In its landmark judgment related to works contract, The Division Bench, by Justice R. Mahadevan and Justice Mohammed Shafiq, decided the issue that has been pending for more than a decade, dissecting the contentions into various heads, and giving extensive and lucid findings on every aspect.

In its landmark judgment related to works contract, The Division Bench, by Justice R. Mahadevan and Justice Mohammed Shafiq, decided the issue that has been pending for more than a decade, dissecting the contentions into various heads, and giving extensive and lucid findings on every aspect.
Holding that “Conditions in “Tax Simpliciter” based on intelligible differentia neither unreasonable nor violative of Part III or XIII of the Constitution” the division bench affirmed the validity of the amendment to Section 6 of the erstwhile Tamil Nadu Value Added Tax Act,2006.

In a batch of cases, the assessees who were works contractors, challenged the vires of the amendment brought in Section 6 of the TNVAT Act, 2006 by Section 3 of Amendment Act 21 of 2007 ,denying the benefit of composition scheme to works contractors purchasing goods from other state or by import, as being violative of Articles 14, 19, 301, 303 and 304 of the Constitution of India and the consequential notices and orders.

The D.B., after analyzing the scope of judicial intervention in fiscal matters held that “The legislature in fiscal matters, enjoys a greater latitude and must be permitted to experiment. The presumption is always in favour of the constitutionality of a provision and the courts must seldom interfere”.

The D.B., tracing the different types of works contractors from the provisions of the very same act and the rules framed thereunder held that the term “works contractor” is a genus with different species and the classification is neither arbitrary nor discriminative but reasonable based on intelligible differentia having nexus to the object of the amendment, which is to curb the tax evasion and create a level playing field and thus not violative of Part III of the Constitution. Terming the composition scheme as only a voluntary option, the court held that assessees were entitled to opt out of the scheme if they are unable to comply with the condition and fall back on the normal scheme under Section 5, applicable to works contractors.

Rejecting the contentions of the Assessees, on the challenge to violation of Part XIII, the Judges held that Section 6 is not the charging section, the amendment “neither prohibits import of goods into the state nor does it impose any additional tax on the goods brought in and held that “A law can be declared as invalid only if it contravenes or impedes the constitutional rights, guarantees and safeguards”, the Bench extensively and emphatically traced down the legislative background, judicial history, evolution of judicial views on works contract and general principles in fiscal matters to reject the challenge.