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Andhra Pradesh High Court
Judges : K.BHASKARAN, S.S.M.QUADRI
Ranjit Kumar - Appellant
Versus
Commercial Tax Officer, Naidupeta, Nellore District - Respondent
Decided On : 08-11-87
SALES TAX - Levy of tax on works contracts - Constitutionality - Conditions, restrictions and other incidents - Specification by Parliament - Necessity - Andhra Pradesh General Sales Tax Act (18 of 1985) - Validity.
Fact of the Case:
Petitioners, civil engineering contractors, challenged the constitutional validity of the Andhra Pradesh General Sales Tax (Amendment) Act (18 of 1985) and the levy of tax on works contracts. They argued that the State Legislature lacked the power to impose such tax without conditions, restrictions, and other incidents specified by Parliament under Article 286(3)(b) of the Constitution.
Finding of the Court:
The court held that the State Legislature was competent to enact the impugned Act and levy tax on works contracts. The power of Parliament to specify conditions, restrictions, and other incidents under Article 286(3)(b) was an enabling provision and not a condition precedent to the State Legislature's power to levy such tax. The court also held that the absence of rules for determining the turnover of goods used in works contracts did not render the charging section of the Act incomplete or inoperative, as the turnover could be determined from the assessee's accounts or information or as assessed by the authorities.
Issues: 1. Whether the levy of tax on works contracts was constitutionally valid in the absence of conditions, restrictions, and other incidents specified by Parliament under Article 286(3)(b) of the Constitution. 2. Whether the liability to tax could relate to a period anterior to the amendment of the rules and the issuance of new rules.
Ratio Decidendi: 1. Article 286(3)(b) of the Constitution is an enabling provision for Parliament to specify conditions, restrictions, and other incidents subject to which the State Legislature can levy tax on works contracts. It is not a condition precedent to the State Legislature's power to levy such tax. 2. The absence of rules for determining the turnover of goods used in works contracts did not render the charging section of the Act incomplete or inoperative. The turnover could be determined from the assessee's accounts or information or as assessed by the authorities.
Final Decision: The writ petitions were dismissed, holding that the impugned Act was valid and the levy of tax on works contracts was constitutional.
( 1 ) PETITIONERS are different; but the questions of law raised are common; hence these two writ petitions have been heard together and are being disposed of by this judgment.
( 2 ) IT would suffice to state the facts in W. P. No. 2121 of 1987 for deciding the questions of law raised. The petitioner is a civil engineering contractor having its office at Madras. For the time being, it has civil engineering contracts with Department of Space, Government of India, at Sriharikota, Nellore district, in the State of Andhra Pradesh. As the petitioner did not trade in any goods, it did not get itself registered earlier as a dealer under the Andhra Pradesh General Sales Tax Act, 1957 ("apgst Act" ). The petitioner, however, got itself registered and obtained a registration with effect from 1/07/1985 on which date the Andhra Pradesh General Sales Tax (Amendment) Act (Act 18 of 1985) came into force, inasmuch as under the said Act transfer of property in the goods used in execution of works contract was made liable to sales tax. This amendment of the "apgst Act" was in consequence of the Constitution (Forty-sixth Amendment) Act. which came into force on 3/02/1983, necessitated by the decision of the Supreme Court in Gannon Dunkerleys case [1958] 9 STC 353 and the decision of this Court in Hotel Dwaraka Hyderabd v. Union of India [1985] 58 STC 241.
( 3 ) IN the writ petitions, two points are canvassed : (1) Whether in view of the provisions of article 286 (3) (b) as amended by the Constitution (Forty-sixth Amendment) Act, the levy of tax on works contracts is constitutionally valid, inasmuch as the Parliament had not by law specified the conditions, restrictions and other incidents subject to which the State Legislature was empowered to impose tax on works contracts; and (2) In any event, before the coming into force of the amendments to the Andhra Pradesh General Sales Tax Rules, 1957 ("the Rules"), dated 5/11/1986 introduced by G. O. Ms. No. 1445 Revenue (H) Department 5/11/1986 published in the Official Gazette dated 2 5/11/1986, no tax could have been levied or collected in respect of transfer of property in goods used in works contracts.
( 4 ) WE are of the opinion that both the points raised are concluded by the Division Bench ruling of this Court in Padmaja Commercial Corporation v. Commercial Tax officer No. I, Vijayawada [1987] 66 STC 26. So far as the first point is concerned, the Division Bench held that the State Legislature was competent to enact Act 18 of 1985 amending the definitions of "dealer", "sale", "turnover", "tax" and "works contract"; and under the enlarged definition of "sale" contained in clause (29a) of article 366 of the Constitution, designed to widen the ambit of entry 54 of List II of the Seventh Schedule, the State Legislature was competent to make suitable provisions enabling the levy of tax on the transactions listed in the definition. A feeble attempt was made before us by the learned counsel for the petitioners to persuade us to reconsider the decision in Padmaja Commercial Corporation [1987] 66 STC 26 (AP ). On this point, repeating the contention that the power of the State Legislature to make laws for the levy of tax on works contract was subject to conditions, restrictions and other incidents as might be specified by law by the Parliament, and that Parliament had not by law specified any conditions, restrictions and other incidents subject to which the State Legislature could make laws for the levy and collection of sales tax on works contracts it was urged that Act 18 of 1985 was unconstitutional. We are not at all impressed by this submission made by the learned counsel for the petitioners. Article 286 (3) (b) referred to and relied on by the counsel for the petitioners is an enabling provision for the Parliament, if it chooses to do so, to specify by law, the conditions, restrictions and other incidents subject to which alone the State Legislature could make laws for the levy an
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