2023 (5) TMI 90 - HC - VAT and Sales Tax

Deemed sale or not - supply of 'goods' defined under Section 2(h) (iii) should have been sub-clause (ii) and 2(h) (iv) of the GST Act - impugned orders challenged on the ground that the observations made by the Appellate Authority that the goods imported by the assessee from outside the State on the strength of C-Forms were supplied to the contractors for execution of work contracts and there was, thus, transfer of property in goods to the contractors was erroneous and legally unsustainable - Whether the Tribunal was bound by its earlier orders in the cases of applicant itself as they have attained finality and, on the principle of consistency , the Tribunal should not hold otherwise than what has been settled by its earlier Benches? HELD THAT - It is held by the Assessing Authority that the transaction i.e transfer of equipments/assets erected and established by the assessee either itself or through sub-contractors is tantamount to execution of works contract by the assessee and, therefore, by the definitions of Sale , Goods and Dealer given in the GST Act, the transfer of goods or property in goods utilized in the execution of works contract is a sale exigible to tax under the GST Act. This finding of fact and the conclusion drawn on the basis of the definitions of Sale, Goods and Dealer given in the GST Act has been upheld by the Appellate Authority as well as the Tribunal - Once the questions of law framed by the Tribunal are appreciated in the aforesaid backdrop, it would clearly transpire that, having regard to the definitions of Goods, Dealer and Sale given in the GST Act, the services provides in the shape of works contract, whether divisible or indivisible involving transfer of property or not, fall in the definition of the term goods and any such transaction shall be deemed to be a sale by the person making the same. Handing over of the goods and material to the contractors for construction and laying of power grids, sub-stations and transmission lines of the assessee did not involve the transfer of right to use goods. Not only the ownership and dominion over the goods handed over to the contractors remained vested with the assessee, but the transfer or handing over of the goods and material to the contractors was without any consideration. It can, thus, be safely concluded that the transaction between the assessee and its contractor involving transfer of goods was not supported by any valuable consideration and, therefore, cannot be construed as a transfer of right to use goods so as to bring it within the purview of term sale as defined under Section 2(L) of the GST Act. From deep scrutiny, it could only be found that the assessee, after erecting grid stations, sub-stations and transmission lines, provides facility of transmission of electric energy to the State and other utilities/undertakings by levying transmission charges. Whether the works executed by the assessee through its sub-contractors involving the use of goods and material are executed for and handed over to the States, other utilities or undertakings, is not clear from the record. As a matter of fact, this aspect has not been considered either by the Assessing Authority or the two Appellate Forums under the GST Act which have heard and decided the appeals. Absent such material on record, it is difficult for us to make any comment, lest the parties or either of them may be prejudiced. In the considered view that, in respect of assessing year 1996-97, there was no transfer of right to use goods from assessee to the contractors who constructed, set up and laid power grids, sub-stations and transmission lines for the assessee by utilizing the goods and material provided to them by the assessee itself without any consideration. It shall be the contractor, who shall be accountable for paying the sales tax on the services provided to the assessee in the shape of works contact. Such is also not the case set up by the revenue before the Forums below or even before us. This will leave us with only the transfer of right to use goods by the assessee to the contractors. It is reiterated that, in the given facts and circumstances, it is found that no transfer of right to use the goods provided by the assessee to the contractors for constructing, erecting or laying out the power grids, sub-stations and transmission lines for the assessee. In the instant case, the ownership and dominion over the goods purchased by the assessee from outside the State always remained with the assessee and the goods were never transferred to the contractors against any valuable consideration. As a matter of fact, the goods and materials purchased by the assessee from outside the State were utilized by the contractors as per the directions of the assessee in raising the construction of various transmission lines, power grids and sub-stations etc. Principle of consistency - Tribunal was bound by its earlier orders in the cases of applicant itself as they have attained finality or not? - whether the Tribunal should not hold otherwise than what has been settled by its earlier Benches? - HELD THAT - Not only the Tribunal but all the Authorities subordinate to it are bound to follow and comply with the law laid down by the Tribunal. This is necessary to maintain judicial discipline and avoid uncertainty in law. The Tribunal may, in appropriate cases, take a view different from the one taken by it earlier if there is change in law or the fact situation in the context whereof the law was declared by it earlier. The Assessing Authorities or the Statutory Appellate Authorities under the GST Act cannot and should not take a view on question of law contrary to the view taken by the Tribunal. Such conduct of the Authorities shall be gross impropriety and indiscipline which may call for initiation of appropriate departmental action. References disposed off.

Summary

Issues Involved:
1. Whether the applicant supplied "goods" as defined under the GST Act and if they are deemed to be a sale before 15.05.1997.
2. Whether the Tribunal was bound by its earlier orders in the applicant's cases based on the principle of "consistency."

Summary:

Issue 1: Supply and Definition of "Goods"
The court examined whether the transactions by the assessee, involving the purchase of goods from outside the state and handing them over to contractors for construction purposes, constituted a "sale" under the GST Act.

- Pre-15.05.1997: The court concluded that the transfer of goods to contractors without consideration did not amount to a "sale" as defined under Section 2(L) of the GST Act. The ownership and dominion over the goods remained with the assessee, and there was no transfer of the right to use goods supported by valuable consideration.
- Post-15.05.1997: The definition of "goods" was expanded to include services provided in the form of works contracts. However, the court noted that the transfer of property in goods involved in the execution of works contracts was excluded from the definition of "sale." The court found that the transaction between the assessee and the contractors did not amount to a sale, and thus, the assessee was not liable to pay tax under the GST Act for these transactions.

Issue 2: Principle of Consistency
The court emphasized that the Tribunal and all subordinate authorities must follow the law laid down by the Tribunal to maintain judicial discipline and avoid uncertainty in law.

- The court noted that the Tribunal had previously held that similar transactions by the assessee did not constitute a "sale" under the GST Act. The court criticized the Assessing Authorities for repeatedly ignoring the Tribunal's mandate and passing contrary orders without justifiable reasons.

Conclusion:
1. Answer to Question 1: The transactions between the assessee and the contractors, where the assessee supplied goods purchased from outside the state for erecting transmission lines, sub-stations, and power grids, did not amount to a "sale" under Section 2(L) of the GST Act during the relevant period and were not exigible to sales tax. Consequently, the assessee was not a dealer liable to pay tax under the GST Act for these transactions.
2. Answer to Question 2: The Tribunal and all subordinate authorities are bound to follow the law laid down by the Tribunal to maintain judicial discipline and avoid uncertainty in law. Any deviation must be justified by a change in law or fact situation, with reasons clearly spelled out.

The court directed the Registry to send a copy of the judgment to the Tribunal for further proceedings in accordance with the law.