TMI Blog2014 (7) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... under the State law on any declared goods and later such goods are sold in the purchase of inter-State trade or commerce and tax is paid under the CST Act for the inter-State transaction, then the dealer shall be entitled to get the amount of tax paid under the State law reimbursed. A bare reading of the provisions of the CST Act clearly shows that sections 14 and 15 of the CST Act do not prohibit the State from imposing tax on goods declared to be of special importance in inter-State trade or commerce. Therefore, the State can levy the tax, but the tax shall not be above five per cent (earlier four per cent). In the TVAT Act, Schedule II of the Act deals with goods taxable at five per cent. Prior to May 4, 2011, the rate was four per cent. Entry 35 provides that declared goods as specified in section 14 of the CST Act, 1956 will be taxed at five per cent. Therefore, this is in consonance with the provisions of the CST Act and we see no conflict whatsoever. Whether the definitions of "sale", "sale price" and "turnover" under sections 2(25), 2(26) and 2(35) under the TVAT Act do not exclude sales which have taken place outside Tripura and is, therefore, illegal. - Held that:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he present case is obviously a big contractor. The petitioner has been approaching the court time and again filing one petition after another. That is his legal right and he is entitled to file a writ petition every time he is aggrieved by any action of the State. At the same time, the writ petitioner must at every stage disclose the pendency of each and every petition which has even the remotest bearing of the case. He cannot himself choose what facts to state and what not to state. If the petitioner does so, he takes the risk of falling foul of the court. In the other connected matters, the stay orders were vacated because a Division Bench of this court found that there was non-disclosure of material facts. In the present case, we are not non-suiting the petitioner since we are dealing with the constitutional validity of the legislation, but we are definitely of the view that the petitioner should have been more careful and the facts which he now seeks to bring in by way of amendment should have been stated in the writ petition itself. This would have avoided any unnecessary controversy. Therefore, we propose to burden him with exemplary costs - Decided against assessee. - W.P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, shall not form part of the Consolidated Fund of India, but shall be assigned to the States within which that tax is leviable in that year, and shall be distributed among those States in accordance with such principles of distribution as may be formulated by Parliament by law. (3) Parliament may by law formulate principles for determining when a sale or purchase of, or consignment of, goods takes place in the course of inter-State trade or commerce. By the 46th Amendment to the Constitution of India, clause (29A) was inserted and this defines tax on the sale or purchase of goods. Clause (29A) reads as follows: (29A) 'tax on the sale or purchase of goods' includes- (a) a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (c) a tax on the delivery of goods on hire-purchase or any system of payment by instalments; (d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) outside the State; or (b) in 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. Thus, no State has the power to impose or authorise the imposition of tax on the sale or purchase of goods which takes place outside the State or in the course of import of goods or export of goods into or out of the territories of India. Article 286(2), like article 269(3), empowers the Parliament to frame laws to formulate the principles for determ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service is for cash, deferred payment or other valuable consideration, but does not include a mortgage or hypothecation of or a charge or pledge on goods; 2. (h) 'sale price' means the amount payable to a dealer as consideration for the sale of any goods, less any sum allowed as cash discount according to the practice normally prevailing in the trade, but inclusive of any sum charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof other than the cost of freight or delivery or the cost of installation in cases where such cost is separately charged: Provided that in the case of a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract, the sale price of such goods shall be determined in the prescribed manner by making such deduction from the total consideration for the works contract as may be prescribed and such price shall be deemed to be the sale price for the purposes of this clause; 2(j) 'turnover', used in relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is a single contract of sale or purchase of goods situated at more places than one, the provisions of this sub-section shall apply as if there were separate contracts in respect of the goods at each of such places. The Parliament by law has laid down the parameters as to when a sale or purchase of goods is said to take place outside the State. The section is worded in a negative manner inasmuch as when a sale takes place within a particular State, it shall be deemed to have taken place outside the other States. By section 5, the Parliament has laid down when a sale or purchase of goods takes place in the course of import or export. Relevant portion of section 15 reads as follows: 15. Restrictions and conditions in regard to tax on sale or purchase of declared goods within a State.Every sales tax law of a State shall, in so far as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely:- (a) the tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed five per cent of the sale or purchase price thereof, (***); ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration; (b) transfer of property in goods (whether as goods or in some other form) involved in execution of a works contract; (c) delivery of any goods on hire purchase or any other system of payment by instalments; (d) transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and purchase of those goods by the person to whom such transfer, delivery or supply is made, but does not include a mortgage, hypothecation, charge or pledge. 2. (26) 'Sale price' means the amount of valuable consideration received or receivable by a dealer for the sale of any goods less any sum allowed as cash discount, according to the practice normally prevailing in the trade, but inclusive of any sum charged for anything done by the dealer in respect of the goods or services at the time of or before delivery thereof, excise duty, special excise duty or any other duty or taxes except the tax imposed under this Act 'and purchase price me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of such goods shall be included in the turnover of the latter dealer but not in that of the former. 2. (36) 'Works contract' means any agreement for carrying out for cash or deferred payment or other valuable consideration- (i) the construction, fitting out, improvement or repair of any building, road, bridge or other immovable property, or (ii) the installation or repair of any machinery affixed to a building or other immovable property, or (iii) the overhaul or repair of- (a) any motor vehicle, (b) any vessel propelled by internal combustion engine or by any other mechanical means, (c) any aircraft, (d) any component or accessory or part of any of the items mentioned in paragraphs (a) to (c) above, (iv) the altering, ornamenting, finishing, improving or otherwise processing or adopting of any goods. 2. (38) 'Zero rating7 means complete removal of tax up to the zero rated stage of production or distribution. No tax is charged on sale and tax credit is given for the tax paid on purchases. Section 3 of the TVAT Act relates to incidence of tax. Section 4 deals with tax on deemed sales and reads as follows: 4. Tax on deemed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducting therefrom- (a) sales of goods declared as exempt from tax in Schedule III; (b) sales of goods which are shown to the satisfaction of the Commissioner to have taken place- (i) in the course of inter-State trade or commerce, or (ii) outside Tripura. (iii) in the course of the import of the goods into or export of the goods out of the territory of India. Explanation.-Sections 3, 4 and 5 of the Central Sales Tax Act, 1956 shall apply for determining whether or not a particular sale or purchase has taken place in the manner indicated in sub-clause (i), sub-clause (ii) or sub-clause (iii). (c) in case of turnover of sales in relation to works contract, the charges towards labour, services and other like charges and subject to such conditions as may be prescribed: Provided that in cases where the amount of charges towards labour, services and other like charges in such contract are not ascertainable from the terms and conditions of the contract, the amount of such charges shall be calculated at the prescribed percentage. (d) such other sales on such conditions and restrictions as may be prescribed. Section 8 reads as follows: 8. Exemptions.-(1) S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llows: Purchase or sales not liable to tax.-(1) Notwithstanding anything contained in this Act, a value added tax shall not be imposed under this Act- (i) Where such sale or purchase takes place in the course of inter-State trade and commerce; or (ii) where such sale or purchase takes place in the course of import of goods into the territory of India or export of goods out of the territory of India. (2) For the purpose of this section, whether a sale or purchase takes place- (i) outside the State of Tripura; or (ii) in the course of inter-State trade and commerce; or (iii) in the course of import of goods into the territory of India or export of goods out of the territory of India shall be determined in accordance with the provisions of section 3, section 4, and section 5 of the Central Sales Tax Act, 1956. Rule 7A which has been inserted by amendment and is under challenge in these writ petitions provides that where a contractor does not maintain accounts, a specified percentage shall be deducted towards labour and service charges. The relevant portion of rule 7A reads as follows: 7A.-Where accounts maintained by the contractor do not show separate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar expenses relatable to supply of labour and services; (h) profit earned by the contractor to the extent it is relatable to supply of labour and services. The amounts deductible under these heads will have to be determined in the light of the facts of a particular case on the basis of the material produced by the contractor. 48. We may, however, make it clear that apart from the deductions referred to above, it will be necessary to exclude from the value of the works contract the value of the goods which are not taxable in view of sections 3, 4 and 5 of the Central Sales Tax Act and goods covered by sections 14 and 15 of the Central Sales Tax Act as well as goods which are exempt from tax under the sales tax legislation of the State. The value of goods involved in the execution of a works contract will have to be determined after making these deductions and exclusions from the value of the works contract. The apex court further went on to conclude as follows (pages 237 and 238 in 88 STC): 51. The aforesaid discussion leads to the following conclusions: (1) In exercise of its legislative power to impose tax on sale or purchase of goods under entry 54 of the Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... architect's fees, and (v) cost of consumables used in the execution of the works contract, (vi) cost of establishment of the contractor to the extent it is relatable to supply of labour and services, (vii) other similar expenses relatable to supply of labour and services, and (viii) profit earned by the contractor to the extent it is relatable to supply of labour and services. (7) To deal with cases where the contractor does not maintain proper accounts or the account books produced by him are not found worthy of credence by the assessing authority the Legislature may prescribe a formula for deduction of cost of labour and services on the basis of a percentage of the value of the works contract but while doing so it has to be ensured that the amount deductible under such formula does not differ appreciably from the expenses for labour and services that would be incurred in normal circumstances in respect of that particular type of works contract. It would be permissible for the Legislature to prescribe varying scales for deduction on account of cost of labour and services for various types of works contract. (8) While fixing the rate of tax it is permissible to fix a unif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s it to show that there has been a clear transgression of the constitutional principles. This rule is based on the assumption, judicially recognised and accepted, that the Legislature understands and correctly appreciates the needs of its own people, its laws are directed to problems made manifest by experience and its discrimination are based on adequate grounds. The presumption of constitutionality is indeed so strong that in order to sustain it, the court may take into consideration matters of common knowledge, matters of common report, the history of the times and may assume every state of facts which can be conceived existing at the time of legislation. 8. Another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion, etc. It has been said by no less a person than Holmes, J. that the Legislature should be allowed some play in the joints, because it has to deal with complex problems which do not admit of solution through any doctrinaire or straight jacket formula and this is particularly true in the case of legislation dealing with economic matters, wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome divine prescience, distortions and abuses of its legislation, which may be made by those subject to its provisions and to provide against such distortions and abuses. Indeed, howsoever great may be the care bestowed on its framing, it is difficult to conceive of a legislation which is not capable of being abused by perverted human ingenuity. The court must, therefore, adjudge the constitutionality of such legislation by the generality of its provisions and not by its crudities or inequities or by the possibilities of abuse of any of its provisions. If any crudities, inequities or possibilities of abuse come to light, the Legislature can always step in and enact suitable amendatory legislation. That is the essence of pragmatic approach which must guide and inspire the Legislature in dealing with complex economic issues. The apex court in Reserve Bank of India v. Peerless General Finance Investment Co. Ltd. [1987] 61 Comp Cas 663 (SC); [1987] 1 SCC 424 dealing with the interpretation of statutes held as follows (page 692 in 61 Comp Cas): 33. Interpretation must depend on the text and the context. They are the bases of interpretation. One may well say if the text is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ghtly interfered with. The unconstitutionality must be plainly and clearly established before an enactment is declared as void. The same approach holds good while ascertaining the intent and purpose of an enactment or its scope and application. . . The court must recognize the fundamental nature and importance of legislative process and accord due regard and deference to it, just as the Legislature and the executive are expected to show due regard and deference to the judiciary. It cannot also be forgotten that our Constitution recognizes and gives effect to the concept of equality between the three wings of the State and the concept of 'checks and balances' inherent in such scheme. In Government of Andhra Pradesh v. Smt. P. Laxmi Devi [2008] 4 SCC 720, the apex court held that when the question of civil liberties and fundamental rights of a citizen are encroached upon, then the court would be strict and not grant much latitude to the Legislature. But in case of economic legislation, the court has more liberal standards and judicial restraint must be observed by the court and greater latitude given to the Legislature while adjudging the constitutionality of such taxing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject which it is not entitled to do, this court will have no hesitation in striking down it. If two views are possible, this court can clarify which is the view which should be taken so that the validity of the Act is upheld. We must remember that the legislation has been enacted with a view to levy tax to generate revenue for the State which revenue is to be utilized by the State for its development. Therefore, unless there is no other option left, but to hold the Act unconstitutional, the effort of this court would be to read the provisions in a manner that the Act is held to be constitutional. It is in light of these principles that we now proceed to examine each of the separate arguments raised by the parties. Whether the State has exceeded its legislative competence: It has been urged by Mr. Sudhir Nandrajog, learned senior counsel appearing on behalf of the petitioners, that entry 54 of List II empowering the State to levy tax on the sale or purchase of goods is expressly subject to entry 92A and, therefore, the State cannot levy any tax on sale or purchase of goods which takes place in the course of inter-State trade or commerce. He further submits that in view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rks contract and, therefore, again there is no provision excluding those sales which are not within the legislative competence of the State. A distinction is sought to be drawn between section 5(2)(a) and (b) and 5(2)(c) on the ground that section 5 (2) (a) and (b) are applicable only in cases of normal sales and 5(2)(c) is applicable only in cases of deemed sales. On this basis, it is urged that the State has levied tax on sales which it is not competent to do so. With regard to section 41, it is urged that this is only a reiteration of the legal provision, but does not have any concrete effect because in contradistinction to section 5(2)(b), it is not made applicable specifically to works contract. It is thus contended that section 41 cannot be incorporated either in section 4 or in section 5(2) (c). It is also submitted that section 41 shall come into operation only at the stage of calculation of tax and that is only an arithmetical exercise. On this basis, it is contended that the entire Act insofar as it relates to imposition of sales tax on works contract is unconstitutional and beyond the legislative competence of the State. On the other hand, Dr. Saraf contends that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provides for an additional deduction in respect of labour services and other like charges. According to him, if his submission is accepted, then the whole Act becomes a viable and constitutional legislation. As far as the scheme of the Act is concerned, we are of the considered view that section 41 of the Act which starts with a non obstante clause shall permeate into each and every provision of the Act. The Legislature must be expected to be aware of its limitations and, therefore, enacted a non obstante clause that no value added tax would be imposed under the Act where any sale or purchase takes place in the course of inter-State trade or commerce or in the course of import of goods into the territory of India or export of goods outside the territory of India. Section 41(2) makes the matter further clear because it clearly lays down that the issue whether a sale took place outside the State of Tripura or in the course of inter-State trade and commerce or in the course of import or export has to be determined in accordance with sections 3, 4 and 5 of the CST Act, 1956. Section 41 is in two parts. The first part lays down that notwithstanding anything else having been stated i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, then the provisions of section 5(2)(b) are otiose and unnecessary. On first blush, this argument seems attractive because if section 41 is to permeate through each and every section, then what was the need of bringing in section 5(2)(b). Here also we are of the view that the State legislative being aware of its limitations while levying tax on sales again by way of abundant precaution repeated what sales were not to be included in the taxable turnover. Section 41 deals with sales not liable to tax and section 5(2)(b) only provides that such sales would not be included while calculating the taxable turnover of the dealer. According to us, there is no merit in the contention of the petitioners in this regard. Section 2(8) of the TVAT Act defines dealer and includes a host of persons in the list of dealers. Under section 2(8)(i), a person engaged in a works contract is also a dealer. Section 3 provides that every dealer whose taxable turnover exceeds the taxable limit or who is a registered dealer should pay tax. This section is obviously applicable to every dealer including a dealer engaged in works contract. Section 4 levies tax specifically on deemed sales and is applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x payable by the dealer. Section 4 makes works contract taxable and has defined various aspects of a works contract. Section 4(3) provides for deduction of tax at source. The tax is, however, payable in terms of section 5 and the taxable turnover has to be calculated in terms of section 5. No doubt, the provisions of section 4 will have to be taken into consideration while calculating the taxable turnover, but the calculation of the taxable turnover has to be in terms of section 5(2) (a) and (b) like in case of all sales including deemed sales. There is a further safeguard in respect of works contract and section 5(2)(c) allows more deductions in terms of the judgment of the apex court in Gannon Dunkerley's case [1993] 88 STC 204 (SC); [1993] 1 SCC 364. We are, therefore, of the view that if the entire Act is read as a whole, then it is more than apparent that the Legislature has, in fact, been extra careful that it does not impose tax on any sales not falling within its jurisdiction and thus, it has excluded those sales both under section 5(2) and under section 41. Therefore, we in our considered view, taking a holistic approach, the provisions of the Tripura Value Added Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the State legislation. Relying upon these observations, it is urged that the Supreme Court has clearly held that transaction falling within the ambit of sections 14 and 15 of the CST Act are to be deducted while calculating the value of the transfer of property in goods in a works contract under the TVAT Act and since the State law does not provide for such exemption, it is violative and against the scheme of the Central Act and, therefore, liable to be struck down. This argument may seem attractive when para 48 of the judgment in Gannon Dunkerley's case [1993] 88 STC 204 (SC); [1993] 1 SCC 364 is read in isolation. However, before coming to Gannon Dunkerley's case [1993] 88 STC 204 (SC); [1993] 1 SCC 364, we may make reference to the judgment of the apex court in Builders Association of India v. Union of India [1989] 73 STC 370 (SC); [1989] 2 SCC 645. This is a Constitution Bench judgment of the apex court wherein the apex court upheld the constitutionality of the 46th Amendment permitting the State to levy sales tax on the transfer of property in goods involved in the execution of a works contract. In para 30, the apex court held as follows (page 394 in 73 STC): ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mittal v. Government of Karnataka [2008] 3 SCC 574. A bare reading of the provisions of the CST Act clearly shows that sections 14 and 15 of the CST Act do not prohibit the State from imposing tax on goods declared to be of special importance in inter-State trade or commerce. Therefore, the State can levy the tax, but the tax shall not be above five per cent (earlier four per cent). In the TVAT Act, Schedule II of the Act deals with goods taxable at five per cent. Prior to May 4, 2011, the rate was four per cent. Entry 35 provides that declared goods as specified in section 14 of the CST Act, 1956 will be taxed at five per cent. Therefore, this is in consonance with the provisions of the CST Act and we see no conflict whatsoever. Whether the definitions of sale , sale price and turnover under sections 2(25), 2(26) and 2(35) under the TVAT Act do not exclude sales which have taken place outside Tripura and is, therefore, illegal. In view of the detailed discussion made in respect of the constitutional validity of the Act, it is apparent that section 41 has to be read into each and every definition. Section 41(2)(i) of the TVAT Act specifically excludes sales which hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levying the tax can be assessed only on the basis of the cost of acquisition of the goods by the contractor. Since the taxable event is the transfer of property in goods involved in the execution of a works contract and the said transfer of property in such goods takes place when the goods are incorporated in the works, the value of the goods which can constitute the measure for the levy of the tax has to be the value of the goods at the time of incorporation of the goods in the works and not the cost of acquisition of the goods by the contractor ... ... 47. . . . The charges mentioned in item No. (vi) cannot, however, be excluded. The position of a contractor in relation to a transfer of property in goods in the execution of a works contract is not different from that of a dealer in goods who is liable to pay sales tax on the sale price charged by him from the customer for the goods sold. The said price includes the cost of bringing the goods to the place of sale. Similarly, for the purpose of ascertaining the value of goods which are involved in the execution of a works contract for the purpose of imposition of tax, the cost of transportation of the goods to the place of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearly lays down what are the deductions to be allowed in the case of works contract. It would be pertinent to mention here that in the opening portion of the judgment, we have culled out the portions of paragraphs 47 and 51 of the judgment in Gannon Dunkerley's case [1993] 88 STC 204 (SC); [1993] 1 SCC 364 and the apex court itself has used the words labour and services and has also held that labour and services would cover the cost of various items at (a) to (h) in para 47. If we read section 2(26) (a), section 4 and section 5(2)(c) together, then it is obvious that when the tax is to be levied on the taxable turnover in relation to works contract, the charges towards labour, services and other like charges are to be excluded subject to conditions which may be prescribed. If the provisions are read together, it is obvious that the Legislature was aware of the judgment and, therefore, inserted a clause that charges towards labour, services and other like charges would be deducted. Labour, services and other like charges would mean the charges as specifically detailed in Gannon Dunkerley's judgment [1993] 88 STC 204 (SC); [1993] 1 SCC 364 where also the apex court only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rable Supreme Court in Gannon Dunkerley's case [1993] 88 STC 204 (SC); [1993] 1 SCC 364 certainly creates uncertainty, so far levy of tax on works contract is concerned. To avoid such uncertainty, the State Government is directed to amend rule 6(e) to bring in line with judgment of the honourable Supreme Court in Gannon Dunkerley's case [1993] 88 STC 204 (SC); [1993] 1 SCC 364 vis-a-vis section 11(2)(c) of the OVAT Act. Till such amendment is made to rule 6(e) of the OVAT Rules, the Commissioner of Sales Tax is directed to issue suitable instructions to all the taxing authorities to allow various deductions from the gross turnover to arrive at the taxable turnover in respect of works contract in terms of decision of the honourable Supreme Court in Gannon Dunkerley's case [1993] 88 STC 204 (SC); [1993] 1 SCC 364. The Orissa High Court did not strike down the Rules, but only directed the State Government to amend the Rules and further ordered that till such amendment was made, the deductions would be in line with the judgment of the apex court in Gannon Dunkerley's case [1993] 88 STC 204 (SC); [1993] 1 SCC 364. As held by us above, the Act and the Rules cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve is bound to follow the same and this cannot be said to be excessive delegation of powers. He has relied upon the judgment of the apex court in Consumer Action Group v. State of T.N. [2000] 7 SCC 425, wherein the apex court held as follows: 18. The catena of decisions referred to above concludes unwaveringly in spite of a very wide power being conferred on the delegatee that such a section would still not be ultra vires, if guidelines could be gathered from the preamble, objects and reasons and other provisions of the Acts and Rules. In testing the validity of such provision, the courts have to discover, whether there is any legislative policy, purpose of the statute or indication of any clear will through its various provisions. If there be any, then this by itself would be a guiding factor to be exercised by the delegatee. In other words, then it cannot be held that such a power is unbridled or uncanalised. The exercise of power of such delegatee is controlled through such policy. The fast-changing scenario of economic, social order with scientific development spawns innumerable situations which the Legislature possibly could not foresee, so the delegatee is entrusted with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of the States that in addition to the value of the goods involved in the execution of the works contract the cost of incorporation of the goods in the works can be included in the measure for levy of tax. Incorporation of the goods in the works forms part of the contract relating to work and labour which is distinct from the contract for transfer of property in goods and, therefore, the cost of incorporation of the goods in the works cannot be made a part of the measure for levy of tax contemplated by article 366(29A)(b). In para 46, the apex court dealt with the arguments raised by the counsel for the contractors and argument No. (vi) was that transportation charges for transport of goods to the place of works should be excluded. The apex court repelled this contention in para 47 of the said judgment and held as follows (page 234 in 88 STC): 47. . . . The charges mentioned in item No. (vi) cannot, however, be excluded. The position of a contractor in relation to a transfer of property in goods in the execution of a works contract is not different from that of a dealer in goods who is liable to pay sales tax on the sale price charged by him from the customer for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxed is provided for in section 5(2)(c) and since section 5(2)(c) is totally in consonance with the provisions of the Constitution, the Central Act as well as the judgment in Gannon Dunkerley's case [1993] 88 STC 204 (SC); [1993] 1 SCC 364, the contention of the petitioners cannot be accepted. The judgment of the Karnataka High Court in Shetty Leasing (India) Ltd. v. Union of India [1996] 100 STC 533 (Karn) is not at all applicable to the facts of the present case. In that case, the court was concerned with the definition of total turnover without there being any provision like section 5(2)(c) or section 41. As such, this judgment is not applicable. Whether the provisions of section 5(2)(c) of the TVAT Act suffer from the vice of excessive delegation: It is contended on behalf of the petitioners that since the expression other charges in section 5(2)(c) has not been defined, the Legislature has delegated its powers to the executive and even worse to the assessing officer and as such, section 5(2)(c) should be struck down. Reliance has been placed on the judgment of the Patna High Court in Larsen Toubro Ltd. v. State of Bihar [2004] 134 STC 354 (Patna). In that case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. The apex court in Delhi Race Club Ltd. v. Union of India [2012] 53 VST 1 (SC); [2012] 16 GSTR 1 (SC); [2012] 347 ITR 593 (SC); [2012] 8 SCC 680, after discussing the entire law held as follows (para 20, page 12 in 53 VST): 30. From the conspectus of the views on the question of nature and extent of delegation of legislative functions by the Legislature, two broad principles emerge, viz. (i) that delegation of non-essential legislative function of fixation of rate of imposts is a necessity to meet the multifarious demands of a welfare State, but while delegating such a function laying down of a clear legislative policy is pre-requisite, and (ii) while delegating the power of fixation of rate of tax, there must be in existence, inter alia, some guidance, control, safeguards and checks in the concerned Act. It is manifest that the question of application of the second principle will not arise unless the impost is a tax. Therefore, as long as the legislative policy is defined in clear terms, which provides guidance to the delegate, such delegation of a non-essential legislative function is permissible. Hence, besides the general principle that while delegating a legislative f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though section 4(1) provides that tax can be levied on transfer of property in goods involved in the execution of a works contract, in the Explanation it is mentioned that the amount received or receivable shall include the value of such goods purchased, manufactured, processed, or procured otherwise by the dealer, and the cost of freight or delivery as may be incurred by such dealer for carrying such goods to the place where these are used in execution of such works contract, but shall not include such portion of the aforesaid amounts as may be prescribed. It is contended that till Rules are framed, how can the deduction be worked out and again it is submitted that this also amounts to excessive delegation as no guidelines have been laid down for the provisions to be made in the Rules. Similarly in respect of section 4(3), it is submitted that since no rule has been framed, no deduction of tax at the time of payment is to be made and there are no guidelines in this behalf. There is no manner of doubt that Explanation to section 4(1) provides that the cost of freight or delivery shall be included in the price of goods unless otherwise prescribed. However, as far as section 4(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed , in constitutional amendment authorizing certain cities to adopt or amend their charters, subject to such limitations as may be prescribed by Legislature, means that future legislation, as well as that existing when city first takes out or amends charter may limit its action' -Vernon's Ann. St.Const. Article 11, $ 5. Dry v. Davidson Tex Civ. App., 115 S.W. 2d 659, 691. In 'Law Lexicon' by P. Ramanatha Aiyar, 2nd Edition, reprint 2000 at page 147, it is indicated as under: 'Used as an adverb, etc., means like, similar to, of the same kind, in the same manner, in the manner in which. It may also have the meaning of because, since, or it being the case that; in the character or under the name of with significance of in degree; to that extent; so far (Black's Law Dictionary).' In one of the cases decided by this court, to be referred later in this judgment, 'as may be prescribed' has been held to mean 'if any7. It is thus clear that such expression leaves the scope for some play for the workability of the provision under the law. The meaning of the word 'as' takes colour in context with which it is used and the manner of it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Act inoperative. . . Therefore, the mandate of the Act is that the Rules will apply if framed. If no Rules are framed, the assessee is entitled to all deductions on account of labour, services and other charges and does not have to fulfil any conditions in this regard. Once he proves that the expenses are related to labour, services and other charges as explained in Gannon Dunkerley's case [1993] 88 STC 204 (SC); [1993] 1 SCC 364, then the assessee shall be entitled to the deductions and will not have to fulfil any other conditions. However, now one condition has been imposed under rule 7A that in case the contractor does not maintain books of accounts, then the deductions shall be at a fixed rate. Whether it is necessary to specify a specific rate in respect of levy of tax on transfer of property in goods involved in a works contract: This argument need not detain us for much time since this matter has already been set at rest by the apex court in Gannon Dunkerley's case [1993] 88 STC 204 (SC); [1993] 1 SCC 364 wherein the apex court held that it would be permissible for the State Legislature to tax all goods involved in the execution of a works contract at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It has been contended by Dr. Saraf that rule 7A is a procedural rule and is only a machinery provision providing the manner in which the tax is to be quantified. Therefore, according to him, it can be retrospective. There is no manner of doubt that procedural laws can apply retrospectively, but when even procedural laws affect the civil rights of the parties, they cannot be treated to be retrospective unless specifically made so. We have a grave doubt whether rule 7A is only a procedural rule. No doubt, it does not lay down rate of tax, but it lays down the maximum rate of deduction which an assessee is entitled to and this affects the civil rights of the assessee inasmuch as the amount of tax payable by him may increase or decrease on account of the deductions allowed/disallowed. Therefore, the rule cannot be said to be wholly procedural. Assuming that the rule is procedural, then also in our opinion it cannot be given retrospective effect because a party who was not aware that he was bound to maintain accounts to claim deductions is now being told that the assessee cannot get deduction beyond a certain percentage. This rule, therefore, cannot be made retrospective. Having sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... VAT Act uses the phrase labour, services and other charges and this is a matter to be considered by the assessing officer as to whether the deduction claimed falls within the scope and ambit of the illustrations and examples given in Gannon Dunkerley's case [1993] 88 STC 204 (SC); [1993] 1 SCC 364. It is also urged that since the provisions of the TVAT Act are similar to the Rajasthan Sales Tax Act which was the subject-matter of Gannon Dunkerley's [1993] 88 STC 204 (SC); [1993] 1 SCC 364 judgment, the TVAT Act should be held to be invalid. This argument has been made only for the purpose of rejection since in the TVAT Act, section 5(2)(b) and section 41 are specific provisions which make it clear that the State shall not impose tax on the transfer of property in goods involved in a works contract taking place during the course of inter-State trade or commerce, import or export inside or outside the territory of India or on any sale taking place outside Tripura. Zero rating: The petitioners contend that in terms of section 8(2) of the Act, the sale of certain goods of local importance as specified in Schedule IV are taxable at zero rate and these include civil st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be pertinent to mention that in the earlier writ petition, the petitioner had annexed with his petition documents to show that VAT was being deducted at the flat rate of four per cent from his bills. On the other hand, according to Sri Nandrajog, learned senior counsel for the petitioner, the matter relating to the service tax was a totally different matter and had no connection with the value added tax case and, therefore, the petitioner did not make reference to the same. It is submitted that reference was made to all other litigations except one case. It would be also pertinent to mention that the petitioners during the course of the writ petition have filed another application being C.M. Application 275 of 2013 whereby they have sought to mention that they have also filed W.P. (C). No. 458 of 2010, W.P. (C). No. 452 of 2011 and W.P. (C). No. 121 of 2012. It is contended that non-mention of presentation of the said writ petitions was bona fide and not deliberate. In W.P. (C). No. 458 of 2010, the writ petitioner had prayed for quashing the orders of deduction of sales tax at source under the Tripura Sales Tax Act. He, however, admits that reference in the writ petition has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fundamentals of judicious litigation. The legal maxim 'jure naturae aequum est neminem cum alterius detrimento et injuria fieri locupletiorem', which means that it is a law of nature that one should not be enriched by the loss or injury to another, is the percept for courts. Wide jurisdiction of the court should not become a source of abuse of the process of law by the disgruntled litigant. Careful exercise is also necessary to ensure that the litigation is genuine, not motivated by extraneous considerations and imposes an obligation upon the litigant to disclose the true facts and approach the court with clean hands. 38. No litigant can play 'hide and seek' with the courts or adopt 'pick and choose'. True facts ought to be disclosed as the court knows law, but not facts. One, who does not come with candid facts and clean breast cannot hold a writ of the court with soiled hands. Suppression or concealment of material facts is impermissible to a litigant or even as a technique of advocacy. In such cases, the court is dutybound to discharge rule nisi and such applicant is required to be dealt with for contempt of court for abusing the process of the court. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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