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TMI Blog2008 (8) TMI 994X X X X Extracts X X X X X X X X Extracts X X X X ..... by Orissa Sales Tax (Amendment) Act, 1984 for levying sales tax on works contract with effect from 7.4.1984. The State Government specified that the rate of tax payable by a dealer on the taxable turnover in respect of 'works contract' shall be 4%. On 4.11.1986 the State Government in the Department of Irrigation and Power issued a letter declaring that in case of works contract executed on or after 7.4.1984 containing the specific clause for reimbursement of sales tax, the Department of Irrigation and Power would be liable for reimbursement of the amount of sales tax actually paid by the concerned contractor on production of necessary documentary evidence in token of making such payment. According to the petitioner, Clause 45.2 of the National Competitive Bidding Contract specifies that any Central or State Sales Tax and other taxes on completed items of work of this contract as may be levied excluding penalty levied for contractor's fault and paid by the contractor shall be reimbursed by the employer to the contractor on proof of payment on production of assessment certificate on every financial year. In view of the covenant of the contract as well as the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be deemed to be the gross value received or receivable by a dealer for carrying out such contract, less the amount of labour charges and service charges incurred for the execution of this contract. Section 2(jj) 'Works Contract' includes any agreement for carrying out, for cash for deferred payment or other valuable consideration, the building, construction, manufacture, processing, fabrication, erection installation, fitting out, improvement, modification, repair or commissioning of any movable or immovable property. 3. According to the learned Counsel for the petitioner, in view of the aforesaid statutory provisions, the circular in Annexure-1 is not maintainable as the immovable property or the works contract is exigible to sales tax and accordingly, O.P.1 is bound to make reimbursement of the sales tax on works contract paid by the petitioner to the sales tax authority, for which the order rejecting the claim of the petitioner for reimbursement in Annexure-7 is liable to be quashed. It was further argued that the clarification made in Annexure-1 is based on misconception and is against the provisions of the Orissa Sales Tax Act. 4. On the contrary, a stand ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, the goods involved in execution of works contract, which is subject to tax, has already been paid by O.P.1 while paying the price for the contract. The contracted price was inclusive of tax. The State Counsel further submitted that the taxable turnover in relation to works contract as defined under Section 5(2)(AA)(i) of the Act shall be deemed to be the gross value received or receivable by a dealer for carrying out such contract less amount of labour charges and services charges incurred for the execution of this contract. According to Mr. Nanda, from the above it can safely be concluded that reimbursement of the tax claimed by the petitioner has already been paid to it, and therefore, there is no need of further reimbursement. 5. Learned Counsel for the State submitted that reading of the definitions 'Goods' and 'Sale' in Sub-sections (d) (g) of Section 2 of the Orissa Sales Tax Act makes it clear that there is no tax as such on works contract but it is a tax on transfer of property involved in the execution of works contract. The property in goods used in the works contract is deemed to have passed on to the contractee as soon as the goods and mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... table to supply of labour and services; (g) other similar expenses relatable to supply of labour and services; (h) profit earned by the contractor to the extent it is relatable to supply of labour and services. The amounts deductible under these heads will have to be determined in the light of the facts of a particular case on the basis of the material produced by the contractor. We may, however, make it clear that apart from the deductions referred to above, it will be necessary to exclude from the value of the works contract the value of the goods which are not taxable in view of Sections 3, 4 and 5 of the Central Sales Tax Act and goods covered by Sections 14 and 15 of the Central Sales Tax Act as well as goods which are exempt from tax under the sales tax legislation of the State. The value of goods involved in the execution of a works contract will have to be determined after making these deductions and exclusions from the value of the works contract. In the light of the aforesaid judgment, let us have a look at the provisions of Section 5(2)(AA) of the Orissa Sales Tax Act, which is as follows: 5(2)(AA) - Notwithstanding anything contained in Sub-section (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... procured by it, which have gone into for the purpose of execution of the works contract. The further admitted fact that O.Ps. 6 to 18 have, in fact, deducted the sales tax at source from the bills raised by the petitioner from time to time in due progress of the work and the same have in turn been deposited with the Sales Tax Department. 9. Before arriving at the conclusion, we may refer to the Circular dated 4th November, 1986 issued by the Irrigation and Power Department, Government of Orissa (Annexure-10 to the rejoinder affidavit filed by the petitioner) on reimbursement of sales tax on works contracts. It-is stated therein that in accordance with the Orissa Sales Tax (Amendment) Act, 1984 read with Orissa Sales Tax (Amendment) Ordinance, 1985, sales tax has become payable on the turnover of works contract with effect from 7.4.1984 and certain instructions have been given for information and guidance of all concerned, the relevant part of which is extracted hereunder: (i) In case of Works Contracts executed on or after 7.4.84 which contained specific clause for reimbursement of Sales Tax, this Department is liable to reimburse the amount of Sales Tax actually paid by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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