9911796707
TMI Blog2007 (11) TMI 581X X X X Extracts X X X X X X X X Extracts X X X X ..... D.G.R. , JJ. M.Y. EQBAL J. In this writ petition, the petitioner has prayed for issuance of appropriate writ declaring that the inter-State sales originated from Pondicherry to the State of Bihar in execution of works contract are exigible to sales tax to Pondicherry jurisdiction under Central Sales Tax Act, 1956 and further prayed for issuance of appropriate writ in the nature of certiorari for quashing the order of assessment for the year 1994-95 so far as raising of additional tax demand of Rs. 5,35,223.24 or inter-State sales transactions which is exigible to Pondicherry jurisdiction under the Central Sales Tax Act, 1956 is concerned, as the same being illegal and contrary to law and is wholly without jurisdiction. Further prayer has been made for issuance of appropriate direction to respondent No. 3 to give effect to the tax paid and realised and grant of refund of the said amount. The brief facts of the case are as under: The petitioner is a registered company having business activities in every States as well as having manufacturing unit located outside the State of Bihar including Pondicherry and, are registered dealer under local and Central Sales Tax Acts in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e department, which were wrongly included in the gross turnover in the original return. (C) Rs. 1,33,80,581 Being the amount of inter-State sale/purchase from Pondicherry. Further case of respondent is that in course of hearing of the assessment proceedings, the amount shown at (A) and (B) were found to be justified, hence these two amounts were excluded from their gross turnover as per their submission and after thorough verification. Thereafter, the amount of inter-State sales/purchase from Pondicherry to the tune of Rs. 1,33,80,581 showing at (C) above is concerned, it was thoroughly examined and verified in course of hearing of the case and it was found that two independent transactions have taken place and hence, there are two independent sales. The respondents' further case is that the first sale has taken place between Pondicherry manufacturing unit and the petitioner which is undoubtedly an inter-State transaction for which Central sales tax at Pondicherry has rightly been paid. Since the second sale has taken place between the petitioner and the contractoree department, in the State of Bihar which is admittedly an intra-State sale which attracts the levy of Bihar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2004] 134 STC 354. The said judgment has been followed by the Jharkhand High Court in the case of Voltas Limited v. State of Jharkhand reported in [2007] 5 VST 492 and affirmed by the honourable Supreme Court in the case of State of Jharkhand v. Voltas Ltd. reported in [2007] 7 VST 317. Mr. Mittal, learned counsel appearing for the petitioner, firstly submitted that earlier there was a dispute as to whether any tax can be levied at all on work contract, but the said conflict was resolved by the Supreme Court in the case of State of Madras v. Gannon Dunkerley Co. (Madras) Ltd. reported in [1958] 9 STC 353, in which the Supreme Court held that when a building contract is entered, there is no sale of goods because in such a contract the agreement between the parties is that the contractor should build according to the specification contained in the agreement and in consideration therefor release of payment as provided therein and in such an agreement, there was neither a contract to sell the materials used in the construction nor those properties based therein as movables. Mr. Mittal then submitted that after 46th amendment, constitutional validity of the said amendment as well as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... echanism of section 21(1) of the Bihar Finance Act and as such the assessment orders have to be set aside in its totality. On the other hand, Mr. Himanshu Kumar Mehta, learned counsel appearing for the respondent-State firstly submitted that admittedly the contract in question was a turn key contract and the goods upon which tax have been imposed are declared goods. Further, goods were transferred from Pondicherry to Bihar and consignor is petitioner and consignee is the Railway. Respondents have neither produced documents of purchase of sale nor any documents have been produced showing that the order was placed by the petitioner. Learned counsel further submitted that the judgment Larsen Toubro Ltd. v. Union of India reported in [1993] 88 STC 204 (SC) is not in their support because of the fact that the judgment reported in the case of Builders' Association of India v. Union of India [1989] 73 STC 370 (SC); [1989] 2 SCC 645 is affirmed in Gannon Durnkerly and Co. [1993] 88 STC 204 (SC); [1993] 1 SCC 346. The impugned order does not disclose the tax assessed upon gross taxable turnover. The Central Sales Tax Act, 1956 (hereinafter referred to as the CST Act ) has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 6 is the important provision which casts a liability and also tax on the inter-State sales. According to this section, every dealer shall be liable to pay tax under this Act on all sales of goods other than electrical energy effected by him in the course of inter-State trade or commerce. Sub-section (2) of section 6 provides that where a sale of any goods in the course of inter-State trade or commerce has either occasioned the movement of such goods from one State to another or has been effected by a transfer of documents of title to such goods during their movement from one State to another, any subsequent sale during such movement effected by a transfer of documents of title to such goods to the Government or to a registered dealer other than the Government shall be exempted from tax if the goods are of the description referred to in sub-section (3) of section 8 of the Act. Section 8 is a charging section which prescribes the rate of tax on sales of goods in the course of inter-State trade or commerce. According to this section, every dealer in the course of inter-State trade or commerce, sells the goods to the Government or to a registered dealer, shall be liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he goods to the Government or to a registered dealer, shall be liable to pay tax which shall be four per cent of his turnover. Section 14 of the Act declares certain goods as having special importance in the inter-State trade or commerce. Section 15 provides certain restrictions and conditions in regard to tax on sale or purchase of declared goods within State. For better appreciation, section 15 is quoted herein below: 15. Restrictions and Conditions in regard to tax on sale or purchase of declared goods within a State.-Every sales tax law of a State shall, in so far as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely: (a) The tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed four per cent of the sale or purchase price thereof, and such tax shall not be levied at more than one stage; (b) where a tax has been levied under that law in respect of the sale or purchase inside the State of any declared goods and such goods are sold in the course of inter-State trade or commerce, and tax has been paid under thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and steel, etc., which were declared goods, had already suffered sales tax at an earlier point in the State and whether on such goods, the tax which was being levied exceeded to limit prescribed by section 15 of the Central Sales Tax Act, 1956. The assessee, therefore, moved the Supreme Court challenging the constitutional validity of 46th amendment and also raised the point that it was not open to the State to ignore the provisions contained under article 286 of the Constitution and the provisions of the Central Sales Tax Act, 1956 while making assessment under the Sales Tax Law passed by the Legislature State. The Supreme Court in Builders Association's case [1989] 73 STC 370, firstly observed: (at page 396 of 73 STC) Before proceeding further it is necessary to understand what subclause (b) of clause (29A) of article 366 of the Constitution means. Article 366 is the definition clause of the Constitution. It says that in the Constitution unless the context otherwise requires, the expressions defined in that article have the meanings respectively assigned to them in that article. The expression 'goods' is defined in clause (12) of article 366 of the Constitution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 (29A) of article 366 of the Constitution thus becomes subject to the same discipline to which any levy under entry 54 of the State List is made subject to under the Constitution. The position is the same when we look at article 286 of the Constitution. Clause (1) of article 286 says that no law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place (a) outside the State; or (b) in the course of the import of the goods into, or export of the goods out of, the Territory of India. Here again we have to read the expression 'a tax on the sale or purchase of goods' found in article 286 as including the transfer of goods referred to in sub-clause (b) of clause (29A) of article 366 which is deemed to be a sale of goods and the tax leviable thereon would be subject to the terms of clause (1) of article 286. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der article 366(29A) of the Constitution. We are of the view that all transfers, deliveries and supplies of goods referred to in clauses (a) to (f) of clause (29A) of article 366 of the Constitution are subject to the restrictions and conditions mentioned in clause (1), clause (2) and sub-clause (a) of clause (3) of article 286 of the Constitution and the transfers and deliveries that take place under sub-clauses (b), (c) and (d) of clause (29A) of article 366 of the Constitution are subject to an additional restriction mentioned in sub-clause (b) of article 286(3) of the Constitution. His Lordships finally held as under: (at page 402 of 73 STC) 40.. We are surprised at the attitude of the States which have put forward the plea that on the passing of the 46th amendment the Constitution had conferred on the States a larger freedom than what they had before in regard to their power to levy sales tax under entry 54 of the State List. The 46th amendment does no more than making it possible for the States to levy sales tax on the price of goods and materials used in works contracts as if there was a sale of such goods and materials. We do not accept the argument that sub-clause ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orks contracts. The present petitioner also filed writ petitions under article 32 of the Constitution of India challenging the validity of the provisions relating to imposition of tax on the transfer of property and goods involved in the execution of works contracts contained in the Sales Tax laws of the States of Tamilnadu, Andhra Pradesh and Rajasthan. The reasons for approaching the Supreme Court under article 32 of the Constitution was that in spite of the decision in the Builders' Association's case [1989] 73 STC 370 (SC); [1989] 2 SCC 645, the petitioner was being subjected to demand for tax in relation to the works contracts by various States and each State is wanting to tax the sales transaction on the basis that it constitutes a sale under its sales tax law. The Supreme Court again elaborately discussed the constitutional amendment and the relevant provisions of Central Sales Tax Act and the local laws and also the ratio decided in Builders' Association's case [1989] 73 STC 370 (SC); [1989] 2 SCC 645. In the case of Gannon Dunkerley Co.'s case [1993] 88 STC 204 (SC); [1993] 1 SCC 364, it was strenuously and seriously contended on behalf of the State t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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(29A)(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 ambit of article 366(29A)(b) but it is not permissible for the State Legislature to define the expression 'sale' in a way as to bring within the ambit of the taxing power 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 and export. (4) The tax on transfer of property in goods (whether as goods or in some other for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Coming back to the instant case, as noticed above, it has not been disputed by the respondents that the goods in question was manufactured and sent from Pondicherry to Bihar and iron and steel being declared goods under section 14 of the Central Sales Tax Act and the same can be taxed only once at four per cent under the provisions of section 15 of the Central Sales Tax Act. It is also not in dispute that during the relevant year, 1994-95 no assessment can be done in respect of works contract inasmuch as there was no sale of goods and the building contract was entered. The petitioner annexed certificate issued by the Commercial Tax Department, Government of Pondicherry to the effect that assessment proceedings were completed in respect of the assessment year 1994-95 wherein the petitioner declared a gross turnover under the Central Sales Tax Act including the supply effected by the petitioner. Since admittedly the goods in question are declared goods under section 14 of the Act and had already suffered tax i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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