Decided on December 15,1998

Dawn Engineering Appellant


- (1.) IN all these matters the validity of Section 3 -B of the Tamil Nadu General Sales Tax Act, 1959 and especially Section 3 -B(2)(b) questioned. In O.P. No. 1708 of 1998 the petitioner is an engineering company and it is engaged in the fabrication, supply and erection of rolling shutters on works contract basis, and the company is not selling anything. The petitioner was assessed to sales tax for 1988 -89 to 1995 -96 and his claim for deduction of turnover in respect of works contract was not considered by the assessing officer for 1990 -91 and on appeal before the Appellate Assistant Commissioner his claim was allowed for deduction. However, the Joint Commissioner who initiated the suo motu revision had held that the deduction allowed was against the decision of the apex Court in [1978] 42 STC 409 (Sentinel Rolling Shutters and Engineering Company Pvt. Ltd. v. Commissioner of Sales Tax) and he set aside the order of the Appellate Assistant Commissioner and remanded the matter for fresh consideration. After passing the order for the year 1988 to 1989, the matter was taken before the Appellate Assistant Commissioner who dismissed the appeal and when the matter was taken up to the second appellate authority, namely, Tamil Nadu Taxation Appellate Tribunal, it remanded the matter once again to the assessing officer to consider the claim of exemption applying strictly Section 3 -B(2)(b) of the Tamil Nadu General Sales Tax Act, 1959 (hereinafter called as "the Act"). The petitioner would submit that there is no element of sale in his transaction, however, invoking Section 3 -B(2)(b) of the Act, the materials used by him have been taxed and the appellate authorities have frequently remanded the matter as they were not certain about the remedy contemplated under Section 3 -B of the Act and as the legal position has not been decided properly, the vires of Section 3 -B(2)(b) of the Act have to be considered. Further, in S.P. No. 406 of 1998 in A.P. No. 412 of 1998 dated August 5, 1998 pertaining to the year 1991 -92 a conditional stay was granted directing the petitioner to pay 25 per cent of taxes on or before September 4, 1998 and this order is sought to be stayed.
(2.) IN O.P. No. 2016 of 1998 the petitioner is a dealer, manufacturing and selling pollution control equipments, steel plant machineries and spares wind electrical generators. His company has also been assessed to tax for 1995 -96, overruling the claim of the assessee for exemption with regard to certain materials used in the works undertaken by him. The petitioner in this O.P. would allege that Section 3 -B of the Act substituted by Act 25 of 1993 has been enacted in contravention of the Constitution of India and the words in Sub -section (2)(b) to Section 3 -B "in the same form" are unwarranted as they place a restriction, which was not contemplated in the Constitution of India and the levy of tax on the deemed sales is contrary to Clause (29A) to Article 366 of the Constitution of India. He further stated that levy of tax on the transfer of property in the goods that are used in the execution of works contract is not in consonance with the constitutional provisions as the works contractor is unable to avail of second sales exemption in respect of First Schedule single point commodities and Second Schedule declared goods, unless the goods in question are transferred "in the same form". Therefore, this petitioner challenges the validity of Section 3 -B(2)(b) of the Act. The petitioner in T.P. No. 2971 of 1997 is the skin and hide tanners merchants association serving for the cause of its members providing necessary assistance, especially in securing the materials for the business. This association also has alleged that Section 3 -B of the Act is contrary to Clause (29A) to Article 366 of the Constitution making a deemed sale even for the works contract and in the contract of coolie for tanning or dyeing, there is no sale of any material and the rules framed thereunder to Section 3 -B have fixed 30 per cent towards the labour to claim deduction and the rest of the 70 per cent is said to be the sale value which is taxable, that this percentage of labour charges fixed under Rule 6 -B is arbitrary and therefore a writ of declaration has to be issued declaring that the sales tax on works contract in respect of the business of coolie for tanning and dyeing contract is illegal and ultra vires to the Constitution.
(3.) AS a matter of fact, the test as to the validity of Section 3 -B(2)(b) of the Act, is undertaken by this Tribunal for the second time, as already this question be considered by this Tribunal in O.P. No. 1964 of 1998 upholding the validity of the provision, in the light of the decisions of the High Court. When these matters were taken up, the learned Counsel in O.P. No. 1708 of 1998 was not ready and sought for adjournment. As the Full Bench was constituted to hear this matter, adjournment was refused, and all the contentions raised in the affidavit filed in O.P. were carefully considered for the disposal of the petition. In the other two matters, the learned Counsel confined their representations to the points raised in the affidavits of the petitioners. To put it concisely, from the averments of the affidavits, the validity of Section 3B is attacked on three grounds. The first ground is the wording "in the same form" found in Sub -section (2)(b) to Section 3B of the Act. The second ground is Section 3 -B(2)(b) is contrary to the Article 366(29A) of the Constitution of India as the definition of "sale" under Section 2(n)(ii) is not in consonance with the Constitutional provisions under 46th Amendment to the Constitution. The third ground relates to the percentage fixed towards the labour charges at 30 per cent under Rule 6 -B of the Tamil Nadu General Sales Tax Rules, 1959 which according to the petitioner is arbitrary.;

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