2016 (12) TMI 68 - HC - VAT and Sales Tax

Works contract - commodities of bitumen and jelly - duty chargeable at 4% or 12.5% - Held that - the Tribunal in the impugned order has considered that the amendment has come into effect from 1st of April 2006. Therefore, for the respective period of 2005 -2006, the amendment did not exist on the statute book. Resonantly, the duty as was prevailing prior to 1.4.2006 for the respective items will be considered for the chargeability. The Tribunal has recorded that for the jelly as well as bitumen which are the material being used, 4% is the duty provided as per the III Schedule vide item No.83 and 11/15 respectively and accordingly, the duty to the extent of 4% is maintained. When the amendment was not on the statute book for specifically providing duty/Tax on works contract, it cannot be said that duty chargeable would fall in the category of residuary item at the rate of 12.5%. The view taken by the Tribunal is that, whatever the items are utilized in execution of the works contract will have to be considered separately for the purpose of chargeability. Of course, the benefit is already gr anted for the Iron and Steel by the First Appellate Authority to the extent of 32.5% of the total amount of the purchase. For the cement, the Tribunal had found that it would be 12.5%, whereas, for jelly, it would be 4% and for bitumen, it would be 4%. The view taken by the Tribunal, more particularly, in the absence of any amendment in the statute book providing for separate chargeability of the works contract cannot be said to be erroneous. Petition dismissed.

Summary

Issues:
Interpretation of taxability of works contract items - bitumen, sand, jelly, steel, cement. Applicability of amendment for taxability - prospective or retrospective.

Analysis:
The judgment addressed multiple issues related to the taxability of works contract items such as bitumen, sand, jelly, steel, and cement. The petitioner argued that all items used in the works contract should be taxed at 12.5%, while the Tribunal had determined specific rates for different items. The key contention was whether the amendment made by item No.4/2006 would have a prospective or retrospective effect.

The Court referred to a previous case to discuss the applicability of the amendment for taxability of duty. It was observed that the insertion of Section 4(1)(c) in the Sixth Schedule specified the rate of tax on works contract effective from 1.4.2006. The Court emphasized that the rate of tax should be uniform for both normal and deemed sales under works contracts. The petitioner argued that the amendment was prospective and could not be applied retrospectively.

The Tribunal considered that the amendment was effective from 1st April 2006, and for the period of 2005-2006, the duty rates prevailing before the amendment would apply. The Tribunal held that for jelly and bitumen, the duty rates were 4% as per the III Schedule. It was noted that each item used in the works contract should be separately considered for chargeability, leading to different rates for different materials.

The Court upheld the Tribunal's decision, stating that in the absence of a specific amendment providing for separate chargeability of works contracts, the Tribunal's view was not erroneous. The Court also referenced previous decisions on iron and steel to support the consideration of different items in works contracts. Ultimately, the Court found that since the issues were already covered by previous decisions, no legal questions warranted further consideration, leading to the dismissal of all petitions.