PUNJ LLOYD LTD Vs. STATE OF M P

JUDGEMENT

(1.) ALL the aforesaid writ petitions involve common question of law; therefore, they are disposed of by this common order.

(2.) FOR convenient disposal of all the aforesaid writ petitions, the facts given in Writ Petition No. 1141 of 1996 (Punj Lloyd Ltd. v. State of M. P. and others), are taken into consideration.

(3.) THE petitioner-company is a registered company under the Companies Act, 1956, having its registered office at New Delhi and branch at Gwalior in the State of M. P. The petitioner-company amongst other activities undertakes works contract. The petitioner-company is a dealer registered under the M. P. General Sales Tax Act, 1958 (since repealed) and is consequently registered dealer under the M. P. Commercial Tax Act, 1994 (hereinafter referred to as "the Act of 1994" ). The respondent No. 3 - Gas Authority of India Ltd. is a Government company and is the Government of India Undertaking. The respondent No. 3 awarded works contract to the petitioner-company for laying of pipeline system and other incidental works at Vijaypur, district Guna. The value of the contract is Rs. 57,05,80,500 approximately. The contract also provides for the material involved at Rs. 5,00,79,240 which works out to 9. 83 per cent of the total value. The rest of the amount is for labour and service charges. The petitioner-company commenced the work and submitted its seventh running bill on March 15, 1996. Under this bill, the petitioner-company had to receive a sum of Rs. 5,62,75,940 approximately. It is alleged that the State Legislature has enacted the Commercial Tax Act, 1994, repealing the M. P. General Sales Tax Act, 1958, with effect from February 7, 1995. Section 35 of the Act provides for deduction at source of tax payable by contractor, inter alia, casting the duty on the person making payment to a contractor in the works contract. It is further alleged that the petitioner-company having undertaken a works contract from the respondent No. 3, the provisions of section 35 of the Act are attracted and by virtue of this provision, the petitioner-company has to suffer the deduction of the tax at source and it is also alleged that the petitioner-company will suffer deduction of Rs. 56,39,449 from payment receivable by the petitioner-company. The petitioner-company has purchased goods in the course of inter-State trade and commerce and it has to purchase certain goods from the registered dealer also within the State which is entitled to be deducted while working out the turnover of the petitioner-company. It is alleged that the total value of the material works out only to 9. 83 per cent and the rest is of labour charges. It is alleged that the petitioner is not liable to pay sales tax on certain sales but by virtue of section 35, still the tax will be deducted at source. Likewise, the petitioner has to pay tax on items mentioned in section 2 (w) (ii) of the Act which are in the nature of tax-paid goods. This amounts to unreasonable restriction on the freedom of trade. Therefore, the petitioner-company has filed this petition challenging the validity of section 35 of the Act being ultra vires of article 19 (1) (g) of the Constitution of India.