Home Case Index All Cases VAT and Sales Tax VAT and Sales Tax + HC VAT and Sales Tax - 1994 (2) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
1994 (2) TMI 295 - HC - VAT and Sales Tax
Issues:
- Whether deductions for sales tax can be made from payments due to contractors for works contracts where no transfer of goods is involved. - Interpretation of constitutional provisions and state sales tax laws regarding works contracts. - Validity of circular issued by Electricity Board for deduction of specified amounts from contractors. Analysis: The judgment by the Kerala High Court addressed the issue of deductions for sales tax from payments due to contractors for works contracts where no transfer of goods is involved. The petitioners, contractors for the Electricity Board, argued that no deductions should be made as they only supplied labor and not materials. The court noted that the Constitution's Forty-sixth Amendment defines "tax on the sale or purchase of goods" to include a tax on the transfer of property in goods in works contracts. The court referred to a Supreme Court decision emphasizing the necessity of a transfer of property in goods for the levy of sales tax on works contracts. The court analyzed a circular issued by the Electricity Board directing deductions for sales tax from contractors. The circular differentiated between cases involving a transfer of property in goods and cases where contractors only supplied labor. The court concluded that the circular did not mandate tax payment in cases of pure labor contracts without any transfer of goods. The judgment clarified that deductions for tax payment would only be necessary if goods supplied by the contractor were embedded in the work. In the final ruling, the court declared that the Electricity Board was not obligated to make deductions for tax payment in cases where contracts only involved the supply of labor or works with materials provided by the Board without any transfer of goods by the contractor. The respondents were directed to release any withheld amounts from the petitioners for works contracts not involving a transfer of property in goods. The original petitions were disposed of accordingly, providing relief to the contractors against the collection of sales tax in such cases.
|