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Judgment
All the cases pertain to similar question of facts and law relating to levy of and deduction at source of Sales Tax under the related provisions of Tripura Sales Tax Act, 1976 (hereinafter called "the Act") and Rules thereunder and as such as agreed by the parties, all the cases are taken together for hearing and disposal by a common judgment.
In all the cases ofvires of the second proviso to Section 3(1) of the Act and Rule 3(A)(2) of the Tripura Sales Tax Rules, 1976 (hereinafter called "the Rules") have been put under challenge by all the petitioners.
The background of the cases is that the Oil & Natural Gas Corporation Ltd. (in short ''ONGC''), Agartala Project and the Gas Authority of India Ltd. (in short ''GAIL''), Agartala had been in necessity for hiring good numbers of vehicle of different classes and in furtherance of their necessity, the ONGC and the GAIL issued Notices InvitingTender asking the interested parties/transporters to make offer for hire of vehicles for specified period to be used by the ONGC and GAIL for transportation/conveyance of their officers and staff. Pursuant thereto the petitioners participated in the bid offering their respective rates and having found the rates offered by the petitioners lowest and acceptable the authorities issued the work orders. The relevant abstracts of few specimen of "work orders" so issued by the ONGC and GAIL are re-produced below for better appreciation: -
"To
M/s Swapan Kr. Paul.
B.K. Road. Agartala,
Tripura West.
Sub : Work Order for supply one diesel driven Tourist Ambassador Car.
Dear Sir,
Subject to the terms & conditions contained in tender/contract No. AGT/TBG/TPT/CARS/7/97-98 and in continuation to the LOI dated 23.3.1998 you are requested to supply a Diesel driven tourist Ambassador car of model not earlier than 1996 for 12 hours duty on the following rates:
FOR 12 HOURS DUTY
Fixed charge Rs. 410''00 per day
(Rupees four hundred ten only)
Running charge Rs. 3.90 per Km.
(Rupees three and paisa ninety only)
Over time charged beyond
12 hrs. duty Rs.35''00 per hr. (Rupees thirty-five only)
Out station charge Rs. 1125/- per day (Rupees one hundred twenty five only)
*****
*****
*****
Yours faithfully,
Sd/-
Chief Manger (Logistics)
ONGC, Agartala."
"To
M/s Chandan Deb,
Near Circuit House : Kunjaban
PO : Abhoynagar : Agartaia - 799005.
Tripura West.
Sub : Providing 05 nos. Commander Jeep on 12 hrs. basis against Tender No. GAIL/AGT/VEH/98-99/01.
Dear Sir,
With reference to your offer against our NIT No. GAIL/AGT/VEH/ 98-99/01 published in various Dailies of Agartaia & Calcutta dated 13-01-1999 & 14-01-1999 and subsequently your letter dated 27.05.1999, we are pleased to award the work to you at your quoted rates and laid down terms & conditions mentioned in the tender document for 05 nos. of Commander jeep (Model 1998 onwards) on 12 hrs basis immediately.
You are, therefore, requested to provide 05 nos. Commander jeep on 12 hrs. basis immediately.
Failure to provide the vehicles requisitioned above within 15 days form the receive of this letter as mentioned in your letter dt.27.05.''999, would amount to not acceptance of the offer you and this letter will stand cancelled.
An amount of Rs. 18,000 (Rupees one eight zero zero zero only) for each vehicle is to be deposited with GAIL. Agartaia in the form of Bank Draft/Bank Guarantee/Cheque of any Nationalised Bank in favour of Gas Authority of India Limited, Agartaia towards Security within 10 days of receipt of this letter.
You are requested to execute an agreement on Non-Judicial stamp paper of Rs. 50 (Rupees fifty).
You are therefore, requested to confirm the date of deployment of above vehicles in advance so that we may cancel the arrangement of existing commander jeeps.
You are also requested to sign the duplicate copy of this letter and return back to us as token of acceptance immediately.
Thanking you,
Yours truly,
For and on behalf of
Gas Authority of India Ltd.
Sd/-
(Barun Biswas)
Dy. Manager (HRM)"
The petitioners accordingly placed the vehicles as per requirement of the hirers viz. ONGC and GAIL and charged the payment as per agreed rates. All of them also entered into separate agreement regulating the implementation of the terms of contract of supply of vehicles on the requisition of the hirers. Rate of payment, detention charge, mode of payment etc. are also incorporated in the agreements. While the supply of vehicles on requisition are being effected, the State Government in the Revenue Department issued the impugned Memorandum bearing No. F.1-7(6)-TAX/92 dt. NIL requiring the hirers viz. ONGC and GAIL to deduct 4% amount from the respective bills of the petitioners pursuant to the provision of Section 3A of the Act read with Rule 3A of Tripura Sales Tax (9th Amendment) Rules, 1989. IN some cases the hirers already started deduction and in some cases deductions are contemplated. Hence the writ petitions.
The petitioners challenged the vires of Rule 3A of the Rules on the ground that there is no charging provision under the Act for levying of sales tax on the transaction of transfer of the right to use any goods and as such the Rules being a delegated legislation cannot impose and/or dictate for realisation of any tax at source and as such Rule 3A of the Rules and also the impugned Memorandum have been put under challenge.
The State Government and the Sales Tax authorities contested the cases by filling counter-affidavit contending inter alia, that the transactions involved in the present cases are fully covered by the term "sale" within the meaning of Section 2(g)(ii) of the Act and under the second proviso to Section 3(1) of the Act, tax at the rate of 4% of the consideration money is charged on such transaction and for the purpose of carrying out the objects of the charging section, the counter-affidavit contends, Rule 3A(2) of the Rules prescribes the mode for recovery of the sales tax and as such according to the counter affidavit, Rule 3A(2) of the Rules and the impugned Memorandum are valid and require no interference in these writ petitions.
Every transaction of transfer of the right to use any goods for any purpose (whether or not for a specified period) for due consideration, cash and/or on credit, is defined to be a "sale" u/s 2(g) of the Act for the purpose of levying and realisation of sales tax. This definition of "sale" has been brought in by way of "The Tripura Sales Tax (Third Amendment) act, 1984" and that was done in conformity and in consonance with the definition of "sale" available in Sub-clause (d) of Clause (29A) of Article 366 of the Constitution of India. The meaning of "sale" for the purpose of tax on sale or purchase of goods has been extended by the Constitution (46th Amendment act, 1982). In view of Sub-clause (d) of clause (29A) of Article 366 of the Constitution of India, a tax can be levied on sale or purchase of any goods which includes "a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration". So, in my considered opinion, the statutory definition of "sale" as available under clause (ii) of Sub-section (g) of Section 3 of the Act is valid and has been done in consonance with the term of Sub-clause (d) of clause (29A) of Article 366 of the Constitution of India and as such the State legislature has the constitutional competence to levy tax on the amount received or receivable by a person for transferring the right to use of his vehicle by other for any purpose (whether or not for a specified period). In other words, the amount derived or derivable for transfer of the right to use of any vehicle, is taxable amount and the consideration money so received is a sale price for the purpose of the Act.
Mr. A.K. Bhowmik, learned senior counsel for the petitioners submits that there is no charging section regulating the present transactions and as such the petitioners are not liable to pay any sales tax.
Mr. U.B. Saha, learned senior Govt. Advocate appearing on behalf of the State respondents having referred to the second proviso to Section 3(1) of the Act submits that any valuable consideration received or receivable for transfer of the right to use any vehicle for any purpose (whether or not for specified period) is taxable at the rate of 4% of the consideration amount in view of second proviso to Section 3(1) of the act.
From a combined reading of Section 2(b), 2(g) and 3A of the Act it reveals that for the purpose of the act there are three kinds of "sale". u/s 2(b), "sale" means sale of goods, manufactured, made or processed in Triprua or brought into Tripura from outside for the purpose of sale and also includes: transaction under u/s 3A of the act where any transfer of property in goods either in the form of goods in original or in some other form involved in the execution of the works contract and also a transaction u/s 2(g) of the Act where any transfer of right to use any goods for any purpose (whether or not for specified period) for any valuable consideration. The first term is undoubtedly a "sale" in common parlance, that is sale of goods itself, but the transactions covered by second and third are "sales" by legal fictions which have been commonly terms as "deemed sale" and that is only for the purpose of sales tax.
Section 3 is the only charging section under the act. Sub- section (1) of sections of the Act postulates that "every dealer in taxable goods shall pay a tax on his turnover at the rate specified in column (3) of the schedule attached to this Act". The second proviso to Section 3(1) of the Act adds "provided further that the rate of tax on any transfer of the right to use any goods for any purpose (whether or not for a specified period) shall be 4%."
So far the charging provision is concerned, Section 3(1) of the Act postulates the levying of tax at the rate specified under the schedule. Section 3A of the act makes the "transfer of property in goods (either in the form of the goods in original or in some other form) involved in the execution of the works contract" chargeable at the rate specified under the schedule while the second proviso to Section 3(1) of the Act makes the consideration amount received or receivable for transferring the right to use any goods for any purpose taxable at the rate of 4% of the consideration amount.
Mr. Bhowmik, learned senior counsel appearing on behalf of the petitioners though concedes that the transaction of any transfer of the right to use of any goods for any purpose of valuable consideration may be termed as "deemed sale", but in absence of specified charging section the petitioners cannot be roped with the liability to pay sales tax. According to Mr. Bhowmik, liability to pay sales tax is embodied in the charging Section 3(1) of the Act read with Section 8 of the Act and since the charging section does not provide tax to be levied on such "deemed sale", the second proviso to the aforesaid Section 3(1) of the act cannot be allowed to survive being a charging section. Mr. Bhowmik further submits that though the aforesaid transactions could be termed as "deemed sale" yet the petitioner cannot be identified to be : dealers" in view of section 2(b) of the Act because none of the petitioners sold any taxable goods for manufactured, made or processed any taxable goods in Tripura nor brought any taxable goods from outside Tripura for the purpose of sale and as such the transport business carried on by the petitioners by allowing their vehicles to be hired either by ONGC or by GAIL or any other authority or individual on payment cannot be termed as a "sale" for the purpose of identifying them to be "dealers".
Mr. Saha, the learned Senior Govt. Advocate, on the other hand, referred the second proviso to Section 3(1) of the Act and according to him, at the time of initial enactment of the Act in 1976, the "transfer of right to use any goods" was not termed as "sale" and as such Section 3(1) of the Act did not include such transaction within the periphery of charging provision, but since in view of 46th Amendment of the Constitution of India in 1982, the act has undergone amendment and in view of the amended meaning of "sale" as available u/s 2(g)(ii) of the Act, any transfer of right to use any goods for any purpose has been brought under its fold and as such the charging section required further amendment and the State legislature vide "The Tripura Sales Tax (Fourth Amendment) Act, 1987 inserted the second proviso to Section 3(1) of the Act.
From the aforesaid discussion and the legal position analysed, I am of the considered opinion to hold that the sales tax on the sale of goods simplicitor is charged by charging Section 3(1) of the Act while consideration received or receivable by a person by transfer of right to use any goods (here the vehicles) for valuable consideration is made taxable by the second proviso to Section 3(1) of the Act.
Mr. Bhowmik, learned senior counsel for the petitioner submits that there is no provision akin to Section 3AA of the Act to realise sales tax by way of deduction at source for the amount due to be paid by the ONGC/GAIL to the petitioners for using the petitioners'' vehicles by them.
It is correct that Section 3AA of the Act authorises the deduction of tax at source at the time of payment for the transactions covered by Section 3A of the Act and the transactions relating to other purposes are not covered by Section 3AA of the Act. Section 3A deals with the payment of tax on the transfer of property in goods involved in the execution of the works contract and Section 3AA authorises the collection of sales tax by way of deduction at source from the amount become due to be paid to the person who is liable to pay sales tax u/s 3A of the Act. In the present cases, the petitioners never entered into agreement with ONGC/GAIL to execute any works contract and no property in goods has ever been transferred by the petitioners in favour of ONGC/GAIL and as such the provision of Section 3AA of the Act for making deduction at source is not applicable in the present cases, the learned senior counsel for the petitioners contends. There is no other provision under the act itself for recovery of tax by way of deduction at source or by way of advance taxation and as such according to the learned senior counsel for the petitioners, Sub-rule (2) of Rule 3A of the Rules is ultra vires of the act itself. Sub-Rule (2) of Rule 3A of the Rules is quoted below:-
"3A (1) ***** *****
(2) Every person responsible for making payment to any person for discharge of any liability on account of valuable consideration payable for any transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash or in any manner, shall at the time of making such payment, deduct an amount equal to four percentum of such towards part or as the case may be, full satisfaction of the tax payable under the Act, on account of such transfer of right:
Provided no such deduction shall be made from the bill(s) or invoice(s) of the transferrer -
(a) on account of such transfer where the transfer of right to use goods was agreed to before first day of January, 1989;
(b) The amounts received as penalty for defaults in payment or as damages for any loss or damage caused to the goods by the person to whom such transfer was made; and
(c) The amount representing the valuable consideration received for such transfer in respect of goods exempt from tax under Sub-section (2) and (3) of Section 3 of the Act."
Mr. Bhowmik, learned senior counsel for the petitioners having referred the following citations submits that the provision of fiscal statute must be strictly construed having regard to the letters and words used in the particular provision of the statute. There is no room for entertaining the intendment of the act nor the statement of reasons and objects of the Bill into consideration in course of interpretation of any provision of the fiscal statute.
(1) AIR 1940 183 (Privy Council)
(2) A.V. Fernandez Vs. The State of Kerala,
(3) Goodyear India Ltd., Gedore (India) Pvt. Ltd., Kelvinator of India Ltd. and the Food Corporation of India and Another Vs. State of Haryana and Another,
(4) AIR 1998 SC 120 (Commissioner of Wealth Tax, Gujarat-III, Ahmedabad, appellant v. Ellis Bridge Gymkhana etc., respondents).
I have carefully gone through he aforecited decisions of the Hon''ble Apex Court. It appears that since from 1940 till date the Hon''ble Apex Court unequivocally reiterated that in interpreting any fiscal statue strict construction should be adhered to the words and language used in a particular section of the statute and in all probabilities the Intendment and/or the statement of objects and reasons behind a fiscal statute should be avoided for consideration. It is correct that the mode of interpretation to be applied in construing a beneficial legislation cannot be taken at par in interpreting any fiscal legislation. So far fiscal legislation is concerned, much emphasise is to be attended to the language and words used in the statute rather than the intention behind.
On the other hand, Mr, Sana, the learned senior Govt. Advocate having referred the following citations contends that the Rules and regulations under a statute have becorne part of the statutory law having the force of law itself and according to Mr. Sana, the statement of objects and reasons of a legislation is to be taken into consideration for practical interpretation of a piece of legislation for its useful purpose,
(a) Air India Statutory Corporation, etc. Vs. United Labour Union and others [overruled],
(b) Peerless General Finance and Investment Co. Limited and Another Vs. Reserve Bank of India,
(c) Aswini Kumar Ghosh and Another Vs. Arabinda Bose and Another,
On perusal of the decisions relied upon by the learned counsel for the adversaries it reveals that so far fiscal statutes are concerned, strict construction must be adhered to in interpreting a particular word or language used in the statute while so far beneficial legislation and other non-fiscal legislations are concerned, liberal construction having regard to the intendment of the Act and the statement of objects and reasons behind it, may be followed.
Mr Bowmik, learned senior counsel for the petitioners submits that provision to any section cannot create any substantive provision of charging section in any fiscal legislation and he referred two citations of the Hon''ble Apex Court, one in Dwarka Prasad Vs. Dwarka Das Saraf, and another in Vishesh Kumar Vs. Shanti Prasad, and submits that a proviso to a section cannot be construed to defeat the basic intention expressed in the substantive legislation nor the proviso could expand the meaning of the main section.
It is very difficult to accept the submission of Mr. Bhowmik on that score. Some time proviso can create an independent right or liability having over ridden the main section. It depends upon the words and language used in the proviso. Sometime proviso may be decisive having its own independency, sometime proviso may be auxiliary to the main provision and everything depends upon the words and language used by the legislature in the proviso as I have already opined that the second proviso to Section 3(1) of the Act is an independent charging provision so far the "deemed sale" is concerned by way of transfer of the right to use any goods for any purpose (whether or not for a specified period) for valuable consideration and rate of tax is 4% of the valuable consideration received or receivable.
Though there is no provision for deduction of tax at source in the Act, but according to the learned senior Govt. Advocate, pursuant to the Rule making power available u/s 44 of the Act, the delegated legislation as available under Rule 3A(2) of the Rules authorises deduction at source, Mr. Saha having referred to Sections 44(1) and 44(2)(i) of the Act submits that being delegated by the legislature, the State Govt. came forward with the Tripura Sale Tax Rules" having embodied among others Rule 3A for realisation of sales tax at source. The relevant clauses of Section 44 of the Act is reproduced below: -
"44. Power to make rules :- (1) The State Government may, make rules for carrying out the purposes of this Act.
(2) Without prejudice to the generality of the foregoing power, such rules may, in particular, prescribed -
(a) *****
*****
(i) for any other matter necessary for giving effect to the purpose of this act."
Mr. Saha submits that though the Act is silent how the sales tax would be realised by deduction at source so far it relates to the transaction of transfer of right to use any goods, but pursuant to the power bestowed by Section 44(2)(i) of the act the State Government made the delegated legislation in rule 3A of the Rules and as such the said Rule 3A is a valid one for carrying out the purpose of the Act. Unless the said Rule 3A is given effect to, the very purpose of the Act to realise the sales tax would be defeated.
On the other hand, Mr. Bhowmik, learned senior counsel for the petitioners submits that the legislature has no right to delegate the essential legislative functions to any outside agency. To identify the taxable goods, to fix the rate of tax to be charged, mode in which the tax is to be levied are the essentials and fundamental functions of a legislation which cannot be delegated to any outside agency and as such according to Mr. Bhowmik, Rule 3A(2) of the Rules is ultra vires of the Act. Mr. Bhowmik further submits that so far the works contract is concerned, the legislature having exercised their law making power inserted Section 3AA allowing the sales tax to be recovered at source and as such it should be presumed by implication that legislature decided not to make any provision for realisation of sales tax at source relating to the "deemed sale" as contemplated u/s 2(g)(ii) of the Act. Mr. Bhowmik having referred a decided case in special reference under Article 143 of the Constitution of India, reported in AIR 1961 SC 332 submits that legislature must decide its primary legislative function itself and not through other agency.
In the aforecited decision, the seven Judges'' Constitutional Bench unequivocally commands that legislature itself must discharge its primary legislative functions and so far the auxiliary or subsidiary functions are concerned that could be delegated to the outside agency. The authority to collect tax, mode of assessment of tax, format of challan, statutory notice tc. are undoubtedly subsidiary and incidental functions rightly to be delegated, but who is to pay tax, on what transaction tax is to be levied, whether tax is to be paid at the closure of assessment year, whether tax is to be realised in advance or recovered at source, these are fundamentally essential functions of the legislation which cannot be delegated. The legislature in its own wisdom incorporated the provision of Section 3AA for realisation of tax at source so far the works contract is concerned, but so far the ordinary sale bf taxable good and the transaction of deemed sale by way of transferring the right to use any goods including vehicles are concerned the legislature never made any law permitting either realisation of advance tax or recovery of tax at source and as such in my considered opinion, the provision of Rule 3A(2) of the Rules is ultra vires of the Act itself and as such the same is liable to be struck down. However, it is made clear that though the provision of Rule 3A(2) of the Rules does not survive yet the petitioners are not absolved from the liability to pay sales tax at the rate of 4% of the consideration money received or receivable by transferring the right to use their vehicles or by allowing their vehicles to be hired by others and the petitioner are also subject to the provision of Section 8(2) of the Act.
The Sales Tax authority is competent under the act to ask for return to be submitted u/s 8(2) of the Act by the petitioner and also the petitioners may be required to deposit the sales tax at the time of furnishing the return. The failure to furnish the return as contemplated u/s 8(2) of the Act is to be dealt with by the provisions laid down thereunder.
Since the matter has been pending for a considerable time, the authority may put itself inconvenience to locate and ascertain the exact tax liability of the petitioners and as such it is ordered that the ONGC and GAIL are to furnish the details of the vehicles hired by them and the amount paid or payable by them to the petitioners within a period of 15 (fifteen) days from today enabling the State authority to proceed in accordance with law for realisation of accumulated sales tax amount payable by the petitioners.
Though the provision of Rule 3A(2) of the Rules is hereby struck down yet in my considered opinion, the petitioners are not absolved from the liability to pay sales tax at the rate prescribed under the second proviso to Section 3(1) of the Act and they are further liable to furnish return as and when called for u/s 8(2) of the Act.
With these observations and direction, the impugned notification requiring the ONGC and GAIL to deduct 4% from the bills of the petitioners are hereby set aside/quashed.
The petitions are allowed to the extent indicted above with no order as to costs.