Research › Search › Judgment

Gauhati High Court · body

2004 DIGILAW 514 (GAU)

Jayshri Borgohain v. State of Assam

2004-09-08

AFTAB H.SAIKIA

body2004
JUDGMENT A.H. Saikia, J. 1. Heard Mr. G.K. Joshi, learned Senior Counsel assisted by Mr. R.K. Joshi and Mrs. U. Chakraborty and Mr. A.K. Goswami, learned Counsel for the petitioners and Mr. D. Goswami, learned Additional Senior Government Advocate, Assam and Mr. J. Singh, learned Standing Counsel, N.F. Railway, appearing for the official respondents. 2. This batch of writ petitions carries a common question of law based on same and identical fact-situation and as such all these petitions are heard analogously and being disposed of by this common judgment and order. 3. The core question involved in this host of writ petitions is whether Section 27 of the Assam General Sales Tax Act, 1993 (in short, "the Act") authorises the Government departments, while deducting taxes at source for the transfer of property in goods involved in a works contract specified in Schedule VI, to deduct taxes at source on the labour components and declared goods under Section 8(3)(iv) of the Act and goods obtained in the course of sale or purchase of goods when such sale or purchase takes place (i) outside the State, or (ii) in course of import of goods into or export of the goods out of the territory of India and/or (iii) in the course of inter-State trade and commerce as envisaged under Section 7(4) of the Act, including the goods mentioned under Section 8(1)(a) and (b) read with Rule 35 of the Assam General Sales Tax Rules, 1993 (in short, "the Rules"). 4. Leading the arguments on behalf of the writ petitioners in this batch of writ petitions, Mr. G.K. Joshi, learned Senior Counsel, has contended that the law pertaining to issue raised in all these writ petitions has already been settled by this court in Allied Traders v. State of Assam reported in (2002) 3 GLR 596 Reported as Arunodoi Construction Co. (P) Ltd. v. State of Assam, [2002] 127 STC 561 (Gauhati), which has been followed in Eleco Construction Co. v. State of Assam reported in (2002) 3 GLR 594 and the case of the writ petitioners is squarely covered by the legal proposition laid down in those referred cases. According to Mr. (P) Ltd. v. State of Assam, [2002] 127 STC 561 (Gauhati), which has been followed in Eleco Construction Co. v. State of Assam reported in (2002) 3 GLR 594 and the case of the writ petitioners is squarely covered by the legal proposition laid down in those referred cases. According to Mr. Joshi, in the instant cases, the various Government departments have initiated action to deduct taxes at source in terms of Section 27 of the Act by which process the petitioners have been burdened to pay the taxes at source for all labour and service charges as well as other related components, when the petitioners are not liable to pay any taxes. His case is that though validity of Section 27 read with Section 8(3)(iv) of the Act was authoritatively upheld by this court in the above-cited precedents and the State respondents were restrained from making any deduction of tax at source from the entire bill amount of the works contract of the petitioners therein with a liberty to the State respondents to deduct tax at source from the bills of the petitioners after excluding therefrom the labour, engineering and other service charges as well as turnover of declared goods, tax-paid goods and goods obtained in the course of inter-State trade within India for being used in the related work in terms of the related provisions of the Act of 1993 and the Rules framed thereunder, the State authorities, despite such accepted legal position, have been continuing to tax the petitioners in terms of Section 27 of the Act. Such State's action is contrary to the provision of the Act and Rules framed thereunder and is an unreasonable restriction on the petitioner's fundamental right to carry on trade or business and hence the same is violative of articles 19(1)(g),265 and 300A of the Constitution of India. 5. In Allied Traders' case, (2002) 3 GLR 596 Reported as Arunodoi Construction Co. (P) Ltd. v. State of Assam, [2002] 127 STC 561(Gau) , this court, on the issue raised before it observed that generally the courts would like to maintain the provisions of law, if possible, even if by reading down the provisions, if required, and accordingly upheld the provisions of Section 27 of the Act by reading the same down in paragraphs 16 and 17 of the judgment as follows : (16)... (1) The words 'sale or supply of goods liable to tax under this Act' appearing in Section 27 of the Act cover 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 and 8 of the Act and deductions and exemptions provided under Sections 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 source under Section 27 is made. (4) In the Schedule of exempted items and taxable items, which were amended vide notifications dated December 24, 1999 and January 27, 2000, Schedule I is in respect of exemption of items and Schedule II provides for tax at the point of first sale. Rule 19 was amended during the pendency of this case and Rule 19(2) was amended-'omitted' with effect from January 19, 2000. Prior to the omission it read as follows : (2) Notwithstanding anything contained in Sub-rule (1), the dealers specified in Section 2(10)(iv) shall not be entitled to use the declaration in form A. Thus, in the light of Sub-rule (2) the contractor or a lessor was not entitled to use the declaration in form A. The effect of exemption of the said sub-rule with effect from 19th January, 2000, is that, henceforth, the contractor or lessor shall be entitled to use the declaration in form A. Thus, when a declaration in form A is given by the contractor, no tax is charged from him at the time of purchase of goods described in Schedule III and the liability to pay tax shifts to the contractor. In view of the above, after the Assam General Sales Tax (Amendment) Rules, 1999, the works contractors have become eligible to use declaration in form A. 17. In view of the above, after the Assam General Sales Tax (Amendment) Rules, 1999, the works contractors have become eligible to use declaration in form A. 17. In the light of the aforesaid directions, we hold that the provisions of Section 27 of the Act and Rule 8(3)(iv) of the Rules are not ultra vires and illegal and they cannot be said to be confiscatory in nature. Deduction of tax at source is permissible under the law and the above provisions of law are to be read down as provided above. We may also mention here that deduction of tax at source under Section 27 of the Act is not an end of the matter and the dealers/assessees are at liberty to claim all permissible deduction, if any available to them, while final assessment is being made. 6. Having regard to the above settled legal position which has been affirmed in the case of Eleco Construction Co. [2007] 7 7ST 600 (Gau) : [2002] 3 GLT 594 and on consideration of the facts and circumstances of the case in its totality and also upon hearing learned Counsel for the parties, this court is of the view that since the issue urged before this court has already been dealt with and decided finally by this court, these writ petitioners are also similarly situated with those mentioned in the above-referred cases and entitled to get the similar relief and accordingly it is provided that the directions and benefits rendered in the above-mentioned cases shall also be equally applicable to all the writ petitioners in this bunch of writ petitions. Hence, a writ of mandamus is hereby issued as follows : (a) the respondents are directed not to deduct any tax at source from the bills of the petitioners pertaining to the related works contract on labour component, declared goods and the goods obtained in the course of inter-State sale relatable to taxable turnover as computed under Section 8(3)(iv)read with Section 27 of the Act and Rule 35 of the Rules as amended ; and (b) the respondents are further directed to refund the amount if already deducted from the petitioners' bills, in accordance with law. 7. For the forgoing reasons and observations, this batch of writ petitions succeeds and stands allowed. However, considering the facts and circumstances of the case, there shall be no order as to costs. In favour of Department