1997 Supreme(P&H) 1372

PUNJAB & HARYANA HIGH COURT
Ashok Bhan and N.K.Agrawal JJ.
Dlf Industries Limited
Versus
State Of Haryana
Civil Writ Petition No. 3542 of 1997,7379 of 1997,
Decided On : SEPTEMBER 10, 1997

The levy of tax on works contracts, the exemption of sub-contractors from the liability of tax, the levy of tax on the purchase of bricks, the validity of the relevant provisions of the Act and the Rules, and the interpretation of the relevant provisions.

Headnote:

SALES TAX - Levy of tax on works contract - Exemption to sub-contractor - Validity of proviso to Section 6(1) of the Haryana General Sales Tax Act, 1973 - Levy of tax on purchase of bricks - Validity of proviso to Section 18 of the Act - Validity of Rule 24(i) and Rule 39A(11) of the Haryana General Sales Tax Rules, 1975.

Fact of the Case:

The petitioner, a public limited company, was engaged in the work of colonization in the State of Haryana and carried out works contracts. The petitioner executed some work itself and some work was got done through the sub-contractor. Material used in the work was arranged by the sub-contractor. The petitioner also did some work for parties other than its holding company. The petitioner had three divisions, namely, Energy Systems Division, Electrical Division, and the Construction Division. The petitioner maintained its headquarters at Gurgaon (Haryana) and was a registered dealer under the Act as also under the Central Sales Tax Act, 1956.

Finding of the Court:

1. The proviso to Section 6(1) of the Act, which exempts a sub-contractor from the liability of tax, is valid and constitutional. 2. The proviso to Section 18 of the Act, which requires a subsequent dealer to furnish a certificate showing the payment of tax at the first stage of sale, is valid and constitutional. 3. Clause (i) of Rule 24 of the Rules, which permits a dealer to deduct from his gross turnover the purchase and sale value of goods which have already been subjected to tax at the first stage of sale, is valid. 4. Clause (c) of Sub-Rule (4) of Rule 28A of the Rules, which requires an exempted industrial unit to issue a certificate in form S.T. 14-A to a purchasing dealer, is valid. 5. Sub-Rule (11) of Rule 39A of the Rules, which prohibits a brick-kiln owner from issuing certificates in form S.T. 14, is arbitrary, unjust, and unreasonable and is, therefore, declared to be bad and is struck down.

Issues: 1. Whether the proviso to Section 6(1) of the Act, which exempts a sub-contractor from the liability of tax, is valid and constitutional? 2. Whether the proviso to Section 18 of the Act, which requires a subsequent dealer to furnish a certificate showing the payment of tax at the first stage of sale, is valid and constitutional? 3. Whether Clause (i) of Rule 24 of the Rules, which permits a dealer to deduct from his gross turnover the purchase and sale value of goods which have already been subjected to tax at the first stage of sale, is valid? 4. Whether Clause (c) of Sub-Rule (4) of Rule 28A of the Rules, which requires an exempted industrial unit to issue a certificate in form S.T. 14-A to a purchasing dealer, is valid? 5. Whether Sub-Rule (11) of Rule 39A of the Rules, which prohibits a brick-kiln owner from issuing certificates in form S.T. 14, is arbitrary, unjust, and unreasonable?

Ratio Decidendi: 1. The proviso to Section 6(1) of the Act is valid and constitutional because it excludes a sub-contractor from the liability of tax as a sub-contract is a part of the works contract. 2. The proviso to Section 18 of the Act is valid and constitutional because it lays down a condition for seeking exemption from the levy of tax at the subsequent stage of sale in respect of the declared goods. 3. Clause (i) of Rule 24 of the Rules is valid because it permits a dealer to exclude the purchase or the sale value of the goods if he filed a certificate in form S.T. 14, duly filled in and signed by the selling registered dealer. 4. Clause (c) of Sub-Rule (4) of Rule 28A of the Rules is valid because it lays down a clear and unambiguous provision that the goods manufactured by an exempted industrial unit shall be exempt from the levy of tax at all the successive stages of sale or purchase subject to the condition that the dealer, making successive sales, furnished a certificate in form S.T. 14-A obtained from the registered dealer from whom the goods were purchased. 5. Sub-Rule (11) of Rule 39A of the Rules is arbitrary, unjust, and unreasonable because it denies the benefit of form S.T. 14 to a buyer of bricks if the brick-kiln owner opted to pay tax in lumpsum.

Final Decision: The writ petitions were partly allowed. The proviso to Section 6(1) of the Act, the proviso to Section 18 of the Act, Clause (i) of Rule 24 of the Rules, and Clause (c) of Sub-Rule (4) of Rule 28A of the Rules were held to be valid. Sub-Rule (11) of Rule 39A of the Rules was declared to be bad and was struck down. The respondents were directed to provide form S.T. 14 to the brick-kiln owners paying lumpsum in lieu of sales tax so that such brick-kiln owners could make declaration in form S.T. 14 available to the buyers of bricks making sales at the subsequent stage.