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2009 (8) TMI 1083 - HC - VAT and Sales TaxWhether the supply of track ballast for the railways in terms of the order issued by the railways is a civil work for the petitioner to opt for payment of tax at compounded rate under section 7(7) of the Kerala General Sales Tax Act, 1963? Held that - It is to be seen from section 7(7) that Railway track maintenance is also treated as a civil work by the Legislature. Certainly the training out is a maintenance work of the railway track as it helps to retain the sleepers on the track and the railway lines intact. In fact, the Department cannot have a case that the training out is not a maintenance work when the railway track maintenance is included in the definition clause of civil works under section 7(7). Even though we dismiss the revision petition holding that the work is not a civil work as claimed by the petitioner for payment of tax at compounded rate under section 7(7) of the KGST Act, we simultaneously hold that assessment of the work as other contract under section 7(7A) is also not correct. However, since the assessment has become final, we do not want to disturb the same. The sales tax revision case is accordingly dismissed, but with direction to the officer not to repeat the mistake for later years
Issues:
1. Interpretation of whether the supply of track ballast for railways constitutes a civil work for tax payment under section 7(7) of the Kerala General Sales Tax Act, 1963. 2. Determination of whether the work order issued by the railways is for a works contract or a sale of goods. 3. Analysis of the nature of work done by the petitioner for the railways and its classification under the relevant tax provisions. 4. Comparison of the legal interpretations from previous judgments of the Karnataka High Court on similar issues. 5. Clarification on whether training out of stone ballast on the railway track constitutes a works contract or maintenance work under section 7(7) of the Act. Detailed Analysis: 1. The main issue in this case revolves around whether the supply of track ballast for the railways qualifies as a civil work for tax purposes under section 7(7) of the Kerala General Sales Tax Act, 1963. The petitioner claimed that the work falls under a works contract, but the assessing officer disagreed, allowing tax payment at a compounded rate under section 7(7A) for other contracts. The High Court examined the nature of the work and the specific terms of the order to determine the correct tax treatment. 2. The High Court analyzed the work order issued by the railways, which primarily involved the supply, stacking, and delivery of stone ballast along the railway track. Despite the heading mentioning "collection and training out of track ballast," the order focused on supply and delivery rather than actual training out work. The court found that the order constituted a purchase order for the supply of goods, with the petitioner responsible for delivery at specified locations based on the engineer's instructions. 3. The court concluded that the work performed by the petitioner was essentially a sale of goods rather than a works contract. The price charged included not only the stacking at the railway station but also the cost of delivery, including labor expenses. As per the interpretation of turnover under the Act, the labor and delivery costs formed part of the taxable turnover, attracting sales tax. The court emphasized that the work order was for pure supply, and any training out work was likely conducted by the railways, not the petitioner. 4. The judgment referenced two decisions from the Karnataka High Court, highlighting differing views on whether training out constitutes a works contract or a sale of goods. While one decision considered training out as a works contract, another viewed it as a sale of goods. The High Court refrained from expressing a definitive opinion on this matter in the present case, focusing on the specific details of the supply order and the nature of the work performed by the petitioner. 5. Regarding the classification of training out work as maintenance work under section 7(7) of the Act, the court acknowledged that railway track maintenance is considered a civil work by the Legislature. However, the assessment as a contract for track maintenance could only be claimed if an indivisible work order specifically for maintenance was issued, which was not the case in the present scenario. The court dismissed the revision petition, stating that the work did not qualify as a civil work for tax payment under section 7(7) but also noted that the assessment as an "other contract" under section 7(7A) was incorrect. Despite dismissing the petition, the court directed the officer to avoid similar mistakes in the future assessments.
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