(1) Any persons responsible for paying any sum being sale price of taxable goods to a dealer in pursuance of a contract on behalf of-

(a) any Department of the Government or Central Government;

(b) any local authority;

(c) any Corporation or a Government company established by or under Central or State Act;

(d) any Co-operative Society; or

(e) any Board constituted by or under Central or State Act;

shall at the time of the credit of such sum to the account of the dealer at the time of payment thereof in cash, by issue of cheque or draft or by any other mode whichever is earlier, deduct tax at the appropriate rate.

(b) In case of works contract the agencies referred to in clause (a) shall furnish copy of the agreement of the work contract executed with the contractor to the Deputy Sales Tax Commissioner of the area concerned in which such department/agency falls.

(2) The tax deducted under sub-section (1) shall be deposited in the treasury within fifteen days of the deduction in the prescribed manner.

(3) The person who deducts the tax under sub-section (1) shall issue a certificate in the prescribed form in duplicate to the dealer who shall attach one copy of the same to his quarterly or annual return, as the case may be, or in case the certificate is not received before filing such return shall furnish it within such time as may be allowed by the assessing authority.

(4) The person liable to deduct the tax under sub-section (1) shall send a statement in such form and in such manner, as may be prescribed, to the Deputy Sales Tax Commissioner within thirty days of the expiry of each quarter of the financial year.

(5) Any deductions made under sub-section (1) and paid to the Government shall be treated as payment of tax on behalf of the dealer from whose payment it was deducted, and credit shall be given to him for the sum so deducted on the production of the certificate furnished under sub-section (3) in the assessment for the year during which the sales were made.

(6) If the person referred to above in sub-section (1) after deduction fails to pay the tax, as is required by or under this Act, he shall without prejudice to any other consequence which he may incur, be liable to pay in addition to the tax so deducted, a sum, by way of penalty, equal to 10% of such amount and all the provisions of this Act shall, in so far as may be applicable, apply to the recovery of such sum.

Provided that the appropriate authority shall give him an opportunity of being heard before levy of penalty.

(7) If any person without reasonable cause fails to deduct the tax as required by sub-section (1) he shall pay by way of penalty a sum equivalent to the tax so deductible provided that before levy of penalty he shall be given a reasonable opportunity of being heard.

(8) If any dealer is not liable to pay tax under the provisions of this Act he may obtain a certificate in the prescribed form from the assessing authority having jurisdiction over his place of business to the effect that no deduction of tax may be made from the payment due to him and the person responsible for making payment shall on production of such certificate by the dealer make payment without deducting any tax.

(8-a) If any dealer has paid the tax under this Act for the goods referred to under sub section (1) before receipt of the sale price of such goods from the persons it is receivable by the dealer, he may obtain a certificate in the prescribed form from the Assessing Authority having jurisdiction over his place of business to the effect that no deduction of tax may be made from the payment due to him and the person responsible for making payment shall on production of–

(i) such certificate by the dealer; and

(ii) the proof of having deposited the tax in respect of such transaction.

make payment without deducting any tax.

(9) If any person without any reasonable cause fails to submit copy of the agreement to the appropriate authority of the area concerned as required under clause (b) of sub-section (1) of this section he shall be liable to pay by way of penalty an amount of Rs. 5000/- per contract, provided that before levy of such penalty he shall be afforded a reasonable opportunity of being heard.

Explanation. Appropriate rate of tax means the rate of tax applicable on the date on which the goods are sold or supplied.