JUDGMENT :

M.R. SHAH, J.

1. Feeling aggrieved and dissatisfied with the impugned common judgment and order dated 29.08.2007 passed by the Gauhati High Court by which the Division Bench of the High Court has dismissed the writ appeals preferred by the State of Tripura which were against the judgment and order passed by the learned Single Judge declaring Rule 3A(2) of the Tripura Sales Tax Rules 1976 (hereinafter referred to as the ‘TST Rules’) as ultra-vires to the Tripura Sales Tax Act, 1976 (hereinafter referred to as the ‘TST Act’) and partly allowing the appeals preferred by the original writ petitioners quashing and setting aside that part of the judgment and order passed by the learned Single Judge by which it was held that the original writ petitioners were liable under Section 3AA of the TST Act, the State of Tripura has preferred the present appeals.

2. That the Tripura Sales Tax Act, 1976 was enacted in the year 1976 containing provisions for the levy of tax on sale on certain goods in Tripura. Section 3A provided for tax on transfer of property in goods involved in execution of works contract. Section 3AA provided for deduction of tax at the time of payment. Section 44 provided for power to make Rules. In exercise of the Rule making power under Section 44 of the TST Act, the Tripura Sales Tax Rules, 1976 came to be enacted. Rule 3A(2) provided for deduction of tax at source equal to 4% on transfer of rights to use goods.

2.1 The Revenue Department of the State of Tripura issued memorandum in the year 1992 for deduction of 4% tax at source under Section 3A of the TST Act.

2.2 Tender notices were issued by the ONGC, Gas Authority of India Ltd., FCI for hiring vehicles. Work orders were issued in favour of the original writ petitioners. Agreements were entered into between the original writ petitioners and GAIL, ONGC, FCI etc. respectively.

2.3 The original writ petitioners-suppliers of the vehicles filed the writ petitions before the learned Single Judge challenging the vires of Rule 3A(2) of the TST Rules and also for refund of the amount so deducted on the ground that there is no charging provision under the TST Act for levy of sales tax on transfer of the right to use goods and, hence, Rule 3A of the TST Rules, which makes it mandatory for persons, responsible for making payment of the bills of the transferer of the right to use goods, to deduct, at source, sales tax at a flat rate of 4% is ultra-vires the TST Act. One another ground of challenge to Rule 3A was that Rule 3A suffers from absence of delegation of power and, hence the memorandum issued in the year 1992 is invalid and cannot be enforced.

2.4 All the writ petitions were resisted by the State contending inter-alia that the transactions involved amounted to ‘Sale’ within the meaning of 2(g)(ii) of the TST Act and that as per the second proviso of Section 3(i) of the TST, Tax at 4% of the valuable consideration, shall be payable on transfer of the right to use any goods for any purpose and, hence, Rule 3A(2), prescribed merely a mode of recovery of sales tax which is otherwise due and payable and thus Rule 3A(2) is valid.

2.5 Learned Single Judge declared Rule 3A(2) as ultra-vires the TST Act. However, the learned Single Judge held that the suppliers are liable to pay sales tax under Section 3AA of the TST Act. Aggrieved by the judgment of learned Single Judge, the State preferred writ appeals before the Division Bench of the High Court. The original writ petitioners-suppliers also filed the writ appeals before the Division Bench aggrieved by that part of the judgment of the learned Single Judge where it was held that the original writ petitioners-suppliers are liable to pay sales tax under Section 3AA of the TST Act.

2.6 The Division Bench considered the following two issues:

(i) Whether authority vests in the Revenue Dept. to direct deduction at Source for payment of Sales Tax from Bills of any person who transfers right to use any goods for any purpose?

(ii) Whet