DLF INDUSTRIES LIMITED Vs. STATE OF HARYANA

JUDGEMENT

(1.) THESE are two petitions (Civil Writ Petition Nos. 3542 and 7379 of 1997) Under Articles 226 and 227 of the Constitution, both by DLF Industries Limited, challenging the vires of certain provisions of the Haryana General Sales Tax Act, 1973 (for short, "the Act") and for quashing the assessment orders relating to 1990-91 and 1992-93 and also consequential demand notices. The vires and constitutionality of the proviso to Section 6 (1), proviso to Section 18 of the Act and validity of Rule 24 (i) and Rule 39a (11) of the Haryana General Sales Tax Rules, 1975 (for short, "the Rules") are under challenge.

(2.) ASSESSMENT was made by the Assessing Authority for the year 1990-91 on January 11, 1994 and for the year 1992-93 on January 28, 1997. The petitioner is a public limited company incorporated under the Companies Act, 1956. DLF Universal Limited is the holding company of the petitioner-company. The said holding company was engaged in the work of colonization in the State of Haryana and carried out works contracts. Major part of the work was done by the holding company by entering into contracts with the petitioner-company. The holding company thus became the contractee and the petitioner-company became the contractor. The petitioner-company, in turn, executed some work itself and some work was got done through the sub-contractor. Material used in the work was arranged by the sub-contractor. The petitioner-company did some work for the parties other than its holding company also. The petitioner-company had three divisions, namely, Energy Systems Division, Electrical Division and the Construction Division. The petitioner-company maintained its headquarters at Gurgaon (Haryana) and was a registered dealer under the Act as also under the Central Sales Tax Act, 1956. The company filed quarterly returns for both the years and deposited tax due as per the returns. The Assessing Authority made certain additions at the time of assessment.

(3.) THE case of the petitioner is that it executed works contract in connection with the construction activity and part of the construction work was done by the sub-contractor. Material used in the work was arranged by the sub-contractor himself who executed part of the works contract as an independent dealer under the Act and was liable to pay sales tax. Under Section 25-B of the Act, a contractee was under obligation to deduct sales tax at the rate of 2 per cent of the amount paid, credited or adjusted for execution of a works contract involving transfer of property in the goods if the total payment exceeded Rs. 1,00,000 in an assessment year. The amount so deducted was to be deposited in the Government treasury. The petitioner deducted a sum of Rs. 5,70,131 in the year 1992-93 towards tax from its sub-contractors and deposited the money in the Government treasury. The assessing authority, while framing assessment for 1992-93, included, in the gross turnover of the petitioner-company, the value of the goods used by the sub-contractors. Liability to pay tax on the materials used by the subcontractors was on them and not on the petitioner. Tax was, therefore, leviable on sale or deemed sale made by the sub-contractors. Property in the goods used by the sub-contractors passed on directly from the sub-contractor to the contractee and not to the contractor, namely, petitioner-company, who had given the sub-contract.