B.R.ARORA, J. - (1.) THE petitioner, a manufacturer of cement, is a public limited company, whose registered office is at Calcutta and the factory/works is at Chittorgarh. The cement manufactured by the petitioner factory is being transported to the different destinations with the assistance of approved transport operators/companies. The petitioner did not deduct the tax at source (TDS) on the payments made to the transporters under S. 194C of the IT Act, therefore, a letter dt. 18th March, 1995 was issued to the petitioner company by the ITO (TDS), Chittorgarh requesting and reminding it to deduct the TDS from the payments made to the transport contractors in accordance with Circular No. 681, dt. 8th March, 1994.
(2.) NO deduction of the TDS was made by the petitioner company under S. 194C of the IT Act as according to the petitioner it was not obliged to deduct the amount of TDS under S. 194C of the Act from the payments made to the transport companies as the provisions are not applicable to such transactions. The respondents, therefore, initiated penalty proceedings against the petitioner. The petitioner, by this writ petition, challenges the legality and validity of the Circular No. 681, dt. 8th March, 1994 issued by the CBDT, New Delhi and the notices issued by the ITO (TDS), Chittorgarh. It is contended by the learned counsel for the petitioner, that (i) S. 194C of the Act covers only works contracts and does not cover the payment of transport charges for carriage of goods; (ii) the service rendered for carrying on transportation of the goods can by no imagination, be treated as covered by the words "any work"used in S. 194C of the Act and the coverage and scope of S. 194C given in Circular No. 681; (iii) Expln. (iii) added to S. 194C of the Act, covering carriage of goods within the expression of word 'works' is only prospective and does not cover the case of the petitioner between the period from 1st April, 1994 to 30th June, 1995; (iv) while issuing the Circular No. 681 (Annexure A) [published at (1994) 117 CTR (St) 229] the decision of the Hon'ble the Supreme Court in Associated Cement Co. Ltd. vs. CIT & Anr. (1993) 111 CTR (SC) 165 : (1993) 201 ITR 435 (SC) : TC 5PS.39 has been wrongly interpreted; and (v) the CBDT has no power, authority or competence to make the law or to impose any liability by issuing the Circular No. 681, dt. 8th March, 1994. In support of his contention, learned counsel for the petitioner has placed reliance over Bombay Goods Transport Association & Anr. vs. CBDT & Ors. (1994) 121 CTR (Bom) 32 : (1994) 210 ITR 136 (Bom) : TC 5PS.123, Delhi Goods Transport Association vs. CBDT & Anr. (1995) 80 Taxman 525, All Gujarat Federation of Tax Consultants & Ors. vs. CBDT & Anr. (1995) 126 CTR (Guj) 288 : (1995) 214 ITR 276 (Guj) : TC 5PS.228, Madras Bar Association & Ors. vs. CBDT & Ors. (1996) 130 CTR (Mad) 360 : (1995) 216 ITR 240 (Mad) and Calcutta Goods Transport Association & Anr. vs. Union of India & Ors. (1996) 134 CTR (Cal) 132 : (1996) 219 ITR 486 (Cal).
(3.) LEARNED counsel for the respondents, on the other hand, has submitted that (i) the Circular No. 681 was issued by the CBDT rightly and properly in exercise of the statutory powers and is neither without jurisdiction nor nullity; (ii) the circular was issued on the proper interpretation of the judgment of the Hon'ble Supreme Court in Associated Cement Company's case and S. 194C of the Act covers the cases of payment of transport charges for carrying the goods; (iii) the Expln. (iii) added to S. 194C by the Finance Act of 1995 w.e.f. 1st July, 1995 is only clarificatory in nature and even without this Explanation the petitioner was obliged to deduct the TDS and the writ petition filed by the petitioner is without any substance and deserves to be dismissed. In support of his contention, learned counsel for the respondents has placed reliance over Associated Cement Co. Ltd. vs. CIT & Anr. (supra) and Ekonkar Dashmekh Transport Co. & Ors. vs. CBDT & Anr. (1995) 129 CTR (P&H) 303 : (1996) 219 ITR 511 (P&H).;