1996 (2) TMI 474 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether drilling of tube wells on labour basis falls under the definition of 'works contract' under the Entry Tax Act?
2. Whether petrol, diesel, and machinery stores used indirectly in the drilling work are exigible to entry tax under the Entry Tax Act?

Analysis:

Issue 1:
The applicants, unregistered dealers, undertook drilling of tube wells for the Public Health Engineering Department and were assessed entry tax. The Tribunal held that the drilling activity falls under the definition of 'works contract' under section 2(m) of the Entry Tax Act. The applicants contended otherwise. The Court analyzed the definition of 'works contracts' under section 2(m) and emphasized that it involves the construction of works like buildings, dams, and other immovable property. The Court noted that the drilling of tube wells on a labour basis does not specifically fit within the provision's scope of installation of machinery or fittings to movable or immovable property. The Court cited legal principles emphasizing the importance of legislative intent in statutory interpretation. Ultimately, the Court ruled in favor of the applicants, stating that the drilling activity did not fall within the definition of 'works contracts' under the Entry Tax Act.

Issue 2:
The second issue pertained to whether petrol, diesel, and machinery stores, not directly used in drilling work but in vehicles and machinery, are subject to entry tax under the Entry Tax Act. However, since the Court ruled in favor of the applicants on the first issue, they did not address the second issue. The Court highlighted that the applicants could choose not to pursue a specific question referred to the Court. Therefore, the Court did not provide an answer to the second question and left it open for future consideration if necessary.

In conclusion, the Court decided in favor of the applicants, ruling that the drilling of tube wells on a labour basis did not constitute a 'works contract' under the Entry Tax Act. The Court did not address the second issue due to the outcome of the first issue. The reference applications were answered accordingly, with no costs imposed on either party, and the Court directed the transmission of the order to the Tribunal as per legal requirements.