Builders Association of India and Others and 9 Ors. vs The State of Bihar and Others

S. Roy, J.—In all these writ Petitions, common question of law is involved. The cases were heard together and are being disposed of by this judgment.

Except Petitioner No. 1 in C.W.J.C. No. 802 of 1990 (R) all the other Petitioners are contractors and executing works contract. There is not much facts which are required to be noticed in these cases, but if necessary facts in C.W.J.C. No. 802 of 1990 (R), which were referred to on behalf of the Petitioners at the time of hearing as the representative petition, will be noticed.

The vires of Section 25 of the Bihar Finance Act, 1981 (the Act) as amended by the Bihar Taxation Laws (Amendment & Validation) Act, 1990 (Amendment and Validation Act) has been challenged in these writ Petitions as also the enforceability of notification dated 7th November, 1984, issued under the unamended Section 25A.

Section 25A of the Act as introduced in the Act by Bihar Finance Act, 1984 which read as follows:

Notwithstanding anything contained in Section 26 every person making any payment in discharge of any liability on account of valuable consideration payable for the transfer of property in goods, whether as goods or in some other form, involved in execution of works contract shall be lawfully competent to deduct an amount not exceeding four percentum purporting to be a part or full of the tax payable on such sales, from the bills or invoices raised by the works contractor as payable by the person:

Provided that no such payment or discharge of any bill raised by the works contractor shall be made without deduction referred to in Sub-section (1):

Provided further that if the Slate Government is satislied that it is necessary to do so in the interest of the State revenue it may notify the names/posts of such persons who shall be lawfully competent person to make such deduction as referred to in Sub-section (1):

(2) The deduction referred to in subsection (1) shall be made in the manner which may be prescribed.

(3) The payment of such deduction into the Government Treasury shall be the responsibility of the person making such deduction.

(4) The person making such deduction shall issue deduction certificate in the prescribed manner to the person or dealer from whose bill or invoice such deduction has been made.

(5) If any person contravenes the pro-visions of Sub-sections (1), (3) and (4), the prescribed authority shall, after giving an opportunity of being heard in the manner prescribed, by an order in writing, direct that such person shall pay by way of penalty, a sum not exceeding twice the amount so deducted and not deposited into the Government Treasury in the manner prescribed.

The Section provided the maximum rate at, which tax was to be deducted. The State Government on 7th November, 1984, issued a notification fixing the rate at 4 percentum and it reads as follows:

Notification.

Dated the 7th November, 1984.

S.O. 1212. - In exercise of the power conferred by Sub-section (1) of Section 25A of the Bihar Finance Act. 1981 (Bihar Act No. 5 of 1981) the Governor of Bihar is pleased to direct that the amount of tax to be deducted under Sub-section (1) off Section 25A shall be at the rate of four percentum.

This Notification shall be deemed'' to have come into force with effect from the 1st April, 1984.

By the order of the Governor of Bihar.

Sd/- N.P. Singh. Commissioner of Commercial Taxes and Special Secretary to the Governor, Finance (Commercial Taxes) Department, Bihar, Patna.

Section 25A was amended from time, to time. 7t was last amended by Section 11 of the Amendment and Validation Act and-after amendment, the Section reads as follows:

Notwithstanding anything (sic) in Section 26, every person making any payment in discharge of any liability on account of valuable consideration payable for the transfer of property in goods, whether as goods or in some other form, involved in the execution of works contract shall be lawfully competent to deduct an j amount as specified by the State Government by Notification purporting to be a part or full of the tax payable on such sales from the bills or invoices raised by the works contractor as payable by the person:

Provided that no such payment or discharge of any bill raised by the works contractor shall be made without deduction referred to in Sub-section (1):

Provided further that if the State Government is satisfied that it is necessary to do so in the interest of the State revenue it may notify the names/posts of such persons who shall be lawfully competent person to make such deduction as referred to in Sub-section (1).

(2) The deduction referred to in Sub-section (1) shall be made in the manner which may be prescribed.

(3) The payment of such deduction into the Government Treasury shall be the responsibility of the person making such deduction.

(4) The person making such deduction shall issue deduction certificate in the prescribed manner to the person or dealer from whose bill or invoice such deduction has teen made.

(5) If any person contravenes any or all of the provisions of Sub-sections (1), (3) and (4), the prescribed authority shall, after giving an opportunity of being heard, by an order in writing, direct that such person shall pay by way of penalty, a sum not exceeding twice'' the amount of tax deductible under Sub-section (1).

(6) The provisions of Section 27 for recovery of any amount of tax due from a dealer shall, mutatis mutandis, apply for recovery of any amount of tax, deducted and/or any penalty imposed but not deposited under this section.

It will be noticed that in original Section 25A, the rate at which tax was required to be deducted from the bills or invoices regarding works contract involving die transfer of property in goods was not to exceed four percent. By the amendment, the percentage at which tax shall be deducted was deleted and the rate has been left to be worked out by the State Government and to notify the same. No notification u/s 25A as amended was issued by the State Government. However, the Respondents went on deducting 4 percent from the bills and invoices of persons executing works contract involving transfer of property in goods on the basis of notification dated 7th November, 1984.

The vires of Section 25A was challenged on the ground that unguided and uncanaged on power has been delegated by the legislature to the Executive by allowing the latter to determine the rate at which sales tax is to be deducted from the bills or invoices. It was submitted that in Section 25A no guideline has been provided for the executive to follow in fixing the rate at which sales tax will be deducted. It was further urged that in the whole of the Act itself, there is no provision which can be said to be guideline for the executive to be followed for issuing notification u/s 25A of the Act. It was submitted that most of the goods used for execution of works contract in which transfer of property in goods takes place, tax paid "declared" goods are used and as no provision has been made in Section 25A to exclude such goods, it'' contravenes Section 15 of the Central Sales Tax Act, 1956 (C.S.T. Act). According to the Petitioners, as no fresh notification u/s 25A as amended in 1990 has been issued, en the basis of notification dated 7th November, 1984, no deduction as sales tax can be made from the bills or invoices of persons executing works contract where transfer of property in goods is involved. It was submitted that even assuming that the notification dated 7th November, 1984 is in force, the rate fixed therein has been fixed arbitrarily. learned Counsel submitted that no transfer of properly in goods takes place during the exertion of contract and it takes place ''only after the work is handed over after completion. No tax can be deducted from bills or invoices during the execution of work.

The questions which arise in these cases are;

(i) Whether Section 25A of the Act is ultravires on the ground that unguided, uncanalised and arbitrary power has been give to the Executive to fix the rate and also because it is in conflict with Section 15 '' of C.S.T. Act.

(ii) Whether the State Government was required to issue a fresh notification under amended Section 25A or the notification issued on 7th November, 1984, can be said to be in force.

(iii) if it is in force, whether'' the rate at which deduction is to be made is arbitrary.

(iv) as transfer of property in goods takes place only when the contract is executed and the work is handed over, no tax is payable during the executing of the work.

In Pandit Banarsi Das Bhanot Vs. The State of Madhya Pradesh and Others, : it was held that fixation of rates of tax not being an essential legislative function could be validly delegated to a non-legislative body but when it is left to such a body, the legislature must provide guidance for such fixation. The law laid down in Banarsi Das (supra) has been consistently followed by the Supreme Court in all subsequent judgments. A number of decisions on this point were cited at the Bar but it is not necessary to encumber this judgment by noticing all these decisions. The two decisions which in point of time are latest are Babu Ram Jagdish Kumar and Others Vs. State of Punjab and Others, , and the The Registrar of Co-operative Societies, Trivandrum and Another Vs. K. Kunjabmu and Others, . In the later case it was observed as follows:

The power to legislate carries with the power to delegate. But excessive delegation may amount to abdication Delegation unlimited may invite despotism uninhibited. So the theory has been evolved that the legislature cannot delegate its essential legislative function. Legislate it must by laying down policy and principle and delegate it may to fill in detail and] carry out policy. The legislature may guide the delegate by speaking through the express provision empowering delegation or the other provisions of the statute, the preamble, the scheme or even the very subject matter of the statute. If guidance there is, wherever it may be found, the delegation is valid A good deal of latitude'' has been held to be permissible in the case of taxing statute and on the same principle a generous degree of latitude must be permissible in the case of welfare legislation, particularly those statutes which are designed to further the Directive Principles of State Policy.

In view of this legal position, we are, required to find out if any guidance has been J given in the Act to the delegate to be followed in fixing the rate.

Works contract in which transfer of property in goods takes place is liable to be ; taxed under the Act and this is not in dispute. learned Counsel appearing on behalf of the Petitioners submitted that there is no provision in the Act which can be said to be guidance for the Executive to fix the rate for deduction of tax u/s 25A. He urged that specific provision with regard to works contract was in Section 13(1)(b)(ii), but as that item in Section 13 has been deleted by the Amendment and Validation Act, no guideline is available in the Act. Learned Advocate General urged that every dealer is liable to sales tax'' or purchase tax. The rate of tax payable by a dealer has been fixed by the legislature in Section 12 of the Act and this is applicable to section 25A also.

Section 3 of the Act provides for payment of sales tax or a purchase tax, as the case may be, by every dealer. Section 4 provides the situation or circumstance when a dealer is liable to pay purchase tax. Section 5 provides for surcharge. Section 6 provides for charge, of additional tax. Section 12 provides the rate of tax, which reads as follows:

Rate of fax. - (1) The sales tax or purchase tax payable by a dealer u/s 3 or 4 shall be levied at the rate of eight percentum of his taxable turnover:

Provided that the State Government may, from time to time, by notification and subject to such conditions and restrictions as it may impose, fix higher rate not exceeding twentyfive perceutum or any lower rate not below two percentum in respect of such class of dealers or such goods, class or description of goods, or, such sales, category or description of sales as may be specified in the notification.

(2) Notwithstanding anything contained in this part the levy of the tax payable by a dealer under this part on sales or purchase of declared goods made by him f inside Bihar shall be subject to the restrictions and conditions contained in Section 15 of the Central Sales Tax Act, 1956 (LXXIV of 1956).

It is not in dispute and could not have been disputed that no steriotype rules can be laid down to find out whether any guidance has been provided by the legislature to be followed by the delegate. Whether any guideline has been provided shall have to be found out from the Act.

Section 12 first provides that sales tax or purchase tax payable by a dealer shall be levied at the rate of 8 percentum on his taxable turnover. The Section however empowers the State Government by notification to fix higher rate not exceeding 25 percentum or any lower rate not below two percentum in respect of particular class of dealers or goods. The section further takes care to provide that levy of tax on sales or purchase of declared goods by a dealer inside Bihar shall be subject to the restriction, and conditions contained in Section 15 of the C.S.T. Act It is clear from Section 3 that tax is payable by dealer. It is also clear that the rate of tax on declared goods that is declared u/s 14 of the C.S.T. Act, shall be subject to Section 15 of C.S.T. Act. In Section 12 the legislature has provided a fixed rate and has also given latitude to the executive by providing the lowest rate and highest rate, at which tax may be made '' payable by a dealer. Providing maximum rate of tax is a form of guidance by the legislature to the delegate Municipal Corporation of Delhi Vs. Birla Cotton, Spinning and Weaving Mills, Delhi and Another, .

Although the rate generally at which tax is payable u/s 12 has been provided, u/s 13 provision has been made for fixing special rate on certain sales and purchase and under section. 25A tax payable by a works contractor has been taken care of.

In Section 13 some insertions by amendment were made by Bihar Finance Act, 1984, one was with regard to works contract. The relevant portion of Section 13 read as follows:

Special rate of tax on certain sales or purchases - (1) Notwithstanding anything contained in this part, but subject to such conditions and restrictions as may be prescribed:

(a) ....

(b)(i) ....

(ii) Sales to or purchase by a registered dealer of goods required by him directly for use in the execution of works contract,

(c) ....

(d) ....

(e) ....

and in respect of which the purchaser has been granted a certificate by the prescribed authority in prescribed manner and for prescribed period shall unless the goods are taxable at a lower rate u/s 12 be subject to Sub-section (2) leviable to tax at such rate or rates as may be notified by the Stale Government in this behalf not exceeding 4 percentum.

Section 13(1)(b)(ii) dealt specifically with works contract and the same was deleted by the Amendment and Validation Act. This was necessary as the power to fix the rate was left to the State Government under the amended Section 25A of the Act.

It will be noticed that in sections 12 and 13 rates of tax have been mentioned. As Clause (b)(ii) Sub-section (1) of Section 13 has been deleted, it must be held that Section 13 does not provide any guideline for fixing the rate u/s 25A. All sales and purchases except those covered by Section 13 must be held to be within the purview of Section 12.

It was submitted on behalf of the Petitioners that the legislature has completely effaced itself by delegating the power to the State Government. It was urged that Section 61 of the Act provides for laying of certain notification on the ''table of the State Legislature. The provision of laying notification on the table of the legislature according to the learned Counsel for the Petitioners has a check on the delegate because the legislature has retained its power to modify or even annul the notification.

So far the second part of the submission is concerned, it is correct. Merely because there is no provision in the Act for laying on the table of the Legislature notification issued u/s 25A, it cannot be held that the Legislature has effaced itself. Such provision in an Act may be a ground for upholding a provision where rate of lax Js left to a delegate to be worked out M.K. Papiah and Sons Vs. The Excise Commissioner and Another, .

I am of the opinion that Section 12 provides the guideline to the executive fort fixing the rate of tax to be deducted u/s 25A of the Act. This answers first part of question No. (i).

With regard to second part of question No. (i) learned Counsel for the Petitioners submitted that in building contract or in any civil engineering job, most of the goods used'' for execution of such contract are tax paid goods and are also declared goods under C.S.T. Act. As tax paid declared goods are used, no tax can be deducted again in view of Section 15 of the C.S.T. Act for such goods. Learned Advocate General submitted that what is deducted u/s 25A was not the actual liability incurred by the works contractor, but that was only tentative amount. The actual amount payable as tax for a particular works contract can be ascertained only at the time of assessment under the Act. The amount of deduction being tentative and subject to assessment Section 25A cannot be said to be in conflict with Section 15 of the C.S.T. Act, with regard to declared goods under that Act. He urged that on Petitioners'' own admission all the goods used in execution of works contract are not tax paid goods. There, therefore, can be no bar u/s 25A to deduct tax on such goods. According to the learned Advocate General, if after final assessment it was found that tax in excess has been deducted u/s 25A, the same, may be refunded to the works contractor as provided under the Act.

Expression "declared goods" has been defined in Section 2(c) of the C.S.T. Act to mean goods declared u/s 14 of that Act to be of special importance in inter-State trade or commerce. Section 14 enumerates various goods which are declared to be of, special importance in inter-State trade or commerce. Section 11 of the Act provides that Sales tax on goods shall be levied only at that point or points in the series of sales as may be specified by the Stale Government by a notification published in the Official Gazette. If the notification specifies any goods, class or description of the goods that the sales tax shall be levied at the first point of sale in Bihar either by an importer or manufacturer or a wholesaler, subsequent sale of the same goods shall not be levied to tax, if the dealer making the subsequent sale produces before the prescribed authority u/s 17 original copy of the cash memo or invoices or bill issued to him and files a true and complete declaration in the form and in the manner prescribed. In execution of works contract for construction of building and/or other civil engineering works declared goods within the meaning of Section 14 of the C.S.T. Act are used. Every sales tax law of State so far as it imposes or authorises imposition of tax on the sale or purchase of declared goods be subject to restrictions and conditions mentioned in Section 15 of the C.S.T. Act. For properly appreciating the rival contentions, it is necessary to notice Section 15 of the C.S.T. Act, which reads as follows:

Restrictions and conditions in regard to tax on sale of purchase of declared goods within a State. - Every sales-tax law of a State shall, in so far as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely;

(a) the tax payable under that law in respect of any sale or purchase of such good inside the State shall not exceed four percent of the sale or purchase price there, of, and such tax shall not be levied at more than one stage;

(b) where a tax has been levied under that aw in respect of the sale or purchase ns the State of any declared goods and such goods are sold in the course of inter. State trade or commerce, and tax has been paid under this Act in respect of the sale of such "cods in the course of inter-State trade commerce, the tax levied under such law shall be reimbursed to person making such sale in the course of inter, State trade or commerce in such manner and subject to such conditions as may be provided in any law in force in that State;

(c) where a tax has been levied under that law in respect of the sale or purchase inside the Sate of any paddy referred to in Sub-clause (i) of Clause (1) of Section 14 the tax leviable on rice procured out of such[paddy shall be reduced by the amount of tax levied on such paddy;

(d) each of the pulses referred to in Clause (vi-a) of Section 14, whether whole or Sweated and whether with or without Stall be treated as a single commodity for the purpose of levy of tax under that law.

It is clear from Section 15 of the C.S.T. Act that tax on the sale or purchase of declared goods shall not be levied at more than one stage that is tax can be levied at one point only. It is not in dispute that so far the declared goods such as cement iron rods, beams and other steel products used in execution of works contract are concerned, tax are Ito be paid at the first point of sale. If taxis, made payable for such declared goods under I Section 25A also, the provision comes in conflict with the restrictions imposed by Section 15 of the C.S.T. Act, inasmuch as tax on declared goods is being realised at two points.

Section 11 of the Act provides that if sales tax has been levied at the first point of sale, no tax shall be levied again in subsequent sale of such goods if the dealer making the subsequent sale produces before the prescribed authority at the time of assessment original copy of cash memo or invoices or bill issued to him and files true and complete declaration in the form and in the manner prescribed. The form prescribed for this is form IXC, as provided in Rule 12(2) of the Bihar Sales Tax Rules, 1983. Nothing has'' been provided in Section 25A that the person making any payment to works contractor shall not make any deduction from bills or invoices, sales tax on the ground that payment of it has been made at the first point Rather non-deduction of sales tax by the person making the payment has been made penal u/s 25A (5). The result is that the works contractor shall have to pay sales tax again from his bills or invoices on declared tax paid goods. In Bhawani Cotton Mills Ltd. Vs. State of Punjab and Another, it was held that as some provision of Punjab General Sales Tax Act was in conflict with Section 15 of the C.S.T. Act such provision was void.

Section 42 of the Act provides for refund of tax paid in excess. Learned Advocate General has taken shelter under this section. Merely because there is provision for efund, the State Legislature cannot be allowed o make a provision which will be in violation of express provision u/s 15 of the I.S.T. Act. If the collection of tax is without jurisdiction, the provision of refund will of validate that action. This legal position is been laid down in Bhawani Cotton tills (supra).

As noticed above, Section 25A does it give any option to the person, making the payment, not to deduct sales tax for the goods for which tax has been paid at the first point He must, therefore, deduct tax for such goods and] also for goods on which no tax has been paid. The result will be that there will be deduction of tax which was not payable by the works contractor.

It is, therefore, held that Section 25A is in conflict with Section 15 of the C.S.T. Act. It is struck down.

In view of this finding, I first felt that it was not necessary to record a finding on other questions formulated in these writ Petitions. But as those questions were strenuously pressed, I am recording my findings on those also.

So far the stand of the Petitioners that as no fresh notification u/s 25A as amended in 1990 has been issued, and original Section 25A having been repealed, the Respondents cannot deduct any sum relying on the notification dated 7th November, 1984.

Original Section 25A contained the provision of deduction of tax not exceeding four percent. By Amendment and Validation Act, that was deleted and power to fix the rate was delegated to the State Government. Admittedly, no notification has been issued by the State Government after amendment of Section 25A,

It was submitted by learned Advocate General that in view of Section 27 of the Bihar & Orissa General Clauses Act, 1917- (General Clauses Act), notification dated 7th November, 1984 continues to be in force and the State Government was not required to issue fresh notification under the amended Section 25A. learned Counsel for the Petitioners replied that Section 27 of the General Clauses Act envisages repeal and re-enactment with or Without modification of an Act and as ''no Act has been repealed and re-enacted, Section 27 does not apply. Consequently notification dated 7th November, 1984 does not survive.

In the present case amendment has been made in Section 25A. The question is "whether "repeal" in Section 27 of the General Clauses Act will include "amendment". No decision of this Court or of the Supreme Court on this point was brought to our notice. The decisions of different High Courts which could be found out on this point have taken a broader view of the matter and have held that "repeal" will include "amendment". Reference "may be made to Allied Exports and Imports, Gudur Nellore District Vs. State of Andhra Pradesh, Hyderabad, , Issa Yacub Biehara v. State of Mysore AIR 1961 Mys 7, Chunilal Vallabhaji Gandhi Vs. State, . I am in respectful agreement with the view. I am of the opinion that notification dated 7th November, 1984 is in force. This disposes of question No. (ii).

learned Counsel for the Petitioners submitted that deduction of tax at 4 percent u/s 25A has no nexus with the actual rate at which person executing works contract in which transfer of property in goods takes place shall be found ultimately liable to pay. He urged with reference to the statements made in paragraph 17 of the supplementary affidavit that if the value of works contract is Rs. 100/-, taxable event occurs only with regard to 35 percent whereas tax is sought to be deducted from the total value of the works contract. With reference to paragraphs 18 and 22 of the supplementary affidavit, it was urged by the learned Counsel for the Petitioners that on most of the goods used for execution of works contract, tax is liable to be paid at the first point of sale and no tax, therefore, can be deducted for those goods from bills and invoices raised by the contractor According to him tax, if at all, can be deducted on the value of the brick and at the prescribed rate which do not exceed more than five, percent of the value of the works contract.

We were informed during the course of hearing that rate of tax except on declared goods vary from 8 percent to 11 percent. The rate at which tax is payable u/s 15 of the C.S.T. Act shall not exceed 4 percent. This Court cannot embark to find out the amount of tax that a person executing works contract may be found liable to pay. In view of the fact that the general tax liability on goods other than declared goods is between 8 percent and 11 percent and on declared goods not exceeding 4 percent, deduction u/s 25A at 4 percent cannot be said to be arbitrary.

There is no merit in the third point raised on behalf of the Petitioners.

It was submitted on behalf of the Petitioners that Section 25A was also ultravires because it provides for deduction of tax from the whole value of the works contract. learned Counsel for the Petitioners was wrong. From the reading of Section 25A it is clear that the deduction shall be made on account of valuable consideration payable for transfer of property in goods, whether as goods or in other form involved in the execution of the works contract and not on the total value of the works contract. If in a works contract there does not take place transfer of property in goods, no deduction u/s 25A can be made.

On question No. (iv) it was submitted by the learned Counsel for the Petitioners that the transfer of property in goods used in execution of works contract does not take place unless the job is completed and handed over. It was urged that unless there is a transfer of property in goods, there is no question of payment of any tax. According to him, deduction of sales tax in the purported exercise of power u/s 25A is in fact, recovery of advance tax which the Act does not provide.

Article 366, Clause 29-A was introduced by 46th Amendment of the Constitution and Clause 29A(b) deals with works contract. It provides that tax on the ''sale or purchase of goods will include a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract. Clause 29A, inter alia, provides that such transfer of any goods shall be deemed to be a sale of those goods by a person making the transfer and a purchase of those goods by a person to whom such transfer is made.

In none of the writ Petitions, agreement has been made pa it of the brief. Nothing has been brought to our notice to show that it was agreed between any of the persons executing works contract and the principal for which it is being executed the there was any term which stipulated the time when the title shall pass in the goods to the principal. In Builders Association of India and Others Vs. Union of India (UOI) and Others, the Supreme Court observed:

Ordinarily unless there is a contract to the contrary in the case of a works contract, the property in the goods used in the construction of a building passes to the owner of the land on which the building is constructed, when the goods or materials used are incorporated in the building. The contractors become liable to pay sales tax ordinarily when the goods or materials are so used in the construction of the building and it is not necessary to wait till the final bill is prepared for the entire work.

There is no merit in question No. (iv).

It is necessary to notice Geeta Prasad Singh and Co. and Others Vs. The State, which was cited at the Bar. In that case also vires of unamended Section 25A was challenged. The challenge was rejected. It was observed in that'' case that deduction of tax u/s 25A "partakes the character of advance tax. "This is contrary to what has been held in Builders Association {supra) relevant portion of which has been quoted hereinabove.

In view of the findings recorded in answer to second part of question No. (i) all the writ petitions must be allowed.

In the result, all the writ petitions are allowed and it is declared that Section 25A of the Act is ultravires. There shall be no order as to costs.

S.B. Sinha, J.

Although I agree with the operative portion of the judgment of my learned Brother Section Roy, J, but as I am not in agreement with his views on some points, I intend to state my own reasonings.

In these writ applications, the Petitioners have, inter alia, questioned the constitutionality and legality of Section 25A of the Bihar Finance Act, 1981 as amended by Bihar Finance (Amendment) Act, 1990 (Act No. 2 of 1990) (hereinafter referred to for the sake of brevity as the said ''Act'').

In C.W.J.C. No. 828 of 1990(R) the Petitioner has also prayed for a declaration that the deletion of Section 13 (1)(V)(ii) by the Bihar Act No. 2 of 1990 by which the facility to purchase goods at a concessional rate to the contractor had been stopped is ultravires Article 14 of the Constitution o f India.

As Brother Section Roy, J. has traced the legislative history of Section 25A in details, it is not necessary to reiterate the same.

However, it may be mentioned that in terms of the provision of Section 25A of the (sic) Act, Respondent No. 3 (Commissioner Commercial Taxes) had issued two notification bearing Nos. 1210 and 1212 dated 7.11.1984 whereby and whereunder various persons and authorities were authorised to deduct tax at source and the rate of such deduction was fixed at 4%. The said notifications are contained in Annexures 3 and 4 to the said writ petition.

Before proceeding to consider the [pints involved in this case in details, the provisions of the said Act which are relevant for Se purpose of this case may be noticed:

Section 2(j) defines gross turnover to mean:

(i) for the purposes of levy of sales tax, in respect of sale of goods, agreement of sale prices received and receivable by a dealer including the gross amount received or receivable for execution of works contract or for the transfer of light to use any goods for any purpose (whether or not for a specified period) during any given period (and also including the sale of goods made outside the State in the course of inter-State trade or commerce or export) but does not include sale prices of goods which have borne the incidence of purchase tax u/s 4.

(ii) for the purposes of levy of purchase tax, aggregate of purchase prices paid % or payable by a dealer during any given period in respect of purchase of goods or class or description of goods which have borne the incidence of purchase tax u/s 4.

(iii) for the purposes of Section 3, the aggregate of the amounts under Sub-clauses (i) and (ii).

Section 2 (ww) defines ''works contract'' which reads as follows:

Works contract'' means any agreement for carrying out for cash or deferred payment or other valuable consideration the construction, fitting out, improvement or repair of any building, road, bridge or other immovable or movable property.

(underlining is mine)

Section 3 is the charging provision. Section 3(10) of the said Act reads as follows:

The tax for each year, may, with the previous approval of the Commissioner be estimated and collected in advance during a year in such installments may be fixed by the prescribed authority. For the purpose the prescribed authority may require the dealer to furnish an advance estimate of his taxable turnover for that year and may provisionally determine the amount of tax payable by the dealer in respect of the year. Thereupon the dealer shall pay the amount so determined by such date as may be fixed by such authority.

Section 7 provides for exemption of payment of tax. Section 11 deals with point or points in the series of sales at which the sales tax shall be levied.

Section 12 provides for rate of tax which reads as follows:

(1) The sales tax or purchase tax payable by a dealer u/s 3 or 4 snail be levied at the rate of eight percentum of his taxable turnover:

Provided that the State Government may, from time to time by notification and subject to such conditions and restrictions as it may impose, fix higher rate not exceeding twenty five percentum or any lower rate not below two percentum in respect of such class of dealers or such goods, class or description of goods, or such sales, category or description of sales as may be specified in the notification.

(2) Notwithstanding anything contained in this part the levy of the tax payable by a dealer under this part on sales or purchases of declared goods made by him inside Bihar shall be subject to the restrictions and conditions contained in Section 15 of the Central Sales Tax Act, 1956.

(Underlining is mine)

Section 13 provides for special rate of tax on certain sales or purchases.

Section 14 provides for registration of dealers.

Section 16 provides for return, rebate and payment of admitted tax.

In terms of Sub-section (5) of Section 16, provisions have been made for filing monthly abstract statement of sales and purchases on 1 or before the last date of the month following the month to which the statement relates, in such form and in such manner as may be prescribed by the dealers whose monthly amount of tax exceeds two thousand five hundred.

Section 21 deals with taxable turn over.

Section 25 provides for payment and recovery of tax.

Section 26 provides for restrictions on collection of tax by dealers. It states that as no person except a registered dealer can recover tax from the customers, in order to obviate such a situation, Section 25A of the Act contains a non-obstante clause overriding the provisions of Section 26.

However, by reason of Section 25A of the Act, the authority to recover tax has been vested in the buyer or its representative.

As indicated hereinbefore, Section 25A provides for deduction of tax from bills or invoices from the works contractor.

Section 42 provides for the manner in which the application for refund should be dealt with.

Section 43 provides for grant of interest in certain cases.

State of Bihar in exercise of its power conferred upon it u/s 58 of to said Act, framed rules known as Bihar Sales Tax Rules, 1983, (hereinafter referred toil ''the said Rules)

Rule 9 provides for maintenance of separate accounts by dealers.

Rule 12 provides for evidence in support of claims for deductions from gross turnover.

Rule 13 provides for evidence in support of claim for payment of tax at special ran u/s 13.

Rule 26A provides for the manner in which the deduction of tax from bills/invoiced of the works contractor are to be carried out in terms of provision of Section 25A.

Rule 34 provides for refund u/s 42 of the Act.

By reason of a notification dated 7th November, 1984 as contained in Annexure-3 to the writ application, persons mentioned therein have been notified as lawfully competent to deduct the amount of sales tax for the purpose of Section 25A at the rate notified from the amount payable against any bill of J invoices raised by the works contractor.

By reason of another notification j dated 7th November, 1984 as contained is Annexure-4 to the writ application, it has been directed that the amount of tax to be'' deducted under Sub-section (1) of Section 25A shall be at the rate of four percentum.

Reading thus the provisions of section 25A read with Rule 26A and the aforementioned two notifications dated 7th November, 1984 it is evident that the tax at the rate of four per centum has to be deducted from all the bills/invoices and not from those bills in terms whereof valuable consideration becomes payable for the transfer of property goods. The right to deduct 4% from the bills or invoices raised by the works contractor becomes enforceable when such works con-pet involves transfer of property in goods whether as goods or in some other from. If therefore the job involves in transfer of property in goods and bills therefore are to be laid from time to time, the persons authored to deduct the amount in terms of Sub-section (1) of Section 25A by reason of the aforementioned notifications dated 7th November, 1984 (Annexure-3) would be entitled to exercise his power thereunder irrespective of the fact as to whether in respect of any particular bill or bills any amount involving the consideration payable for the transfer of property in goods involved in the execution of the works contract or not or whether any tax at all is payable or not.

The persons who have been authorised to Induct tax from the bills or invoices submitted by a works contractor has not been given nor could be given any adjudicatory function even for the purpose of prima facie determining the extent or transfer of goods involved in execution of the works contract and the amount of tax that would be payable by the contractor.

It will, therefore, not be correct to say that deduction is to be made from the value of the property in goods transferred and not from the total value of the works contract. The questions posed in this application have thus, to be answered in the aforementioned background.

The nature of tax, the incidence of tax the taxable event, and the quantum thereof would vary from case to case. Giving thus a literal meaning to Section 25A of the Act Rule 26A of the Rules and the notifications dated 7.11.84 it is evident that thereby a statutory liability has been fastened upon every person in making any payment or discharge of any liability on account of valuable consideration payable for the transfer of property in goods to deduct an amount as specified by the State Government by notification purported to be in part or full, the tax payable on such sales from the bills or invoices raised by the works contractor.

The constitutionality of the provisions of the right of the State to realise sales tax from the works contractors was questioned in various writ application before the Supreme Court of India; one of them having been filed by Builders Association of India, the Petitioner No. 1 in C.W.J.C. No. 802 of 1990 (R). The said decision is reported in Builders Association of India and Others Vs. Union of India (UOI) and Others, .

A Division Bench of this Court of which one of us (S. Roy, J.) was a member in Jamshedpur Contractors'' Association and Others Vs. The State of Bihar and Others, , held that Rule 13A of the said Rules is ultravires Section 25A of the Bihar Finance Act. Similar view has been taken in Construction and Construction Vs. Union of India (UOI) and Others, and in Shewaram Hirwani and Another Vs. State of Bihar and Others, .

In Construction and Construction (supra) Rule 26A was directed to be read, down in the following manner:

As such, in my view, the words ''all payments being made in respect of all works contracts executed'' used in Sub-rule (2) of Rule 26A has to be read to mean payments made for the transfer of property in goods whether as goods or in some other form, involved in the execution of a works contract. If that interpretation is given, then deductions have to be made only out of payments to he made for the transfer of property in goods, involved in the execution of a works contract and no deduction is to be made in respect of the amount spent over labour charges and other services in which no transfer of any property in goods is involved. This interpretation of the words ''all payments'' shall not only be consistent with Section 25A of the Act but also with the aforesaid judgment of the Supreme Court in the case of Builders Association of India and Ors. v. Union of India and Ors. (supra). It need not be pointed out that Sub-rule (2) of Rule 26A cannot cover a field beyond prescribed by Section 25A and Article 366(29-A)(b) of the Constitution.

The attitude on the part of the State with regard to the imposition of tax on works contract will be evident from the stand taken by the State before the Supreme Court of India in Builders Association of India''s case (supra) wherein the court held:

We are surprised at the attitude of the State which have put forward the plea that on the passing of the 46th amendment the Constitution had conferred on the States a larger freedom than what they had before in regard to their power to levy sales tax under Entry 54 of the State list.

It is, therefore, clear that the amount of deduction at the rate of 4% from the bills or invoices was considered to be reasonable in view of the law as it then stood and as it was understood by the State which would be evident from its stand in Builders Association case (supra) as also the decision of this Court in Geeta Prasad Singh and Co. and Others Vs. The State, In the latter case it has been held that the scheme of Section 25A of the Act authorises deduction from the entire bill.

From the decisions aforementioned it is, therefore, now well settled that rule 13 of the Bihar Sales Tax Rules is ultravires and the authorities of the State of Bihar have no jurisdiction to issue any directive with regard to J the percentage of labour element involved in a particular works contract. In other words, it is now well settled that sales tax is leviable only on the total considerations of the goods transferred in execution of the works contract and not any other element. It is also now the settled law that sales-tax required to be paid in respect of a works contract shall be subject to the other provisions of the said Act.

Despite the decisions of the Supreme Court and this Court as mentioned herein before, Rule 26A has not been amended not any new notification had been issued.

As indicated by Brother Section Roy, J, according to the Respondents the said notification dated 7th November, 1984 as contained & Annexure 3 and 4 of C.W.J.C. No. 802/90(R) are still operative.

In Builders Association''s Case (supra) the Supreme Court was not required to consider the constitutionality of the provisions of Section 25A neither on the ground that by reason of the said provision unguided, uncanalised, arbitrary and naked powers have been conferred upon the State of Bihar nor was it called upon to consider as to whether the said! provision is reasonable.

With regard to the question of reasonableness, it has been stated that the liability of the members of the Association will be around 1% of the gross value of the contract.

In support of the aforementioned contentions the Petitioners have annexed chart which is contained in Annexure-6 to the writ application and which reads as follows:

Fixed Elements:

(i) Overhead Establishment etc. (as per report of rates and cost committee, Govt, of India. 10%

(ii) Profit (as per Govt, estimate) 10%

(iii) Contingency : 2%

Total Fixed Elements 22% i.e. Rs. 22/-

Variable Element i.e. Rs. 78/- 78% of Rs. 100/-

(a) Non-material component :

(i) Labour : 40% of Rs. 78%- i.e. Rs. 31.20 says Rs. 30/- 30%

(ii) Depreciation on plant, equipment & machineries 4% of Rs. 78/- i.e. Rs. 3.12 says Rs. 3.50 3.5%

(b) Material component:

(I) Consummable:

(i) Petrol, oil & lubricants (POL) 6% of Rs. 78%- i.e. Rs. 4.68 says Rs. 5/- 5%

(ii) Centring, shuttering, scaffol ding, Bailies, Nails, Strings, Shuttering i.e. Rs. 4.68 says 4.50 4.5%

(II) Materials component:

(i) Materials used on which Sales Tax paid at 1st point like cement, steel, glass, paints, varnishes, plywood, timber asbes tos, cement products, sanitary fittings mosaic tiles, bitumens, refractory products, stone chips, boulders etc. 38% of Rs. 78/- i.e. Rs. 29.64 says 30/ 30%

(ii) Materials on which Sales Tax is to be paid at end point like sand, bricks etc. 6%of Rs. 78/- i.e. Rs. 4.68 says Rs. 5/- 5%

Total variable elements: _______ 78%

Elements on which Sales tax may be levied 5% of the total value of contract of Rs. 100/- i.e. on Rs. 50/-only. Considering rate of Sales Tax as 8% amount of Sales Tax on Works contract; =8% of Rs. 5/- =0.40 paise+ 1% TOT=0.44 paise. Total liability of Sales Tax on Works Contract of Rs. 100/- may be 0.44 paise i.e. 0.4% of the value of Works Con tract.

According to the Petitioners, those figures are based on Indian Practical Civil Engineers Hand Book 5th Edition by Sri P.N. Khanna.

With regard to the transfer of property in goods involved in a building contract, it has been stated:

that it is further stated that goods involved in the execution of the works contract are mainly the following items:

(i) cement.

(ii) steel.

(iii) paint and varnishes.

(iv) Electrical fittings and goods.

(v) Sanitary goods and fittings.

(vi) Mosaic, (vii) Timber.

(viii) Plywood.

(ix) Stone materials, such as boulders, chips etc.

(x) Glass sheets.

(xi) Sand.

(xii) Brick.

That under the scheme of the Act, goods are taxable at particular point of sale in accordance with Section 11 of the Act and all the goods needed in the execution of the works contract are taxable either at the first point of sale when the goods are purchased by the contractor or at the last point of sale when the goods are sold by a registered dealer to any person other than a registered dealer.

That it is further stated that according to the Scheme of the Act, if the goods are liable to be taxed at the first point of sale, it is commonly said to be tax paid goods and a dealer has to pay tax at the time of purchase of such goods and thereafter no further tax is payable on subsequent sale of such goods. It is relevant to mention at this stage that goods like cement, steel etc. mentioned in item Nos. (i) to (x) of the foregoing paragraph, ''are the goods on which tax is payable at the first point of sale in Bihar and the contractors purchase those goods after payment of tax and therefore, no further tax is payable on the use of these goods in the execution of the works contract.

That only few goods like sand, brick which are used by the contractors, are taxable at the last point of sale under the scheme of the Act when such goods are sold by a registered dealer to a person other than a registered dealer as mentioned above. The value of such goods, in no case, exceeds more than 5% of the total value of the contract. It is necessary to mention and state at this stage that all Government Department like P.W.D., P.H.E.D. and other departments under whom the contractors work, are registered under the provisions of the Act and such Departments are entitled to purchase goods without payment of any tax on furnishing prescribed declarations. Thus, a contractor is not liable to pay tax even in respect of goods which are subjected to tax at the last point of sale because in respect to such goods he is entitled to file declarations submitted by the departments.

The, contentions raised on behalf of the Petitioners are:

(A) Section 25A confers uncanalised, unguided and arbitrary power on the State Government and, thus, the same is ultravires the Constitution of India.

(B) From the chart as contained in Annexure-6 it will be evident that in a building contract, 35% to 40% of the total value of contract involved in transfer of goods upon which tax can be levied and it has, therefore, been contended that deduction @4% of tax at source is arbitrary and unreasonable when the total liability towards sales tax would not exceed 1% of the gross value.

(C) As despite amendment in Section 25A by reason of the Act 2 of 1990 no new notification has been issued, the Respondents have no jurisdiction to deduct any amount from the bills and/or invoices. The notifications dated 7.11.1984 all contained in Annexures 3 and 4 to the writ application are not saved u/s 27 of the Bihar and Orissa General Clauses Act.

In any event, the said notification dated 7th November, 1984 fixing the rate of deduction @ 4% from every bill or in-voices must be declared ultravires in view of the changed situation.

(D) As the works contractors are also registered dealers, they are entitled to all the benefits conferred upon all other registered dealers under the said Act and the rules.

In C.W.J.C. No. 802 of 1990 (R), a counter affidavit has been filed on behalf of the State; but the statements made in the supplementary affidavit to the effect that the members of the Petitioner No. 1 Association are not required to pay more than 1% of the sales tax on the entire value of the works contract and as stated in details in paragraphs 62 to 64 hereinbefore have not been disputed.

Learned Advocate General appearing on behalf of the States, in reply, submitted:

(i) Section 12 of the Act provides for the necessary guidelines.

(ii) As the rate of tax varies from 8% to 11%, deduction of sales tax at the rate of 4% from the bill is reasonable.

(iii) The notifications dated 7th November, 1984 as contained in Annexure-3 and 4 to the writ application are saved u/s 27 of the Bihar and Orissa General Clauses Act.

(iv) When the transfer of goods takes place the contractor becomes liable to pay sales tax when the goods or materials are used for the construction of the building and, thus, taxable event occurs as soon as the said transfer takes place.

Re Contention No. A

There cannot be any doubt that primarily fixation of rate of tax is the legislative function. Such a legislative function may, however, in certain circumstances be delegated to the executive. Such delegation of power must not, however, be unguided, uncanalised or arbitrary.

In Re: The Delhi Laws Act, 1912, the Ajmer-Merwara (Extension of Laws) Act, 1947 and the Part C States (Laws) Act, 1950, , it was held that I Parliament cannot delegate its primary legislative function. The same view has been taken by the Supreme Court in a number of decisions. It is also well settled that the delegation of power must be subject to fixation of a reasonable standard to cover the exercise of the Relegated power.

It is also well known that a Legislative Act will not be held ultravires for want of valid express guidance given in that regard, if there are any in-built safeguards therefore in the Act itself. See Shivji Prasad and Others Vs. The State of Bihar and Others,

The question which, however, arises for consideration in this case is as to whether there are inbuilt safeguards in the Act so as to save it from the wrath of Article 14 read with Article 245 of the Constitution.

According to the learned Advocate General, the in-built safeguard has to be found out in Section 12 of the Bihar Finance Act; by reason whereof power to fix rate of tax In terms of the aforementioned provision has been fixed at 8% subject to the proviso appended thereto as a result whereof the rate of tax can be varied from 2% to 25%. Section 13 of the Act also provides for the rate of tax in respect of certain specified matters which come within the purview thereof.

Section 25A of said Act, has got nothing to do with fixation of tax. It is merely a recovery provision.

The question, therefore, which would arise for consideration is as to whether Section 12 of the said Act can be taken recourse to fox the purpose of finding out as to whether the same provides for the necessary guidelines with regard to the fixation of rate for the purpose of deduction from the bills/invoices by way of recovery of the tax.

On a plain reading of Section 25A of the Act read with the notification dated 7th November, 1984, as contained in Annexure 4 to the writ application, it would be evident that the authorities named in the notification dated 7th November, 1984 as contained in Annexure-3 to the writ application are under a statutory obligation to deduct 4% from the bill or invoice. It will therefore, ex facie, not be correct to contend that recovery has to be made only in respect of the transfer of goods involved in the execution of the works contract.

The nature, the extent, the manner and and the time for transfer of goods involved in, the execution of a works contract would depend upon the nature of the contract itself. The amount of tax and the rate thereof which has to be paid by the contractor will thus depend upon the extent of the goods actually transferred by contractor to his principal in execution of the works contract. The persons who have been authorised to deduct tax from the bills or invoices submitted by a works contractor have not been given nor could be given any adjudicatory function even for the purpose of prima facie determining the extent of transfer of goods involved in execution of works contract and the amount of tax that would be payable by the contractor.

Prior to the amendment carried out by reason of Bihar Finance (Amendment) Act, 1990, the maximum rate at which deductions were to be made had been fixed. So far as the unamended provision of Section 25A is concerned, guideline was provided by fixing the maximum rate of deduction from the bill/ invoices. Determination of quantum, effect and purpose of recovery of tax from bills or invoices submitted by the works contract is essentailly a legislative function.

By reason of the impugned amendment in Section 25A of the said Act, the provision fixing the maximum rate at which deductions are to be made from the bills has been deleted. It will, therefore, be in the discretion of the executive to fix the rate. By reason of Section 12 an enabling provision has been made to fix the rate of tax. Fixation of rate of tax, in my opinion, has got no direct and immediate nexus with the provision for recovery of tax, as would appear from the discussions made hereinafter.

In a given case, it is possible that in execution of the works contract, no sales tax at all would be payable inasmuch as tax has already been paid in respect of the goods transferred in execution of the works contract or the tax has to be paid by the purchaser.

It is also possible that tax may have to be levied at the rate of 95% of the entire bill or invoice in view of the nature of the works contract involved. While constructing an earthen dam, the value of the materials by way of bricks, sand or cement would be negligible which may be to the extent of 5% of the entire value of works contract and the labour and other element would be to the extent of 95%; whereas in the case of installation of a transformer the costs of transformer itself may cover 95% of the total value of the works contract; 5% being the cost of labour and other elements. No guideline has thus been provided to the State to deal with such extreme situations. From what has been stated hereinbefore, it would also appear that rate of tax fixed by the State u/s 12 of the Act will, thus, have no direct and immediate nexus as the rate of tax would vary from goods to goods sought to be transferred if execution of the works contract which in turn would depend upon the nature of the contract itself.

In C.W.J.C. No. 828 of 1990 (R), the! Petitioner thereof has contended that in respect of the contracts entered into by it with the State, except one part of the contract, no materials are to be used at all and in relation to that part of the contract which necessitates use of materials, the same is supplied by the department.

The deduction of certain amount from bills or invoice submitted by the contractor from time to time would also depend upon the fact as to whether the said bill covers; items whereby transfer of some goods has taken place or not. By way of example, it may be mentioned that while constructing a building or plant, a contractor who is also to prepare the plan may have to submit a bill immediately after preparation of the plan. He may also submit a bill for laying down the foundation at a stage when it would not involve transfer of any goods. In absence of any specific provision authorising persons to deduct tax in terms of the notification as contained in Annexure 3 and 4 to the writ application, such an authority will have no, other option but to deduct 4%-from the said" bills also although at that point of time, no '' transfer of any goods in execution of work contract had taken place.

In a given case, as noticed by my learned Brother Section Roy, J it is also possible that the provision of Central Sales Tax would be applicable in relation to the transfer of goods pad/or there may be a case where in relation to the transfer of some goods, the authority empowered to deduct tax from the bills or invoices submitted by the contractor has not been delegated with the power even to prima facie determine the amount of tax payable out of the total amount of the bill.

Taking into consideration such a situation, can it be said that Section 12 in exercise of which power the State is entitled to levy different rate of tax varying from 2% to 25% provides for the necessary guidelines so as to save the provision of Section 25A of the Act from being declared unconstitutional? In my opinion, the answer has to be rendered in negative.

In Debi Gopal Krishna v. State of Punjab and Ors. reported in AIR 1967 SC 1985 Subba Rao, C.J. speaking for the Constitution Bench held as follows:

Under Section 5 of the Punjab General Sales Tax Act 1948, as it originally stood, an uncontrolled power was conferred on the provincial Government to levy every year on the taxable turnover of a dealer tax at such rate; as the said Government might direct. Under that Section the Legislature practically effaced itself in the matter of fixation of rates and it did not give any guidance either under that Section of under any other provision of the Act. No other provision was brought to our notice. The argument of the learned Counsel that such a policy could be gathered from the constitutional provisions cannot be accepted for, if accepted, it would destory the doctrine of excessive delegation. It would also sanction conferment of power by Legislature on the executive Government without laying down any guidelines in the Act. The minimum we expect of the Legislature is to lay down in the Act conferring such a power of fixation of rates clear legislative policy or guidelines in that regard. As the Act did not prescribe any such policy, it must be held that Section 5 of the said Act, as it stood before the amendment, was void.

(Underlining is mine)

The other provisions of the Act which are said to be supplying the requisite guidelines to the executive must have a reasonable nexus with the power sought to be delegated by the Legislature in favour of the executive. As Section 12 deals with the fixation of rate of tax which has got nothing to do with the fixation of rate at which recovery shall be made from the bills, the same in my opinion,'' does not alter the position in law inasmuch as the persons who are registered dealers would be entitled to avail the special rate of tax on certain sales and purchases which benefit is available to any other registered dealer, despite the amendment carried out in Section 13 of the said Act by Act No. 2 of 1990. In Babu Ram Jagdish Kumar and Others Vs. State of Punjab and Others, , the Supreme Court approved the ratio laid down in Debi Das Gopal Krishna (supra) but distinguished the said decision inter alia, on the ground that in terms of Punjab General Sales Tax Act and the notification issued thereunder, no exemption granted to the tax-payer has been taken away holding:

The tax payable under the Act admittedly being an indirect tax, the tax burden would ordinarily fall on the consumer of rice and not on any of the intermediaries including the appellants. The impugned notification cannot therefore be treated as one issued against the policy of the statute.

Such is not the position here.

In Debi Das�Gopal Krishna''s case (supra) Subba Rao, CJ. speaking for the Constitution Bench upon taking into consideration the decision of Corporation of Calcutta and Another Vs. Liberty Cinema, held as follows:

If this decision is an authority for the position that the Legislature can delegate its power to a statutory authority to levy taxes and fix the rates in regard thereto, is equally an authority for the position that the said statute to be valid must give a guidance to the said authority for fixing the said rates and that guidance cannot be judged by stereotyped rules but would depend upon the provisions of a particular Act, to that extent this judgment is binding on us. But we cannot go further and hold, as the learned Counsel for the Respondents asked us to do that whenever, a statute defines the purpose or purposes for which a statutory authority is constituted and empowers it to levy tax that statute necessarily contains a guidance to fix the rates; It depends upon the provisions of sach statute.

(underlining is mine)

In M.K. Papiah and Sons Vs. The Excise Commissioner and Another, the Supreme Court although noticed the Debi Das''s case (spra) but did not distinguish the same. In that case, it was, however, held that the Legislature may also retain its control over its delegate by exercising its power of repeal. With utmost respect, in my opinion, the same runs counter to the decision of the constitution Bench in Debi Das''s case (supra).

It was further held that a delegation of legislative power may be held to be good when the delegated legislation itself may have to be placed before the Parliament.

There is no such provision in. the said Act.

In Debi Das''s case, the Supreme Court repelled the contention to the effect that whenever a Statute defines purpose or purposes for which a statutory authority is constituted and empowers it to levy tax, that Statute necessarily contains a guidance to fix a rate. It further repelled the contention that the doctrine of constitutional and statutory objects would afford reasonable guideline for the Government to fix rate.

It was held:

Conferment of reasonable area of discretion by a fiscal statute has been approved by this Court in more than one decision : See Khandige Sham Bhat and Others Vs. The Agricultural Income Tax Officer, . At the same time a larger statutory discretion placing a wide gap between the minimum and the maximum rates and thus enabling the Government to fix an arbitrary rate; may not be sustained.

The supreme Court further held:

Further citation is unnecessary for; the principle of excessive delegation is well settled and the cases are only illustrations of the application of the said principle, The law on the subject may briefly be stated thus:

The Constitution confers a power, and imposes a duty on the Legislature to^ make laws. The essential legislative function is the determination of the legislative policy and its formulation as a rule of conduct. Obviously it cannot abdicate its functions in favour of another. But in view of the multifarious activities of a welfare State, it cannot presumably work out all the details to suit the varying aspect of complex situation. It must necessarily delegate the working out of details to the executive or any other agency. But there is danger inherent in such a process of delegation. An over-burdened legislature or one controlled by a powerful executive may unduly overstep the limits of delegation. It may not lay down "any policy at all; it may declare its policy in vague and general terms; it may not set down any standard for the guidance of the executive; it may confer an arbitrary power of the executive to change or modify the policy laid down by it without reserving for itself any control over subordinate legislation. Tills self effacement of legislative power in favour of another agency either in whole of in part is beyond the permissible limits of delegation. It is for a Court to hold on a fair, generous and liberal construction of an impugned statute whether the legislature exceeded such limits. But the said liberal '' construction should not be carried by the Coutts to the extent of always trying to discover a dormant or latent legislative policy to sustain an arbitrary power conferred on executive authorities. It is the duty of the Court to strike down without any hesitation any arbitrary power conferred on the exective by the legislature. (underlining is mine) It was further held:

While it is tine that the tax cannot be realised without it being quantified, the non-quantification of the liability will not destroy the liability under the charging section.

In Babu Ram Jagdish Kumar and Others Vs. State of Punjab and Others, also the Supreme Court held that there cannot be any abdication ht the essential legislative power. It said:

Even in matters relating to taxation laws it has been consistently held that the Legislature can delegate the power to fix rates of tax provided there are necessary guidelines regarding such fixation on the ground that in a modern society, taxation is one of the methods by which economic and social goals of the State can be achieved and the power to tax, therefore, should be a flexible power and capable of being easily altered to meet the exigencies of circumstances. Such delegation has been held to be not amounting to delegation of essential legislative function.

In that case, the Supreme Court was f considering the provisions of Section 31 of the punjab General Sales Tax Act, 1948 Section 31 whereof reads as follows:

Power to amend Schedule C : The State Government, after giving by notification not less than three months'' notice of its intention so to do, may by notification add to, or delete from Schedule C'' any goods and thereupon. Schedule C shall be deemed to be amended'' accordingly.

In the The Registrar of Co-operative Societies, Trivandrum and Another Vs. K. Kunjabmu and Others, , the Supreme Court did not notice Debi Das''s case (supra). In that case the provision of Section 60 of the Madras Co-operative Societies Act which provided for exemption of Societies from the application of the provisions of the Act or application with modification. In that case it was held:

The policy of the Act is there and so are the guidelines. Why the legislation? To facilitate the formation and working of Co-operative Societies". Co-operative Societies for what purpose? ''For the promotion of thrift, self-help and (sic) aid. Amongst whom ? ''Among agriculturists and other persons with common economic needs''. To what end? ''To bring about better living, better business and better methods of production''. The objectives are clear; the guidelines are there. There are numerous provisions of the Act dealing with registration of societies, rights and liabilities of members, duties of registered societies, privileges of registered societies, property and funds of registered societies, inquiry and inspection, supersession of committees of societies, dissolution of societies, surcharge and attachment, arbitration etc. We refrain from referring to the details of the provisions except to say that they are generally designed to further the objective set out in the preamble. But, numerous as the provisions are, they are not capable of meeting the extensive demands of the complex situations which may arise in the course of the working of the Act and the formation and the functioning of the societies. In fact, the too rigorous applications of some of the provisions of the Act may itself occasionally result in frustrating the very objects of the Act instead of advancing them. It is to provide for such situations that the Government is invested by Section 60 with a power to relax the occasional rigour of the provisions of the Act and to advance the" objects of the Act. Section 60 empowers the State Government to exempt, a registered society from any of the provisions of the Act or to direct that such provision shall apply to such society with specified modifications. The power given to the Government u/s 60 of the Act is to be exercised so as to advance the policy and objects of the Act, according to the guideline; as may be gleaned from the preamble and other provisions which we have already pointed out, are clear.

(Underlining is mine)

This decision, thus has also no application to the facts of the present case.

In Harakchand Ratanchand Banthia and Others Vs. Union of India (UOI) and Others, , the Supreme Court struck down Gold Control Act The said decision was'' followed by the Supreme Court in A.N. Parasuraman Etc. Vs. State of Tamil Nadu, . It held that as Tamil Nadu Private Education Institution (Regulation) Act does not lay down any guideline for, the exercise of the power by the delegated authority, as a result of which the authority is in a position to act according to his whims and is, thus, discriminatory and arbitrary.

In Gopal Narain Vs. State of Uttar Pradesh and Another, , the Supreme Court upheld the authority to fix rate of tax by the Municipal Board under the provisions of U.P. Municipalities Act stating that the law provides for a detailed guideline which held:

It will be seen from the aforesaid provisions that the rate of tax to be levied and the persons or the class of persons liable to pay the same have a reasonable relation to the subject taxable under the Act. The said rate to be imposed and the persons or the class of persons liable to pay the same are ascertained by a quasi-judicial procedure after giving opportunity to the parties affected, subject to revision by the State Government. We cannot, therefore, say that the power conferred upon the Municipal Board is an arbitrary power offending Article 14 of the Constitution.

Similarly, in Dr. Balbir Singh and Others Vs. M.C.D. and Others, the Supreme Court held:

The words...having regard to...the circumstances of the case'' undoubtedly leave a certain measure of discretion to the Controllor in fixing the standard rent but this discretion is not such an unfettered, and unguided discretion as to enable the* Controller-to fix any standard rent which he considers reasonable. He is reguired (sic) fix the standard rent in accordance with the formula laid down in Section 6 or Section 7 and he cannot ignore that formula by saying that in the circumstances of the case he considers it reasonable to do so. The only discretion given to him is to make adjustments in the result arrived at on the : application of the relevant formula, were it is necessary to do so by reason of the fact that the landlord might have made some alteration or improvement in the, building or circumstances might have transpired affecting the condition or utility of the building or some such circumstances of similar character. The compulsive force of the formula laid down in Section 6 for the determination of standard rent and of the provision of Section 7 for increase in standard rent is not in any way whittled down by Sub-section (2) of Section 9 but a marginal discretion is given to the Controller to marginal the rigour of the formula where the circumstances of the case so require.

Such guidelines have not been provided in the impugned legislation at all. In Devi Das''s case (supra), it has been held that when the rate of tax to be fixed has such a wide gap the same cannot be said to be providing for a guideline.

In my considered view, therefore, Section 12 of the Act which provides for only rate of tax and that too from 2% to 25% does not provide guideline for recovery of the tax.

The learned Advocate General contended that'' Section 25A required an amendment as the matter relating to fixation of the amount fin terms of Section 25A had to be made flexible keeping in view the rate of tax which may be imposed from time to time. This may be I so but while delegating its power to fix the rate with regard to recovery of tax from the I bills or invoice, it was also obligatory upon I the Legislature to give sufficient guidelines to I the executives for the purpose of fixing different rates depending upon the nature of works contract the value of the goods which is sought to be transferred in execution of the works contract and other relevant factors. In this context is was all the more necessary to delegate power to make guideline to fix tax so that the State may not impose flat rate as has been done in the instant case without having any reasonable nexus with the payability of the tax by individual works contractor.

In this connection it may be mentioned that not only there is no provision for grant of interest in respect of excess tax deposited, the period of limitation for making an assessment under the Bihar Finance Act is 8 years as provided for u/s 24 of the Act.

The provisions for refund is also subject to the limitation provided for under the proviso appended thereto.

Interest becomes payable in terms of Section 43 of the Act if the amount is not refunded within six months from the date of receipt of the application in that behalf from the dealer or person concerned.

It is, thus, possible that in a given case, a huge amount is collected by way of deductions in terms of Section 25A of the Act, but, the actual refund may be made after a '' number of years and except u/s 43 of the Act which provides for interest from the date mentioned therein, no interest on that amount shall also be payable. In terms of Article 265 of the Constitution of India, no tax can be levied or collected except in accordance with law.

The mode of recovery of tax except as specifically provided for by reason of a valid legislation will, thus, be ultravires Article 265 of the Constitution.

It is true as has been contended by the learned Advocate General that the power should be given to the State to issue notifications from time to time so as to determine the rate at which the amount should be deducted from the bills and/or invoices of the works contractor, but, such delegation of power should have been, in my opinion, coupled with the guidelines to be fixed in respect of each type of contract so as to enable the State to come to tentative finding as to the amount of rate pf tax which might be payable by contractor executing a particular nature of works contract.

The general notification fixing a particular rate in respect of all works contract irrespective of the nature of the contract the amount involved and/or the rate of tax would be irrational.

As demonstrated hereinbefore, separate guidelines in relation to different nature of the works contract are necessary so as to enable imposition of different rates for deduction from the bills by the executive. As indicated hereinbefore, irrespective of the nature of the works contract and irrespective or the fact as to whether any tax is payable or not, the Contractor will have to pay tax. Such a provision will also be violative of Article 14 of the Constitution.

In the matter of levy of tax, a very wide latitude is available to Legislature in the matter of classification of object, persons and things for purpose of taxation.

However, the provision for recovery of tax stands on a different footing. Recovery of tax is permissible only when it becomes due except in the case of advance tax. Recovery of tax denotes recovery of tax assessed or assessable. A power to recover tax without any guidelines cannot be sustained. As noticed hereinbefore, even the maximum rate at which recovery can be made has not been specified which provision existed in unamended Section 25A of the Act. There is also no provision for laying down the 1 notification before the legislative assembly. No check, thus, at all has been provided with regard to the power of the State to issue notification fixing the rate at which recovery is to be made from the bills/invoices.

In similar situation in Debi Das''s case (supra) the Supreme Court struck down the provisions of Punjab Sales Tax Act. In View of the aforementioned authoritative pronouncement of the Supreme Court, in my opinion Section 25A of the said Act has to be struck down.

Re : Question-B:

It is well known that a taxing statute is lot wholly immune from attack on the ground hat it infringes the equality clause under Article 14 of the Constitution. Though the cou-(sic) are not concerned with the policy underlying a taxing statute or whether a particular ix could not have been imposed in a different ay or in a way that the court might think ore just and equitable. See Kunnathat Thathunni Moopil Nair Vs. The State of Kerala and Another, .

Recently, the Supreme Court in (sic) Hotel Pvt. Ltd. and Anr. v. State of (sic) Bengal and Ors. reported in (1991) 2 (sic) Court Cas. 154 considered the (sic) concept of the doctrine of equal (sic) of laws as enshrined under Article 14 of the Constitution of India.

The Supreme Court in that case, however, held after considering a large number of decisions:

From the propositions of law enunciated in the above cases by this Court, it is well settled that a taxation will be struck down as violative of Article 14 if there is no reasonable basis behind the classification made by it, or if the same class of property, similarly situated, is subjected to unequal taxation as was held in S.K. Dutta ITO v. Lawrence Singh Ingty. If there is no reason for the classification then also the law will be struck down. However, as was held in Kunnathat Thathunni Moopil Nair v. State of Kerala and State of A.P. v. Nalla Raja Reddy if the taxation imposes a similar burden on everyone with reference to that particular kind and extent of property on the same basis of taxation, the law shall not be open to attack on the ground that the result of the taxation is to impose unequal burdens on different persons. It was held in Steelworth J.L. v. State of Assam that in law of taxation of income it is competent for the legislature to graduate the rate of tax according to the ability to pay. In Ganga Sugar Co. Ltd. v. State of U.P. also it has been held that in the matter of taxation law as the court permits a greater latitude to the discretion of the legislature and in Khyerbari Tea Co. v. State of Assam it has been held that in tax matters the State is allowed to pick |and choose districts, objects, persons, methods and even rates for taxation if it does so reasonably. In Twyford Tea Co. v. State of Kerala it has been observed that when a statute divides the objects of tax into groups or categories, so long as there is equality and uniformity within each group, the tax cannot be attacked as violative of Article 14. although due "to fortuitous circumstances or a particular situation some included within a group may get some advantage over others provided of course they are not sought out for special treatment. It has repeatedly been held, for example in Khyerbari Tea Co. Gopal Narain v. State of U.P. and Steelworth v. State of Assam and V. Venugopala Ravi Verma v. Union of India that as to what articles should be taxed is a question of policy and there can not be any complaint merely be-, cause the legislature has decided to tax certain articles and not others. In D.S. Nakara v. Union of India Desai J. even expressed that too microspopic a classification may also be violative of Article 14.

It further held:

Whether a particular tax is discriminatory or not must necessarily be considered in light of the nature and incidence of that particular lax and cannot be judged by what has been held in the context of other taxes except the general propositions. The precedents relating to property taxes such as land tax, building tax, plantation tax and even income tax or a service tax wilt not be of direct relevance to a luxury tax^ as it is neither a property tax nor an income tax "but a tax on the provision for luxury.

(Underlining is mine)

What is, however, permissible in the mutter of levy of tax cannot be held to be permissible in the matter of recovery of tax. In the matter I of recovery of tax, in absence of any specific provisions in this regard, the substantive and procedural law for recovery of tax assessed must be the same.

In respect of levy of Sales Tax, the assessee stands on a far better footing than assessee under the other tax laws in as much as the assessment has to be done on the basis of taxable turnovers.

The matters relating to assessment of sales tax, regard being had to the provisions of Section 13, notifications issued under J Section 11 of the Bihar Finance Act from time to time and Sections 14 aid 15 of the Central Sales Act involve great complication.

As indicated hereinbefore from the scheme and the provisions of Section 25A of the said Act read with Rules and the notifications issued, it is evident that deduction @ 4% is to be made from every bill or invoice.

The consideration which would attract the provisions of Section 25A of the Act and Rule 26A of the Rules as also the notifications as contained in Annexures 3 and 4 is as to whether the works contrast involved transfer of goods or not. In the event it is found that in course of execution of the works contract, there would occur transfer of goods, the persons authorised to make deduction in terms of notification dt. 7.11.84 as contained in Annexure-3 would have no option but to deduct 4% from each bill or invoice in view of the scheme of the Act itself.

In Geeta Prasad Singh v. State of Bihar reported in 1986 PUR 451 however it was held that deduction of 4% from the entire bill cannot be said to be confiscatory. The Division Bench held that if the tax paid is excessive, he may be entitled to some interest as well. But unfortunately there exists no such provision. The Division Bench in that case did not take into consideration the matter relating to reasonableness of the rate fixed on the touchstone of the facts and the provisions of law as have been raised in these writ applications.

As indicated hereinbefore, the rate notified has to be applied in respect of each bill or invoice irrespective of the fact as to what extent the works contractor is liable for payment of tax.

While judging this matter, it is to be considered that a registered dealer is bound to submit, monthly statements in respect of his turnover. A registered dealer is also liable to submit quarterly return, and along with which it must deposit the admitted tax. It is true as has been submitted by the learned Advocate General that in the event tax is deducted by the Principal in excess of the limited liability determined as being payable, there is a provision for refund thereof in terms of Section 42 of the Act.

In Bhawani Cotton Mills Ltd. Vs. State of Punjab and Another, , the Supreme Court repelled such a contention and held:

If a person is not liable for payment of tax at all, at any time, the collection of a tax from him, with a possible contingency of refund at a latex stage, will not make the original levy valid because if particular sales or purchases are exempt I from taxation altogether, they can never be taken into account, at any stage, for the purpose of calculating or arriving at the taxable turnover and for levying tax.

In this connection, it may be mentioned that in C.W.J.C. No. 802 of 1990 (R), the Petitioners have stated as follows:

That the Petitioners state that it is common knowledge that the work contracts are of various natures, such as, Building construction, Dam construction, Road construction, Irrigation Projects etc. and in some type of contracts there is no element of sale involved in form of goods while in some contracts like, building construction some element of goods are involved varying from 35% to 40%, of the total value of the contract. It is relevant to state here that among all type of works contract maximum amount in form of goods are involved in building contracts. After the decision of the Hon''ble Supreme Court of India in Builder''s Association of India, only transfer of property in goods involved in the execution of Works contract is liable to be taxed subject to all the restrictions and benefits of the respective sales tax law of the State. Thus, in a building contract, maximum 35% to 40% of the total value of the contract may be taxed and that too with all the restrictions and benefits provided under the Bihar Finance Act.

In Builders Association of India and Others Vs. Union of India (UOI) and Others, , it was held that 46th a amendment of the Constitution made it possible for the State to levy sale tax on the price of the goods and materials used in works contracts as if there was a sale of such goods and materials.

It was held that the power of the State to, levy tax on sales and purchase of goods include ''deemed sale'' and purchase of goods under clause 29A of Article 366 of the Constitution falls under. Entry 54 and not outside it.

The reasonableness of the fixation of 4% in terms of the impugned notification is required to be judged in the aforementioned context.

Rule 26A of the Bihar Sales Tail Rule 1983 provided for the matter relating to tax from the bills/invoices of work contract u/s 25A.

Sub-rule (2) of Rule 26A provides that the deduction referred to under Sub-section (1) of Section 25A shall be made at the rate notified in this behalf from time to time by the Government. Sub-rule (2) provides that such reduction shall be made from all payments made in respect of all work contracts executed whether in part or in full after 1st April 1984 provided total value of the works contract or contracts exceed Rs. 25000/-.

From the provisions aforementioned, it would be evident that whereas, the notification fixing the rate was to be made from time to time by the Government in terms of Rule 26A such a notification has now to be made in terms of Section 26A as amended. It is further evident that in terms of Sub-rule (2) of Rule 26A of the Rules deductions have got to be made from all payments and not from as particular bills or invoice or invoices which represent the value of the transfer of goods involved in the execution of the works contract.

The fixation of rate of 4% from the bills/invoices submitted by the works-contractor in terms of Section 25A has to be considered from another angle.

the Petitioners have rightly brought to our notice that whereas in terms of Sub-rule (2) of Rule 26A deductions were required to be made from the bills and/or invoices in respect of the works contract which included the labour element also, Rule 13A provided how the deductions have to be made on account of labour charges from the turn over in respect of a works contract.

As noticed hereinbefore, Division Bench of this Court of which one of us (S. Roy J.) was a member in Jamshedpur Contractors'' Association and Others Vs. The State of Bihar and Others, held that Rule 13A is ultravires Section 25A of the Bihar Finance Act. Similar views has been taken in Construction and Construction Vs. Union of India (UOI) and Others, and in Shewaram Hirwani and Another Vs. State of Bihar and Others, .

The stand taken by the State before this Court in Construction and Construction (supra) and before the Supreme Court in Builders'' Association (supra) as also before us, was that deductions have to be made from all the bills. Such appears also to be the scheme.

It is, therefore, clear that the amount of deduction at the rate of 4% from the bills or invoices was considered to be reasonable in view of the law as it then stood and as it was understood by the State which would be evident from its stand in Builders Association Case (supra) as also the decision of this Court in Geeta Prasad Singh and Co. and Others Vs. The State, .

In view of the decision of the Supreme Court in Builders Association Case as also of this Court in Contractors Association Case (supra) it is now firmly settled that sales tax will be payable only on the valuable consideration of the goods transferred by the contractor to the employer involved in the works contract.

This is not the case of the State that after the decision of the Supreme Court in Builders Association case the rate of tax has been enhanced.

It may be mentioned that taxes payable on the value of goods transferred in execution of the works contract would be subject to all incidence of tax and/or exemptions therefrom as provided for in the notifications issued under sections 11 and 13 of the Act also in terms of Section 14 and 15 of the Central Sales Tax Act.

Prima facie, therefore, the Petitioners have been able to show that what was reasonable at one point of time was no longer reasonable of view of the decision of the Supreme Court of India in Builders Association''s case. The Petitioners, therefore, have prima facie discharged the onus that the rate of tax once considered to be reasonable can no longer be said to be reasonable. The Supreme Court in many decisions struck down a law which was once considered to be reasonable, but owing to passage of time was held to ''be unreasonable. Reference in this connection may be made to Motor General Traders v. State of A.P. reported in AIR 1984 SC 121 and in Rattan Arya and Others Vs. State of Tamil Nadu and Another, .

Although in Construction & Construction (supra), the provision of Rule 26A was sought to be read clown, the same lacuna has again occurred by reason of amendment of Section 25A of the Act.

It is true that in order to uphold the constitutionality of a Statute it is possible to read the same down, which, is now well known, depends upon, the purport of the Act itself.

In Delhi Transport Corporation Vs. D.T.C. Mazdoor Congress and Others, it was held by Ramaswamy, J:

The Courts though have no power to amend the law by process of interpretation, but do have power to amend it so as to be in conformity with the intendment of the legislature. Doctrine of reading down is one of the principles of interpretation of statute in that process. But when the offending language used by the legislature is clear, precise and unambiguous violating the relevant provisions in the Constitution, resort cannot be had to the doctrine of reading down to blow life into the void Jaw to save it from unconstitutionality or to confer jurisdiction on the legislature. Similarly it cannot be taken aid of to emasculate the precise, explicit, clear and unambiguous language to canfer arbitrary, unbriddled and uncanalised power on an employer which is a negation to just, fair and reasonable procedure envisaged under Article 14 and 21 of the Constitution and to direct the authorities to record reasons, unknown or unintended procedure.

Ray J. held:

In interpreting the provisions of an Act, it is not permissible where the plain language of the provision gives a clear and unambiguous meaning that it can be interpreted by reading down save presuming certain expressions in order to save it from constitutional invalidity. Therefore, it cannot be held by reading down the provisions of Regulation 9(b) framed u/s 53 of the Delhi'' Road Transport Act, 1950 read with Delhi Road Transport (Amendment) Act, 1971 that the said provision does not confer arbitrary, unguided, unrestricted and uncanalised power without any guidelines on the authority to terminate the services of an employee without conforming to the principles of natural justice and equality as envisaged in Article 14.

Sawant, J. held:

The doctrine of reading down or of recasting the statute can be applied in limited situations. It is essentially used firstly, for saving a statute from being struck down on account of the unconstitutionality. It is an extension of the principle that when two interpretations are] possible one rendering it constitutional and the other making it unconstitutional, the former should be preferred. The unconstitutionality may spring from either the incompetence of the legislature to enact the, statute or from its violation of any of the provisions of the Constitution. The second situation which summons its aid is where the provisions of the statute are vague and ambiguous and it is possible to gather the intentions of the legislature from the object of the statute, the context in which the provision occurs and the purpose for which it is made. However, when the provision is cast in a definite and unambiguous language and its intention is clear, it is not permissible either to mend it even if such recasting is in accord with good reason and conscience, [n such circumstances, it is not possible for the Court to remake the statute. Its only duty is to strike it down and leave it to the legislature if it so desires to amend it. What is further, if the remaking of the statute by the courts is to lead to its distortion that course is to be scrupulously avoided. One of the situations further where the doctrine can never be called into play is where the statute requires an extensive additions and deletions. Not only it is no part of the court''s duty to undertake such exercise, but it is beyond its jurisdiction to do so.

Another difficulty in reading down the statute, as was purported to be done in Construction and Construction (supra) and Shewaram Hirwani is that as noticed hereinbefore, the persons authorised to make deduction either in terms of Sub-section (1) of Section 25A or in terms of a notification issued under Sub-section (3) thereof may not be able to determine the amount unless the entire work is completed for the purpose of finding out quantum of the payments being in respect If works contract executed and/or the valuation of the goods transferred which attracts h liability on the part of the contractor to pay sales tax.

Further, in a case where the works Contract involves transfer of goods attracting the provisions of Central Sales Tax Act, no deduction from the bills or invoices of the works contractors in terms of Section 25A of I the said Act would be permissible. I The question as to whether in a given case the provision of Central Sales Tax Act would 5 be attracted or the said Act would be attracted may itself pose a complicated question.

No machinery has been nor could be provided for decision of such a matter by the employer of the works contractor. In view I of the fact that the persons mentioned in the notification as contained in Annexure-3 to the writ application had been authorised to collect tax on behalf of the State at the rate of 4% from the bills or invoices submitted by the works contractor, the same so far as the transfer of goods involved in the works contract attracting the provisions of the Central Sales Tax Act would be ultravires.

However, with greatest respect to S. Roy, J., I am constrained to observe that Section 25A in its entirety is not conflict with Section 15(1) of the Central Sales Tax Act.

From the scheme and object of Section 25A of the said Act, it is evident that the same is a recovery provision. Such a recovery provision has got nothing to do with the leviability of the tax at all. Section 12(2) of the said Act also provides that the rate of tax so fixed by the state shall be subject to the provisions of Section 15 of the Central Sales Tax Act.

In Bhawani Cotton Mills Ltd. Vs. State of Punjab and Another, , the majority held that the purchase tax imposed by reason of Punjab General Sales Tax Act is ultravires Section 15A of the Central Act inasmuch as thereby ''ax can be levied at more than one stage.

Such is not the position of law in the instant case. In that case it was further held that Section 15 of the Central Sales Tax Act does not make any distinction between a registered dealer and an unregistered dealer.

In that case the dealer claimed exemption u/s 5(2)(a)(vi) and Rule 27A of the Rules made under Punjab General Sales Tax Act and the Rules framed thereunder.

Repelling that contention, it was held that these provisions apply only to registered dealers, whereas Section 15 of the Central Act is not restricted to the registered dealer. If an unregistered dealer intends, there is no machinery by which a dealer can ascertain whether his vendor of the declared goods has paid the tax. In that decision it was held:

The orders of assessment could not be sustained on the basis 6f provisions for a refund as the same do not afford adequate relief.

In Bhawani Cotton Mills, therefore, the Supreme Court declared the relevant provisions ultravires as by reason thereof Sales Tax could be collected at several stages despite the fact that cotton was a declared commodity.

In a case of transfer of goods involved in the works contract, some articles may be declared goods; some may not be. The provision of Section 15 of the said Act would be attracted only in the case of transfer of declared goods.

It was not the case of the Petitioner that the goods involved in the works contract is subject to taxation at more than one stage despite the fact that the same are declared goods u/s 15 of the Central Act.

The State Government has issued a notification dated 26th December, 1977 whereby stage of levy of sales tax has been fixed. The said notification was amended from time to time. It is in this situation that the Petitioner has contended that in view of the notification issued from time to time, except in the case of bricks, sand etc. sales tax is leviable only at the last stage of sale; whereas in others cases it is leviable only at the first stage of sale. A State Legislation levying sales tax can be declared ultravires Section 15(a) of the Central Sales Tax Act only if it provides for imposition of tax at a rate higher than the rate prescribed thereunder or at more than one stage.

In this connection, reference may be made to Debi Das Gopal Krishna v. State of Punjab (supra).

However, I am of the view that in view of Bhawani Cotton Mills case, the recovery of tax will be illegal in view of the fact that thereby taxes can become recoverable although no tax is payable in view of the fact that taxes arc to be collected in terms of Section 25A of the Act irrespective of the fact as to whether some good transferred involving works contract are declared goods or not.

In a given case, it is possible that in view of the taxable turnover of the works contractor, no sales tax at all would be payable, but so far as person authorised to deduct tax in terms of Section 25A is concerned, in view of the provision for penalty as contained in Sub-section (5) thereof, such an authority will have no other option but to deduct 4% from all invoices or bills submitted by the contractor irrespective of the fact as to whether tax in relation to the commodities in question h leviable or not.

In Bhawani Cotton Mills case, with regard to the argument advanced on behalf of the Revenue to the effect that'' even if a person] who is not liable to pay tax in respect of a� declared goods, he may obtain refund in, respect thereof, it was held:

If the Central Act makes it mandatory that the tax can be collected only at one stage, in our opinion, it is not enough for the State to say that a person who is not liable to pay tax, must nevertheless pay it in the first instance and then claim refund at a later stage. We may state that the question as to how far a party can ask for refund, if the order of assessment, being set aside, by appropriate proceeding is highly doubtful, because at the time when actual order of assessment is passed, in certain cases it may not be possible for'' the party to say whether he is entitled to exemption or not under Sub-clause (vi) of Section 5(2)(a) of the Act. If the person is not liable for payment of tax at any time, the collection of tax from him with possible contingency of refund at a later stage would not make original levy valid.

In this view of the matter in my opinion, it can only be held that as in terms of Section 25A deduction of tax have to be, made by a person authorised in this behalf by the State despite the fact that a tax in respect of the goods sought to be transferred was not leviable at all, the same will be illegal to that extent.

It is now well known that levy includes recovery. A provision for recovery of tax i is not permissible in law unless it is payable.

In Cape Brandy Syndicate v. I.R.C. (1921 (1) Kings Bench 64) Rowlatt, J. observed:

In a taxing statute one has to look merely as to what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumpton as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.

I In this view of the matter, in my opinion, Section 25A as such cannot be held to be ultravires Section 15(1) of the Act, but it must be held to be unreasonable in as far as in terms thereof tax will compulsorily be deducted although in certain circumstances, no tax at all may be leviable.

At this juncture another point raised at the bar viz, as to when the property in j a works contract passes to the employer may be considered.

Sections 19 and 20 of the Indian Sale of Goods Act read as follows:

Property passes when intended to pass. - (1) Where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer as such time as the parties to the contract intend it to be transferred.

(2) For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case.

(3) Unless a different intention appars, the rules contained in Sees. 20 to 24 ate rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer.

Specific goods in a deliverable state. - Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment of the price or the time of delivery of the goods, or both, is postponed.

What, therefore, would the deliverable stage would depend upon the nature of the works contract itself.

The Supreme Court in Builders Association of India and Others Vs. Union of India (UOI) and Others, held that in view of clause 29A of Article 366 of the Constitution, the provision imposing sales tax on, works contract is valid.

In paragraphs 33 to 39 of the said judgment the Supreme Court was considering the effect of the submission made on behalf of the State that the properties that are transferred to the owner in execution of a works contract are not goods in the execution of the works contract but a conglomerate, that is, entire building that is actually constructed. The Supreme Court, therefore, in that decision was not called upon to answer as to at what stages, the property used in execution of works contract passes unto the principal.

There cannot be any doubt that the J same depends upon the terms of contract.

Sales tax can be recovered except in a case covered u/s 3(10) of the said Act, only when a taxable event occurs. While executing the works contract, therefore, it is possible that the property actually passes on to the delivery of possession of the subject matter of the works contract itself. As for example, in a building contract where the building is actually handed over or in a case of erection of machinery or plant where the same is handed over. Some contracts do provide for return of the goods if the same does not conform to the specifications not only during the period when the machinery or the plant as such is installed, but also during the period when the contract is required by way of guarantee or warranty to maintain the same within a certain period. In those cases, the title in respect of the materials do not pass to the owner unless and until it is finally accepted.

In a case of works-contract, goods'' transferred must be in a deliverable stage. If it is not in a deliverable stage the question of passing of title from the seller to the buyer will not arise.

The works contract itself may be a turnkey contract or a package deal contract.

The word ''delivery'' means the transfer of its possession of a thing from one person to another; transmitting the possession of a thing from one person into the power or possession of another.

In a case of a building contract, ordinarily, therefore, delivery of the building is given only on its completion.

It is useful to refer a few passages from Gajria''s Building & Engineering Contract:

While a building contract may contain no explicit provision as to the passing of the property in materials, it frequently will expressly provide (often in relation to the calculation of interim payments) that materials shall be paid for either on deliver or on delivery being certified by the architect or engineer. Where this is so, the property in them will pass to the employer, either on payment or as section as the condition as to the certificate has been fulfilled.

It should be borne in mind that in those cases where the ownership of materials or plant is effectively transferred to the building owner, whether by express provision or otherwise, the transfer is never quite absolute since it will usually be subject to a right express or implied for the builder to remove the plant, or any excess of materials if they have not been used and fixed, on completion of the work."

"Effect of provisions for payment : Even where no explicit provisions for passing the property in materials or plant exist, there may be provisions in a contract for payments which include the value of materials or plant brought on to the site. Such provisions will normally pass the property to the building owner upon payment, or if the contract so provides upon the issue of any relevant certificate."

"Time of vesting : Where the vesting of property is stipulated to occur only on the occurrence of an event, the fact as to whether this event has or has not happened must be ascertained in the ordinary way, unless the architect or engineer, or an arbitrator has been by the agreement of the : parties constituted judge of the event.

The time of vesting must be gathered '' from the contract, it may be made...to depend on the engineer''s opinion or certificate, or upon a default by the builder, after notice given by the building owner. As against a trustee or liquidator, it would seem that unless perhaps there has been disclaimer, the time of vesting or seizure is immaterial, since the trustee will obtain-no greater interest than the bankrupt and if it is a defeasible interest, it matters not that the defeasance follows the bakruptcy provided that the contract itself was entered into without notice of any act of bankruptcy. But in other cases, the builders ownership or possession of the property may come to an end before the vesting or seizure has taken place, and this. will consequently be fatal to the building owner''s rights.

It is therefore, clear that the question as to the time when the materials used in execution of a woks contract vests in the employer depends upon facts and circumstances of each case.

The question which is, however, relevant for the purpose of consideration of this case is as to whether any sufficient safeguard has been made in Section 25A of the Act so as to enable the employer not to deduct the amount of 4% from the bills or invoices of the works contractor despite the fact that the title in respect of the goods transferred in execution of the works contract has not passed on to him. The answer to this question has to be rendered in negative.

It is, therefore clear that in a case where taxable event has not occurred, Section 25A cannot'' be taken recourse to. But in view of scheme of Section 25A and rule 26A coupled with the notifications dated 7th November, 1984 as contained in Annexures 3 and 4 it must be held that the person authorised will have no option but to deduct 4% from the have no option but to a tractor despite the fact that a taxable not have occurred.

Under a contract an employer may agree to pay certain amount of the entire consideration when good are brought on site or payment of certain amount depending upon the extent of the work irrespective of the fact as to whether the goods involved in the execution of the work contract has passed on him or not. In certain cases despite the fact that materials are affixed to building or other errection the contractor will have a right to take it out for replacement and for other purpose.

In Emden and gill''s Building contracts and practice it has been observed:

Building materials : In the case of a building contract where the property in the materials on the site has, by a vesting clause vested in the employer, it has been held that the materials are in the possession order and disposition of the builder with the consent of the true owner, until the building is finished, so as to make the contractor on bankruptcy of the contractor the property in them passes to his trustee.

See Re Fox parte Oundle and thrapston R.D.C. (1948) 1 All ER 849.

there cannot be any doudt as has been observed by the supreme court in Building Association�s case that ordinarily unless there is a contract, to the (sic) in the case of works contract, the property in good use in the contruction of the building passes to the owner of the land when the good or materials used or incorporated in the building and thus the contractor becomes liable to pay tax till final bill is prepared for the entire work But as noted hereinbefore, there may be a case where there may be a contract to the contrary and/or running bills and invoices are not prepared on the basis of the materials incorporated m the building but on other basis. Even in relation to the category of the case not falling within the ordinary cases as mentioned by the Supreme Court in Builders Association case, the parson authorised to deduct tax will have no other option but to comply with the provisions of the notifications as otherwise the provision of Sub-section (5) of the Act may be invoked as against him.

My conclusions, therefore, are:

(a) In absence of any guidelines having been issued, Section 25A of the Act must be held to be ultravires the Constitution as thereby an unguided, uncanalised, and arbitrary power has been conferred upon the State.

(b) In view of the fact that no machinery his been provided for even to ascertain prima facie as to whether any tax. at all is payable or the approximate quantum of tax, if any, and/or as to whether taxable I event has at all occurred or not, the provisions of Section 25A of the Act providing for recovery of tax at the rate of 4% from the bills/invoices submitted by the works contractor must be held to be arbitrary and unreasonable and thus, would be ultravires Article 14 of the Constitution.

(c) In view of the uncontroversial averments made by the Petitioner that at best only 1% sales tax is leviable in respect of building contract, notification authorising deduction of 4% of sales tax must be held to be unreasonable and arbitrary and thus the same is violative of Article 14 of the Constitution.

Re-Question No. C:

In Bhawani Cotton Mills Ltd. Vs. State of Punjab and Another, , the Supreme Court observed:

Apart from the fact that there is no question of the 1958 Act being repealed or re-enacted it is also clear that the definition of the expression u/s 2(ff), as it stood in 1958; on the basis of which the notification of 1958 was issued, is quite inconsistent with amended definition of the expression ''purchase'' in Section 2(ff) in 1960.

The learned Advocate general contended that in Bhawani Cotton Mills case the Supreme Court did not consider the meaning of the word ''repeal''.

In G. Ekambarappa and Ors. v. Excess Profits Tax Officer reported in AIR 1967 Supreme Court 1541, it was held:

To put it differently, the Act was repealed so far as the area of Bellary district was concerned. Repeal of an Act means revocation or abrogation of the Act and, in our opinion, Section 6 of the General Clauses Act applies even in the case of a partial repeal or repeal of part of an Act.

In Firm A.T.B. Mehtab Majid and Co. Vs. State of Madras and Another, it was held:

It has been urged for the Respondent that if the impugned rule be held to be invalid old Rule 16 gets revived and that the tax assessed on the Petitioner will be good. We do not agree. Once the old rule has been substituted by the new rule, it ceased to exist and it does not automatically get revived when the new rule is held to be invalid.

In Article 178 of Francis Bennion''s Statutory Interpretation page 429, the learned Author has stated that ''to repeal an Act is to cause it to cease to be a part of corpus juris or body of law. To ''repeal'' an enactment is to cause it to cease to be in law a part of the Act containing it.

A repeal may be either express or implied. The repeal of an enactment constitutes the amendment of the Act containing it. Accordingly the rules applicable to amendments set out in sections 170 to 177 of this Code may also apply to a repeal.

It is therefore clear that there can be a repeal in respect of a particular provisions of the section. However, the words ''with or without modification'' in Section 27 of the Act is important.

Similar provisions are contained in Section 17(2)(a) and 17(2)(b) of the Interpretation Act, 1978. Bennion in his Statutory Interpretation in Article 184 and 185 states the law thus:

Repeal : re-enactment (adaptation of references) Where an Act passed after 1889 repeals and re-enacts an enactment (with or without modification) then, unless the contrary intention'' appears, any reference in any other enactment to the enactment so repealed is to be construed as a reference to the provision re-enacted Commentary:

This derives from Section 17(2)(b) of the Interpretation Act, 1978. It applies also to a revocation by delegated legislation made after 1978. (Interpretation Act 1978 Section 23). The restriction to post-1889 Acts derives from the Interpretation Act, 1978 Section 22 and Schedule 2 para 3.

This provision is intended for consolidation Acts, which may include minor modifications of existing law. If applied to anything else, it should be construed with great caution. This is because of the vagueness of word ''modification'' in the parenthesis. If it is held to cover anything more than minor modification it may alter rights and liabilities in unintended ways. See Brown v. Mclachlan (1872) LR 4 PC 543 : Stevens v. General Steam Navigation Co. (1903) 1 KB 890.

The provision is subject to difficulties and objections similar to those discussed in the commentary on Section 176 of this Code.

Repeal : Re-enactment (preservation of delegated legislation):

Where an Act passed after 1978 repeals and re-enacts an enactment (with or without modification) then, unless the contrary intention appears delegated legislation made, or having effect as if made, under the enactment repealed insofar as it could be made under the provision reenacted, has effect as if made under that provision.

COMMENTARY

This derives from Section 17(2)(b) of the Interpretation Act 1978. The restriction to post-1978 Acts derives from the Interpretation Act 1978 Section 22(1). As to the type of Acts for which this is intended see commentary on Section 184 of this Code.

It is, therefore clear that the word ''modification'' only refers to ''minor modification'' and not to ''major modification''.

By reason of Section 25A of the Finance Act as it stood prior to enactment of Act II of 1990 merely prescribed the maximum rate. In terms of Rule 26A, the notification was to be issued king a rate from time to time. However, by reason of Section 25A as it now stands, the maximum rate fixed by reason of State has been deleted and in its place the words ''as may be fixed'' from time to time have been inserted. This, in my ''opinion, is not a minor modification.

In Bhawani Cotton Mills Ltd. v. State of Punjah and Anr. reported in AIR 1967 SC 16 the Supreme Court, was considering the amendment in the definition of ''purchase which were in the following terms:

Purchase with all its grammatical or cognate expressions meats the acquisition of goods specified in Schedule C for cash or deferred payment or other valuable consideration otherwise than under a mortgage, hypothecation, charge or pledge.

"Purchase with all its grammatical or cognate expressions means the acquisition of goods other than sugarcane, food-grains and pulses for use in the manufacture of foods for sale, for cash or deferred payment or other valuable consideration, otherwise than under a mortgage, hypothecation, charge or pledge."

(introduced in the Act by Punjab Act VII of 1958)

"Purchase with all its grammatical or cognate expressions, means the acquisition of goods specified in Schedule C for use in the manufacture of goods for sale, for cash or deferred payment or other valuable consideration, otherwise than under a mortgage, hypothecation, charge or pledge."

(Amended by Punjab Act XXIV of 1959).

Upon taking into consideration the amendments made it observed that:

It was not disputed by the State that, no fresh notification was issued after the expression ''purchase'' was amended in 1960 till September 26, 1961, and as such the original notification would be valid even after amended definition in view of Section 22 of the Punjab General Clauses Act which is in pari materia with Section 27 of the Bihar and Orissa General Clauses Act and Section 24 of the Central Act.

It held:

Section 22 of the Punjab General Clauses Act has no application, whatsoever to these cases. Apart from the fact that there is no question of the 1958 Act being repealed or re enacted, it is also clear that the definition of the expression u/s 2(ff) as it stood in 1958, on the basis of which the notification of 1958 was issued, is quite inconsistent with amended definition of the expression ''purchase'' in Section 2(ff) in 1960. The High Court has sustained the levy of tax under the original notification of 1)58, on the basis of Section 22 of the Punjab General Clauses Act which, in our opinion, does not assist the State. It h not open to the State to urge that it is entitled, in the matter of levying tax on transactions by way of purchase, to tax only the category of purchases for use in the manufacture of goods for sale. Further the State has not been able to satisfy us that there is any reasonable classification made, which will enable this Court to sustain the Notification in as much as no fresh notification had been issued, u/s 5(1) till September 26, 1961, the assessment for the years 1960-61 and 1961-62, on the basis of the Notification issued in 1958, cannot be sustained on this additional ground also.

It is, therefore clear that the amendment made in Section 25A by reason of Act No. II of 1990 was not by way of a ''minor modification''.

The aforementioned decision has been followed by the Supreme Court in The State of Punjab and Others Vs. Shakti Cotton Company and Others, and in The State of Punjab and Others Vs. Subhash Trading Company and Others, .

The defect pointed out in Bhawani Cotton Mill''s case was rectified by Punjab General Sales Tax Act (as amended by Act 7 of 1967), validity whereof was upheld in Rattan Lal and Co. and Another Vs. The Assessing Authority and Another, .

The matter again came up in The State of Punjab and Others Vs. Shakti Cotton Company and Others, , wherein the following direction was given:

The appellants contested the writ petition on various grounds. But the material averment, which has to be noted is to the effect that the Assessee was entitled to deduction only on the purchase of cotton sold by it as required u/s 5(2)(a)(vi) of the Act and that too on the purchase value of the commodity sold and not on its sale price. It was further averred that cotton seeds are different fro nix cotton and the price realised by the sale of the former does not qualify for deduction under the said provision of the Act as the cotton seeds are not the same conmodity as cotton that had been originally purchased. Hence, it was pointed out that the assessing authority had acted according to law in allowing the deduction only on the purchase value of cotton sold by the firm.

The said decision was followed by the Supreme Court again in The State of Punjab and Others Vs. Subhash Trading Company and Others,

It will, therefore, be seen that despite the amendment by reason of the validation Act, the Supreme Court directed fresh orders of assessment to be made in accordance with the amended provisions and did not uphold the assessments which had already been made earlier.

As indicated hereinbefore, in terms of" unamended Section 25A, the power to issue notification was by reason of Sub-rule (1) of Rule 26A of the Bihar Sales Rules, 1983. However, by reason of the amended Section 25A, the notification has to be issued in the main provision itself. As discussed hereinbefore, the amendment which has since been made will have to be read in the context of the decision of the Supreme Court in Builders Association as also of this Court in Jamshedpur Contractors Association. Reading thus, in my opinion, the amendment made is inconsistent with the unamended Act.

In General Manager, Bhilai Steel Project, Bhilai Vs. Steel Workers'' Union, Bhopal and Others, , interpreting Section 25 of the M.P. General Clauses Act which is in pari materia with Section 24 of the Central Act, it has been held that the continuance of a subordinate Legislation is subject to the clarification that it is not inconsistent with the provisions re-enacted.

By reason of Section 25A, a maximum rate was fixed but by reason of the amended provision of Section 25A, any rate for such deduction can be fixed by the State Government. The two provisions are not, therefore, consistent with each other. In that situation, in my opinion, it was obligatory on the part of the State, to make a fresh notification.

In Bhawani Cotton Mills Ltd. case (supra) Vaidyalingam, J. held that amended definition of purchase being inconsistent with the unamended definition of the expression purchase'', Section 22 of the Punjab General Clauses Act was not applicable.

This aspect has also been considered recently by the Supreme Court in Poonjabhai Varmalidas Vs. Commissioner of Income Tax, Ahmedabad, wherein it has been held:

The effect of Section 24 of the General Clauses Act, 1897 insofar as it is material, is that where the repealed and re-enacted provisions are not inconsistent with each other, any order made under the repealed provision is deemed to be an. order made under the re-enacted provision.

By reason of the unamended provision of Section 25A, maximum rate at 4% was fixed, but by reason of the amended provision, the State Government, has been-conferred with the discretion to fix any rate as it may deem fit and proper.

Both the provisions, therefore, are inconsistent with each other.

Further in view of the provisions of section 2(oo) of the said Act as amended by Act No. 2 of 1990, now a notification has to be published in the official gazette which was not required under the old Act.

In this case, unamended provision of Section 25A was merely enabling provision It did not make any provisions for issuance of any notification. It merely fixed the maximum amount which can be deducted from the bills or invoices raised by the Works Contractor namely, not exceeding 4%. The words ''an amount not exceeding 4% turn" has been substituted by reason of the amendment by words as may be specified by the State Government by a notification'' Provisions for fixation of rate by a notification was provided for under Sub-rule (1) of Rule 26A.

Thus, although the impugned notification dated 7th November 1984 as contained in Annexure-4 to the writ application purported to have been issued under Sub-section (1) of Section 25A in truth and substance, the same issued under Sub-rule (1) of Rule 26A of the Bihar Sales Tax Rules, 1983. Thus Section 27 of the Bihar and Orissa General Clauses Act saves merely a notification issued under, the Act which has been repealed or re-enacted and not by reason of the rule issued under the repealed Act. In this view of the Act, ;n my opinion, also the provisions of Section 25A of the Bihar and Orissa General Clauses Act shall not apply to the facts of the present Act.

This view has to be taken in view of the fact that Rule 26A stands unamended.

Re. contention No. D:

In Builders Association case (supra), the Supreme Court held:

It could not have been the contention of the revenue prior to the 46th Amendment that when the goods and materials had been supplied under a distinct and separate, contract by the contractor for the purpose of construction of a building the assessment of sales tax could be made ignoring the restrictions and conditions incorporated in Article 286 of the Constitution. If that was the position can the States contend after the 46th Amendment under which by a legal fiction the transfer of property in goods involved in a works contract was made liable to payment of sales tax that they are not governed by Article 286 while levying sales tax on sale of good; involved in a works contract 7 They cannot do so. When the law creates a legal fiction such faction should be carried to its logical end. There should not be any hesitation in giving full'' effect to it. If the power to tax a sale in an ordinary sense is subject to certain conditions and restrictions imposed by the Constitution, the power to tax a transaction which is deemed to be a sale under Article 366 (29A) of the Constitution should also be subject to the same restrictions and conditions.

By reason of legal fiction created in terms of Clause 29A of Article 366 of the Constitution of India, a works contractor becomes a dealer within the meaning of the said Act, he in my opinion, would also be entitled to have all the privileges conferred thereunder.

Section 13(1)(b)(ii) as it stood prior to enactment of Act 2 of 1990 has been quoted by Brother S. Roy, J. in paragraph 16. The word ''works contract'' by reason of the amendment carried out in Section 13(1)(b)(ii) has been deleted. Brother Roy, J. has rightly observed that the same was necessary as the power to fix rate was given to the State Government under the amended Section 25A of the Act.

By reason of the amendment, sales to or purchase by a registered dealer or goods required by him directly for use in execution of a works contract did not attract special rate of tax fixed in terms of Section 13 of the Act, but if the works contractor is a registered dealer and he intends to utilise the goods mentioned in one or the other clauses contained in Section 13 thereof, in my opinion, he ipso facto becomes entitled thereto. If a works contractor is a registered dealer, he shall in my considered opinion, be entitled to all the rights and privileges conferred upon any other registered dealer if he fulfils the conditions imposed therefor.

For the foregoing reasons, these applications must be allowed but in the facts and circumstances of the case, there will be no order as to costs.

S.N. Jha, J.

I have had the advantage of reading the text of the judgments prepared by my learned Brethren. With utmost respect, however, I regret my inability to agree to the ultimate conclusion arrived at by them. I shall very briefly record ray opinion, without referring to or trying to distinguish the decisions cited and relied upon by them, lest tin judgment would become still bulkier. This broad spectrum of the case as also the relevant provisions have already been noticed and (sic) not necessary to refer to all of them over again.

Brother S. Roy, J. has held that Section 12 of the Bihar Finance Act (in short the Bihar Act'') contains the necessary guideline^ for fixing the rate of tax to be deducted u/s 25A, and has, as a matter of fact, answered all questions formulated by him against the Petitioners, but in final analysis struck down Section 25A for a different reason, namely, being in conflict with Section 15 of the Central Sales Tax Act (in short ''the Central Act''). Brother Sinha, J., on the other handnn has held the provisions of Section 25A to be ultra vires, namely, on the ground of. absence] of the guidelines rendering the said provision arbitrary, uncanalised and unbriddled, but at the same time has also held, again in disagreement, that the provisions of Section 25A of the Bihar Finance Act arc not in conflct with them of Section 15 of the Cental Act.

I am of the opinion, in agreement, with Brother Roy, J. that Section 12 contains sufficient guidelines for fixing the rate of tax to be deducted u/s 25A and, there fore, the provisions of Section 25A cannot be unguided, uncanalised and so on. I would only like to add that having regard to the migratory nature of the business of works contract and mobility of ''dealers'' i.e. works contractor engaged in such business it is necessary to provide for the machinery for collection of the tax'' in advance by way of deduction at source, as under the Income Tax Act, which will be subject to final quantification during the assessment proceeding. The decisions, which have been cited on behalf of the Petitioners, deal with cases of excessive delegation on the point of the leviability of tax i.e. while dealing with |he charging provisions of the relevant statutes Section 25A is in the nature of machinery provision. Whether sufficient guidelines have been prescribed in the statute or not has to be examined with reference to the charging provision and not the machinery provision.

As regards the question of Section 25A of the Bihar Act being in conflict with Section 15 of the Central Act, I have same reservations in agreeing to the conclusion arrived at by Brother S. Roy J., which I shall briefly indicate. Before that, I would only point out that in the Builders Association of India and Others Vs. Union of India (UOI) and Others, the Supreme Court has held that the State is competent to enact sales tax law levying taxes on the transfer of property In good* involved in the execution of works contract, subject to the restrictions and conditions mentioned in Article 286 of the Constitution. Article 286 as amended, inter alia, ?provides that any law of State, in so far as it imposes or authorises the imposition of (a) a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-State trade or commerce; (b) a tax on the sale or purchase of goods, being a tax of the nature referred in Sub-clause (b), Sub-clause (c) or Sub-clause (d) of Clause (29-A) of Article 366, be subject to such restrictions 5Fprovisioiis'' in regard to the system of levy rates and other incidents of the taxes at Parliament made by the law specified.

In Modi Spinning and Weaving Mills Co. Ltd. Vs. Commissioner of Income Tax, Punjab and Another, where Sections 4 and 5 of the Punjab General Sales Tax Act provided for tax at the rate of 4% (4 paise in a rupee) on sale of cotton a point, was raised that the same was in conflict with the provisions of sections 14 and 15 of the Central Act, which created at the relevant time a maximum limit of 2%. The said question was answered by a Constitution Bench of the Supreme Court, thus:

The meaning or the intention of Clause (3) of (sic) 286 is not to destroy all charging sect ions in the Sales Tax Acts of the State which are discrepant with Section 15(a) of the Central Sales lax Act, but to modify them in accordance therewith. The law of the State is declared to be the subject to the restrictions and conditions contained in the law made by Parliament and the rate in the State Act would pro tanto stand modified. The effect of Article 286(3) is now brought out by the second proviso to Section 5(1). But this proviso is enacted out of abundant caution and even without it the result was the same.

(emphasis added)

The aforesaid decision was noticed with approval in Bhawani Cotton Mills Ltd. Vs. State of Punjab and Another, as well as in Devi Das Gopal Krishnan and Others Vs. State of Punjab and Others, . It may be pointed out here that these cases had arisen out of the assessment orders under the State Act determining tax liability under the State law at particular rates though being in conflict with the mandate of Section 15(a) of the Central Act, and, thus, it is apparent that the decision in those cases was rendered on the facts of the case.

Another aspect to be noticed is that in terms of Section 15 of the Central Act, it is not permissible to levy tax at more than one point of sale inside the State and to provide for a subsequent refund (now reimbursement after amendment) of the tax collected at that one point, but when the goods purchased and sold are not the same and in between they have undergone manufacture or processing to produce a commercially different article, it cannot be said that the said goods are taxed at two stages. In State of Tamil Nadu Vs. Pyare Lal Malhotra and Others, . Tae Supreme Court had the occasion to consider the tax liability incases where the goods in question after the necessary manufacturing process have undergone a definite metamorphosis as to the commercial identity of the new product, and in that connection after following the dictum laid down in Debi Das Gopal Krishna (supra) in the following terms:

That apart, it is clear that the scrap iron ingots undergo a vital change is the process and manufacture and are convered into a different commodity, viz., rolled steel sections. During process the iron loses its identity and becomes new marketable commodity. The process is certainly one of manufacture.

Their Lordships stated the law in the foil-wing words:

No doubt, in the law dealing with the sales tax, the taxable event is the sale and not the manufacture of goods. Nevertheless, if question is whether a. new commercial commodity has come into existence or not, so that its sale is a new taxable event, in the Sales Tax law, it may also become necessary to consider whether a manufacturing process, which has altered the identity of the commercial commodity, has taken place. The law of sales tax is also concerned with "goods" of various descriptions. It, therefore, becomes necessary to determine whether they cease to be goods pf one taxable description and become those of a commercially different category and description.

In execution, of works contract, as is usually and generally seen, the inputs purchased by the works contractors are sold to the contractors not in the original form, but some other form, which will be the subject taxation. To illustrate, the iron and steel purchased by the contractor, may be converted into gate, grill, beam and other structural things, which will be different commercial commodities attracting taxation at the rate higher than those notified for iron and steel Similar is the case with timber, tiles, electrical fittings and numerous other items, depending upon the nature of the contracts. In the cast of air conditioner, refrigeration works, even higher rates of taxation are attracted.

I am of the opinion that if there is any discrepancy between the said State Act and the Central Act, to the extent of discrepancy, the provisions in the State Act will have to be read down as having pro tanto stood modified, and if this is not done at the stage of assessment of the tax liability of the dealer i.e. the works contractor, the order may be set aright by the appropriate authority. In such cases, individual actions may be bad but that is, no ground for holding that the provision of Section 25A is in conflict with those of Section 15 of the Central Act. Having reached this conclusion, and being in respectful agreement with the conclusions arrived at by Brother Section Roy, J. on all other questions what automatically follows is that, according to me, Section 25A of the State Act does not suffer from any vice of illegality as alleged by the Petitioners. I, accordingly, uphold the provisions as contained in Section 25A of the State Act.

I would, accordingly, dismiss these writ petitions as being devoid of any merit, but without any order as to costs.