2009 (4) TMI 842 - AAAR - VAT and Sales Tax

Summary

Issues Involved:
1. Nature of sales (inter-State vs. intra-State)
2. Double taxation
3. Legislative provisions and amendments
4. Contractual obligations and movement of goods
5. Determination of sale price and turnover

Issue-wise Detailed Analysis:

1. Nature of Sales (Inter-State vs. Intra-State):
The primary issue was whether the transactions in question constituted inter-State sales or intra-State sales. The assessee, a contractor, argued that the transactions were local sales in Delhi, while the assessing authority in Gurgaon treated them as inter-State sales. The Tribunal concluded that the movement of goods from Haryana to Delhi was in pursuance and incidental to the contract of sale, thus qualifying as inter-State sales under Section 3(a) of the CST Act. The Tribunal stated, "The applicant has not been able to prove that the sale has taken place within the State of Delhi."

2. Double Taxation:
The assessee faced multiple tax demands from both Delhi and Haryana for the same transactions, leading to a writ petition in the Delhi High Court. The High Court directed the assessee to file an appeal against the Haryana assessment and involve the Delhi administration to resolve the issue of double taxation. The appellate authority in Faridabad acknowledged the double taxation but upheld the inter-State nature of the sales, advising the assessee to seek cancellation of the Delhi assessment or a refund.

3. Legislative Provisions and Amendments:
The judgment discussed the legislative history and amendments to the CST Act, particularly the inclusion of works contracts under the definition of "sale" following the 46th Constitutional Amendment and subsequent amendments in 2002 and 2005. The Supreme Court's decisions in various cases, such as Builders Association of India v. Union of India and Gannon Dunkerley & Co. v. State of Rajasthan, were cited to explain the implications of these amendments. The Tribunal noted, "The charging section, i.e., section 6 has to be read with section 8, which prescribes the rate of tax and both are integrally connected."

4. Contractual Obligations and Movement of Goods:
The Tribunal examined the contractual obligations and the movement of goods from Haryana to Delhi. The contracts required the use of bituminous mixture prepared at the assessee's hot-mix plant in Haryana, which was then transported to Delhi. The Tribunal found that the inter-State movement of goods was a necessary consequence of the contracts, stating, "The inter-State movement of goods (bituminous mixture) was a necessary consequence of and incidental to the relevant contracts and such movement cannot be dissociated from the contract."

5. Determination of Sale Price and Turnover:
The appellant argued that the turnover attributable to works contracts could not be taxed under the CST Act prior to the 2005 amendment. However, the Tribunal, relying on the Supreme Court's decision in Mahim Patram Private Ltd. v. Union of India, rejected this contention. The Tribunal explained that the provisions in the Haryana Value Added Tax Act, 2003, and the Haryana Value Added Tax Rules, 2003, provided a mechanism for determining the sale price and turnover for works contracts. The Tribunal stated, "Provisions in the State Sales Tax Act/VAT Act can be referred to for the purpose of ascertaining the sale price/turnover relating to the transfer of property in goods involved in the execution of works contract."

Conclusion:
The appeal was dismissed, and the Tribunal upheld the Haryana Tax Tribunal's decision that the transactions were inter-State sales. The appellant was directed to ensure the transfer of the balance tax due to the Haryana Government. The judgment emphasized the importance of legislative provisions and contractual obligations in determining the nature of sales and addressed the issue of double taxation by advising the assessee on appropriate remedies.