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TMI Blog1992 (11) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... do not wish to say anything on the same. During the course of arguments before us, the learned counsel for the appellant sought to challenge the validity of section 19A of the Karnataka Sales Tax Act which provides for deduction of tax at source. We find that the said provision was not challenged by the appellant in the writ petition before the High Court and was also not challenged in the additional grounds which were submitted by the appellant in the High Court after the decision of this Court in Builders Association case [1989 (3) TMI 356 - SUPREME COURT OF INDIA]. It has also not been challenged by the appellant in the special leave petition filed before this Court. In these circumstances, we have not permitted the appellant to raise this question. - Civil Appeal No. 990 of 1991, W.P. No. 8296 of 1986 - - - Dated:- 17-11-1992 - KANIA M.H., VEA J.S.RM, AGRAWAL S.C., YOGESHWAR DAYAL AND ANAND A.S. DR. JJ. C.S. Vaidyanathan, Senior Advocates (S.R. Setia and K.V. Vijayan, Advocates, with him), for the appellant. G. Ramaswamy, Attorney-General of India, Dipankar Gupta, Solicitor-General of India and B.B. Ahuja and R.N.N. Murthy, Senior Advocates (Ranbir Chandra, Asho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been considered by us in our decision pronounced today in Gannon Dunkerley Co. v. State of Rajasthan (Civil Appeals arising out of S.L.P. Nos. 3365-68 of 1992) Reported in [1993] 88 STC 204 (SC) supra. and wherein it has been held as under: "(1) In exercise of its legislative power to impose tax on sale or purchase of goods under entry 54 of the State List read with article 366(29-A)(b), the State Legislature, while imposing a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract is not competent to impose a tax on such a transfer (deemed sale) which constitutes a sale in the course of inter-State trade or commerce or a sale outside the State or a sale in the course of import or export. (2) The provisions of sections 3, 4, 5 and sections 14 and 15 of the Central Sales Tax Act, 1956, are applicable to a transfer of property in goods involved in the execution of a works contract covered by article 366(29-A)(b). (3) While defining the expression 'sale' in the sales tax legislation it is open to the State Legislature to fix the situs of a deemed sale resulting from a transfer falling within the ambi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and services that would be incurred in normal circumstances in respect of that particular type of works contract. It would be permissible for the Legislature to prescribe varying scales for deduction on account of cost of labour and services for various types of works contract. (8) While fixing the rate of tax it is permissible to fix a uniform rate of tax for the various goods involved in the execution of a works contract which rate may be different from the rates of tax fixed in respect of sales or purchase of those goods as a separate article." The impugned provisions of the Karnataka Sales Tax Act have to be considered in the light of the aforesaid principles. Although in the writ petition the appellant had challenged the validity of a number of provisions, in his arguments before the High Court the learned counsel for the appellant confined his submissions to explanation (3)(c) to section 2(1)(t) and section 5B read with the Sixth Schedule. Clause (t) of section 2(1) of the Act defines the expression "sale" in the following terms: "(t) 'sale' with all its grammatical variations and cognate expressions, means every transfer of the property in goods other than by way of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tside the State within the meaning of sections 3 and 4 of the Central Sales Tax Act into an inside sale and thereby subjecting the same to levy of tax under the Act which is beyond -the legislative competence of the State Legislature under entry 54 of the State List read with article 366(29-A)(b). The said contention of the appellant has been rejected by the High Court. Having heard Shri Vijayan, the learned counsel for the appellant, we do not find any substance in the contention. A perusal of clause (t) shows that in the main part the expression "sale" has been defined and in the inclusive part of the said definition, sub-clauses (i) to (iv) reproduce sub-clauses (a) to (d) of clause (29-A) of article 366. Explanation (3) contains three clauses, whereby the situs of the sale is fixed. Clause (a) of explanation (3) contains the words "other than the sale in the course of inter-State trade or commerce or in the course of import or export" which means that a sale or purchase of goods in the course of inter-State trade or commerce or in the course of import or export is excluded. Moreover clause (a) of explanation (3) merely reproduces the provisions contained in the main par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver of transfer of property in goods (whether as goods or in some other form) involved in the execution of works contract. The expression "taxable turnover" is defined in clause (u-1) of section 2M as follows: "(u-1) 'taxable turnover' means the turnover on which a dealer shall be liable to pay tax as determined after making such deductions from his total turnover and in such manner as may be prescribed, but shall not include the turnover of purchase or sale in the course of inter-State trade or commerce or in the course of export of the goods out of the territory of India or in the course of import of the goods into the territory of India Rule 6 of the Karnataka Sales Tax Rules, 1957, provides for determination of the total and taxable turnover of a dealer. The total turnover is to be determined in accordance with clauses (a) to M of sub- rule (1). Clause (c) relates to works contracts and it provides that the total turnover shall be the aggregate of "the total amount paid or payable to the dealer as the consideration for transfer of property in goods (whether as goods or in some other form) involved in the execution of works contract; and including any amount paid as advance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving any transfer of property in goods actually incurred in connection with the execution of works contract, or (v) such amounts calculated at the rate prescribed in column (3) of the Table below, if they are actually incurred towards 'labour charges' and other like charges and are not ascertainable from the books of accounts maintained and produced by a dealer before the assessing authority." In the Table which is appended below clause (n), the percentage of the value of the contract which would be deducted towards labour and other charges has been specified in respect of different types of works contracts specified in the said Table. In sub-clause (ii) of clause (m) amounts actually expended towards labour charges for erection, installation, fixing, fitting out, or commissioning of the goods specified in the serial numbers wholly or partly, are deductible and under sub-clause (iii) of clause (m) all amounts paid to sub-contractors as the consideration for execution of works contracts whether wholly or partly, are deductible. Similarly, under sub-clause (iii) of clause (n), all amounts paid to sub-contractors for execution of works contract whether wholly or partly are deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been prescribed in the Table appended below sub- clause (v) of clause (n) of sub-rule (4) of rule 6 of the Rules are arbitrary. As regards the challenge to the rates of tax prescribed in the Sixth Schedule on the ground that the same have been fixed with reference to the nature of the contract and not with reference to the goods involved in the execution of a works contract, we find that the High Court has upheld the same and has placed reliance on the decision of this Court in Twyford Tea Co. Ltd. v. State of Kerala [1970] 3 SCR 383 wherein this Court has referred to the decision in East India Tobacco Company v. State of Andhra Pradesh [1962] 13 STC 529 (SC); [1963] 1 SCR 404 and has laid down that the Legislature has a "wide range of selection and freedom in appraisal not only in the objects of taxation and the manner of taxation but also in the determination of the rate or rates applicable" (page 393). In Gannon Dunkerley case [1993] 88 STC 204 after taking note of the abovementioned principle and the decisions of this Court we have held that while fixing the rate of tax, it is permissible to fix a uniform rate of tax for the various goods involved in the execution of a works ..... X X X X Extracts X X X X X X X X Extracts X X X X
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