TMI Blog2002 (3) TMI 940X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Government Advocate, Assam on behalf of the respondent State of Assam. 3. Section 27 of the Act reads as follows : 27. (1) Notwithstanding anything contained in any other provisions of this Act - (a) every person (excluding an individual, Hindu undivided family, a firm or a company not under the control of the Government) responsible for making any payment or discharging any liability on account of any amount payable for the transfer of property in goods (whether as goods or in some other form) involved in a works-contract specified in Schedule VI or for the transfer of the right to use any goods specified in Schedule (VII) for any purpose, (or) (b) every person responsible for paying sale price or consideration or any amount purporting to be the full or part payment of sale price or consideration in respect of any sale or supply of goods liable to tax under this Act to the Government or to a company, corporation, board, authority, undertaking or any other body by whatever name called, owned, financed or controlled wholly or substantially by the Government, shall, at the time of credit to the account of or payment to the payee of such amount in cash, by cheque, by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the writ petitions, petitioners have also stated that provisions of Section 8(i)(c) and Section 8(3)(iv) are ultra vires, illegal and violative of Article 286 of the Constitution of India as the above provisions do not provide for deduction of the value of the goods used in execution of the works contract supplied in course of inter State trade or commerce which falls Under Section 3, 4 and 5 of the Central Sales Tax Act. 6. Before proceeding further it may be beneficial to recapitulate the history and the judicial decisions concerning the impugned provisions of law. In the case of State of Madras v. Gannon Dunkerly Co., reported in 9 STC 353, the Apex Court held that a works contract is indivisible contract and the turnover of the goods used in execution of the works-contract could not therefore become exigible to sales tax. Parliament amended Article 366 of the Constitution by introducing Sub-clause(b) of Clause(29-A) to enlarge the scope 'tax on the sale or purchase of goods' so that it may include the transfer of goods referred to in Sub-clause(b) of Clause(29-A) of Article 366 which is deemed to be sale of goods. Thus, in view of forty-sixth amendment, the wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suance of the directions in Builders' Association of India(supra), writ petitions were filed in many States of the country and the decision of the High Courts came up before the Apex Court in the case of M/s Gammon Dunkerley Co. and Ors. v. State of Rajasthan, reported in 1993 wherein the Apex Court held : (1) In exercise of its legislative power to impose tax on sale or purchase of goods under Entry 54 of the State List read with Article 366(29-A)(b), the State Legislature, while imposing 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 is not competent to impose a tax on such a transfer(deemed sale) which constitutes a sale in the course of inter-State trade or commerce or a sale outside the State or a sale in the course of import or export. (2) The provisions of Sections 3, 4 and 5 and Sections 14 and 15 of the Central Sales Tax Act, 1956 are applicable to a transfer of property in goods involved in the execution of a works contract covered by Article 366(29-A)(b). (3) While defining the expression 'sale' in the sales tax legislation it is open to the State Legislature to fix ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 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 of deduction of 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 uniform rate of tax for the various goods involved in the execution of a works contract which rate may be different from the rates of tax fixed in respect of sales or purchase of these goods as a separate articles. 9. The provisions of Assam Act more particularly the provisions of Section 27 of the Act were challenged before this court in the case of Santosh Kumar Harlalka and Ors. v. State of Assam and Ors., reported in(1995) 2 GLR 95. The challenge was on the ground that the manner of rate of deduction of tax at source has not been prescribed. This court finding that the above contents are correct, allowed the writ petition but provided that 'the authority after prescribing the manner and the rate shall be at liberty to deduct tax at source'. Similar view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co.(supra) it is well established that the State has no jurisdiction to levy tax on entire stock of sales covered by Sections 3, 4 and 5 of the Central Sales Tax Act. Hence it is submitted that where no deduction or exemption is provided in respect of those sales ; realisation of advance tax by form of deduction of tax at source Under Section 27 is not permitted. In the case of Bhawani Cotton Mills Ltd. v. State of Punjab, reported in 20 STC 290 the Apex Court held : 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 particular sales or purchases are exempt from taxation altogether, they can never be taken into account, at any stage, for the purpose of calculating or arriving at the taxable turnover and for levying tax. 13. Learned counsel for the petitioners in support of their submission have placed reliance on a decision of the Apex Court in the case of Steel Authority of India Ltd. v. State of Orissa and Ors., reported in 118 STC 297 wherein the provisions of Section 13-AA of the Orissa Sales Tax Act regarding de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Orissa or Himachal Pradesh Act. Thus, Section 27 of the Act itself provides that deduction of tax at source is to be made in respect of sale or supply of goods which is liable to tax under this Act, that is, Assam Act, which in turn goes to show that Section 27 of the Act is not to be read in isolation inspite of non obstinate clause with which the section starts. In our opinion, the non obstinate clause means or is to be read as a repugnancy clause only, that is, where the provisions of Section 27 are found to be repugnant to the other provisions or else under the Act, Section 27 will prevail. We find no force in the submission that Section 27 is to be read in isolation only in view of the specific provision that liability to deduct tax at source is confined to any sale or supply of goods liable to be taxed under this Act. It is also submitted that the clause liability to tax under this Act is confined to sale or supply of goods and is not applicable or is not made applicable in respect of transfer of property in goods involved in a works contract. The definition of 'sale price' Under Section 2(34) of the Act includes consideration received or receivable by the dealer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or zero rate as provided in any other provisions of this Act in respect of sale of such goods) ; (iii) in respect of goods specified in Schedule III, the turnover during such year of sale to registered dealers of goods specified in the purchasing dealer's certificate of registration as being intended for resale within the State or of containers or other materials for the packing of such goods; (iv) in respect of goods involved in any works-contract specified in Schedule VI - (a) the turnover relating to declared goods, and (b) so much of the labour and other charges incurred by the dealer after the transfer of the property in the goods involved in the works-contract or at the option of the dealer such percentage towards labour and other charges of the gross turnover after deducting therefrom the turnover relating to declared goods as is specified in that Schedule ; (v) such other amount as may be prescribed ; and (vi) from the resultant balance an amount arrived at by applying the following formula : Rate of Tax Resultant balance as mentioned above 100 + Rate of tax Explanation : Where the taxable turnover of a dealer is taxable at different rates or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mainly contractors. It is well settled proposition of law that generally the courts would like to maintain the provision of law, if possible, and even if by reading down the provisions, if required. Following the majority decision in the case of 20th Century Finance Corpn. Ltd. and Anr. v. State of Maharashtra, reported in we hold that the provision of Section 27 of the Act should be upheld by reading it down as below :- (1) The word sale or supply of goods liable to tax under this Act appearing in Section 27 of the Act covers the supply of goods in works contract also and only those goods which are liable to tax or which are included in the taxable turnover will be subject to deduction of tax at source. (2) Section 27 of the Act will have to be read together with charging sections, namely, Sections 7, 8 of the Act and deductions and exemption provided Under Section 7 and 8 of the Act as regards the inter-State trade, declared goods, exempted goods etc. shall also be applicable in case of deduction of tax at source Under Section 27 of the Act. (3) The certificate under Rule 35(5) will be available to the Contractors executing works contract where deduction of tax at sourc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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