9911796707
TMI Blog1989 (1) TMI 353X X X X Extracts X X X X X X X X Extracts X X X X ..... avation of rock and earth for levelling the ground. 2.. The petitioner is a partnership firm, having its head office at Aurangabad in the State of Maharashtra where it is registered as a dealer under the Bombay Sales Tax Act, 1959 and has taken work at Malajkhand, district Balaghat in the State of Madhya Pradesh. The petitioner is a contractor and undertakes labour/works contracts in different parts of India. The contract undertaken is exclusively in the nature of labour contract. The petitioner, on December 1, 1986, entered into an agreement with the Hindustan Copper Ltd., a Government of India undertaking (hereinafter referred to as "the Government Co.") which is extracting copper ore by employing the open cast method, for which excess earth above the level from where copper ore is located, is to be removed. The work of removal of excess earth, i.e., excavation and removal of about 2 million cubic metres of waste rock and earth has been entrusted to the petitioner. The total contract is valued at Rs. 5.30 crores, which is to be executed within a period of 20 months from the date of its execution. The terms and conditions are incorporated in the said agreement and the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the petitioner-firm about the contract given to it at Malajkhand by the Government company and the agreement entered into with that company, but contended that in view of the amendment of article 366 of the Constitution, the State Governments are empowered to levy tax on the goods supplied for the execution of the works contract and accordingly the definition of "sale" in clause 2(n) of the Act was amended with effect from July 1, 1984, so as to include transfer of goods in the execution of the works contract. As the petitioner started its work after July 1, 1984, it is liable to be included within the meaning of "dealer" under section 2(d) of the Act. Any raw material or incidental goods utilised for the work is also liable for entry tax under section 3(1)(b) of the Entry Tax Act. The works contract of the petitioner is fully covered by the incidence of taxation under both these Acts. Therefore, proceedings were started by the Sales Tax Officer, Balaghat, and the Sales Tax Officer, Flying Squad, Chhindwara. There is no illegality or infirmity in the proceedings. The petitioner is liable to be taxed for the works contract being executed in the State of Madhya Pradesh under both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arassment, the High Courts will issue appropriate orders or directions to prevent such consequences. Writ of certiorari and prohibition can issue against Income-tax Officer acting without jurisdiction under section 34 of the Income-tax Act." The Supreme Court further held that when an action of the Income-tax Officer is without jurisdiction, though there is other remedy available under the Income-tax Act, that is not sufficient reason for refusing to give relief by a writ prohibiting the authority from acting without jurisdiction. 4.. Section 4 is the charging section under the Sales Tax Act, providing that every dealer whose turnover during the period of twelve months immediately preceding the commencement of this Act exceeds the limit specified in sub-section (5) shall from such commencement be liable to pay tax under this Act on his taxable turnover in respect of sales or supplies effected in Madhya Pradesh. Sub-section (5)(cc) provides that in relation to a dealer who enters into a works contract and in the execution thereof supplies goods, the limit shall be fifty thousand rupees. Section 7 provides for levy of purchase tax and every dealer, who, in the course of his busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rks contract, but not for sale therein, entry tax shall be paid by every dealer liable to tax under the Sales Tax Act, who has effected entry of such goods. Works contract has been defined in section 2(m) to mean contracts relating to construction of works like buildings, dams and bridges and other immovable property, erection of factories, installation of machinery and fittings and installations to movable or immovable property in the execution whereof goods are consumed or used but not sold. Under section 2(bb), "incidental goods" means goods other than raw material and packing material for use by a dealer in the manufacture or processing of goods or in mining or in the generation or distribution of electricity or any other form of power. 7.. The question is whether the petitioner is liable to pay entry tax for importing diesel, lubricating oil and spare parts and the machineries to the site of the work from outside the State of Madhya Pradesh for executing the work. In fact, the machineries brought to the site by the petitioner are its assets and those machineries are transferred from one place to another and they are brought back after the work is over. The work undertaken by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk undertaken by the petitioner is in the nature of labour contract and it does not come within the purview of works contract, as defined in the Act. In case the petitioner was required to execute the work entirely by employing labour and not any machinery, it cannot be made to pay any tax under these two enactments, and merely use of machinery for facilitating the work to be executed will not alter the situation. 8.. The Supreme Court in Vanguard Rolling Shutters Steel Works v. Commissioner of Sales Tax [1977] 39 STC 372; AIR 1977 SC 1505, has held: "It was therefore, clear that the transaction was a composite consolidated contract which was one and indivisible comprising labour and services executed for a lump sum. It was also clear that the materials were not merely supplied to the owner so as to pass as chattel simpliciter, but were actually fixed to an immovable property and after the same were fixed and erected they became a permanent fixture so as to become an accretion to the immovable property. The term in the contract providing for the advance payment of the entire price was a term meant for the convenience of the parties as the contractor did not want to take any r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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