IMPORTANT POINT
High Court has rightly held relying on 1997(2) SCC 183 that Section 17(6) of Karnataka Sales Tax Act, 1957 (as amended by Act No. 5 of 1996) is not unconstitutional and that the amendment brought in Section 17(6)(i) of the Act by Act No. 7 of 1997 retrospectively is also not unconstitutional.

Headnote:(i) Karnataka Sales Tax Act, 1957 -Section 17(6) (as amended by Act No. 5 of 1996)-Constitution of India-Entry 54 of List III in 7th Schedule r/w Article 366(29A)(b)-Contention that the State has no legislative competence to levy sales tax on the total consideration of the works contract so as to include items or goods in which there was in fact no transfer of property-Whether correct? (No)-Kerala Sales Tax Act and Karnataka Sales Tax Act are in pari materia, thus relying on State of Kerala v. Builders Association of India, 1997(2) SCC 183.
       Held : We are of the considered view that principles laid down by this Court in the aforesaid decision squarely apply to the facts of this case having regard to the similarity of the provisions in the two Acts. We therefore find ourselves in complete agreement with the High Court and hold that sub-section 6 of Section 17 of the Karnataka Sales Tax Act is constitutionally valid and the challenge on the ground of lack of legislative competence of the State Legislature must be repelled. (Para 15)
       (ii) Karnataka Sales Tax Act, 1957 -Amendment brought in Section 17(6)(i) of the Act by Act No. 7 of 1957 retrospectively-Whether unconstitutional? (No) it is neither arbitrary under Article 14, nor affects rights of appellant under Article 19(1)(g) and is in legislative competence under Article 265 (Paras 15 and 16)-Whether any directions are needed so that the assessments made on the basis of the options already given are not affected in any manner? (No)-Case law distinguished (Para 18) (Sale of Goods Act, 1930-Sales Tax on Works Contract).
       Held : Having held that the retrospective operation of the amended provision is constitutional, and having noticed that the assessees are at liberty to opt for regular assessment under Section 5-B of the Karnataka Sales Tax Act, it would not be appropriate to make such a direction on considerations of equity particularly while dealing with a taxing statute. (Para 18)
       Held finally : We accordingly dismiss the appeals, but without any order as to costs. (Para 20)

JUDGMENT

Bisheshwar Prasad Singh, J.-In this batch of appeals by special leave common questions arise for consideration and therefore the appeals have been heard together and are being disposed of by this common judgment.

2. The questions which arise for consideration are whether sub-section 6 of Section 17 of the Karnataka Sales Tax Act, 1957 (hereinafter referred to as "the Act") as amended by Act No. 5 of 1996 is unconstitutional, and secondly, whether the amendment brought in Clause (i) of sub-section 6 of Section 17 of the Act by Act No. 7 of 1997 retrospectively is also unconstitutional. The High Court of Karnataka has answered both these questions in the negative and against the appellants. The main judgment was rendered in the writ petition preferred by the appellant in Civil Appeal No. 902 of 1999. The remaining matters were disposed of by the High Court following the aforesaid judgment.

3. To determine the questions that arise for consideration, it is necessary to notice the legislative history of sub-section 6 of Section 17 of the Act. We may first notice Section 5B of the Act which provides for levy of tax on transfer of property in goods involved in the execution of works contract which reads as follows :

"5-B. Levy of tax on transfer of property in goods (whether as goods or in some other form) involved in the execution of works contracts.-Notwithstanding anything contained in sub-section (1) or sub-section (3) or sub-section (3-C) of Section 5, but subject to sub-section (4), (5), or (6) of the said Section, every dealer shall pay for each year, a tax under this Act on his taxable turnover of transfer of property in goods (whether as goods or in some other form) involved in the execution of works contract mentioned in column (2) of the Sixth Schedule at the rates specified in the corresponding entries in column (3) of the said Schedule."

Section 5B was introduced in the Act by Act No. 27 of 1985 with effect from April 1, 1986 pursuant to the Constitution (46th Amendment Act, 1982) introducing Clause 29A) in Article 366 of the Constitution.

4. By Act 4 of 1987 sub-section 6 of Section 17 of the Act was incorporated which as originally enacted read as follows :-

"Notwithstanding anything contained in sub-section (1) to (3), subject to such conditions and in such circumstances as may be prescribed, the Assessing Authority of the area may, if a dealer liable to tax under Section 5-B so elects, accept in lieu of the amount of tax payable by him during any year, under this Act, in respect of works contacts falling under serial number 6 of the Sixth Schedule, by way of composition, an amount at the rate of Two percent of his total turnover in respect of transfer of property in goods (whether as goods or in some other form) involved in the execution of such works-contracts."

5. Sub-section 6 of Section 17 of the Act was amended by Act No. 4 of 1992 with effect from April 1, 1992 and the amended sub-section read as follows :-

"Notwithstanding anything contained in sub-section (1) to (3), but subject to such conditions and in such circumstances as may be prescribed, the Assessing Authority of the area may, if a dealer liable to tax under Section 5-B in respect of the works contract specified in column (2) of the table below so elects, accept in lieu of the amount of tax payable by him during the year under this Act, by way of composition an amount at the rates specified in the corresponding entries in column (3) of the Table on his total turnover relating to transfer of property in goods (whether as goods or in some other form) involved in the execution of such works-contract."

6. Again by Act No. 5 of 1996 sub-section 6 of Section 17 was amended to read as follows :-

"Notwithstanding anything contained in Section 5-B, but subject to such conditions and in such circumstances as may be prescribed, the Assessing Authority of the area may, if a dealer liable to tax under Section 5-B so elects, accept in lieu of the amount of tax payabl

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2002 Supreme(SC) 629

Cases Referred (4)