STATE OF CHHATTISGARH & ORS. versus M/S. VTP CONSTRUCTIONS

Citation: [2007] 12 S.C.R. 1148 · Decided: 07-12-2007 · Supreme Court of India · Bench: ARIJIT PASAYAT · Disposal: Dismissed

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Judgment (excerpt)

A 
STATE OF CHHA TTISGARH & ORS. 
v. 
M/S. VIP CONSTRUCTIONS 
DECEMBER 7, 2007 
B 
[DR. ARIJIT P ASAY AT AND AFT AB ALAM, JJ.) 
Chhattisgarh VanijyikKar Adhinihyam, 1994-s.35-Sales Tax-
Deduction at source-Constitutional validity of-Held: The provision 
C is constitutionally invalid. 
Sales tax was deducted at source under Section 35 of 
Chhattisgarh Vanijyik Kar Adhinihyam, 1994, from the payment 
made to the respondent-assessee, for works contracts executed by 
D it. Respondent filed Writ Petition challenging constitutionality of 
Section 35. High Court declared the provision as unconstitutional 
and directed refund of the amount recovered to the respondent. 
Hence the present appeal. 
Dismissing the appeal, the Court 
E 
HELD: In view of the decisions in Steel Authority's case and 
Nathapa 's case* the High Court was right in holding that Section 35 
ofChhattisgarh Vanijyik Kar Adhinihyam, 1994, was constitutionally 
invalid. The direction for refund of the amount collected from the 
respondent under the provi~ions of the said Section had been rightly 
F 
directed to be refunded. [Para 10] [1152-C, DJ 
G 
H 
Steel Authority of India Ltd. v. State of Orissa and Ors., [2000) 3 
SCC 200 and 1\1/s. Nathpa Jhakri Jt. Venture v. State of Himachal 
Pradesh and Ors., [2000] 3 SCC 319, relied on 
Punj Lloyd Ltd. v. State of Madhya Pradesh and Ors., (1996) 29 
VKN 533, referred to. 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5679 of 
2007. 
1148 
f 
STATE v. VTPCONSTRUCTIONS[PASAYAT,J.] 
1149 
From the Judgment and Order dated 21.2.2006 of the High Court A 
ofChattisgarh at Bilaspur in W.P. No. 661 of2002. 
Rajesh Srivastava for the Appellant. 
The Judgment of the Court was delivered by 
DR ARIJIT P ASA YAT, J. 1. Leave granted. 
B 
2. Challenge in this appeal is to the judgment rendered by a Division 
Bench of the Chhatisgarh High Court. Respondent filed a writ petition 
before the Chhatisgarh High Court questioning constitutional validity of 
Section 35 ofChhattisgarh Vanijyik Kar Adhiniyam, 1994 (hereinafter C 
referred to as the 'Adhiniyam'). It corresponds to the Chhatisgarh 
Commercial Tax Act, 1994 (in short the 'Act'). The respondent hereinafter 
is described as the 'assessee'. 
3. Background facts highlighted by the respondent are as follows: D 
The writ petitioner is a prop1ietary concern of one Shri Krishana 
Mudliar and it has been executing works contracts for various Departments 
of the Chhattisgarh State Government and others and was holding sales-
tax registration No.061/RDN/14,'2739/02. During the assessment year 
2001-2002, the writ petitioner had executed works contracts awarded E 
by Executive Engineer, P.W.D. (B&R), Division Khairagarh, for which it 
received payment ofRs.1,27,115/- on which sales tax ofRs.2,545/-, being 
2% of sum ofRs.1,27.115/- was deducted at source towards the sales 
tax payable as provided under Section 35 of the Adhiniyam. Certificate 
of tax deduction is dated 11104/2001 made under Section 35 of the Act. F 
4. In support of the writ petition, it was contended that Section 35 
of the Act does not make any provision for deduction and ascertainment 
of value and nature of goods supplied during execution of work-contracts. 
Section 35 of the Act does not make any provision for detennination of 
value of goods supplied in the course of inter State trade during execution G 
of works contracts. 
5. The writ petition is opposed by the present appellants by filing 
reply/statement of objections. In the reply statement, it was stated that 
the contractors who are engaged in the construction of buildings, roads, H 
1150 
SUPREME COURT REPORTS 
[2007] 12 S.C.R. 
A bridges, dams etc generally come from other States. The process of 
assessment of sales tax is very lengthy and before the assessment is 
completed, such contractors disappear from the scene after receiving full 
payment under the contract. In such situation, it was very difficult for the 
Commercial Tax Department to trace out such contractors and eventually 
B sales tax payable by such contractors could not be recovered at all thereby 
causing heavy financial loss to the Government. In order to safeguard the 
interest of the State, Section 35 is enacted in the Act and that the State 
Legislature has legislative competence to enact Section 35. It was stated 
that Section 35 is not a unique provision in the Act and similar provisions 
c are enacted in the Sales Tax Acts of other States, for example, Section 
6-D of the Uttar P

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