JUDGMENT

Dr. ARIJIT PASAYAT, J.—

1.Leave granted.

2.Challenge in this appeal is to the judgment rendered by a Division Bench of the Chhatisgarh High Court. Respondent filed a writ petition before the Chhatisgarh High Court questioning constitutional validity of Section 35 of Chhattisgarh Vanijyik Kar Adhiniyam, 1994 (hereinafter referred to as the ‘Adhiniyam’). It corresponds to the Chhatisgarh Commercial Tax Act, 1994 (in short the ‘Act’). The respondent hereinafter is described as the ‘assessee’.

3.Background facts highlighted by the respondent are as follows :

“The writ petitioner is a proprietary concern of one Shri Krishana Mudliar and it has been executing works contracts for various Departments of the Chhattisgarh State Government and others and was holding sales-tax registration No.061/RDN/14,’2739/02. During the assessment year 2001-2002, the writ petitioner had executed works contracts awarded by Executive Engineer, P.W.D. (B&R), Division Khairagarh, for which it received payment of Rs. 1,27,115/- on which sales tax of Rs.2,545/-, being 2% of sum of Rs. 1,27,115/- was deducted at source towards the sales tax payable as provided under Section 35 of the Adhiniyam. Certificate of tax deduction is dated 11/04/2001 made under Section 35 of the Act.”

4.In support of the writ petition, it was contended that Section 35 of the Act does not make any provision for deduction and ascertainment of value and nature of goods supplied during execution of work-contracts. Section 35 of the Act does not make any provision for determination of value of goods supplied in the course of inter State trade during execution of works contracts.

5.The writ petition is opposed by the present appellants by filing reply/statement of objections. In the reply statement, it was stated that the contractors who are engaged in the construction of buildings, roads, bridges, dams etc generally come from other States. The process of assessment of sales tax is very lengthy and before the assessment is completed, such contractors disappear from the scene after receiving full payment under the contract. In such situation, it was very difficult for the Commercial Tax Department to trace out such contractors and eventually sales tax payable by such contractors could not be recovered at all thereby causing heavy financial loss to the Government. In order to safeguard the interest of the State, Section 35 is enacted in the Act and that the State Legislature has legislative competence to enact Section 35. It was stated that Section 35 is not a unique provision in the Act and similar provisions are enacted in the Sales Tax Acts of other States, for example, Section 6-D of the Uttar Pradesh Trade Tax Act, Section 6-E of the Bengal Finance (Sales-Tax) Act, 1941; Section 25-A of the Bihar Finance Act, 1981; Section 25-B of the Haryana General Sales Tax Act 1973, Section 12-A of the Himachal Pradesh General Sales Tax Act 1968, Section 16-C of the Jammu & Kashmir General Sales Tax Act, Section 19-A of the Karnataka Sales Tax Act and Section 13-AA of the Orissa Sates Tax Act, 1947. It was also contended that the Constitutional validity of Section 35 of the Adhiniyam was already considered and upheld by the Division Bench of the Madhya Pradesh High Court in the case of Punj Lloyd Ltd. v. State of Madhya Pradesh and Ors.1, (1996) 29 VKN 533.

6.The High Court referred to decisions of this Court in Steel Authority of India Ltd. v. State of Orissa and Others2, [2000 (3) SCC 200) and M/s Nathpa Jhakri Jt. Venture v. State of Himachal Pradesh and Ors.3, [2000 (3) SCC 319] and declared the provision to be unsustainable.

7.In support of the appeal learned counsel for the appellants submitted that the ambit and scope of Section 35 of the Act were not kept in view by the High Court. The decision in Steel Authority’s case (supra) and Nathpa’s case (supra) were dealing with different provisions and, therefore, has no application to the facts of the case.

8.Steel Authority’s case (supra) relat