B.R. Arora, J.@mdashThis writ petition and the writ petitions mentioned in the Schedule, appended to this judgment, involve common questions of
law and, there fore, we propose to decide all these writ petitions by this common judgment. For the convenient disposal of all these writ petitions,
the facts of D.B. Civil Writ Petition No. 1698/1989 (M/s. Sood Enterprises v. Union of India and Ors.) are taken into consideration.
2. The petitioner is partnership concern and is carying-on the business of taking building contracts from the various departments of the Central
Government as well as of the Rajasthan Government. The petitioner in this writ petition, has challenged the vires of 46th Constitutional Amendment
Act, 1982, and consequential amendments made by the Rajasthan Government in the Rajasthan Sales Tax Act, 1954 by the Finance Act of 1987
(Act No. VII of 1987), Rajasthan Sales Tax (Amendment) Act, 1988, Rajasthan Sales Tax (Second Amendment) Act, 1988, and the Notification
EX. 2, EX. 3, EX. 4, EX. 6 and EX. 8, issued in pursuance to these amendments. The validity of the amending provisions of the Act Rules, and
the Notification have been challenged on various grounds taken in the writ petitions(s).
3. The respondents filed their return to the writ petition and in their return, a stand has been taken that all these grounds raised by the petitioner do
not survive because through various amendments made in the Act and the Rules and through various instructions issued in this regard, the grievance
of the petitioner has been made good and the grounds raised by the petitioner do not raise any issue between the parties and actually no
controversy remains and the controversy raised by the petitioner is purely academic on the face of it and this Court is not expected to decide the
question merely for the academic consideration.
4. In order to appreciate the controversy it would be proper to give brief history of the amendments, which are under challenge in the present writ
petition(s). The Parliament, by way of the Constitution (46th Amendment) Act, 1982, amended Article. 366 of the Constitution of India by way of
adding Clause 29-A to Article 366 of the Constitution.
Clause 29-A of Article 366 reads as under:
29-A. ''Tax on the sale or purchase of goods""-includes.
(a)Aa tax on the transfer otherwise than in pursuance of a contact of property in any goods for cash, deferred payment or otherwise valuable
consideration.
(b) A tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a wok contract;
(c) A tax on the delivery of goods on hire purchase or any system of payment of installments;
(d) A tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, defered payment or other
valuable consideration;
(e) A tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other
valuable consideration;
(f) A tax on the supply, by way of or as part of any service or in any other manner whatsoever of goods, being food or any other article for human
consumption or any drink whether or not intoxicating-where such supply or service, is for cash, deferred payment of other valuable consideration
and such transfer, delivery of supply of any goods shall be deferred to be sale of those goods by the person making the transfer, delivery or supply
and a purchase of those goods by the person to whom such transfer, delivery or supply is made.
5. The corresponding amendments in Articles 269 and 286 were also made by this 46th Constitutional Amendment. The State Government
thereafter, by the ''Finance Act of 1987 (Act No. 87 of 1987), which will hereinafter be refereed as the ''Finance Act, 1987'', in order to give
effect to the financial proposal of the State Government for the financial year 1987-88, made certain other changes and amended the Rajasthan
Sales Tax Act, 1954. By this amendment, definition of the expression ''contract'' was amended and the definitions of sale and ''turn-over'' were
substituted for the existing definitions. Two proviso were also substituted to the definition of ''sale"" comprised in Clause 2 (p) of the Rajasthan
Sales Tax Act. The State Government, also, by a notification dated may 28,1987 (EX.2) made certain amendments in the Rajasthan Sales Tax
Rules, 1955. After the amendment in the Act and the Rules, the State Government vide notification EX.3 dated May 28, 1983, notified the rate of
tax payable by a contractor on his turnover of the works contract. According to this notification, rate of tax on work contract relating to any kind
of construction was notified as 2% while with respect to works contract relating to any kind of installation, fittings-out, improvement, overhaul or
repair, was notified at 4%. The State Government again, by a notification EX.4 dated March 8,1988, notified the rates of tax payable by the
contractor on his turn-over of the works contract as specified in coulum 2 of the list, on the articles mentioned in the list. The State Government,
again, by Rajasthan Sales Tax (Amendment) Act, 1988 (Act No. 9 of 1988) further amended the Sales Tax Act of 1954. Various amendments
were made by this Amendment Act, which are challenged by the petitioner in this writ petition. The State Government, in pursuance to these
amendments made in the various provisions of the Rajasthan Sales Tax Act, issued notification EX. 6 dated 5th September 1988 and again notified
the rate of tax payable by a contractor on his turnover of the works contract relating to dyeing, printing, processing and similar activities. The State
Government again, by Rajasthan Sales Tax (Second Amendment) Act, 1958 (Act No. 13 of 1988) further amended the Rajasthan Sales Tax Act,
1954. This Act received the assent of the Governor on 15th October 1988. The State Government, thereafter, issued notification EX. 8 dated
November 7,1988 and granted exemption from the tax payable by the dealer in respect of the goods involved in the execution of the first works
contract where the value of the goods involved does not exceed 15% of the sale-price of the works contract. Various writ petitions were filed
before Hon''ble the Supreme Court, challenging the validity of the Constitutional 46th Amendment and the Supreme Court, in the case of Builders
Association of India and Others Vs. Union of India (UOI) and Others, , vide its judgments dated 31st march, 1989, up-held the validity of the
Constitutional 46th Amendment and held as undcr:
(i) What the Forty-sixth Amendment has done is no more than making it possible for the States to levy sales tax on the price of goods and
materials used in works contracts as if there was a sale of such goods and materials. It ha s not conferred on the State a larger freedom than what
they had before in regard to their power to levy sales tax under entry 54 of the State List. Sub-clause (b) of Article 366(29-A) cannot be read as
being equivalent to a separate entry in List II of the Seventh Schedule to the Constitution enabling the States to levy tax on sale and purchases
independent of entry 54 thereof. As the Constitution exists todya, the power of the States to levy taxes on sales and purchase of goods including
the ''deemed'' sales and purchases of good under Clause (29-A) of Article 366 is to be found only in entry 54 and not out-side it.
(ii) In sum, it is declared that sales tax laws passed by the Legislatures of States levying taxes on the transfer of property in goods (whether as
goods or in some other form) involved in the execution of a works contract are subject to the restrictions and conditions mentioned in each Clause
or sub clause of Article 286 of the Constitution.
(iii) As there are infinite variety of the manifestation of ''works contracts'' whatever might be the situational differences of individual cases, the
constitutional limitations on the taxing-power of the State as are applicable to ''works contracts'' represented by ''building contracts'' in the context
of the expanded concept of ''tax on the sale or purchase of goods'' as constitutionally, defined under Article 366(29-A), would equally apply to
other species of ''works contracts'' with the requisite situational modifications, (iv) In so far as works contracts relating to building activities are
concerned, the Forty-sixth Amendment has empowered the States to exert its taxing power in an important, area of social and economic life of the
community. But in exerting this power particularly in relation to transfer of property in goods involved in the execution of ''work contracts'' in
building activity, in so far as it affects the housing projects of the under-privileged and weaker Sections of society, the State might perhaps, be
pushing its taxation-power to the peripheries of the social limits of the power and, perhaps, even of the constitutional limits of that power in dealing
with equals. In such class of cases, ''building activity'' really relates to a basic substantial necessity. It would be wise and appropriate for the State
to consider whether the requisite and appropriate classifications should not be made of such building activity attendant with such social purposes
for appropriate separate treatment.
(v) In respect of the validity of the sales-tax laws of different States and rules made there under, no opinion is being expressed herein. The
petitioners are at liberty to approach the authorities under the Sales Tax Act or the High Court concerned for necessary relief. It is open to them to
question the validity of the statutory provisions and the Rules made there under before the High Court concerned. When such petitions are filed,
the High Courts will proceed to dispose of the cases in the light of this Judgment.
(vi) Article 366 is the definition clause of the Constitution and unless the context otherwise requires, the expressions defined in that article have the
meanings respectively assigned to them In at article. If the object of introducing anew definition is to enlarge the scope of that concept then
wherever those words occur in the Constitution, they would be construed in the wider sense.
After the judgment of the Supreme Court in. Builders'' Association of India and Ors.'' case (supra), the State Government by its notification S.0.51
dated June 28,1989 (EX. Rules 2/1) provided that a contractor shall pay tax on the value of the goods involved in the execution of the works
contract at the rates notified for such goods u/s 5. of the Act. The State Government also issued Rajasthan Sales Tax Amendment Ordinance,
1989 amending Section 2(h) and Section 2(p), respectively, with effect from 1.4.1987. The State Government also amended the last proviso to
Section 2(p) as well as the proviso to Section 2(o)(ii). This Ordinance was later on replaced by the Rajasthan Sales Tax Amendment Act, 1989
(Act No. III of 1990. The State Government also, in order to clarify the position in view of the judgment of the Supreme Court, issued instructions
regarding levy of sales tax in Rajasthan to all the concerned authorities responsible for executing the provisions of Sales Tax in Rajasthan. These
Instructions show the view of Department regarding the levy of sales tax. These instructions were issued of 2nd of August, 1989 and read as
under:
GOVERNMENT OF RAJASTHAN
COMMERCIAL TAXES DEPTT.
No F.16(22) Tax/CCT/84/2240 dated 2.8.1989
All Dy. Commissioners (Adm./A.E./Appeals/Revisions).
All Commercial Taxes Officers.
All Asstt. Commercial Taxes Officers.
Sub:--Levy of Sales Tax on works Contracts in Rajasthan.
1.0 In pursuance of 46th Amendment in the Constitution, the Rajasthan Sales Tax Act, 1954 (hereinafter referred to as the Act) was amended
from 1st April, 1987 by Act 7 of 1987. For levying tax on works contracts, the Rajasthan Sales Tax Rules, 1955 (hereinafter referred to as the
Rules) were also amended and a notification providing for rate of tax on such. contracts was issued on 28.5.1987.
2.0 The levy of tax on work contract gave rise to several controversies in almost alt the States including the State of Rajasthan and a large number
of representations regarding the levy of tax on works contract have been received from trade and industry, awarders, contractors etc. It was
challenged in the Supreme Court by way of writ petitions by the Builders'' Association of India and Ors. The Supreme Court decided the case on
31st March, 1989 vide its judgment reported at (1989) 73 STC 370 and has laid down the basic principles and guide lines for levying tax on
works contracts.
3.0 Following the law laid down by the Supreme Court in the case of Builders Association of India and keeping in view the various representations
received on the subject, the State Government has issued 5 Notifications on 28th June 1989. By one notification, a new Rule 10B has been
inserted in the Rules, which gives an option to the contractors of civil works to claim exemption from tax by paying a notified exemption fee. By
another Notification, Sub-rule (2) of Rule 29 of the Rules has been substituted and deductions have been allowed according to the law laid down
by the Supreme Court. By the third notification, some parts of Rule 46 have been amended for the purpose of simplification. The fourth notification
provides for the rates of tax payable on the goods Involved in the execution of works contracts, and the fifth notification provides for the quantum
of exemption fee payable by the contractors who opt for exemption from tax on works contacts.
4.0 For the sake of the guidance of the Departmental Officers and for the sake of the convenience of the awarders and contractors, the following
clarificatory instructions are issued:
4.1 Deduction to be allowed from turn-oven
(1) By the substituted Sub-rule (2) of rules 29 of the Rules, tax shall be computed on the turnover of a contractor after deducting there from
(a) Value of the goods, which are exempted from tax;
(b) Value of the goods which have already suffered tax at the rate prescribed u/s 5 of the Act; and
(c) all sums paid towards labour charges
(ii) As regards the claims of deduction for exempted goods or tax paid goods, the burden of prof shall be on the contractors to prove the same
according to the provisions of Section 5-D of the Act and according to the ratio of the following Judgments of the Supreme Court:
(a) The Commissioner of Income Tax, Bihar and Orissa Vs. Sri Ramakrishna Deo,
(b) (1968) 21 STC 25 SC S.R. Chattiar V.P.B.N.N. Nadar and Co.
(iii) In case of labour charges also, the burden of proof shall be on the contractors. However, where the labour charges are not determinable from
the accounts of the contractors or are considered unreasonably high considering the nature of the contract, the assessing authorities shall allow the
labour charges according to the table attached to clause (ii) of Sub-rule (2) of Rule 29 of the Rules.
4.2 Operative date for deductions:
(i) It is settled legal position that a judgment of the Supreme Court takes effect from the date of inception of the provisions which were under
dispute before the Court and which were adjudicated upon, because the Court does not legislate the law, it only interprets the law. Therefore, the
law laid down by the Supreme Court in the case of Builders Association of India shall apply from 28th May 1987, when the tax was levied on
works contract in the State of Rajasthan.
(ii) It is also settled legal position that the State Government cannot make the rules retrospectively, until or unless powers have been delegated to it
in the Act itself. In view of this legal position and in the absence of express powers for making the rules of deduction retrospectively in the Act,
Sub-rule (2) of Rule 29 of the Rules has been amended prospectively. Therefore, this Rule will take care of all the future cases. But, on account of
the decision of the Supreme Court, which has got binding force by virtue of Article 141 of the Constitution, the principles laid down in the case of
Builders Association of India shall apply from 28th May 1987, when tax on works contract was levied for the first time. This interpretation is also
confirmed by the combined reading of Section 3, Section 2(s) and Section 5(3) of the Act. Section 3 is the charging Section , which provides for
levy of tax only on taxable turnover and not on turnover. According to Section 2(s), taxable turnover is arrived at after deducting from the
aggregate amount if the proceeds of sale of goods on which no tax is livable under the Act and which have already been subjected to tax under the
Act. According to proviso to Sub-section (3) of Section 5, the turnover of a contractor shall be subjected to tax after allowing such deductions as
may be prescribed. According to the ''Law of Interpretation'' as held by the Supreme Court in the case of Dr. Balinam A aman Hiraj, reported at
(1989) 72 STC 384 no Section of an Act can be read in isolation. Accordingly, all these three Sections have to be read together and the only
possible inference that emerges from such reading coincides with the decision of the Supreme Court given in the case of Builders Association of
India, therefore, all the assessing authorities are instructed that the affect of the said judgment of the Supreme Court should be given from 28th
May, 1987 for computing the taxable turnover.
43 Deduction at source:
(i) According to the amended clause (a) of Sub-rule (2) of Rule 46, in a works contract the awarder in case of its being a Department of any
Government, a Corporation, A Government Undertaking, a Co-operative Society, a Local Body, a Trust or a Private or public limited Company
responsible for paying any sum to a contractor for carrying out any work, shall, at the time of credit of such sum to the accounts of the contractor
or at the time of payment thereof in cash or by issue of a cheque or draft of by any other mode, deduct the amount equal to 3% of such sum
towards the tax and shall issue a certificate of deduction of tax to the contractor in Form ST. 45. Such deduction of tax shall be subject to
adjustment at the time of assessment of the contractor.
(ii) This amended Sub-rule shall not have retrospective effect and shall apply from 28-6-1989.
4.4 Information by some awarders:
According to the newly inserted Sub-rule 1 (A) of Rule 46, where the gross value of a contract exceeds Rs. 5 laces, the awarder shall, within one
month of the making of the contract, furnish to the assessing authority of the contractor, particulars of the contract in Form S.T.47.
4.5 Rates of tax:
By necessary implication of the Supreme Court judgment in the case of Builders Association of India all Notifications about rates of tax on works
contracts issued u/s 5 of the Act have become ultra vires. Therefore, a new notification has been issued u/s 5 of the Act on 28th June, 1989 which
reiterates the rates of tax already notified u/s 5 of the Act and which shall be applicable on the goods involved in the execution of works contract
from 28.5.1987.
4.6 Option for Civil Contactors:
(i) A new Rule 10-B has been inserted in the Rules from 28th May 1987, and according to this Rule, in case of works contract relating to civil
works, the contractors have been given an option to choose exemption from tax on payment of a fee as notified by the State Government.
According to the notification issued on 28th June, 1989 which has been made effective from 28.5.87, such contractors may opt for exemption
from tax on payment of exemption fee @ 3% on the total value of a works contract. (ii) Such contractor shall make an application to his assessing
authority in Form S.T. 1-A within 60 days from 28th June 1989 or from the date of the award of the contract, whichever is later, for granting
certificate of exemption from tax. The delay in filing such application may be condoned on payment of a penalty not exceeding Rs. 10001
(iii) If the assessing authority is satisfied that the application of such contractor is covered by Rule 10-B, he shall by an order in writing grant
exemption certificating Form S. T. 2-A.
(iv) The exemption fee for such a works contract, as notified by the State Government from time to time shall be recoverable from the contractor in
the following manner
(a) If the awarder is a department of any Government a Corporation, a Government Undertaking, a Cooperative Society a Local Body, a Trust or
a Private or Public Limited Company, responsible of paying any sum to such contractor, who has opted for exemption from tax, such awarder
shall deduct the exemption fee at such rate as notified by the State Government for time to time from the payment to be made in any manner to
such contractor and all the provisions of Rule 46 shall apply mutates mutants. For the time being, the rate of such exemption fee is 3 per cent of the
total value of a works contract.
(b) In case of an awarder being not covered by sub-clause (a), the exemption fee shall be recoverable from the contractor in installments payable
in a period not exceeding one year from the date of the issue of the exemption certificate:
Provided that where the stipulated period for completion of such works contract exceeds the period of one year, the assessing authority may, with
in previous approval of the By. Commissioner (Adm.), extend the period of payment of installments, but not exceeding the stipulated period of
completion of the works contract or three years, whichever is earlier.
5.0 All Heads of the Department and Presidents/Secretaries of different trade Organizations are requested to further circulate the contents of this
circular to their subordinates or to their members, as the case may be, in order to ensure better comprehension, of the revised legal position with
regard to tax on works contract by all concerned.
sd/-
(Prriyardashi Thakur)
Commissioner,
Commercial Taxes Department,
Rajasthan, Jaipur.
6. In view of the supersession and withdrawal of the notifications EX. 3, EX. 4, EX. 6 and further amendments made in the Act and the Rules as
well as from the facts that the respondents have issued certain instructions vide EX. R.2/2 clarifying the position of the Department regarding the
levy of sales tax to the concerned authorities responsible for execution of the provisions of the Sales Tax, only the following points remain to be
considered and decided by this Court:
(i) Whether the validity of Article 366(29-A) of the Constitution of India can be looked into by this Court even after the Judgment of the Hon''ble
Supreme Court in Builders Association of India and Others Vs. Union of India (UOI) and Others, , wherein the Validity of this amendment was
up-held? (ii) Whether provisions of Section 7(2-c) of Rajasthan Sales Tax Act, which provide for the deduction of the sales tax at source from the
bills of works contracts is discriminatory and is violative of Article 14 of the Constitution of India?
(iii) Whether the amendment in the taxing statutes can be made retrospectively ahd whether sales tax can be charged in the case of works contract
prior to 24.4.1988 (iv) Whether the Notification dated 28th June, 1989 can be issued without making corresponding amendment in the Rajasthan
Sales Tax Act and Rules in accordance with the judgment of the Hon''ble Supreme Court in Builders Association of India''s case and whether the
sales tax can be charged?
(v) Whether the petitioners are entitlted for any refund?
(vi) Whethe the Notification dated 28th June, 1989 fixing the exemption as the payment of 3% sales tax is valid?
(vii) Whether the Notification Section 34 dated 28th June 1989 fixing condition fo the labour charges can be issued.
So far as the other contentions raised by the petitioner in the writ petition are concerned, they do not survive in view of the supersession of the
Notifications EX. 3, EX. 4, EX. 6, and various amendments made in the Rajasthan Sales Tax Act and the Rules and in view of the instructions EX.
R.2/2 issued by the respondents to the concerned assessing authorities because the relief prayed-for by the petitioner has already been granted by
the respondents and no dispute, in fact, with respect to these questions really survives, This Court is not expected to go into the validity of the
provisions which are not in existence and have been superseded already by amendment and also resolved the controversy by issuing instructions
granting the relief. When actually no dispute remains to be decided between the petitioner(s) and the respondents then the Court is not expected to
decide the questions for academic purposes, only. The grievance of the petitioner is that only the administrative instructions have been issued by the
respondents to various authorities granting the relief to the petitioner but no corresponding amendment has been made in the Act and the Rules,
and, therefore, this Court should decide these questions also. When the instruction have already been issued by the respondents granting relief to
the petitioners and the authorities are acting-upon those instructions and the relief�s have already been granted to the petitioner, as such no
grievance of the petitioners remains to be decided. The petitionrs are availing the benefits of the instructions and therefore they cannot be permitted
to question the validity of the instructions. When the petitioner has no grievance in respect of these contentious and is getting the relief then merely
because amendments in the corresponding provisions have not been made, the question of the validity of the provisions is not required to be
considered.
7. Now we propose to take the points raised. by the petitioner which remain to be decided.
I) The petitioner has challenged the validity of Article 366(29-A) of the Constitution of India on various grounds which were not taken note of by
the Hon''ble Supreme Court while deciding the case of Builders Association of India and Others Vs. Union of India (UOI) and Others, The
contention of the learned Counsel for the provisions of Article 366(29-A) of the Constitution of India has not been judged by the Hon''ble
Supreme Court...these points and no finding has been given by the Supreme Court on these points and, therefore, this Court is competent to judge
the validity of the provision of Article 366(29-A) of the Constitution on these points. In support of his contention, the learned Counsel for the
petitioner has relied-upon the judgment of Good Year India Limited and Ors. v. The State of Haryana and Ors. 1989 (31) STL 49 (SC) wherein
it has been held that precedent is an authority only for the point it actually decides and not for other which even logically follows from it and a
decision on a question which has not been argued cannot be treated as a precedent. We have gone through the judgment of the Hon''ble Supreme
Court in the Good Year India Limited and others'' case but in our view that judgment does not apply to the present case. So far as the contention
Which has not been raised before the Court and no finding has been given by the Court on those points, these points can be agitated and can be
decided by the Court, but in the present case the validity of the provisions of Article 366(29-A) of the Constitution of India was under
consideration before the Hon''ble Supreme Court and the Supreme Court, after considering the provisions of Article 366(29-A), up-held the
validity of the 46th Amendment. When the Hon''ble Supreme Court has up-held the validity of the 46th Amendment of the Constitution, this court
is not expected to again go into and decide the question whether the 46th Amendment is a valid piece of legislation or not. Taking into account the
other grounds of attack questioning the validity, in our view, this Court cannot, again, judge the validity of the provisions of Article 366(29-A) of
the Constitution, The 46th Amendment of the Constitution is, thus, perfectly legal and valid.
(II) Now, the question whether the provisions of Section 7(2-C) of the Rajasthan Sales Tax Act, which provides for the deduction of sales tax
from the bills of works contract is discriminatory or is violative of Article 14 of the Constitution, is concerned, it has been contended by the learned
Counsel for the petitioner that this provision has been made by which the works contractors have been subjected to tax deduction at source when
no such similar procedure exists for any other class/categories of dealers, traders and manufacturers. According to the learned Counsel for the
petitioner, such provision for deduction at source has not been authorized under the 46th Constitution Amendment nor under the Rajasthan Sales
Tax Act, 1954 prior to the insertion of Section 7 (2-C) of the Act. Before dealing with his controversy, it will be better to refer Section 5(3) and
Section 7(2-C) of the Rajasthan Sales Tax Act, which read as under:
5(3) Notwithstanding anything contained in this Act in the case of works contract, the turn over of such contract shall be subjected to tax.
Provided that such deduction, as may be prescribed, may be allowed to a contractor while determining his tax liability.
7(2-C) Notwithstanding anything contained in this act, in the case of a works contract the tax may be deducted in such manner and in such
circumstances as may be prescribed from every bill of payment to a contractor.
From a bare perusal of Section 5(3) and Section 7(2-C) of the Act, it is clear that Section 5(3) of the Act is a charging Section and it creates a
liability for tax in the case of a works contract and/provides that a then over of such works contract shall be subjected to tax. Section 7(2C) deals
with the question that how the tax in the case of a works contract is to be deducted. It provides that the tax may be deducted in such manner and
in such circumstances as may be prescribed from every bill of a payment to a contractor. Section 7(2-C) of the Rajasthan Sales Tax Act deals
with the deduction of the tax at source. Thus Section 7(2-C) of the Act is being a provision which provides the machinery how the tax is to be
recovered and, therefore, such provision should be construed in a manner which makes it workable. Section 7(2-C) of the Act provides only a
mode of collection of tax at source and when the legislature thought it proper to provide a particular mode for the collection of the tax then it
cannot be said that Section 7(2-C) of the Act is outside the legislative competence of the legislature. The method of Collection of tax or deduction
of tax at source does not affect the essence of the duty but is only relates to the machinery of collection for administrative purposes. The legislature
has the power to create machinery and to provide a mode of collection of tax. Whether to deduct a tax at source of impose a liability on a
particular person to collect and pay to the department in order to recover the tax or to prevent the evasion of payment of the tax, such powers of
the legislature providing recovery of tax by a particular procedure and the authorities have been recognized by the Apex Court. When a particular
mode has been provided by the legislature for the recovery of the tax, it cannot be said that it is in any way discriminatory. Section 7(2-C) of the
Act is only a mode of recovery of sales tax and it is meant to secure the Government revenue. It is nothing but in the form of an advance tax. The
principle of recovery of advance tax is not new. The concept of advance lax finds place in the provisions of Section 1954 (C) of the Income Tax
Act, also. The provisions only provide that in a case of works contract, the tax may be deducted in such manner and under such circumstances as
may be prescribed from every bill of a payment to a contractor. According to this provision the deduction of the sales tax has to be made from the
bills of the contractor at the time of the payment of the bills. The case of the petitioner is that the purchasers are entitled to make the payment while
in the presents case, the amount has to be deducted room the bills of the awarder or the contractor. This provision has been made in order to
deduct the tax at source so that the revenue of the Government may be secured. A provision has been made in Section 5(3) of the Act itself which
provides that such deductions made from the bills of the petitioner while determining the tax liability, exemption will be allowed to the awarder is
not entitled to make the payment. That deduction will be allowed to the petitioner at the time his assessment order is passed, but so far as the
deduction of tax at source is concerned that cannot be said in any way, to be illegal. The law for taxation sometimes has to provide the mode for
collection of tax at a convenient place. So far as the question that this deduction of tax has been provided only in cases of works contractors and
not in the cases of other contractors, suffice it to say that it is merely a machinery provision which provides for the collection of the tax but so far as
the liability part is concerned, that has been provided in Section 5(3) of the Sales Tax Act. This provision encompasses not only the private
individuals but all the persons entering into works contract. It ay involve the individuals and the companies, and others, also. Futher-more, in order
to provide the machinery for the evasion of tax if a particular mode of recovery of tax has been provided in a particular class of persons then it
cannot be said of be, in any way, discriminatory. It is no doubt true that the guarantee of equal protection applies against substantive as will as
procedural laws but a procedure different from that laid down by the ordinary law in respect of a particular class of persons can be prescribed for
a particular class of persons if the discrimination is based on a reasonable classification having regard to the objective which the legislature had in
view and the policies underlying it. If the provisions in the case are in accordance with the policy, which has been formulated, and the objective,
which it seeks to accomplish, then the provision cannot be condemned as arbitrary or violative of article 14 of the Constitution. In the present case,
the provisions have been made in order to prevent the evasion of tax and to provide a mode for the recovery of the tax. In a works contract,
works contractors themselves form a class and, thus, there is no question of any discrimination. Moreover, Article 14 does not apply in procedural
matter unless it results in prejudice to the person. In our view, no prejudice has been caused to the petitoner or any work contractor and,
therefore, the provisions of Section 7(2-C) of the Act are intra-vires and are not discriminatory or arbitrary.
(III) The next point raised by the petitioner is that the amendment of the taxation statute cannot be made retrospective. It has been argued by the
learned Counsel for the petitioner that the definition of the ''works contract was inserted by the legislature for the first time orv 28th May, 1987 by
the Rajasthan Sales Tax Act (First Amendment). According to him, as the definition of ''works contract'' has been substituted with effect from
22nd April, 1988, therefore, the tax on works contract can be charged with effect from 22.4.1988 only and not prior to that. Vide Rajasthan Sales
Tax Amendment Act, 1988 (Act No. IX of 1988), a new Clause (i) in Section 2 was added in the Rajasthan Sales Tax Act from 1st April, 1987,
providing the definition for ''works contract'' which reads as under:
2 (u)--works contrtact'' includes any agreement for the building, construction, manufacture, processing, fabrication, erection, installation, fitting out,
over-hauling, repair or commissioning of any movable or inmovable property for cash, deferred payment''or other valuable consideration, but
excludes a works contract purely of labour or service.
The case of the petitioner is that prior to the amendment made on 22nd April, 1988, as there was no definition of works contract and, therefore,
no sales tax could have been changed on the works contract, while the legislature has given retrospective effect to the definition with effect from
01.04.1987 Now, so far as the question: whether retrospective effect can be given to the taxation statute or not, that stands concluded by the
judgment of the Apex Court in Ujagar Prints Vs. Union of India (UOI), , wherein the Hon''ble Supreme Court has observed as under:
(30). There is really no substance in the grievance that the retroactivity imparted to the amendments is violative of Article 19(1)(g). A competent
legislature can always validate a law which has been declared by Courts to be invalid, provided the infirmities and vitiating in factors noticed in the
declaratory judgment are removed or cured. Such a validating law can also be made retrospective. If in the light of such validating and curative
exercise made by the Legislature-granting legislative competence-the earlier judgment becomes irrelevant and unenforceable, that cannot be called
an impermissible legislative overruling of the judicial decision. All that the legislature does is to unsheet in a valid law with retrospective effect in the
light of which earlier judgment comes irelvant.
Such legislative expedience of validation of laws is of particular significance and utility and is quite often applied, in taxing statutes. It is necessary
that the legislature should be able to cure defects in statutes. No individual can acquire a vested right from a defect in a statute and seek a windfall
from the legislature''s mistakes. Validity of legislations retroactively curing defects in taxing statutes is well recognized and courts, except under
extraordinary circumstances, would be reluctant to override the legislative judgment as to the need for and wisdom of the retrospective legislation.
In Empire Industries Limited and Others Vs. Union of India and Others, this Court observed:
...not only because of the pare mount governmental interest in obtaining adequate revenues, but also because taxes are not in the nature of a
penalty or a contractual obligation but rather a means of apportioning the costs of government amongst those who benefit from its.
In testing whether a retrospective imposition of a tax operates so harshly as to violate fundamental rights under Article 19(1)(g), the factors
considered relevant include the context in which retroactivity was contemplated such as whether the law is one of validation of taxing statute struck
down by courts for certain defects; the period of such retroactivity and the degree and extent of any unforeseen or unforeseeable financial burden,
imposed for the past period etc. Having regard to all the circumstances of the present case, this Court in Empire Industries case held that the
retroactivity of the Amending provisions was not such as to incur any infirmity under Article 19(1)(g). We are in respectful agreement with that
view.
It is, thus, not in dispute that retrospective operation can be given to the taxing statutes, also. Even otherwise, in the present case, this argument is
not available to the petitioner. In view of the provisions of Section 2 (e) of the Rajasthan Sales Tax Act, which were already in existence prior to
the insertion of Clause (u) to Section 2 of the Act, which provides a definition of the works contract. Section 2(e) of the Act gives the definition of
the word ''contract'' or ''works contract'' and reads as under:
2(e) Contract (or works contract) means any agreement for carrying out for cash or deferred payment or other valuable consideration (I) the
construction, fitting out, improvement or repair of any building, road, bridge, or other immovable property; (II) the Installation, or repair of any
machinery affixed to a building or other immovable property; or (Hi) the over-hauling or repair of any motor vehicle.
Thus, in the interim period, there were two definitions of the works contract and prior, to 30.3.1987, Section 2(e) was already in existence, which
also includes the works contract. There was, therefore, in our view, no gap and the tax on the works contract could have been levied even prior to
that. The argument of the petitioner on this point, in our view, has no force and is liable to be rejected.
8. The next point raised by the learned Counsel for the petitioner that notification dated 28th June, 1989, could not have been issued by the
Government without making corresponding amendments in the Rajasthan Sales Tax Act and the Rules in view of the judgment of the Hon''ble
Supreme Court in Builders Association of India. In our view, the amendment was made merely to enable the State Legislature to enact the law
imposing tax in the cases of works contract and after the amendments, various provisions have been inserted in the Rajasthan Sales Tax Act and
the Rules by way of amendments. The Hon''ble Supreme Court has upheld the validity of the 46th Constitutional Amendment Act. In our view,
after the judgment of the Supreme Court, the State Government is competent to issue the Notification dated 28th June 1989 without making
further amendments in the Rajasthan Sales Tax Act and the Rules, which has rightly been issued.
9. Now, comes the question: whether the petitioner is entitled for any refund? As we have already held above that the amendment to the taxation
statutes can be made retrospectively and we have also held that there was no gap with respect to the charging provisions in the case, of works
contract as prior to the amendment, Section 2(e) provides the definition for contract and ''works contract'' also. As the tax has not been charged
illegally from the petitioner, therefore, the petitioner is not entitled for any refund.
10. The next question raised by the counsel for the petitioner that vide Notification dated 28th June, 1989, S.O. 52 published in the Rajasthan
Gazette Extraordinary Part IV C-II dated 1st July, 1989, by which the exemption from tax on the transfer of property or goods (whether as goods
or in some other form) involving works contract has been granted on the condition that the contractor claiming the exemption holds a valid
certificate of exemption with reference to the contracts for Which the exemption is claimed on payment of exemption fee at the rate of 3% of the
total value of such works contract, that the rate of tax levied by this notification is excessive. It is not in dispute that the rate of tax on various items
under the Sales Tax Act is provided upto 10%. In our view, this Exemption Fee of 3% on the total value of works contract cannot be said to be,
in any way, excessive. Moreover, the payment of this Exemption Fee is not binding on the works contractors. If the works contractors wanted to
avail of the benefit of exemption they can make payment of the tax at the rate of 3% on the total turnover and if they do not want to avail the
benefit, they can pay the tax as per law. As the Notification docs not bind the petitioner to compulsorily deposit the amount of 3% and obtain the
exemption, in our view, this Notification S.O. 52 of 28.6.89, therefore, cannot be said to be, in any way, violative or discriminatory or illegal.
11. Now, remains the last question to be decided: Whether the condition fixed by the State Government in respect to the labour charges in S.O.
52 dated 28th June, 1989 can be issued or not? These instructions were published in the Rajasthan Gazette Extraordinary Part IV C-II dated 1st
July 1989. Vide this notification, the amendment lo Sub-rule (2) of Rule 29 of the Rajasthan Sales Tax Rules. 1955 was made. Sub-rule (2) of
Rule 29 reads as under:
29(2)-in case of a works contract tax shall be computed on the turnover of the contractor after deducting
(i) The value of the goods transferred in execution of works contract, whether as goods or in some other form, which have already suffered tax at
the rate prescribed u/s 5 or which are exempted from tax u/s 4 of the Act.
(ii) All sums towards labour charges, which are directly co-related with the goods, property in which has passed in the execution of works
contract, whether as goods or in some other form:
Provided that where the labour charges are not determinable from the accounts of the contractors, or are considered unreasonably high
considering the nature of the contract, the deductions towards labour charges shall be allowed by the assessing authority according to the limits
prescribed in column 3 for the type of contract specified in column 2 of the table given below:
According to the proviso to Sub-rule (2) of Rule 29 in the, case where the labour charges are not determinable from the accounts of the contractor
or ate considered unreasonably high, considering the nature of the contract, the deductions towards the labour charges shall be allowed by the
assessing authority to the limit prescribed in the rule. In order to determine the labour charges when the assessee docs not keep proper books of
accounts or where the labour charges could not have been determined, the procedure has been provided by this notification by amending Sub-rule
(2) of Rule 29 of the Rajasthan Sales Tax Rules. A bona fide assessee, who maintains the proper accounts and where labour charges can be
determined from the accounts of the contractor then these provisions are not applicable. These provisions are merely to assist the assessing
authority to provide the mode of assessing the contractor where the labour charges could not be determined or where the account maintained by
the assessee contractor are not proper. In this view of the matter, Sub-rule (2) of Rule 29 cannot be said to be, many way, discriminatory or
violative of the provisions of the Act.
12. Thus, in the result, we do not find any merit in this writ petition and the writ petitions mentioned in the Schedule and they are dismissed. No
order as to costs.
