihar [2000] 117 STC 41, Gujarat High Court in Larsen Toubro Ltd. v. Commissioner of Sales Tax [2001] 124 STC 162, Karnataka High Court in Larsen Toubro Ltd. v. State of Karnataka [2003] 129 STC 401 and Jharkhand High Court in Larsen and Toubro Limited. v. State of Jharkhand [2005] 140 STC 134, where also various High Courts have struck down similar provisions providing for deduction of tax at source in the case of w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt him such certificate as may be appropriate, in the manner prescribed: Provided that nothing in the said certificate shall affect the assessment of the sales tax liability of the contractor under this Act. (b) Where such a certificate is produced by a contractor before the deducting authority, until such certificate is cancelled by the Commissioner, the deducting authority shall either make no deduction of tax or make the deduction of tax as the case may be, in accordance with the said certificate. While dealing with the challenge to the vires of the provision, the honourable Supreme Court in Steel Authority of India Ltd.'s case [2000] 118 STC 297 opined that the section was beyond the competence of State Legislature and accordingly the same was struck down. The relevant paras from the judgment are extracted below: (at page 304 of 118 STC) 12. In Bhawani Cotton Mills Ltd. v. State of Punjab [1967] 20 STC 290 (SC); [1967] 3 SCR 577, this court said 'if a person is not liable for payment of tax at all, at any time, the collection of a tax from him, with a possible contingency of refund at a later stage, will not make the original levy valid; because, if partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otify the names/posts of such persons who shall be competent persons to make such deductions. While dealing with the issue and relying upon the judgment in Steel Authority of India Ltd.'s case [2000] 118 STC 297, the honourable Supreme Court struck down section 12A of the Himachal Pradesh General Sales Tax Act opining it to be beyond the competence of State Legislature and directed for refund the amount collected by the State. The relevant paras thereof are extracted below: (at pages 309 and 310 of 118 STC) 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 four per cent or two 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 effect of the provision is that, irrespective of whether the sales are inter-State sales or outside sales or export sales which are outside the purview o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid judgment of Chhattisgarh High Court was upheld by the honourable Supreme Court in State of Chhattisgarh v. VTP Constructions [2008] 12 VST 14; [2008] 10 RC 179. In Larsen and Toubro Ltd.'s case [2000] 117 STC 41 (Patna) the challenge was to the vires of section 25A of the Bihar Finance Act, 1981 which provided for deduction of tax at source out of any amount payable in respect of transfer of property in goods involved in execution of works contract. A Division Bench of the Patna High Court, finding the provision to be beyond the competence of State Legislature struck down the same to the extent it related to transfer of property in goods taking place in the course of inter-State trade or commerce or a sale outside the State or in the course of import within the ambit of sections 3, 4 and 5 of the Central Sales Tax Act, 1956 or declared goods within the meaning of sections 14 and 15 of the said Act. Before the Gujarat High Court as well in Larsen Toubro Ltd.'s case [2001] 124 STC 162, the challenge was to the vires of section 57B of the Gujarat Sales Tax Act, 1969, providing for deduction of tax on the payment made to a contractor for carrying out any work ..... X X X X Extracts X X X X X X X X Extracts X X X X
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