1991 (9) TMI 335 - AT - VAT and Sales Tax

Summary

Issues Involved:

1. Liability of tax on works contracts under the Bengal Finance (Sales Tax) Act, 1941.
2. Constitutionality of Section 6D of the 1941 Act and the Forty-sixth Amendment to the Constitution.
3. Taxability of inter-State sales and importation of goods under Section 6D.
4. Applicability of Section 6D and Rule 48B to "notified commodities" taxable under the West Bengal Sales Tax Act, 1954.
5. Tax implications of sub-contractors' involvement in works contracts.

Detailed Analysis:

1. Liability of tax on works contracts under the Bengal Finance (Sales Tax) Act, 1941:

The applicant, a Government company engaged in works contracts, contended that its turnover from such contracts was not liable to tax under the 1941 Act. The respondent-State argued that amendments in 1984, particularly the insertion of Section 6D, made the applicant liable to pay tax on the transfer of property in goods involved in the execution of works contracts. The Tribunal upheld the respondent's contention, stating that the applicant is liable to pay sales tax under Section 6D of the 1941 Act.

2. Constitutionality of Section 6D of the 1941 Act and the Forty-sixth Amendment to the Constitution:

The applicant challenged the constitutionality of Section 6D and the Forty-sixth Amendment, arguing that they were beyond the legislative competence of the State Legislature and violated Article 286(3) of the Constitution. The Tribunal referred to the Supreme Court's decision in Builders' Association of India [1989] 73 STC 370, which upheld the constitutionality of the Forty-sixth Amendment and the consequential State Acts. The Tribunal also cited its own decision in Nepal Chandra Banerjee and others, which upheld the validity of Section 6D and relevant provisions of the 1941 Act.

3. Taxability of inter-State sales and importation of goods under Section 6D:

The applicant argued that Section 6D does not cover inter-State sales or imports, and such sales cannot be taxed by the State. The respondent-State maintained that Section 6D does not contemplate taxing inter-State sales or imports. The Tribunal noted that the Supreme Court in Builders' Association of India had clarified that the Forty-sixth Amendment does not remove constitutional restrictions like Article 286 from the State's power to levy tax on deemed sales. The applicability of these restrictions will depend on the facts of each case.

4. Applicability of Section 6D and Rule 48B to "notified commodities" taxable under the West Bengal Sales Tax Act, 1954:

The applicant contended that Section 6D and Rule 48B should not apply to "notified commodities" taxable under the 1954 Act, as such goods are excluded from the purview of the 1941 Act. The Tribunal referred to its earlier decision in Photovisual v. Commercial Tax Officer, which held that Section 6D, being a later provision, overrides Section 23 of the 1954 Act. The Tribunal concluded that the immunity from tax on second or subsequent sales under the 1954 Act does not extend to deemed sales under Section 6D of the 1941 Act.

5. Tax implications of sub-contractors' involvement in works contracts:

The applicant raised concerns about the potential double taxation when sub-contractors supply materials during the execution of works contracts. The respondent-State argued that the sub-contractor is often an agent of the contractor, and the liability of tax would devolve upon the contractor. The Tribunal stated that the taxability of supplies of materials by sub-contractors depends on the terms of the contract and the circumstances of each case. The Tribunal emphasized that no hard and fast rule can be laid down and that the assessing authority will have to decide on a case-by-case basis.

Conclusion:

The writ application was dismissed in part, with the Tribunal upholding the decisions in Builders' Association of India and Nepal Chandra Banerjee and others. The remaining points were disposed of with observations made in the judgment. The Tribunal emphasized that the assessing authority and appellate/revisional authorities are competent to adjudicate disputes based on the facts of each case.