1995 (7) TMI 388 - HC - VAT and Sales Tax

Issues Involved:
1. Competency of the review petition.
2. Whether the printing of lottery tickets amounts to the execution of a "works contract".
3. Competency of the State of Haryana to levy sales tax on goods involved in the execution of a works contract where the order for printing of lottery tickets has been placed by another State.

Summary:

Re: (i) Competency of the Review Petition
The petitioner had prayed for the quashing of the assessment order dated January 14, 1992. The Bench did not pass any order regarding this prayer. The court found this grievance just and fair, acknowledging a mistake that deserved rectification. Thus, the review petition was deemed competent.

Re: (ii) Printing of Lottery Tickets as a "Works Contract"
The petitioner argued that printing lottery tickets involves a sophisticated and technical process, expertise, and a high degree of confidentiality, thus amounting to a "works contract". The court agreed, noting that the petitioner could not sell the lottery tickets in the market to any person; they had to be supplied to the customer, involving expertise and confidentiality. The supply of paper and ink was incidental. The court referred to the Supreme Court's decision in State of Tamil Nadu v. Anandam Viswanathan [1989] 73 STC 1, which supported this view. Consequently, the court held that the printing of lottery tickets amounts to the execution of a "works contract".

Re: (iii) Competency of the State of Haryana to Levy Sales Tax
The court noted that under entry 54 in List II, the State Legislature is competent to levy taxes on the sale or purchase of goods. However, when such sale or purchase occurs in the course of inter-State trade and commerce, only Parliament has the power to levy taxes. The 46th Amendment introduced a fiction that allows the Legislature to make laws on the transfer of property in goods involved in the execution of a works contract. However, since the Central Sales Tax Act has not been amended to include this fiction, the State Legislature cannot levy sales tax on such transactions. Therefore, the State of Haryana is not competent to levy sales tax on the transfer of property in goods involved in the execution of a works contract when the order for printing of lottery tickets has been placed by another State.

Conclusion:
1. The printing of lottery tickets amounts to the execution of a "works contract".
2. The State of Haryana is not competent to levy sales tax on the transfer of property in goods involved in the execution of a "works contract" where the order for printing of lottery tickets has been placed by another State, and there is movement of the end-product in the course of inter-State trade and commerce.
3. Clause (29A) added in article 366 by the 46th Amendment of the Constitution is an enabling provision and does not authorize the State Legislature to levy taxes on inter-State trade and commerce unless the Central Sales Tax Act is amended.
4. Review Application No. 147 of 1993 filed by the petitioner is allowed, and the assessment order dated January 14, 1992, is set aside.
5. Review Application No. 205 of 1993 filed by the State of Haryana is dismissed.
6. Civil Writ Petitions Nos. 14757 and 14758 of 1993 and 4502 of 1995 are allowed, and the impugned orders of assessment are set aside.
7. The cases are remitted to the assessing authority for a fresh decision in accordance with the law and the conclusions recorded above.

Petitions disposed of accordingly, with no order as to costs.

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