D. M. DHARMADHIKARI, J. ( 1 ) THE petitioner- Larsen and Toubro Limited is a company registered under the Companies Act and a leading engineering concern. It undertakes works contracts of different nature. It entered into a contract with National Dairy Development Board, Anand (respondent No. 3) for setting up automated dairy plant at Banas II Dairy on 25. 8. 1999 for a total value of Rs. 28, 82,05,360/- which is now increased, with additional works, to Rs. 29,09,51,966/- on the terms and conditions contained in the document of contract. ( 2 ) DURING the course of works contract, the petitioner company submitted its bills periodically for payment to its employer viz. National Dairy Development Board. The department insisted on deducting 2% on the amounts payable for the works executed under various bills in accordance with the impugned provisions contained in section 57b of Chapter VA inserted by Gujarat Act 15 of 1997 with effect from 1. 4. 1997 to Gujarat Sales Tax Act, 1969. ( 3 ) BY this petition, the petitioner company (`contractor for short) challenges the constitutional validity of the provisions contained in Chapter VA and particularly section 57b thereof on the sole ground of lack of legislative competence of the State Legislature in enacting such a law authorising deduction of sales tax at source on the total value of works contract payable to the contractor under the bills. ( 4 ) THE legal position not in dispute is that originally, there was no power of taxation available either to the State or Union Legislature under Lists I and II to the Seventh Schedule of the Constitution of India to levy sales tax on sale and supply of material under the composite works contract involving sales and supplies of goods and labour. Such power on the State and Union Legislatures was conferred only by Constitution (46th Amendment) Act, 1982, whereby definition clause 29 (A) was inserted in Article 366 of the Constitution to expand the meaning of Entry 92a in List I to the Seventh Schedule and Entry 54 in list II to the Seventh Schedule. The relevant constitutional provisions contained in Article 366 (29a) and corresponding Entry 92a in the Union List I and Entry 54 in List II of the Seventh Schedule are reproduced herein:"366. The relevant constitutional provisions contained in Article 366 (29a) and corresponding Entry 92a in the Union List I and Entry 54 in List II of the Seventh Schedule are reproduced herein:"366. In this Constitution, unless the context otherwise requires, the following expressions have, the meaning hereby respectively assigned to them, that is to say-x x x x x" (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 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) for cash, deferred payment of other valuable consideration; (E) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; (F) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other articles for human consumption or any drink (whether or intoxicating), where such supply or service,. is 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 a purchase of those goods by the person to whom such transfer, delivery or supply is made. "list I"92a: Taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce". LIST II"54. TAXES on the sale or purchase of goods other than newspapers, subject to the provisions of Entry 92a of List I. " ( 5 ) IT is also not in dispute that Central Sales Tax Act referable to Entry 92 of the Union List has not been amended after the Constitutional changes referred to above. No tax,therefore, is leviable on Inter-State sales and supplies of material and articles in the course of execution of works contract. No tax,therefore, is leviable on Inter-State sales and supplies of material and articles in the course of execution of works contract. ( 6 ) THE petitioners contention in the petition is that in execution of the works contract of installation of the Dairy Plant , most of the goods and machinery are imported from foreign country and large number of articles and goods are brought from other States. A very small percentage of goods were required to be purchased from registered dealers in Gujarat which are all tax paid in the State of Gujarat in the hands of the suppliers of goods. Despite the protest of the petitioner from its employer that no tax is payable on the value of work done, a total sum of Rs 41,68,380/- has been deducted at the rate of 2% on payments under the bills by the employer for the period of work done between 7. 9. 1999 and 20. 12. 2000. ( 7 ) LEARNED counsel Mr. K. H. Kaji, appearing for the petitioner-contractor contends that the State Legislature by inserting section 57b under Chapter VA of the Gujarat Sales Tax Act to authorise employer to deduct 2% of the value of bill of the contractor, is an attempt to collect advance tax at source even on inter-State sales and transactions, which is beyond the legislative competence of the State Legislature under Entry 54 of the List I to the Seventh Schedule of the Constitution. Provisions of Section 57b is clearly an encroachment on the Central legislative field exclusively available to the Union Legislature under Entry 92a of List I to the Seventh Schedule. Learned counsel, after taking us through the relevant provisions of the Constitution and impugned provisions in section 57b, submits that such attempt by the State Legislatures to collect advance sales tax at source from the bills of the contractor did not succeed on similar provisions in Orissa in the case of Brajendra Mishra vs. State of Orissa and others , 92 STC 17; in Karnataka in the case of KEC International Limited and another vs. State of Karnataka and others, 105 STC 192 and in Bihar, in the petitioners own case Larsen Toubro Limited and others vs. State of Bihar and others, 117 STC 431. It is submitted that the ground of want of legislative competence of the State Legislature has been accepted by the the Supreme court in the case of Steel Authority of India Limited vs. State of Orissa and others, (2000) 118 STC 297 which was a case arising out of Orissa Sales Tax Act. Supreme court followed its earlier decision ( (supra) in Nathpa Jhakri Joint Venture vs. State of Himachal Pradesh and others, (2000) 118 STC 306 . The prayer,therefore, made is to grant similar relief of striking down the provisions of section 57b of the Act on the sole ground of lack of legislative competence with the State Legislature. ( 8 ) MR. S. N. Shelat, learned Advocate General appearing for the State of Gujarat made strenuous efforts to support the impugned provisions contained in section 57b of the Act. He tried to point out the distinction between the provisions in Orissa, Karnataka, Bihar and Himachal Pradesh Sales Tax laws and provisions in the Gujarat Act. The submission made is that in accordance with provisions of sub-section (4) (a) and (b) of section 57b, read with section 87 and definition clause 29 (b) of section 2 of the Gujarat Act, on a certificate to be produced by the contractor from the Commissioner that certain supplies and sales in the course of execution of works contract were inter-State sales, deduction at source from his bill to that extent of the amount so certified, is not to be made by the employer. He submits that such safeguard was not to be found in other Sales Tax Laws in other States which were held, therefore, to be lacking in legislative competence. ( 9 ) TO better appreciate the contentions advanced against the impugned provisions, by the learned counsel on behalf of the petitioner and in support of them by the learned Advocate General on behalf of the State, it would be necessary to reproduce relevant provisions contained in the impugned provisions of section 57b, Section 87, Section 2 (28) (c) and section 2 (29) (a):"57b. (1) Notwithstanding that the assessment in respect of the specified sales is to be made for a year or part of a year, the tax on such sales shall be payable at source in accordance with the provisions of this section. (1) Notwithstanding that the assessment in respect of the specified sales is to be made for a year or part of a year, the tax on such sales shall be payable at source in accordance with the provisions of this section. (2) Nothing in sub section (1) shall prejudice the levy of tax on the specified sales under sections 7 and 8. (3) (a) Any person responsible for paying specified sale price to a contractor for carrying out any work in pursuance of a specified works contract, shall at the time of payment of the whole or part of the specified sale price,deduct from such price an amount equal to two paise in a rupee of such payment as a tax on specified sales". x x x x x (4) (a) Where the Commissioner is satisfied that the contractor or the sub contractor is not liable to pay tax under this Act, on specified sales involved in any specified works contract, he shall on an application made by the contractor or the sub-contractor in this behalf, give him a certificate to that effect in such form as may be prescribed. (B) Where any such certificate is given under clause (a),the person responsible for paying any specified sale price under clause (a) or clause (b) of sub-section (3) shall not deduct any amount as tax in respect of the specified works contract mentioned in the certificate. (5) x x x (6) x x x (7) x x x (8) x x x (9) x x x (10) x x x (11) x x x (12) x x x ". "87. NOTHING in this act or the rules made thereunder shall be deemed to impose or authorize the imposition of a tax on any sale or purchase of any goods, where such sale or purchase takes place:- (I) in the course of inter State trade or commerce, or (II) outside the State, or (III) in the course of the import of the goods into the territory of India or the export of the goods out of such territory,and the provisions of this Act and the rules shall be read and construed accordingly. Explanation: For the purpose of this section whether a sale or purchase takes place: (A) in the course of inter-State trade or commerce, or (B) outside the State, or (C) in the course of the import of he goods into territory of India or export of the goods out of such territory,shall be determined in accordance with the principles specified in sections 3,4 and 5 of the Central Sales Tax Act , 1956 (LXXIV of 1956 ). ""2. (28) `sale means a sale of goods made within the State for cash or deferred payment or other valuable consideration and includes- (a) x x x (b) x x x (C) transfer of property in goods (whether as goods or in some other form) involved in execution of a works contract. ""2 (29) `sale price means the amount of valuable consideration paid or payable to a dealer for any sale made including any sum charged for anything done by the dealer in respect of the goods at the time of or before delivery thereof, other than the cost of insurance for transit or of installation when such cost is separately charged and includes- (A) in relation to- (I) for transfer otherwise than in pursuance of a contract of property in any goods, (II) the transfer of the right to use any goods for any purpose (whether or not for a specified period), (III) the supply of goods by any unincorporated association or body of persons to a member thereof; (IV) the supply by way of or as part of any service or in any other manner whatsoever, of goods , being food or any other article for human consumption or any drink (whether or not intoxicating),the amount of cash, deferred payment or other valuable consideration paid or payable thereto: (B) in relation to the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract, such amount as is arrived at by deducting from the amount of valuable consideration paid or payable to a person for the execution of such works contract, the amount representing labour charges for such execution; (C) in relation to the delivery of goods on the purchase or any system of payment by instalments, the amount of valuable consideration payable to a person for such delivery. " (underling for emphasis) It will also be necessary to reproduce section 57a in Chapter VA which contains definitions of various terms used in section 57b, such as contractor, sub-contractor, specified sale, specified sale price and specified works contract:"57a:- For the purpose of this Chapter, unless the context otherwise requires- (A) contractor or `sub-contractor means the dealer referred to in sub -clause (f) of clause (10) of section 2; (B) `specified sale means the sale referred to in sub-clause (c) of clause (28) of section 2; (C) `specified sale price means the sale price referred to in sub-clause (b) of clause (29) of section 2; and (D) `specified works contract means a works contract, the specified sale price of which exceeds ten lakhs rupees. " ( 10 ) THE above quoted provisions make it manifest that by sub-section (3) (a) of section 57b,there is an obligation imposed on the part of employer to charge at source, 2% of amount of bill where the contractor has not produced a certificate mentioned in sub-section (4) (a) from the Commissioner that certain sales, being inter-State sale transactions, no local tax under the Act is leviable. Learned counsel appearing for the petitioner has pointed out that obtaining of a certificate from the Commissioner for non-deduction of 2% at source in accordance with sub-section (4) of section 57b, in actual practice, is as cumbersome exercise as participating in regular assessment proceedings because detailed information about the transactions in the form of documents and in writing are demanded in terms of internal circular of the department dated 2. 11. 1999, a copy of it has been made available to us in the course of hearing. Whether obtaining of a certificate from the Commissioner for no deduction of advance tax at source is highly cumbersome and big botheration to the contractors or dealers is not a question directly relevant for deciding the validity of the impugned provisions on the question of legislative competence. We, therefore. do not consider it necessary to deal with such objections. ( 11 ) LEARNED Advocate General has drawn our attention to comparative provisions in Orissa Sales Tax Act contained in sub-section (5) (a) of section 13aa of the Orissa Act which are considered by the Supreme court in the case of Steel Authority of India (supra ). We, therefore. do not consider it necessary to deal with such objections. ( 11 ) LEARNED Advocate General has drawn our attention to comparative provisions in Orissa Sales Tax Act contained in sub-section (5) (a) of section 13aa of the Orissa Act which are considered by the Supreme court in the case of Steel Authority of India (supra ). They read as under :"13aa (5) (a)- Where, on an application being made by the contractor in this behalf, the Commissioner is satisfied that any works contract of the nature referred to in sub-section (1) involves both transfer of property in goods and labour or service, or involves only labour or service and accordingly, justifies deduction of tax on a part of the sum in respect of the works contract or. as the case may be, justifies no deduction of tax, he shall, after giving the contractor a reasonable opportunity of being heard, grant 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. " ( 12 ) IN comparing and contrasting these provisions in the Orissa Act with the provisions contained in sub-section (4) (a) and (b) of section 57b of the Gujarat Act, submission made is that Gujarat Act is an improvement. The vice which existed in the Orissa Act is not to be found in the Gujarat Act. It is pointed out that Supreme court struck down section 13aa of the Orissa Act on the ground that section 5a of the said Act does not precisely make it clear that no tax is leviable on the transactions which relate to the Inter-State sales, outside sales and sales in the course of import. It is submitted that sub-section (4) (a) of section 57b read with section 87 and the definition of `sale in section 2 (28) (c) and `sale price in section 2 (29) (b) of Gujarat Act , there is a clear indication that inter-State sales in the course of inter-State trade, outside sales and amounts in the works contract representing labour charges are not to be taxed. At the rate of 2% deduction at source cannot be made in respect thereof. At the rate of 2% deduction at source cannot be made in respect thereof. It is,therefore, submitted that the vice that existed in Orissa, Karnataka, Bihar and Himachal Pradesh Acts does not exist in the Gujarat Act hence, this court should uphold the impugned provisions. ( 13 ) ATTENTION of this court is specifically invited to para 15 of the judgment of the Supreme court in Steel Authority of India (supra) in which the provisions of section 13a of Orissa Act came up for consideration and ultimately struck down:"15. It was then contended by learned counsel for the State that the preamble of the Orissa Sales tax Act took account of the fact that that statute was limited to the sale or purchase of goods in Orissa. Unfortunately, it would appear that the State Legislature overlooked its limitations; even as contained in the preamble, when enacting section 13aa. It was also contended that the deduction that was required to be made under section 13aa (1) was of four per cent of the amount credited or paid by the owner to the contractor, whereas the sales tax liability of the contractor thereon was eight per cent. It was contended that this requirement proceeded on the assumption that half of the amount was not liable to tax being in respect of inter-State sales, outside sales and export sales. No such assumption based on the rate of tax at any given point of time can be made. SECTION 13aa should have been precisely drafted to make it clear that no tax was levied on that part of the amount credited or paid that related to inter-State sales, outside sales and sales inn the course ofi8mport,particularly after the previous section 13aa had been struck down by the Orissa High court for the reason that it was couched in terms wider than were permissible to the State Legislature and that judgment was accepted. " (THE portions in first part of the para and the second part of the para are underlined to indicate the portions of the judgment of the Supreme court relied upon respectively by the learned counsel for the petitioner and the learned Advocate General for the State. " (THE portions in first part of the para and the second part of the para are underlined to indicate the portions of the judgment of the Supreme court relied upon respectively by the learned counsel for the petitioner and the learned Advocate General for the State. ( 14 ) AFTER considering the contentions advanced by the learned counsel appearing for opposite parties, in our considered opinion, the impugned provisions in the Gujarat Act cannot be saved on the contentions advanced by the learned Advocate General of the State. Section 87 of the Act makes it clear that State Act would not be applicable to sales in Inter-State trade and commerce, outside sales and sales in the course of import. This is nothing but surplusage as this is a legal position in view of Central Sales Tax Act and Entry 92a of Union List I of the Seventh Schedule. Existence of such provisions in section 87 does not at all advance the case of the State to assume power to impose and collect tax even on inter-State sales and transactions by treating them to be sales within the State. ( 15 ) IT is true that Gujarat Act by its definition in sub clause (1) of clause (28) of `sale and sub clause (c) of clause (29) of `sale price clearly intends to exclude from the definition of `sale price inter-State sales or outside sales and price representing labour charges in the course of works contract. Such definition clauses and the provisions of section 87, however, cannot be held as conferring legislative competence on the State Legislature to levy and collect sales tax in advance on inter-State sales or outside sales or sales in the course of import only because the contractor fails to produce a certificate from the Commissioner of no deduction of tax at source, in accordance with sub-section (4) of section 57b. We need not go into the question whether obtaining of such certificate from the Commissioner for non-payment of tax at source is cumbersome and impracticable. It is likely that at time of preparation and payment of bill, certificate for no-TDS may not always be obtainable. We need not go into the question whether obtaining of such certificate from the Commissioner for non-payment of tax at source is cumbersome and impracticable. It is likely that at time of preparation and payment of bill, certificate for no-TDS may not always be obtainable. The impugned provision imposing obligation on the employer under sub section (4) (a) of section 57b to deduct 2% of the amount of bill as tax assuming the work contract to have involved all supplies of material and goods within the State and taxable as such, is an encroachment on the legislative field exclusively assigned to the Union Legislature under Entry 92a of List I of the Seventh Schedule of the Constitution of India. It is important to note that at the time of collection of advance tax on bills, neither employer as payer nor the contractor as payee has any right to make tentative self assessment of his tax liability, as is to be found in other taxation laws like Income tax Act. There is no provision permitting payer or payee to make self assessment for deduction or non-deduction of tax at source. The impugned provisions contained in sub-section (3) of section 57b impose an obligation on the employer to deduct 2% of the amount of bill as sales tax treating whole of it as a sale price and regardless of the nature of sales and transactions. Such obligation the employer has to discharge in all cases where no certificate for non-deduction from the Commissioner in terms of sub-section (4) to that section is produced. The argument advanced on behalf of the State is that source of power to impose tax confers ancillary power to make machinery provision for collection of such tax even in advance, to ensure collection of tax due which may be subsequently determined in regular assessment. This argument has a serious flaw in the present legislative context. If the State Legislature has no power to impose tax on inter-State sales or sales in the course of import or outside sales through the amount of bill for works contract, even machinery provisions cannot be made to collect such tax in advance by TDS by assuming all the transactions of sales or supplies to be intra-State sales and taxable within the State. Mere non-production of certificate for non-TDS under sub-section (4) (a) of the said section authorises the tax authorities of State to collect tax on sales which in fact are not sales within the State. By the impugned machinery provision, thus, tax is permitted to be collected at source on works contracts assuming them to have involved intra-State sales , when in reality, they are found to be inter-State sales or sales in the course of import or outside sales. The machinery provision cannot go to the extent of collecting tax on sale transactions which are not taxable within the State. C learly, thus by enacting the provisions under section 57b, an indirect or surreptitious attempt has been made by the State Legislature to encroach on exclusive Central legislative field in Entry 92a of List I to the Seventh Schedule of the Constitution of India. The impugned provisions thus can be described as an unauthorised piece of colourable legislation. It is projected to be legislation on the legislative field in entry 54 of List II of the State List, but in fact, by making it obligatory on the employer to collect 2% advance tax at source on bills in all works contracts on assumption of all transactions as sales within the State, there is an attempt through the impugned provisions by the State to legislate on Central field exclusively assigned to the Union under Entry 92a of List I to the Seventh Schedule of the Constitution of India. ( 16 ) APART from the reasonings and conclusions given by the Supreme court and various other High courts in the cases relied on behalf of the petitioner, we find complete lack of legislative power with the State Legislature in introducing by amendment section 57b in the Gujarat Sales tax Act. We cannot accept the stand taken on behalf of the State that section 57b is ancillary and subsidiary provision to ensure collection of sales tax on transactions within the State. Such power to collect tax on inter-State transactions merely due to non-production of certificate for non-deduction at source cannot save the provisions and bring it within legislative competence of State Legislature. Sub-section 3 (a) of section 57b is not a procedural provision but is the main charging section which empowers collection of tax by the employer on behalf of the State and without active involvement of either employer or contractor. Sub-section 3 (a) of section 57b is not a procedural provision but is the main charging section which empowers collection of tax by the employer on behalf of the State and without active involvement of either employer or contractor. There is no provision permitting self or provisional assessment or tax liability on works contract. Such a provision,therefore, cannot be sustained and has to be struck down. ( 17 ) WE also rely on the decision of the Supreme court in the case of Bhawani Cotton Mills Ld. vs. State of Punjab, AIR 1967 SC 1616 : (1967) 20 STC 290. Provision of Punjab General Sales Tax Act, 1956 permitted levy of purchase tax on inter-Sate sales with a provision for refund. That provision was stuck down by the Supreme court observing thus:"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 the 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. "applying the ratio of the decision of the Supreme court in Bhawani Cotton Mills (supra) to the case in hand, collection of tax on inter-State sales from the bills with a provision for its refund after assessment would not make the levy as valid and competent by the State Legislature when the power to levy such tax vests exclusively with the Union in List I. ( 18 ) FOR the aforesaid additional reasons and various reasons given by the Supreme court and other High courts in the cases (supra), we allow this petition and strike down provisions contained in section 57b of the Sales tax Act, 1969 holding it to be beyond legislative competence of the State Legislature. Amount of tax as TDS has already been deducted from the petitioner to the extent of Rs. 41,68,380. 00. The said amount deducted and any such further deduction of TDS at the rate of 2%, made from the petitioner, shall be refunded to the petitioners by the State within outer limit of one month from the date of this order. Amount of tax as TDS has already been deducted from the petitioner to the extent of Rs. 41,68,380. 00. The said amount deducted and any such further deduction of TDS at the rate of 2%, made from the petitioner, shall be refunded to the petitioners by the State within outer limit of one month from the date of this order. In the circumstances, the petitioner shall also be entitled to cost of this petition which is assessed at Rs. 2,000. 00. Rule is made absolute. .