STATE OF KERALA AND ANR. versus BUILDERS ASSOCIATION OF IND!A AND ORS.

Citation: [1996] SUPP. 9 S.C.R. 300 · Decided: 28-11-1996 · Supreme Court of India · Bench: B.P. JEEVAN REDDY · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
STATE OF KERALA AND ANR. 
v. 
BUILDERS ASSOCIATION OF IND!A AND ORS. 
NOVEMBER 28, 1996 
ll 
[B.P. JEEVAN REDDY AND S.C. SEN, JJ.] 
Kera/a General Sales Tax Act, 1963 
Section 7(7), (7A}-Validity of-Alternate method of taxation~ption-
,, 
~I for tJ:e assessee-Whether the validity can be questione~Held, the asses-
sce, who has not opted for the alternate method of taxation, cannot complain 
as not affected by if-The assessee, who opted for the alternate method q/so 
ca11not complain having voluntarily opted to be governed by it. 
D 
Section 7(8), (11), (12}-Validity of-Incidental and ancillary to Sub-
sections (7) & (7A~eld, cannot be faulted. 
Section 7(7) & (7A)-Nature of-The method of taxation introduced 
by Sub-section (7) and (7A) is in the nature of composition of tax payable 
under Section 5(1)(iv). 
Co11stih1tio11 Of India, 1950-Anicle 366(29A)-Kera/a General Sales 
./!lx Act, 1963-Section 7(7), (7Aj--£nactment of-Cltallenge~Plea that 
violative of Article 366(29A) and beyond legislative competence of 
State-Held, the Act not beyond legislative competence of State or violative 
of Alticle 366(29A}-1he Constitution does not preclude the legislature from 
F evolving alternate, simplified and hassle free method of assessment of tax 
payable, making it optional for the assessee. 
Kera/a General Sales Tax Rules, 1963-Rule 224-Validity of-Chal-
lenged-Plea that contrary to the Kera/a General Sales Tax Ac~ as it provides 
G for collection of tax even before making of an assessment-Held, all the 
provisions of the Rule are designed to ensure due realisation of the tax 
due-No exception can be taken thereto. 
Rule JOA-Validity of-Providing procedure to come under the alter-
nate method of taxation provided by Section 7(7) & 7(7A~eld, attack upon 
H the validity not tenable. 
300 
-
STAIB v. BUILDERS ASSN. OF INDIA 
301 
Sub-sections (7) and (7A) of Section 7 of Kerala General Sales Tax A 
Act was enacted as an alternate method of taxation which was optional for 
the assessee/contractor. Several contractors who had not opted for this 
method challenged the validity of Sub-section (7), (7A), (7B, (11) and (12) 
of Section 7 of the Act, and Rule 22A and 30A of Kerala General Sales Tax 
Rules by way of writ petitions in High Court. Single Judge dismissed the 
writ petitions. In appeal, the Division Bench struck down the provisions as 
void and unconstitutional on the ground that they are violative of Article 
B 
366 (29A) of the Constitution of India. It also held that levying tax on the 
entire value of the contract means levy of tax contrary to the provisions of 
Central Sales Tax Act and the Kerala General Sales Tax Act, since the 
goods which are transferred in the course of execution of a work contract C 
may be 'declared goods', they may be .. goods which are liable to be taxed 
under the Central Sales Tax Act, the goods so transferred may also be 
taxable under different schedules to the Kerala Act, which prescribe dif· 
ferent rates, and thus, the enactment of the above provisions are beyond 
legislative competence of State. 
D 
In appeal to this Court, besides other contentions, the respondents 
contended that Rules 22A and 30A are contrary to the Act and are 
arbitrary as they provide for collection of the tax even before assessment: 
Allowing the appeal, this Court 
HELD : 1.1. The judgment of the Division Bench declaring sub-sec· 
lions (7), (7A), (7B), (11) & (12) of Section 7 as unconstitutional and void, 
E 
is liable to be set aside. The alternate method of taxation provided by 
Sub-section (7) or (7 A} of Section 7 is optional. The Sub-sections expressly 
provide that the method of taxation provided therennder is applicable only 
F 
to a contractor who elects to be governed by the said alternate method of 
taxation. There is no compulsion upon any contractor to opt for the 
Jllethod of taxation provided by Sub-section (7) or Sub-section (7A). It is 
wholly within the choice and pleasure of the contractor. If he thinks it is 
beneficial for him to so opt, he will opt; otherwise he will be governed by 
the normal method of taxation provided by Section S(l)(iv). Sub-section G 
(8) provides that the option to come under Sub-section (7) or (7 A) has to 
be exercised by the contractor "either by an express provision in the 
agreement for the contract or by an application to the assessing authority 
to permit him to pay the tax in accordance with any of the said sub-sec· 
!ions." In these circumstances, a cont

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