Proviso to S.3-B(2)(d) of TNGST Act Not Applicable to Contractor Assigning Work to Registered Sub-Contractor: Madras HC [Read Order]

The High Court of Madras held that the proviso to Section 3-B(2)(d) of the Tamil Nadu General Sales Tax Act, 1959, would not apply where a contractor assigns work to a registered sub-contractor.

Chaitanya Builders & Leasing (P) Ltd.,petitioner-assessee, had challenged the validity of the proviso to Section 3-B(2)(d) of the Tamil Nadu General Sales Tax Act, 1959, claiming it was unconstitutional and beyond the State’s legislative powers.

The Madras High Court noted that the same issue was already decided in Larsen & Toubro Ltd. v. Assistant Commissioner (CT), where the proviso was read down. That decision, based on Supreme Court rulings in Larsen & Toubro Ltd. and Builders Association of India, held that the proviso would not apply where the contractor assigned work to a registered sub-contractor.

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Relying on that precedent, the Court partly allowed the petition and read down the proviso, clarifying that it would not apply when the sub-contractor was a registered dealer.

The petitioner counsel stated that both the petitioner and the sub-contractor were registered dealers. The Court clarified that this fact was not relevant, as the issue was limited to the legal validity of the provision.

The Division Bench comprising Justice Anita Sumanth and Justice C.Kumarappan partly allowed the writ petition, with no costs. The connected miscellaneous petition was closed.

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