By C. B. Thakar Advocate, G. G. Goyal, Janak Vaghani Chartered Accountants
fiogf49gjkf0d
Value Added Tax – Works Contract – Taxable Turnover – Deduction Provided For Other Like Charges – No Rules Framed to Prescribed “Other Like Charges” –Provisions Uncertain and Unworkable, section 11(2) ( c) of The Orissa Value Added Tax Act, 2004 and R 6(e) of The Orissa Value Added Tax Rules 2005.
FACTS:
The dealer filed a Writ Petition before The Orissa High Court to declare Provision of section 11(2) (c) of The Orissa Value Added Tax Act, 2004 as well as rule 6(e) of The Orissa Value Added Tax Rules, 2005 unworkable.
HELD:
Section 11(2)( c) of The Act provides for deduction towards labour, service charges and other like charges, the Rule 6(e) provides for deduction of labour and service charges only from the gross turnover to arrive at the taxable turnover in respect of works contract. Thus, even though section 11(2) (c ) provides deduction towards “ Other like charges” besides labour and service charges, the rules do not provide any such deductions. When the statute provides that something is to be prescribed in the rules then that thing must be provided in the rules with a view to making the provision workable and valid. Thus, if the measure of tax is not provided either under the Act or under the rules, the levy itself becomes uncertain and such uncertainty proves fatal to the validity of the taxing statute. To avoid such uncertainty, the State Government was directed by the High Court to amend rule 6(e) to bring in line with judgment of the SC in the Gannon Dunkerley’s case [1993] 88 STC 204 (SC) and the Commissioner of Sales Tax was directed to issue suitable instructions to all the taxing authorities to allow various deductions from the gross turnover to arrive at the taxable turnover in respect of the works contract in terms of decision of the SC in the Gannon Dunkerley’s case. The High Court allowed writ Petitions with the aforesaid directions/observations.
