Deduction of 4% from the total bills of contractors engaged in works contracts under Sec. 25A of the Bihar Finance Act and Rule 26A of the Bihar Sales Tax Rules is a valid mode of recovery of sales tax and does not infringe Article 366(29A) of the Constitution.

Uday Sinha, J.

1. These four writ petitions under Articles 226 and 227 of the Constitution raise common questions of law. They have, therefore, been heard together and are being disposed of by this common judgment.

2. The questions agitated at the Bar are pure questions of law. They relate to the ambit/vires of notifications (annexures 1, 1/A and 1/B, all dated 7th November, 1984). As a follow up of those annexures, the Bihar Government in the Finance (Commercial Taxes) Department issued notice (annexure 2) whereby all Government departments, Board and Organisations were directed to deduct 4 per cent of the bills of all contractors engaged in works contract. In essence, the petitioners have prayed for quashing of annexures 1 series and annexure 2. Since the questions agitated are pure questions of law, it is not necessary to advert to the additional prayer of the petitioners in the different writ petitions for quashing the deductions in the bills of the petitioners.

3. The petitioners are contractors registered with various departments of Government of Bihar for executing works contracts. In terms of the contracts, materials like bitumen, "cement, steel rods, etc., are/were to be supplied to the petitioners by the Government. The value of the materials supplied was to be deducted from the bills of the contractors. In terms of annexures 1 series and annexure 2 the departments deducted 4 per cent from their entire bills. That brought the petitioners rushing to this Court. According to the petitioners, they were liable to pay tax only upon the value of the materials supplied/sold by them to the Government. On the face of it the contention of the petitioners appeared sound. Rules were, therefore, issued and by various ad interim orders, it was ordered that deduction of only 4 per cent of the value of materials supplied/not of the entire bills could be deducted. The rest of the bills should be paid to the contractors.

4. The broad questions falling for consideration are only two. The first question agitated before the Bar is that payments made in respect of works contract as a whole cannot be subjected to sales tax by the State Legislature or by the State Government. The second submission advanced by Mr. Bindeshwari Choudhary was that if the Government was entitled to deduct 4 per cent of the bills in terms of the notifications, referred to above, the State Government was liable to reimburse the contractors in regard to the taxes realised from them.

5. The stand of the State, on the other hand, is that the deductions ordered to be made from the total bills of the contractors were not tax realised from them, but the deduction was only a mode of collection of sales tax in respect of materials supplied by the contractors. Learned Advocate-General was candid in conceding that the materials supplied by the contractors alone were sales and tax could be levied and realised only in respect of materials supplied/sold by them. He stated in unmistakable term that the State Government had no intention of collecting tax on the entire bills of the contractors which would include payments for labour as well as materials supplied. Let us test the validity of the submissions urged on behalf of the petitioners. Another matter which I would like to set out clearly here and now is that the petitioners do not dispute that they would be liable to pay sales tax on materials supplied by them. The materials may be supplied either by the contractors from the market or they may be supplied to them through the department, the value for which may be deducted from their total bills, would attract the eye of the sales tax.

6. In 1982 the Constitution was amended by the Constitution (Forty-sixth Amendment) Act, 1982. Sec. 4 thereof introduced Sub-article (29A). Article 366 lays down that the expressions mentioned therein in the Constitution have the meanings respectively assigned to them in that article. In that behalf Sub-article (29A) "tax on the sale o