Full Judgment Text
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PETITIONER:
M/S NATHPA JHAKRI JT. VENTURE
Vs.
RESPONDENT:
STATE OF HIMACHAL PRADESH & ORS.
DATE OF JUDGMENT: 14/03/2000
BENCH:
S.N.Phukan, S.R.Babu
JUDGMENT:
RAJENDRA BABU, J. :
CIVIL APPEAL NO. 8468 OF 1997
The appellant before us called in question the
validity of Section 12-A of the Himachal Pradesh General
Sales Tax Act, 1968 [hereinafter referred as the Act] and
Rule 31-A of the Himachal Pradesh General Sales Tax Rules
[for short the Rules] before the High Court of Himachal
Pradesh. The said provisions provided for deduction of an
amount from the bills or invoices of the works contractors
purporting to be tax payable towards transfer of goods
involved in works contract. The High Court took the view
that the relevant amount is the valuable consideration
payable for the transfer of property in goods and not the
entire value or consideration for the entire works contract
and what was directed to be deducted is only an amount not
exceeding 4 per cent as may be prescribed purporting to be a
part or full of the tax payable on such sales which would
necessarily mean tax payable under the charging provisions
of the Act The charging provision was not in challenge
before the High Court. The High Court held that the State
Legislature has not exceeded its competence in enacting
Section 12-A of the Act. As regards Rule 31-A of the Rules,
the High Court stated that the crucial part of the Section
is repeated in the Rule and if all the sub-rules are read
together there could be no doubt that the expression all
payments being made in respect of all works contract
executed means and refers only to the payments on account
of valuable consideration payable for the transfer of
property in goods and not other payments. The High Court
further noticed that the Rule also does not enable any
person to deduct any amount other than what is contemplated
by the Section and, therefore, it does not suffer from any
invalidity. On that basis, the High Court dismissed the
writ petitions.
As was contended before the High Court, it is
submitted on behalf of the appellant that provision for
compulsory deduction from payment to works contractor does
not provide for exclusion of cases where the transaction may
not amount to a sale at all and there is no mechanism by
which the contractor can claim that a transaction does not
amount to sale so that no deductions may be made under the
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aforesaid provision. It is also submitted that the recovery
is on events which do not attract tax at all, for example,
Section 6 of the Act, which is the charging Section,
excludes from taxable turn over, the turn over of a dealer
on sales to any undertaking supplying electrical energy to
the public under a licence or sanction granted under the
relevant law of goods for use by it in the generation or
distribution of such energy subject to production of a duly
signed form by an authorised officer in that regard and the
Rule provides for deduction of 4 per cent amount on all
payments in similar terms to deduct an amount equal to 4 per
cent. The said provisions in Section 12-A and Rule 31-A are
identical to those considered by this Court in Steel
Authority of India Ltd. v. State of Orissa & Ors. etc.
etc., 2000 (2) SCALE 98. The relevant portion of Section
13-AA of the Orissa Sales Tax Act considered by this Court
in Steel Authority of India (supra) and Section 12-A of the
Act is as under :-
13-AA. Deduction of tax at source from the payment
to works contractor (1) Notwithstanding anything contained
in Section 13 or any other law or contract to the contrary,
any person responsible for paying any sum to any contractor
(hereinafter referred to in this section as the deducting
authority) for carrying out any works contract which
involved transfer of property in goods, in pursuance of a
contract between the contractor and (a) Central Government
or any State Government, or (b) Any local authority, or (c)
Any authority or Corporation established by or under a
statute, or (d) Any Company incorporated under the Companies
Act, 1956 (1 of 1956) including any State or Central
Government undertaking, or (e) Any Co-operative Society or
any other Association registered under the Societies
Registration Act, 1860 (21 of 1860) Shall, at the time of
credit of such sum of the account of the contractor or at
the time of payment thereof in cash or by issue of a cheque
or draft or any other mode, whichever is earlier, deduct an
amount towards sales tax equal to (four percentum) of such
sum in respect of the works contract, if the value of the
works contract exceeds rupee one lakh.
12-A. Notwithstanding anything to the contrary
contained in Section 13, every person making any payment or
discharge of any liability on account of valuable
consideration payable for the transfer of property in goods,
whether as goods or in some other form, involved in the
execution of works contract shall deduct an amount not
exceeding four percentum, as may be prescribed, purporting
to be a part or full of the tax payable on such sales, from
the bills or invoices raised by the works contractor as
payable by the person:
Provided that no such payment or discharge of any bill
raised by the works contractor shall be made without
deduction: Provided further that if the State Government is
satisfied that it is necessary to do so in the interest of
the State revenue, it may notify the names/posts of such
persons who shall be competent persons to make such
deductions.
Rule 31-A of the Rules reads as under :-
Rule 31-A. Deduction of tax from the bills/invoices
of work contractor: (1) For the purpose of Section 12-A of
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the Act, every person in a department of any Government, a
Corporation, Government Undertaking, a Co-operative Society,
a local body, a Trust or a Private or Public Limited Company
or any other concern responsible for making any payment or
discharge of any liability on account of valuable
consideration payable for the transfer of property in goods
whether as goods or in some other form involved in the
execution of works contract or for carrying out any works
shall at the time of:-
(i) Payment thereof in cash or by issue of a cheque or
bank draft or any other mode; or (ii) credit of such sum to
the account of the works contractor; or (iii) discharging
liability on account of the said valuable consideration to
the works contractor, deduct an amount equal to two
percentum of such sums towards the tax under Section 12-A of
the Act.
(2) The deduction under sub-rule (1) shall be made
from all payments being made in respect of all works
contract executed, whether in part or in full.
However, Shri B. Dutta, the learned senior advocate
appearing for the State, very valiantly emboldened himself
to submit that he can distinguish the decision of this Court
in Steel Authority of India case (supra) and stated that the
provisions of Section 13-AA and Section 12-A are not in pari
materia. 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 work 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 work 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 of the State Act and those
transactions in respect of which no tax can be levied even
in terms of the enactment itself such deductions have to be
made in the bills or invoices of the contractors. To say
that if a person is not liable for payment of tax inasmuch
as on completion of the assessment refund can be obtained at
a later stage is no solace, as noticed in Bhawani Cotton
Mills Ltd. v. State of Punjab & Anr., 1967 (3) SCR 577.
Further, there is no provision for certification of the
extent of the deduction that can be made by the authority.
Therefore, we must hold that arbitrary and uncanalised
powers have been conferred on the concerned person to deduct
upto 4 per cent from the sum payable to the works contractor
irrespective whether ultimately the transaction is liable
for payment to any sales tax at all. In that view of the
matter, we have no hesitation in rejecting the contention
advanced on behalf of the State.
The learned counsel drew our attention to the decision
in a case arising under the Bihar Sales Tax Act and the
earlier decision under the Orissa Sales Tax Act, but in view
of the decision of this Court in Steel Authority of India
(supra) it is wholly unnecessary to refer to the same.
Following the decision in Steel Authority of India (supra)
case, we allow this appeal and set aside the order made by
the High Court by allowing the writ petition and quashing
the aforesaid provisions as being beyond the purview of the
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Himichal Pradesh State Legislature. Such amount as has been
collected from the appellant under provisions of Section
12-A read with Rule 31-A shall forthwith be refunded by the
State. If any amount has been deposited in any Bank
pursuant to orders passed by this Court or the High Court,
it shall be refunded to the appellant with interest accruing
thereon. In the circumstances of the case, there shall be
no orders as to costs.
CIVIL APPEALS NOS. 8470/1997, 8471/1997, 8469/1997,
8472/1997 AND WRIT PETITION (CIVIL) NO. 552/1999
Following the judgment just delivered in CIVIL APPEAL
NO. 8468 OF 1997, these appeals and writ petition are
allowed and the orders under appeal are set aside. Such
amount as has been collected from the appellants under the
provisions of Section 12-A shall forthwith be refunded by
the State. If any amount has been deposited pursuant to
orders passed by this Court or the High Court, the same
shall be refunded to the appellants with interest accruing
thereon. No orders as to costs.