Petition under Article 226 of Constitution of India - Writ of Mandamus

In the Court of Judicature at ………………..
Civil Misc. Writ Petition No………of 20…….
(Order Article 226 of the Constitution of India)
(District :………….)
…………………………………………………
Petitioner
Versus
1. …………………………..
2……………………………
3……………………………
Respondents

To,

The Hon'ble Chief Justice and his other Companion Judges of the aforesaid Court.

The humble petition of the abovenamed petitioner most respectfully showeth :

1. That the petitioner is a contractor and executing work of construction of Draine, culverts, Boundary Wall and Kharanja etc. under the agreement with respondents Nos. 2 and 3. Under the agreement there is provisions for deduction of Sales Tax. But in addition to it the respondents have proposed to make a deduction 4% under Section 8-D of the Sales Tax Act. This deduction is wholly illegal and liable to be quashed by this Hon'ble Court, true copy of agreement would be produced at the time of hearing.

2. That for pursuant to the Forty Sixth amendment the State Government by U.P. Sales Tax (Amendment Consolidation) Act, 1985 (U.P. Act No. 25 of 1985) sought to substitute a sub-section (b) in Section 2 of the U.P. Sales Tax  Act, 1984 w.e.f. ………, 20……. in please of old sub-section (b) Section 2 of the  Act. By the said amendment Act a new sub-section (m) was added to section and another new Section 3 of Act, 1986, stated inter alia that consequent upon the Forty sixth amendment to the Constitution the State Government is empowered  to enact law as for imposition of tax on the sales of purchases of goods under entry 54 of List II of the Seventh Schedule in respect of :

(1) Transfer of property in goods involved in the execution of a works contract.

(2) Transfer of right to use in goods for any purposes.

(3) The delivery of goods in hire-purchase of any system of payment by instalments and

(4) The supply of any good or drinks etc. by way of order as part of service or in any other manner.

4. That the State U.P. further promulgated in ordinance No. …………, which was subsequently replaced by U.P. Act, No……………. By means of the  said Sales Tax Act, which provides for tax deduction from the amount payable to works contractor.

5. That in exercise of the powers conferred by Section 24 of the U.P. Sales Tax Act, the State Government framed Rules styled as the Uttar Pradesh Sales Tax (First Amendment) Rules, 1987 by which Rules 44-B and 44-C were inserted. These rules provided for the determination of the turnover of goods involved in the execution of a works contract and transfer of right to use goods Rule 44-B reads under :

"44. B. Determination of turnover of goods involved in the execution of works contracts.

The tax under Section 3-F, transfer of property in goods (whether or goods or in some other from) involved in the execution of works contract shall be computed on the net turnover relating to works contracts in determining the turnover the amounts specified below, shall be deducted if they are included in the gross turnover.

(a) The amount representing the purchase price of such good, involved in the execution of such works contract on the sales of purchase whereof  the tax under the Act is shown to the satisfaction of the assessing authority to have been paid.

(b) The amount representing the purchase price of such goods involved in the execution of such works contract as from tax under Section 4 or have been purchased from on industrial until which is exempt from text under Section 4-A.

(c) The amount representing the value of such of the goods, involved in the execution of such works contract as were supplied to the contractor by the property in such goods remaining under the runs of the contract there is about to return the unises goods to the contracts.

Explanation : For the purposes of this rule, goods turnover shall mean the aggregate of the amount receivable by a dealer in and assessment year as valuable consideration for the transfer of property is goods used in the execution of a works contract after the commencement of this rule,  whether of not the amount receivable or valuable consideration for such transfer is separately shown in the works contract and whether the execution of such works contract commented during the year of  earlier and included any advance received by the dealer towards valuable consideration for the works contract."

6. That the State Government in exercise of the power under Section 3-F of the U.P. Sales Tax Act issued a notification No. SI-II 2399/M-9(195)/25 U.P.  Act V-46, Order 37, dated …………………. Published in the U.P Gazette Extra-ordinary dated ………. which was to be effect from …………. 20.….. declaring as many as 115 categories of contract to be taxable at the rates applicable to the relevant notification relation to the maid good issued under Section 304 of Section 3-D of the U.P. Sales Tax Act. Items No. 6 of the said notification which is relevant in the present case, is as under :

Civil works like construction of building bridges road dams barrages, sewages spillways and diversions.

7. That the State Government further in exercise of the powers conferred by Section 8-D, Sales Tax Act issued another notification No. St.II 2401/X-9(1985)-66-U.P. Act V-48 dated…………..published in the U.P. Gazette Extraordinary dated ………….

8. That the petitioner submit that Sections 2 to 2(m) 3-J and 8-D of the U.P. Sales Tax Act No. 48, Order 87 dated ………..authorizing levy of  sales tax on more contract was also ultra vires  and beyond the legislative competence of the state legislates.

9. That Section 8-D the U.P. Sales Tax Act which provides for tax deduction by the contract from the amount as payable to the contractor is in the garb of providing for the tax deduction form payable the works contractor the State of U.P. is in fact, deduction tax on the income of the contractor is not permissible under the Constitution of India Section 8-D of the U.P. Sales Tax Act, does not mean any difference of destination in respect of the amount of tax which has to be deducted as it covers the entire payments made by the  contracts to the contractor irrespective of the fact as to whether such payment has been made by the contractee towards the price of the goods or towards the service or Labour charges incurred by the contractor for in with and substance provides for the deduction at source on the income of the contractor in respect of the entire amount payable by the contractee to the contractor which is wholly outside the legislative competence of the State legislature to enact such a provision since it has no authority or legislative competence to enact law imposing tax on income which has been specifically reserved under Section 32 of list 1 of the seventh schedule of the Constitution of India with the parliament.

10.  That the next aspect to be considered is  that Section 8-D of the U.P. Sales Tax Act purports of the provision regarding payment in advance of the sales tax which any ultimately to liable to be payable on the turnover works contract the costs of various items of goods are not only included but the cost of labour and service and profit on the entire project are also included the cost of labour and services as well as the profits of the entire project are also included in the amount payable by the contractee to the contractor according to explanation Rule 4-D of the rules the gross turnover shall mean aggregate of  the amount received to receivable the taxable turnover is to be determined in the manner prescribed as approved by Section 3-D of the Act. The Phase  manner prescribed means as prescribed by the Rules the cost of labour and service and the profits on the entire project are not liable to tax under the Act as the liability to pay tax under Section 3-D of the Act is confined to the turnover  relating to transfer of the property is good involved in the execution of works contract only. In 29 out of 100 cases the contracts would not be aware of the cost  of the value of the movable goods involved in the execution of the works  contract the only alternative, therefore left with him would be to deduct 4% of the gross value of the contract or the amount paid by him to the contractor from time to time which would obviously include not only the for transfer of property in the goods i.e. movable but also include the cost of labour/service  and the profits is relatable to the entire project. This would obviously be  beyond the scope of Act. Thus Section 8-D (1) therefore is wholly unworkable in its practical sense unless the deduction is made on the gross value inclusive of cost of Labour and service as well as total profit which obviously  would be beyond the general scheme and the charging section of the Act and would, therefore, be repugnant to the same and thus be void.

11. That the petitioner respectfully submit that the constitutional validity of the provisions of the U.P. Sales Tax At, as amended U.P. Act No. 25 of 1985 and U.P. Ordinance No. 7 of 1987 cannot be challenged or raised  before the authorities constituted under the Act, the petitioners have thus no efficacious and speedy alternative remedy available except to approach this Hon'ble Court under Article 226 of the Constitution of India.

12. That the enquiry and balance of convenience is also in favour of the petitioner is case the stay order is granted.

13. That recently the Hon'ble Supreme Court has upheld the constitutional validity of the Forty Six Constitutional Amendment Act but the directed the petitioners in that case to a approach the High Court of the respective States for deducing the validity  of the sales tax laws enacted by the different states.

14. That the validity of Section 8-D of the U.P. Sales Tax Act has still to be adjudicated by the Hon'ble High Court of Allahabad as directed by the  Hon'ble Supreme Court and the said matter is pending consideration in various cases before this Hon'ble Court.

15. That this Hon'ble Court has passed interim order in similar writ petitions one of which was filed by M/s. ……………….Contractors Association and others district ……………. The interim order passed in the said case by this Hon'ble Court on ………20…… by the bench consisting of Hon'ble the Chief Justice and Hon'ble Mr. Justice ……………is quoted below :

"Put up on the date admission until further orders of the court, there shall be no deduction on tax with regard to Sales tax in terms of Section 5-D of U.P. Sales Tax Act of more than 2% of the amount payable thereunder. However after the assessments have been made the petitioner will be liable to pay the entire amount of tax on the total liability determined.

Sd/ C.J.
Sd/ R.K.G.

16. That is those circumstances and on the facts and circumstances mentioned in the proceedings paragraphs of the petition it is absolutely necessary in the interest of justice that this Hon'ble Court may be pleased to restrain the respondents from in any way deducting the amount equivalent 4% of the amount of payments to be made by the respondents No. 2 to the petitioner under Section 8-D (1) of the U.P. Sales Tax Act during the pendency of the present writ Petition in this Hon'ble Court otherwise the petitioners shall suffer grave and irreparable loss.

17. That the petitioner have no other equally efficacious adequate speedy alternative remedy available to than except to approach this Hon'ble Court under Article 226 of the Constitution of India.

18. That the present writ petition is being filed on the following amongst other :

GROUNDS

1. Because under Section 2(d) of the U.P. Sales Tax Act, goods has been defined to include all kinds of movable property. The charging Section under the U.P. Sales Act provides for a charge on the sale of purchase of goods in  other words, under the U.P. Sales Tax Act, Sales Tax can only be levied and collected in respect of the sale or purchase on only those goods which are  movable properties. In the execution of a Civil works contract for construction of buildings and road, as in the case of the petitioner, there is no sale of any  movable material or property in the form the material used in the execution of the contract. The movable material is affixed in the construction of the building road and it losses it independent identify. No independent title in the  said movable material is passed to the respondents. In these circumstances there being no sale of any movable property, the petitioner cannot be assessed to pay sales tax and no sales tax can be levied or collected from them.

2. Because Section 8-D of the U.P. Sales Tax Act, is illegal arbitrary and unreasonable and is also violative of Article of the Constitution of India and is liable to be struck down.

3. Because respondents cannot deduct any tax what to pay 4% at source from the payments made by them to the petitioner in respect of contracts which have came to an end against payment and to petitioner and the contracts which are presently in process and they are not in any may related to or connected  with earlier contracts which have already seen completed.

4. Because  the respondents are not entitled to deduct any amount what to any amount equivalent to 4% tax on the payment made by them to the petitioners and the view to the contract is wholly illegal without jurisdiction and unconstitutional.

PRAYER

On the facts and grounds mentioned above, it is most respectfully prayed :

(a) Issue a suitable writ petition, order or direction in the nature of a writ of mandamus declaring that the U.P. Sales Tax (Amendment and Validation) Act, 1986 as also the U.P. Act No. 17 of 1987 are ultra vires  of the Constitution of India and are null and volid.

(b) Issue a suitable writ,  order or direction in the nature of mandamus declaring Section 8-D of U.P. Sales Act  ultra-vires and null and void.

(c) That in the alternative, and without prejudice to prayer (a) hereinabove, the notification published in U.P. Gazette, extraordinary dated ………….., authorizing levy of sales tax at source on contract be declared as beyond the legislative competence of the legislature ulterior to verse to the Constitution of India and null and void.

(d) That a suitable writ, order or direction in the nature of writ of mandamus be issued restraining the respondents and their servants against and officers from deducting tax at secured on the payments which are to be made by them to the petitioners, after ………...20……..

(e) That a suitable writ, order or direction in the nature of writ of mandamus be issued restraining the respondents their servants, agents and officers from in any way being any sales tax upon the petitioners in respect of the civil contract work carried on by the petitioners.

(f) That any other suitable writ, order or direction as this Hon'ble Court may deem fit and proper in the circumstances of the case, be also issued.

(g) That cost of the petition be also awarded to the petitioner against the respondents.

Advocate for the Petitioners