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2015 (3) TMI 210 - HC - VAT and Sales TaxNature of the works contract - indivisible and composite works contract or not - Rejection of the application for grant of exemption under Rule 10A and 10B - laying, jointing etc. of pipes and commissioning of pipelines etc. - Held that - On the declaration of law of the Hon'ble Supreme Court in Larsen and Toubro Limited and Anr. Vs. State of Karnataka and Anr., 2013 (9) TMI 853 - SUPREME COURT , and considering the reference made in Raheja Development's case(2005 (5) TMI 7 - Supreme Court), no interference is required to be made with the order of the Appellate Authority, dated 24.05.1997 under Section 84 of the Act of 1994. The Appellate Authority has, considering the entire case law on the subject, upheld the order passed by the Assessing Authority, that the works contract executed by the appellant-Company is a divisible contract, which is established by the work orders i.e. Annexures A-2 and A-3. The Assessing Authority had examined the work orders in holding that the works contract was divisible and had also rejected the application for exemption on the ground that the sale of prestressed cement concrete pipes falls within the definition of sale of goods under the Act. - In view of the alternative remedy available to the petitioner-Company, we are not inclined to reconsider and review the findings, based upon the terms of the agreement read along with the work orders. The legal proposition with regard to definition of 'works contract' in Article 366(29A)(b) of the Constitution of India, has been explained in the recent judgment in Larsen and Toubro Limited and Anr. Vs. State of Karnataka and Anr. For sustaining levy of tax on goods, deemed to have been sold in execution of a works contract, three conditions namely (i) there must be a works contract; (ii) goods should have been involved in execution of a works contract; and (iii) property in those goods must be transferred to a third party, either as goods or in some other form, have been amply clarified. A contract may involve both, a contract of work and labour, and a contract for sale. A transfer of property in goods under clause 29A(b) of Article 366, is deemed to be sale of goods involved in execution of a works contract by a person making transfer and purchase of those goods to a person, to whim such transfer is made. A single and indivisible contract has been brought on par with a contract containing two separate agreements, empowering the State to levy sales tax on value of material in execution of works contract. So far as the exemption is concerned, we do not find any error in the finding recorded by learned Single Judge, that the exemption Notification having been issued on 29.03.2001, will only apply prospectively from the year 2001-2002, and that the benefit of exemption can be availed by a firm only after issuance of the Notification dated 29.03.2001. The petitioner has challenged the Assessment Year 1999-2000, and therefore, the Notification was not applicable to the dispute involved in the matter. - No error of law in the judgment of learned Single Judge, dated 25.02.2002, dismissing all the writ petitions filed by the petitioner - Decided against assessee.
Issues Involved:
1. Divisibility of the works contract. 2. Entitlement to exemption certificates under Rule 10A and 10B. 3. Applicability of the 46th Constitutional Amendment and its impact on the definition of "sale." 4. Retrospective application of the exemption notification dated 29.03.2001. 5. Availability of alternative remedies. Detailed Analysis: 1. Divisibility of the Works Contract: The petitioner-company challenged the assessment orders which treated the contract as divisible into two parts: one for the supply of pipes and the other for laying them. The court upheld the Deputy Commissioner(Appeals) and the Appellate Authority's findings that the contract was divisible. The supply of pipes was deemed a sale, subject to sales tax, while the laying of pipes was considered a service. This was based on the work orders and the nature of the contract, which indicated separate components for supply and services. 2. Entitlement to Exemption Certificates: The petitioner sought exemption certificates for the work orders under Rule 10A and 10B, arguing that the contracts were indivisible. However, the Tax Assessing Authority and the Appellate Authority rejected this claim, stating that the contracts were divisible and the supply of pipes constituted a sale. The court agreed with this assessment, noting that the supply of pipes fell within the definition of 'sale' under the Rajasthan Sales Tax Act, 1954. 3. Applicability of the 46th Constitutional Amendment: The court discussed the impact of the 46th Constitutional Amendment, which added clause 29A to Article 366, defining 'sale' to include the transfer of property in goods involved in the execution of a works contract. This amendment allowed states to levy sales tax on the value of materials used in works contracts. The court referenced the Supreme Court's decisions in Builders Association of India and Gannon Dunkerley, which clarified that a works contract could be taxed for the value of goods involved, even if the contract was indivisible. 4. Retrospective Application of the Exemption Notification: The petitioner argued for the retrospective application of the exemption notification dated 29.03.2001. However, the court held that the notification, which categorized laying of pipelines with material as a works contract, was clarificatory and applied prospectively from the year 2001-2002. The petitioner's assessment for the year 1999-2000 could not benefit from this notification. 5. Availability of Alternative Remedies: The court emphasized the availability of alternative remedies, suggesting that the petitioner should have approached the Rajasthan Tax Board for further appeals. The court was not inclined to interfere with the findings of the lower authorities, given the alternative remedy available. Consequently, the writ petition was dismissed on this ground. Conclusion: The court upheld the findings of the lower authorities, confirming that the works contract was divisible and subject to sales tax on the supply of pipes. The exemption notification could not be applied retrospectively, and the petitioner was advised to seek alternative remedies through the Rajasthan Tax Board. The appeals and the writ petition were consequently dismissed.
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