The imposition of sales tax on works contracts, including the element of labor charges, is ultra vires the Constitution of India as it goes beyond the scope of Article 366(29A), which restricts the imposition of sales tax to transactions involving the sale of goods.

S.B.Sinha, J.

1. In this writ application the petitioner inter alia has prayed for a declaration that the Constitution (Forty-sixth Amendment) Act as also the provisions of Bihar Finance Act, 1981 , in so far as it seeks to impose sales tax on works contract are ultra vires the Constitution of India and further for a declaration that Sec.21(1)(a)(i) as inserted by the Bihar Finance Act, 1985, and Rule 13-A of the Bihar Sales Tax Rules, 1983 , are also ultra vires, illegal, void ab initio and further for quashing of the orders imposing penalty upon the petitioner for the assessment years 1985-86 and 1987-88 as also the demand notices for the years 1986-87 and 1987-88 and the notices of assessment for the years 1986-87 and 1987-88 as contained in annexure-4 series to the writ application.

2. The facts of the case lie in a very narrow compass.

3. Allegedly the petitioner had entered into various contracts with the respondent No. 5 and pursuant thereto had been carrying on various construction jobs of civil nature. According to the petitioner, the material contents involved in the works contract is about 25 per cent and 30 per cent of the entire works contract. The petitioner has further asserted that most of the materials specially steel and cement are supplied by the principal either free of cost or on cost recovery basis and the title of the said property at all times remains with the principal and never passes on to the petitioner. It is further alleged that the said contract jobs are performed by the hired labourers. It has further been asserted that sales tax payable by him on the whole contract is 8 per cent plus 1 per cent turnover plus 5 per cent surcharge on sales tax payable which is about 9.5 per cent in terms of the notification issued by the State of Bihar under the Bihar Finance Act, 1981 and rules framed thereunder. The petitioner has further asserted that his principal had been deducting 4 per cent from the amount payable to the petitioner from his running account bills in terms of Sec.25A of the Bihar Finance Act.

4. The petitioner was assessed for the year 1985-86 and the total tax was assessed at Rs. 22,157.29 out of which the amount of Rs. 9,189 was deducted at source from the running account bills of the petitioner by respondent No. 5 and deposited in the Government treasury and the balance amount of Rs. 13,038.29 was paid vide challan No. 2 dated 12th August, 1988.

5. According to the petitioner the assessing authority namely respondent No. 4 without taking into consideration the aforementioned facts levied penalty under Sec.25(3) at the rate of two and one half per cent per month for the first three months and at the rate of 6 per cent per month for the balance period, aggregating a sum of Rs. 13,848. The petitioner has further contended that he could not file his return for the first and second quarters of the assessment year 1987-88 within the stipulated period in view of strike resorted to by the labourers wherefor the respondent No. 4 had imposed a penalty of Rs. 3,800 upon him in terms of Sec.16(8) of the Bihar Finance Act. The aforementioned orders of penalty are contained in annexure-4 and 4/3 to the writ application.

6. The petitioner has further contended that he has been issued with notices of assessment for the assessment years 1986-87 and 1987-88.

7. Mr. Pawan Kumar the learned counsel appearing on behalf of the petitioner did not press the question of vires of Constitution (Forty-sixth Amendment) Act, in view of the recent Supreme Court decision in Builders Association of India V/s. Union of India reported in [1989] 73 STC 370 ; 1989 BLT 151.

8. The learned counsel however, submitted that in the aforementioned decision, the Supreme Court did not go into the question of the vires of the legislation made by the State Legislature which may be capable of being challenged on the grounds other than the question of vires of the said Constitution (Forty-sixth Amendment) Act. The learned Counsel