9911796707
TMI Blog1998 (8) TMI 588X X X X Extracts X X X X X X X X Extracts X X X X ..... cluding testing and commissioning of pipelines, etc., in respect of Ajmer, Kishangarh, Beawar Water Supply Reorganisation Scheme from Bisalpur Dam pursuant to a notice inviting tenders dated September 8, 1997. The applicant-company submitted its tender which was accepted. It was chosen as the contractor to execute the foregoing works. The work orders which were issued on August 23, 1988 and July 10, 1989 culminated into agreements between the applicant-company and the PHED on January 11, 1989 and July 23, 1989. As per the terms of agreements the requisite pipes were to be manufactured, supplied, laid and jointed by the applicant-company. It was to establish a factory near the working site for the manufacture of pipes and the specials. Trench excavation was also to be done by the applicant-company. Submission of completion drawings was also the work which was entrusted to be done by the applicant-company. The entire scheme was to be commissioned and successfully operated for a period of at least 30 days at designed flow and pressure. It was a turnkey project. The quotation given by the applicant-company was inclusive of all taxes, levies and octroi, etc. It was also provided tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en by the Orissa High Court as also by the apex Court in similar matters. It was prayed that the impugned order dated May 24, 1997 be quashed. It may be declared that the agreements dated August 23, 1988 and July 10, 1989 are indivisible works contracts. The applicantcompany is not liable to pay sales tax over and above 2 per cent which has already been deducted by PHED at source from the running bills. 3.. In the counter filed on behalf of the non-applicants Nos. 1 to 4 the factual position with regard to the issuance of notice inviting tenders and work orders, execution of agreements, framing of the assessment order and the passing of the appellate order has been admitted. It is alleged that a works contract cannot be treated to be an indivisible contract after coming into the force of the Constitution (Forty-sixth) Amendment Act, 1982 (Amendment Act). A works contract is to be treated as a divisible one consisting of two parts-one for the supply of material and the other for the supply of labour and services. The first part of the works contract is to be treated as a contract for sale. The assessment order as also the first appellate order are just and proper. The applicant- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for works done. On that view it was held that no tax could be charged on the value of the works contracts. A contrary view was taken by the Kerala High Court in Gannon Dunkerley and Co. Madras (Private) Ltd. v. Sales Tax Officer, Mattancheri [1957] 8 STC 347; AIR 1957 Ker 146. The view taken by the Madras High Court was upheld by the apex Court in State of Madras v. Gannon Dunkerley Co. (Madras) Ltd. [1958] 9 STC 353 (SC); [1959] SCR 379 . The position was that if the works contract was indivisible it was not exigible to tax. Until the amendment Act came on the scene the position all along was that no sales tax could be charged on a works contract unless it was shown that it consisted of two parts-one for the sale of material and the other for the supply of labour and services. If it was shown that it consisted of two parts then the first part of the contract with regard to the sale or supply of material used for the execution of works contract was exigible to tax. If not, not. The amendment Act brought this branch of law concerning works contract out of the state of uncertainty and put it on to the uplands of clarity in that it provided in clause (29-A) of article 366 for the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and a purchase of those goods by the person to whom such transfer, delivery or supply is made. Hence, a transfer of property in goods under sub-clause (b) of clause (29-A) is deemed to be a sale of the goods involved in the execution of works contract by the person making the transfer and a purchase of those goods by the person to whom such transfer is made. The object of the new definition introduced in clause (29-A) of article 366 of the Constitution is, therefore, to enlarge the scope of tax on sale or purchase of goods wherever it occurs in the Constitution so that it may include within its scope the transfer, delivery or supply of goods that may take place under any of the transactions referred to in sub-clauses (a) to (f), thereof wherever such transfer, delivery or supply becomes subject to levy of sales tax. So construed the expression tax on the sale or purchase of goods in entry 54 of the State List, therefore, includes 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 also. The tax leviable by virtue of sub-clause (b) of clause (29-A) of article 366 of the Constitution thus becomes su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to tax a sale in an ordinary sense is subject to certain conditions and restrictions imposed by the Constitution, the power to tax a transaction which is deemed to be a sale under article 366(29-A) of the Constitution should also be subject to the same restrictions and conditions. (page 400 of STC; pages 351 and 352 of SCR). 10.. The decision in Builders Association case [1989] 73 STC 370 (SC); [1989] 2 SCR 320 was reiterated in Gannon Dunkerley Co. case [1993] 88 STC 204 (SC). Now we proceed to have a look at the relevant provisions contained in section 2(o) and (u) of the Act. Section 2(o) of the Act so far as it is relevant for our purposes is as hereunder: 2(o) sale , with all its grammatical variations and cognate expressions, means every transfer of the property in goods (other than by way of mortgage, hypothecation, charge or pledge) by one person to another for cash or deferred payment or other valuable consideration and includes: (i).............................. (ii) a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; Explanation I.-The transfer of property in goods (whether as goods or i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgment of the High Court of Orissa, Cuttack, in Indian Hume Pipe Company Ltd. v. State of Orissa decided on December 10, 1991 a copy of which has been placed on record as annexure 10. This judgment is of no help to the case of the applicant-company. The works contract in that case related to a period prior to the coming into force of the amendment Act in 1982. As mentioned earlier the position has undergone a sea change after the amendment Act. Shri Gupta further contends that the Civil Appeals Nos. 3411-3413 of 1984 filed by the State of Orissa against the judgment were dismissed by the honourable Supreme Court on September 24, 1995. The order dismissing the appeals is as hereunder: Learned counsel for the appellant fairly states that it cannot be argued, having regard to the agreement in question, that it was divisible into one of sale and one of works. The period involved was prior to the 46th Constitution Amendment so that the benefit thereof is not available to the appellant. The appeals are, therefore, dismissed with no order as to costs. 14. A perusal of this order of the apex Court gives a quietus to the contention of the learned counsel Shri Gupta that this order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contracts relating to any kind of construction. 2% 2 Works contracts relating to any kind of installation, fitting out, improvement, overhaul or repairs. 4% Superseded by S.No. 712 dated March 8, 1988 S.No. 712: F.4(5) FD/Gr. IV/88-27 dated March 8, 1988. S.O. 258.-In exercise of the powers conferred by section 5 of the Rajasthan Sales Tax Act, 1954 (Rajasthan Act 29 of 1954) and in supersession of this Department Notification No. F.4(80) FD/Group-IV/81-43 dated May 28, 1987, the State Government hereby notifies that the rates of tax payable by a contractor on his turnover of the works contracts as specified in column (2) of the list annexed hereto, shall be as shown against them in column (3) of the said list: List S. No Nature of the works contracts Rate of tax (1) (2) (3) 1 All works contracts relating to immovable property but excluding those of installation and fitting out. 2.5% 2 All works contracts relating to installation and fitting out: (a) if the goods involved in the execution of the works contracts have suffered tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
