2003 (9) TMI 718 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to sales tax assessment on works contract; Transfer of property in goods for sales tax levy; Interpretation of contractual terms; Application of 46th Amendment on sales tax; Deemed transfer of goods in works contract.

Analysis:
The petitioner, a partnership firm, challenged sales tax assessments by the Assistant Commissioner for three financial years related to a construction project. The petitioner argued that sales tax cannot be levied without transfer of property in goods, which only occurs when goods are incorporated in the construction. They contended that no subsequent transfer of property happens at project completion. The petitioner claimed to be a bailee or trustee of materials, not the owner, as agreed in the contract terms.

The State defended the sales tax levy, citing deemed sale of goods and materials used in the works contract, purchased from the Government. The agreement between the petitioner and the State outlined provisions for material supply and sales tax deductions, indicating the State's role in providing materials like cement and steel for the project.

The judgment referenced the Supreme Court decision in Builders Association of India v. Union of India, which allowed sales tax on goods in a works contract post the 46th Amendment. The court noted the State's supply of cement and steel to the petitioner, leading to deemed transfer of property in goods upon project completion, justifying the sales tax levy.

Concluding, the court dismissed all writ petitions, upholding the sales tax assessments. The judgment emphasized the application of the 46th Amendment on sales tax in works contracts and the deemed transfer of goods upon project completion, allowing for sales tax levy by the State.