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Judgment
We have heard Dr. Debi Pal, the learned Counsel appearing on behalf of the Petitioners and Mr. Narain Roy, the learned Govt. Pleader No. 2 appearing on behalf of the State at length. In our opinion this should be disposed of at this stage itself.
The Petitioners initially filed this writ petition praying therein the following reliefs:
(i) It be declared that Constitution (46th Amendment) Act, 1982, the Bihar Finance Act 1982 particularly Section 21(1)(a)(i) thereof as inserted by the Bihar Finance Act, 1984 and Rules 13A and 26A of the Bihar Sales Tax Rules, 1983 are ultravires the Constitution of India, illegal, without jurisdiction, void and of no effect and unenforceable;
(ii) A writ of or in the nature of Certiorari be issued for quashing the notices etc. as contained in Annexure-7 series be not quashed;
(iii) Any other appropriate writ (s) be issued, order (s) be passed and direction (s) be made as to Your Lordships may appear fit and proper
By an order dated 24.5.1988 this application was directed to be put up after disposal of C.W.J.C. No. 152 of 1988 (R).
On 23.8.1989, the Petitioners filed an application for amendment of the writ application praying inter-alia that the following relief be also granted to it:
For issuance of appropriate writ (s) Older (s)/Direction (s) commanding upon the Respondents, particularly Respondent No. 4, who assessing authority, not to assess the Petitioner on that part of the works. Contract, which has been assigned by the Petitioner to Sub-contractor.
By an order dated 25.8.1989 the said application for amendment was directed to be considered at the time of admission of the writ application itself.
The main points which were initially raised in this writ application are no longer res-integra, in view of the decision of the Supreme Court in Builders Association Ltd. v. Union of India reported in 1989 BLT 151 : 1989 PLJR (SC) 31 wherein the Supreme Court upheld the Constitutional validity of Constitution (46th Amendment) Act, 1982.
This Court in Jamshedpur Contractors Association v. Union of India in C.W.J.C. No. 1304 of 1988 (R) and other analogous cases (reported in (1990 PLJR 407) had held following the principles laid down by the Supreme Court that Rule 13(A) of the Bihar Sales Tax Rules, is ultravires the Constitution of India.
After hearing counsel for the parties, we are of the opinion, that the application for amendment should be allowed and the said application should be treated as part of main writ petition.
The Petitioners have stated that a contract has been granted to Petitioner No. 1 by M/s Tata Iron & Steel Company Ltd. for the construction of 3.6 MGD Sewage treatment plant at Southern Pumping station, Jamshedpur, which job consist of mechanical, electrical, structural and earth works etc.
The Petitioners have further asserted that for execution of the aforementioned works contract, Petitioner No. 1 has engaged a Sub-contractor namely M/s Specon India Ltd. and the said Sub-contractor executed that part of the contract which was assigned to it by the Petitioners in accordance with the terms of the contract itself.
The further case of the Petitioners is that the aforementioned Sub-contractor is paying Sales Tax in respect of the goods supplied by it for execution of the works contract in terms of the provisions of Bihar Finance Act and the Bihar Sales Tax Rules.
It is further alleged that in the year 1984/85 the Petitioner No. 1 and the Sub-contractor were both seperately assessed. However, in the year 1985-86 the Petitioner No. 1 has been assessed in respect of the entire works which included that part of the work which was performed by the Sub-contractor in execution. of the entire works contract.
Dr. D. Pal, the learned Counsel appearing on behalf of the Petitioners submitted that in this case part of the contract having been assigned in favour of the aforementioned M/s Specon India Ltd. in terms of the provisions of the contract entered into by and between the Petitioner No. 1 and M/s Tata Iron & Steel Company Ltd. the sales tax is not payable by Petitioner No. 1 in respect of the entire job. The learned Counsel, therefore, contended that in view of the fact that the aforementioned Sub-contractor was being separately assessed in respect of the goods supplied and works done which formed part of the aforementioned subcontract, in respect thereof and for supply of the same goods the Petitioner No. 1 cannot be over again held liable for payment of Sales Tax. Property in the goods supplied passed only once to the principal, regardless of the fact whether the work is executed by the contractor or the Sub-contractor.
In Builders Association''s case (supra) Supreme Court upon considering the provision of the Constitution 46th amendment as also (ho other provisions thereof came to the conclusion that Sales Tax is to be paid only in respect of such goods (in any form) which are supplied by the Contractor to the principal in execution, of the works contracts.
Thus, it is clear that a Sub-contract If granted validity and in terms of provisions of contract entered into by and between the principal and the main contractor that is a part of main contract itself.
It is also clear that any goods supplied by the Sub-contractor in execution of his portion of the job, would be relatable to supply of goods in execution of the works contract itself Between the principal and the main contractor.
So far as the principal is concerned, unless there exists a contrary intention expressed in the agreement itself, goods supplied in execution of the works contract whether in respect of the work assigned to the Sub-contractor or work executed by the contractor himself would form one transaction.
Therefore, if any such Sub-contractor in execution of the portion of the works contract which has been assigned to it supplied any goods, he would be liable to pay Sales Tax whereas in respect of the goods supplied by the main contractor in execution of the works contract which part it retained for itself, the sales tax would be payable by it. In respect of the supply of goods property wherein passes to the principal, Sales Tax is leviable only once.
The learned Govt. Pleader No. 2 appearing on behalf of the State could not controvert this position of law.
It is well known that taxing statutes must be construed strictly. In terms of the provisions of the Bihar finance Act and the Rules framed thereunder, indicated herein before, only the goods which are supplied in execution of the works contract are liable to be taxed. It is also evident, whether the said goods are supplied by the Sub-contractor or the contractor himself, title in relation thereto passes to the Principal only in execution of the main contract. Thus, the said good would be liable to be taxed only once.
If the Sub-contractor had already been assessed, and in the order of assessment passed the assessing authority had already taken into consideration the goods which were supplied in execution of his portion of the contract, in our opinion, no further sales tax would be leviable thereupon.
In this view of the matter, the writ petition is allowed in part and the order of assessment and the notice of penalty'' issued against the Petitioner as contained in Annexures-5 and 6 of the writ petition are quashed and the Respondent No. 4 is hereby directed to proceed with the assessment proceeding and/or'' penalty proceeding in accordance with law, keeping in view, the decision of the Supreme Court in Builders Association''s Case (supra), the decision in Jamshedpur Association''s case (supra) and the observations made herein before.
In the facts and circumstances of the case, there will be no order as to costs.