in the high court of karnataka at...
TRANSCRIPT
IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 10TH DAY OF DECEMBER 2013
PRESENT
THE HON’BLE MR.JUSTICE N.KUMAR
AND
THE HON’BLE MRS.JUSTICE RATHNAKALA
S.T.R.P. NOS. 209/2013 & 622-644/2013
c/w
S.T.A. NO. 95/2009
S.T.R.P. NOS.319/2012 & 565-575/2012,
S.T.R.P. NOS. 318/2012 & 472-482/2012,
S.T.R.P. NOS. 316/2012 & 128/2013,
S.T.R.P. NOS. 296 & 414/2013,
S.T.R.P. NOS. 297/2013 & 662-672/2013,
S.T.R.P. NO. 93/2009,
S.T.R.P. NOS. 3/2011 & 12-28/2011,
S.T.R.P. NOS. 9/2011 & 74-84/2011
S.T.R.P. NOS. 237/2011 & 41-51/2012
S.T.R.P. NOS. 239/2011 & 79-89/2012
S.T.R.P. NOS. 240/2011 & 68-78/2012
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S.T.R.P. NOS. 245/2011 & 177-194/2012
S.T.R.P. NOS. 269/2011 & 152-176/2012
S.T.R.P. NOS. 271/2011 & 234-243/2012
S.T.R.P. NOS. 284/2011 & 206-216/2012
S.T.R.P. NOS. 285/2011 & 195-205/2012
S.T.R.P. NO. 288/2011
S.T.R.P. NO. 289/2011
S.T.R.P. NOS. 291/2011 & 250-261/2012
S.T.R.P. NOS. 292/2011 & 228-233/2012
S.T.R.P. NOS. 293/2011 & 292-310/2012
S.T.R.P. NO. 6/2012
S.T.R.P. NOS. 18/2012 & 217-227/2012,
W.A. NO.3306/2011 & W.A. NOS.5405-5415/2011
W.A. NO.4828/2010 & W.A. NOS.5430-5494/2011 (T-KST)
W.A. NO.740/2011 & W.A. NOS.4273-4295/2011 (T-RES)
W.A. NO.3441/2011 & W.A. NOS.5394-5404/2011 (T-RES)
W.A. NOS.16364/2011 & 16910-16923/2011 (T-RES)
W.A. NO.3489/2011 & W.A. NOS.5389-5393/2011 (T-RES)
W.A. NOS.1214-1229/2012 (T-RES)
S.T.R.P. NOS. 90/2012 & 300-304/2013,
S.T.R.P. NOS. 108/2011 & 246-268/2011,
S.T.R.P. NOS. 314/2012 & 97-119/2013
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IN S.T.R.P. NOS. 209/2013 & 622-644/2013
BETWEEN: The State of Karnataka, Represented by Secretary, Finance Department, Vidhana Soudha, Bangalore – 560 001. …COMMON PETITIONER
(By Smt. S. Sujatha, AGA.)
AND: M/s. Reddy Structures Pvt. Ltd., Represented by the Manager, No.1, III Floor, Mahaveer Tower, 24th Main, J.P. Nagar, 6th Phase, Bangalore – 560 078. ...COMMON RESPONDENT
These Petitions are filed under Section 65(1) of the Karnataka Value Added Tax Act, 2003 against the judgment dated: 30.10.2012 passed in STA Nos.975/12 to 998/12 on the file of the Karnataka Appellate Tribunal, Bangalore, allowing the appeals.
IN S.T.A. NO. 95/2009
BETWEEN: M/s. Shravanthi Shelters No.1565/A, 28th Main, 30th Cross, BSK 2nd Stage, Bengalooru – 560 070. Represented by its Partner Sri.L. Balakrishnama Naidu
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S/o. Late. Sri. Gurappa Naidu Aged about 48 years. …APPELLANT
(By Sri G. Sarangan, Sr. Counsel
for Smt. Vani H., Adv.)
AND: The Sate of Karnataka, Represented by its Secretary, Department of Finance, Vidhana Soudha, Bangalore – 560 001. ...RESPONDENT
(By Smt. S. Sujatha, AGA.) This Appeal is filed under Section 66(1) KVAT Act,
against the Revision order dated: 29.06.2009 passed in No.ZAC-1/BCD-1/SMR-24/09-10, T-642/09-10, on the file of the Addl. Commissioner of Commercial Taxes, Zone-I, Bangalore, restoring the orders of Audit Authority U/S 39 (2) and setting aside the common appeal order and the proceeding drawn in consequence of appeal order by the Audit Authority including the earlier proceedings and accordingly concluding the revision proceedings. IN S.T.R.P. NOS. 319/2012 & 565-575/2012
BETWEEN: The State of Karnataka, Represented by Secretary, Finance Department, Vidhana Soudha, Bangalore – 560 001. …COMMON PETITIONER
(By Smt. S. Sujatha, AGA.)
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AND: M/s. Antony Thomas and Co., Represented by the Proprietor, No.48, Haines Road, Frazer Town, Bangalore – 560 005. ... COMMON RESPONDENT
(By Sri. G. Sarangan, Sr. Counsel for Smt. Vani H., Adv.)
These Petitions are filed under Section 65(1) of KVAT
Act, against the order dated: 22.02.2012 passed in STA Nos.2028 to 2039 of 2009 on the file of the Karnataka Appellate Tribunal, Bangalore, setting aside the Revision order and common Re-Assessment order passed by the RA in these cases for 12 tax periods from April 2006 to March 2007 which also includes levy of penalty and interest for the tax periods June 2006, September 2006, October 2006 and November 2006, remanding these cases to the PA for fresh disposal according law in the light of the observations contained in this order. IN S.T.R.P. NOS. 318/2012 & 472-482/2012
BETWEEN: The Sate of Karnataka, Represented by its Secretary, Finance Department, Vidhana Soudha, Bangalore – 560 001. …COMMON PETITIONER
(By Smt. Sujatha, AGA.)
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AND: T.R. Rajan, No.498/1, 40th Cross, 8th Block, Jayanagar, Bangalore – 560 082. ... COMMON RESPONDENT
(Notice Served.) These Petitions are filed under Section 65(1) of the
Karnataka Value Added Tax Act, 2003, against the Judgment dated 28.09.2011 passed in STA Nos.1196/2008 to 1207/2008 on the file of the Karnataka Appellate Tribunal, Bangalore, allowing the appeals filed Under Sec.63 of Karnataka Value Added Tax Act 2003.
IN S.T.R.P. NOS. 316/2012 & 128/2013
BETWEEN: The State of Karnataka, Represented by Secretary, Finance Department, Vidhana Soudha, Bangalore – 560 001. …COMMON PETITIONER
(By Smt. S. Sujatha, AGA.)
AND: M/s. Prism Properties, Represented by its Partner, No.194, Akruti Chambers, 3rd Floor, Double Road, Indiranagar, Bangalore – 560 038. ... COMMON RESPONDENT
(By Sri. G.K.V. Murthy, Adv.)
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These Petitions are filed under Section 65(1) of KVAT Act, against the judgment dated: 20.09.2011 passed in STA Nos.606 and 607/2008 on the file of the Karnataka Appellate Tribunal, Bangalore, allowing the appeals.
IN S.T.R.P. NOS. 296 & 414/2013
BETWEEN: The State of Karnataka, Represented by its, Secretary to Government, Department of Finance, Bangalore – 560 001. …COMMON PETITIONER
(By Smt. S. Sujatha, AGA.)
AND: M/s. Afcons Infrastructure Limited, Represented by the Dealer, Thannirbavi, Penambur, Mangalore. ... COMMON RESPONDENT
These Petitions are filed under Section 65(1) of KVAT Act, 2003 against the order dated 28.1.2013 passed in STA Nos.1052 and 1053/2009 on the file of Karnataka Appellate Tribunal, Bangalore, partly allowing the appeals filed U/s 63(1) of Karnataka Value Added Tax Act, 2003 challenging the appeal orders bearing No.KVAT.AP.163/2006-07 and KVAT.AP.238/2007-08.
IN S.T.R.P. NOS. 297/2013 & 662-672/2013
BETWEEN: The State of Karnataka, Represented by Secretary, Finance Department,
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Vidhana Soudha, Bangalore – 560 001. …COMMON PETITIONER
(By Smt. S. Sujatha, AGA.)
AND: M/s. Afcons Infrastructure Limited, Represented by the General Manager, Thannirbavi, Panambur, Mangalore. …COMMON RESPONDENT
These Petitions are filed under Section 65(1) of KVAT Act, 2003, against the order dated 28.1.2013 passed in STA Nos.910 to 921/2011 on the file of Karnataka Appellate Tribunal, Bangalore, partly allowing the appeals filed U/s 63(1) of Karnataka Value Added Tax Act, 2003 challenging the common appeal order bearing No.KVAT.AP.100/10-11 dt. 6.12.2010.
IN S.T.R.P. NO. 93/2009
BETWEEN: State of Karnataka, By the Commissioner of Commercial Taxes Vanijya Therige Karyalaya Gandhinagar Bangalore – 560 009. …PETITIONER
(By Smt. S. Sujatha, AGA.)
AND: M/s. B.E. Billimoria & co. Ltd Shivakrupa 1 Floor, Plot No.56 1 cross, IV Main, Domlur II Stage,
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Indiranagar, Bangalore – 560 071. ...RESPONDENT
(By Sri. T.N. Keshava Murthy, Adv.)
These Petitions are filed under Section 65(1) of Karnataka Value Added Tax Act, against the judgment and order dated: 13.11.2008 passed in STA Nos.274 to 283/2008 on the file of the Karnataka Appellate Tribunal, Bangalore, allowing the appeals filed under Sec. 63 of Karnataka Value Added Tax Act, 2003.
IN S.T.R.P. NOS. 3/2011 & 12-28/2011
BETWEEN: State of Karnataka rep. by the Commissioner of Commercial Taxes, Vanijya Therige Karyalaya, Gandhinagar, Bangalore – 1. …COMMON PETITIONER
(By Smt. S. Sujatha, AGA.)
AND: M/s. Beary’s Construction Company, No.21, Wood Street, Bangalore – 560 023. ...COMMON RESPONDENT
(By Sri. P.B. Appaiah, Adv.)
These Petitions are filed under Section 65(1) of KVAT Act, against the judgment dated: 18.10.2010 passed in STA Nos.6 to 23/2010 on the file of the Karnataka Appellate Tribunal, Bangalore, allowing the appeals filed under the provisions of the Karnataka Value Added Tax Act, 2003.
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IN S.T.R.P. NOS. 9/2011 & 74-84/2011
BETWEEN: The State of Karnataka Represented by the Commissioner of Commercial Taxes, Vanijya Therige Karyalaya, Gandhinagar, Bangalore – 1. …COMMON PETITIONER
(By Smt. S. Sujatha, AGA.) AND: M/s. JMC Projects (India) Ltd., Gold Tower, No.50, 2nd Floor, Residency Road, Bangalore – 560 025. ...COMMON RESPONDENT
(By Sri. Madhusudan R. Naik, Sr. Counsel for M/s. Naik & Naik Law Firm, Adv.)
These Petitions are filed under Section 65(1) of KVAT
Act, against the judgment dated: 18.10.2010 passed in STA Nos.728 to 739/2010 on the file of the Karnataka Appellate Tribunal, Bangalore, partly allowing the appeals filed under the provisions of the Karnataka Value Added Tax Act, 2003. IN S.T.R.P. NOS. 237/2011 AND 41-51/2012
BETWEEN: The State of Karnataka By its Secretary Finance Department Vidhana Soudha Bangalore – 560 001. …COMMON PETITIONER
11
(By Smt. S. Sujatha, AGA.)
AND: M/s. B.K.N. Developers No.1565/B, 30th Cross, 28th Main, Banashankari 2nd Stage, Bangalore – 560 050. ...COMMON RESPONDENT
(By Sri. G. Sarangan, Sr. Counsel for Smt. Vani H., Adv.)
These Petitions are filed under Section 65(1) of
Karnataka Value Added Tax Act, 2003, against the judgment dated: 18.04.2011 passed in STA Nos.354 to 365/2008 on the file of the Karnataka Appellate Tribunal, Bangalore, allowing the appeals.
IN S.T.R.P. NOS. 239/2011 & 79-89/2012
BETWEEN: The State of Karnataka Represented by the Secretary Finance Department Vidhana Soudha Bangalore – 560 001. …COMMON PETITIONER
(By Smt. S. Sujatha, AGA.)
AND: M/s. Shravanti Shelters No.1565/A, 30th Cross, 28th Main, Banashankari II Stage Bangalore – 560 070. ... COMMON RESPONDENT
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(By Sri. G. Sarangan, Sr. Counsel for Smt. Vani H., Adv.)
These Petitions are filed under Section 65(1) of KVAT
Act, against the judgment dated: 18.04.2011 passed in STA Nos.342-353/2008 on the file of the Karnataka Appellate Tribunal, Bangalore, allowing the appeals.
IN S.T.R.P. NOS. 240/2011 & 68-78/2012
BETWEEN: The State of Karnataka, Represented by the Secretary, Finance Department, Vidhana Soudha, Bangalore – 560 001. …COMMON PETITIONER
(By Smt. S. Sujatha, AGA.)
AND: M/s. Gopalan Enterprises (India) Private Limited, No.5, Richmond Road, Bangalore – 560 025. ... COMMON RESPONDENT
(By Sri. K.P. Kumar, Sr. Counsel for M/s. King & Partridge, Adv.)
These Petitions are filed under Section 65(1) of KVAT
Act, against the judgment dated: 24.06.2011 passed in STA Nos.1295 to 1306/2008 on the file of the Karnataka Appellate Tribunal, Bangalore, partly allowing the appeals.
13
IN S.T.R.P. NOS. 245/2011 & 177-194/2012
BETWEEN: The State of Karnataka, Represented by the Secretary, Finance Department, Vidhana Soudha, Bangalore – 560 001. …COMMON PETITIONER
(By Smt. S. Sujatha, AGA.)
AND: M/s. Shubham Developers, DSR Diya Arcade, #220, 1st Floor, 9th Main, Next to Maxwell Public School, HRBR Layout, I Block, Kalyannagar, Bangalore – 560 043. ... COMMON RESPONDENT
(Notice Served.)
These Petitions are filed under Section 65(1) of KVAT Act, against the judgment dated: 28.02.2011 passed in STA Nos.2268 to 2274/2009 and 2275 to 2286/2009 on the file of the Karnataka Appellate Tribunal, Bangalore, allowing the appeals filed u/Sec.63 of KST Act. IN S.T.R.P. NOS. 269/2011 & 152-176/2012
BETWEEN: The State of Karnataka, Represented by the Secretary, Finance Department, Vidhana Soudha, Bangalore – 560 001. …COMMON PETITIONER
14
(By Smt. S. Sujatha, AGA.)
AND: M/s. ACE Building Constructions, No. 401, A Wing, 4th Floor, Carlton Towers, #1, Airport Road, Bangalore – 560 008. ... COMMON RESPONDENT
(By Sri. E.R. Indrakumar, Sr. Counsel for Sri. E.I. Sanmathi, Adv.)
These Petitions are filed under Section 65(1) of
Karnataka value Added Tax Act, 2003, against the judgment dated: 21.06.2011 passed in STA Nos.2555 to 2580/2010 on the file of the KAT and allowing the appeals.
IN S.T.R.P. NOS. 271/2011 & 234-243/2012
BETWEEN: The State of Karnataka, Represented by the Secretary, Finance Department, Vidhana Soudha, Bangalore – 560 001. …COMMON PETITIONER
(By Smt. S. Sujatha, AGA.)
AND: M/s. Neeladri Smart Homes Pvt. Ltd. No.1299C, 1st Main, 1st Cross, New Thippasandra,
15
HAL Post, Bangalore – 560 075. ... COMMON RESPONDENT
(By Sri. E.R. Indrakumar, Sr. Counsel for Sri. E.I. Sanmathi, Adv.)
These Petitions are filed under Section 65(1) of KVAT
Act, against the judgment dated: 31.05.2011 passed in STA Nos.1591 to 1594/2008 & 212 to 218/2009 on the file of the Karnataka Appellate Tribunal, Bangalore, allowing the appeal setting aside the order dated:01.09.2008, passed by the Joint commissioner of Commercial Taxes (Appeals)-3, Bangalore, upholding levy of 12.5% Tax on declared goods followed by penalty and interest and accordingly revised demand notices shall be issued.
IN S.T.R.P. NOS. 284/2011 & 206-216/2012
BETWEEN: The State of Karnataka, Represented by the Commissioner of Commercial Taxes, Vanijya Therige Karyalaya, Gandhinagar, Bangalore – 560 009. …COMMON PETITIONER
(By Smt. S. Sujatha, AGA.)
AND: M/s. Abraham & Thomas Engineering Pvt. Ltd., Represented by its Director, No.48, Haines Road,
16
Frazer Town, Bangalore – 560 005. ... COMMON RESPONDENT
(By Sri. G. Sarangan, Sr. Counsel for Smt. Vani H., Adv.)
These Petitions are filed under Section 65(1) of KVAT
Act, against the judgment dated: 31.01.2011 passed in STA Nos.705 to 716/2008 on the file of the Karnataka Appellate Tribunal, Bangalore, allowing the appeals.
IN S.T.R.P. NOS. 285/2011 & 195-205/2012
BETWEEN: The State of Karnataka, Represented by the Secretary, Finance Department, Vidhana Soudha, Bangalore – 560 001. …COMMON PETITIONER
(By Smt. S. Sujatha, AGA.)
AND: M/s. Vishnu Priya Builders, No.609, Laxmi Chambers, 1st Main, ‘C’ Block, AECS Layout, ITPL Main Road, Opp. Brook Fields, Kundalahalli, Bangalore – 560 037. ... COMMON RESPONDENT
(By Sri. G. Sarangan, Sr. Counsel for Smt. Vani H., Adv.)
These Petitions are filed under Section 65(1) of KVAT
Act, against the judgment dated: 18.04.2011 passed in STA
17
Nos.836-847/2008 on the file of the Karnataka Appellate Tribunal, Bangalore, allowing the appeals.
IN S.T.R.P. NO. 288/2011
BETWEEN: State of Karnataka, Represented by the Secretary, Department of Finance, Vidhana Soudha, Bangalore – 560 001. …PETITIONER
(By Smt. S. Sujatha, AGA.)
AND: M/s. Lakshmi Venkateshwara Constructions, Represented by Sri S.N. Nagesh(Proprietor) No.277, Ashoka Pillar Road, Jayanagar, Bangalore – 560 011. ... RESPONDENT
(By Sri. T.N. Keshava Murthy, Adv.) This STRP is filed under Section 23(1) of KST Act,
against the judgment dated:20.01.2011 passed in STA No.469/2010 on the file of the Karnataka Appellate Tribunal, Bangalore, partly allowing the appeal.
IN S.T.R.P. NO. 289/2011
BETWEEN: State of Karnataka, Represented by the Secretary,
18
Department of Finance, Vidhana Soudha, Bangalore – 560 001. …PETITIONER
(By Smt. S. Sujatha, AGA.)
AND: M/s. Sri Lakshmi Venkateshwara Constructions, Represented by Sri S.N. Nagesh No.277, Ashoka Pillar Road, 2nd Block, Jayanagar, Bangalore – 560 011. ... RESPONDENT
(By Sri. T.N. Keshava Murthy, Adv.) This STRP is filed under Section 23(1) of KST Act,
against the judgment dated:20.01.2011 passed in STA. No.1050/2008 on the file of the Karnataka Appellate Tribunal, Bangalore, partly allowing the appeal.
IN S.T.R.P. NOS. 291/2011 & 250-261/2012
BETWEEN: State of Karnataka by the Secretary to Govt., Finance Department, Vidhana Soudha, Bangalore. …COMMON PETITIONER
(By Smt. S. Sujatha, AGA.)
19
AND: M/s. DSR Constructions, No.170, 2nd Phase, Koramangala, Bangalore – 560 034. ...COMMON RESPONDENT
(Notice Served.) These Petitions are filed under Sec.65(1) of KVAT Act,
against the judgment dated: 29.03.2011 passed in STA. Nos.1538-1550/2008 on the file of the Karnataka Appellate Tribunal, Bangalore, allowing the appeals.
IN S.T.R.P. NOS. 292/2011 & 228-233/2012
BETWEEN: The State of Karnataka Represented by the Secretary, Finance Department, Vidhana Soudha, Bangalore-560 001. …COMMON PETITIONER
(By Smt. S. Sujatha, AGA.)
AND: M/s. Sankalp Constructions Private Limited, Represented by M.C. Jayasimha – Authorised Representative No.650-C, 11th Cross, 7th Block, Jayanagar,Bangalore. ... COMMON RESPONDENT
(By Sri K.J. Kamath, Adv for M/s. Kamath & kamath.)
20
These Petitions are filed under Sec.65(1) of KVAT Act, against the orders dated:20.01.2011 passed in STA. Nos.534 to 540/2007 on the file of the Karnataka Appellate Tribunal, Bangalore, allowing the appeals.
IN S.T.R.P. NOS. 293/2011 & 292-310/2012
BETWEEN: State of Karnataka By the Secretary, Department of Finance, Vidhana Soudha, Bangalore - 560 001. …COMMON PETITIONER
(By Smt. S. Sujatha, AGA.)
AND: M/s. Nova Hamlet Limited, No.59, 4th Main, 18th Cross, Malleshwaram, Bangalore – 560 055. ...COMMON RESPONDENT
(By Sri B.R. Krishna, Adv. for Sri. Jayanth Pattanshetti Associates.)
These Petitions are filed under Sec.65(1) of KVAT Act,
against the judgment dated:28.07.2011 passed in STA. Nos.687-706/2011 on the file of the Karnataka Appellate Tribunal, Bangalore, allowing the appeal.
IN S.T.R.P. NO. 6/2012
BETWEEN: The State of Karnataka, Represented by the Commissioner
21
of Commercial Taxes, Vanijya Therige Karyalaya, Gandhinagar, Bangalore – 560 009. …PETITIONER
(By Smt. S. Sujatha, AGA.)
AND: M/s. U.P. Stage Bridge Corporation Ltd., BDA Park, HAL 2nd Stage, Indiranagar, Bangalore – 560 038. ... RESPONDENT
(By Sri. B. Somaskanda, Adv.) This STRP is filed under Section 23(1) of KST Act,
against the judgment dated: 10.01.2011 passed in STA. No.1787/2009 on the file of the Karnataka Appellate Tribunal, Bangalore, allowing the appeal.
IN S.T.R.P. NOS. 18/2012 & 217-227/2012
BETWEEN: State of Karnataka By its Secretary, Finance Department, Vidhana Soudha, Bangalore - 560 001. …COMMON PETITIONER
(By Smt. S. Sujatha, AGA.)
AND: M/s. Gopalan Homes, No.5, Richmond Road, Bangalore – 560 025. ... COMMON RESPONDENT
(By Sri K.P. Kumar, Sr. Counsel for M/s. King & Partridge, Adv.)
22
These Petitions are filed U/s 65(1) of Karnataka Value
Added Tax Act, 2003 against the judgment dated: 04.08.2011 passed in STA.Nos.699 to 710/2009 on the file of the Karnataka Appellate Tribunal, Bangalore, allowing the appeal.
IN W.A. NOS. 3306/2011 & 5405-5415/2011
BETWEEN: 1. State of Karnataka
By its Secretary, Department of Finance, Vidhana Soudha, Bangalore – 560 001.
2. The Assistant Commissioner of Commercial Taxes (Audit) – 51,
DVO-5, Abhaya Complex, Bangalore – 560 020. …COMMON APPELLANTS
(By Smt. S. Sujatha, AGA.)
AND: M/s. Simplex Infrastructure Ltd., No.73/1, The Arcade, 3rd Floor, Garudacharya Palya, Mahadevpura Post, Bangalore – 560 048. (Represented by its Deputy General Manager Mr. Sandip Bavan Das Aged 53 years. ... COMMON RESPONDENT
(By Sri Vikram A. Huilgol, Adv.)
23
These Appeals are filed U/S 4 of the Karnataka High Court Act Praying to set aside the order passed in the Writ Petition Nos.22745-22756/2010(T-RES) dated 02/08/2010.
IN W.A.NOS.4828/2010 & 5430 To 5494/2011(T-KST)
BETWEEN: IN W.A.NOS.4828/2010 & 5430/2011(T-KST)
1. State of Karnataka
By its Principal Secretary, Department of Finance, Vidhana Soudha, Bangalore.
2. Joint Commissioner of Commercial Taxes (Admn),
Vat Division I, 7th Floor, VTK Building, Gandhi Nagar, Bangalore – 560 009.
3. Deputy Commissioner of Commercial Taxes, (Audit)-13, Vat Division I, 7th Floor VTK Building, Gandhi Nagar, Bangalore – 560 009. …APPELLANTS
(By Smt. S. Sujatha, AGA.)
AND: 1. M/s. Nagarjuna Construction Company Limited.
# 301 Batavia Chambers, No.8, Kumara-Krupa Road, Kumara Park East, Bangalore – 560 001 Represented by its Senior Vice President,
24
Sri C. Premachander Reddy, S/o Sri C. Varadha Reddy, Aged about 48 year, R/O No.301, Batavia Chambers, 8, Kumara-Krupa Road, Kumara Park East, Bangalore – 560 001
2. Sri A G Ravi S/O Sri A P Gangadharaiah Aged About 41 years
R/O No.301, Batavia Chambers, 8, Kumara-Krupa Road, Kumara Park East, Bangalore – 560 001 ...RESPONDENTS
IN W.A. NO. 5431/2011(T-KST)
BETWEEN: 1. State of Karnataka
By its Principal Secretary, Department of Finance, Vidhana Soudha, Bangalore.
2. The Commissioner of Commercial Taxes
VTK Building, Gandhi Nagar, Bangalore – 560 009.
3. The Assistant Commissioner of Commercial Taxes, (Audit)-52, DVO-5 Bangalore – 560 009. …APPELLANTS
(By Smt. S. Sujatha, AGA.)
25
AND: 3. M/s. Jampana Constructions Private Limited.
Registered office No.389/1, 1st Floor, Judges Colony, R T Nagar, Bangalore – 560 032 Represented by its Director, J Venugopal Krishnam Raju, S/o Sri J. Sathyanarayana Raja, Aged 41 years, R/O No.1390, 8th Cross, 10th Main, Judicial Layout, G.K.V.K. Post, Bangalore – 560 065.
4. Sri J. Srinivasa Raju S/O Sri J. Satyanarayana Raju,
R/o No.981/D, 14th Main, Judicial Layout, G.K.V.K. Post, Bangalore – 560 065. ...RESPONDENTS
IN W.A. NOS.5432-5435/2011(T-KST) BETWEEN: 1. State of Karnataka
by its Principal Secretary, Department of Finance, Vidhana Soudha, Bangalore.
2. The Assistant Commissioner of
Commercial Taxes (Audit) 21, DVO-II, Jeevan Sampige, 2nd Floor, LIC Building, Near Sampige Theatre,
26
Malleswaram, Bangalore – 560 003.
3. The Deputy Commissioner of Commercial Taxes, (Audit) – 13, VAT Division-I, 7th Floor, VTK Building, Gandhinagar, Bangalore – 560 009. 4. The Commissioner of Commercial Taxes, Karnataka State Bangalore …COMMON APPELLANTS
(By Smt. S. Sujatha, AGA.)
AND: 5. M/s. Shri Aruna Constructions Private Limited,
#323, Sri Ranga Nilaya, 2nd Floor, 1st Cross, 3rd main, R.T. Nagar, Bangalore – 560 032 Represented by its Director, Sri. J. Rama Raju, S/O J. Sathyanarayana Raju, Aged About 48 Years, R/O No.981/D, 14th Main, Judicial Layout, G.K.V.K. Post, Bangalore – 560 065.
6. Sri J. Ram Babu
S/O J. Arjun Raju Aged About 38 Years, R/O No.1174, 10th “B” Cross Near New Town Public School, Yelahanka New Town, Bangalore – 560 064. ...COMMON RESPONDENTS
27
IN W.A. NOS.5436-5447/2011(T-RES)
BETWEEN: 1. The Commercial Tax Officer,
Audit-22, Dvo-2, II Floor, LIC Building, Sampige Road, Malleswaram, Bangalore – 560 003.
2. The State of Karnataka
Represented by the Principal Secretary to Government, Finance Department , Vidhana Soudha, Bangalore – 560 001. …COMMON APPELLANTS
(By Smt. S. Sujatha, AGA.)
AND: 7. M/s. Mfar Constructions Private Limited,
No.8 & 8A, A V S Compound, 80 Feet Road, Koramangala Bangalore – 560 034. Represented by its Chief Executive Officer, Sri B K Dhar, S/O Sri. J.L. Dhar, Aged About 58 Years. ...COMMON RESPONDENT
IN W.A. NOS.5448-5454/2011 (T-KST)
BETWEEN: 1. The Commercial Tax Officer,
(Intelligence)-XV, South Zone VTK – II, 6th Floor, 80 Feet Road,
28
Viveknagar Post, Koramangala, Bangalore – 560 047.
2. State of Karnataka
Represented by the Principal Secretary to Government Finance Department , Vidhana Soudha, Bangalore – 560 001. …COMMON APPELLANTS
(By Smt. S. Sujatha, AGA.)
AND: 8. M/s. UE Development India Private Limited,
60, Wellington Road, Richmond Town, Bangalore – 560 025 (By Mr. Yam Keong Chee, 48 Years) ...COMMON RESPONDENT
IN W.A. NOS. 5455-5466/2011 (T-KST) BETWEEN: 1. The Commissioner of Commercial Taxes,
Vanijya Therige Karyalaya, 1st Main Road, Gandhinagar, Bangalore – 560 009.
2. The Deputy Commissioner of
Commercial Taxes (Audit-41), Dvo-4, Vanijya Therige Karyalaya, Koramangala, Bangalore. …COMMON APPELLANTS
29
(By Smt. S. Sujatha, AGA.)
AND: 9. M/s. Senthuran Construction Company,
No.606, 3rd Floor, 80 Feet Road, 6th Block, Koramangala, Bangalore – 560 095. Represented by its Proprietor, Mr. J. Chandrashekar. ...COMMON RESPONDENT
IN W.A. NOS. 5467-5478/2011 (T-KST)
BETWEEN: 1. The Commissioner of Commercial Taxes,
Vanijya Therige Karyalaya, 1st Main Road, Gandhinagar, Bangalore – 560 009.
2. The Deputy Commissioner of
Commercial Taxes (Audit-41), Dvo-4, Vanijya Therige Karyalaya, Koramangala, Bangalore. …COMMON APPELLANTS
(By Smt. S. Sujatha, AGA.)
AND: 10. M/s. Senthuran Construction Company,
No.606, 3rd Floor, 80 Feet Road, 6th Block, Koramangala,
30
Bangalore – 560 095. Represented by its Proprietor, Mr. J. Chandrashekar. ...COMMON RESPONDENT
IN W.A. NOS. 5479-5490/2011 (T-KST)
BETWEEN: 1. The Commissioner of Commercial Taxes,
Vanijya Therige Karyalaya, 1st Main Road, Gandhinagar, Bangalore – 560 009.
2. The Deputy Commissioner of
Commercial Taxes (Audit-41), Dvo-4, Vanijya Therige Karyalaya, Koramangala, Bangalore. …COMMON APPELLANTS
(By Smt. S. Sujatha, AGA.)
AND: 11. M/s. Senthuran Construction Company,
No.606, 3rd Floor, 80 Feet Road, 6th Block, Koramangala, Bangalore – 560 095. Represented by its Proprietor, Mr. J. Chandrashekar. ...COMMON RESPONDENT
IN W.A. NO. 5491/2011(T-KST)
BETWEEN: 1. State of Karnataka
Represented by the Principal Secretary
31
Department of Finance , Vidhana Soudha, Bangalore – 560 001.
2. The Commercial Tax Officer, (Enf)-10, South Zone, Bangalore.
3. The Additional Commissioner of
Commercial Taxes, (Enforcement)-South Zone, VTK-2, 80 Feet Road, Koramangala, Bangalore – 560 047.
2. The Commissioner of Commercial Taxes
Karnataka State, Bangalore. …APPELLANTS
(By Smt. S. Sujatha, AGA.)
AND: 12. M/s. JMC Projects (India) Limited
A-104, Shapath-4, Opp Karnavati Club: SG Road, Ahmedabad-380 051 And with its Local Office at Gold Towers: # 50, 2nd Floor, Residency Road, Bangalore – 560 002. Represented by its Authorised Signatory Assistant Vice President (Finance), Chinnubai Parikh, Aged About 53 Years, R/O Ahamedabad. .
13. Sri Nithin C Parikh, S/O Chinnubai Parikh,
32
Aged About 53 Years, R/O Ahamedabad ...RESPONDENTS
IN W.A. NOS. 5492-5494/2011 (T-KST)
BETWEEN: 1. The Commercial Tax Officer,
(Enforcement - II), Maidan Road, Mangalore – 575 001.
2. The Commissioner of
Commercial Taxes, Gandhinagar, Bangalore – 560 009.
3. The State of Karnataka
Represented by its Principal Secretary to Government, Finance Dept., Vidhana Soudha, Bangalore – 560 001 …COMMON APPELLANTS
(By Smt. S. Sujatha, AGA.)
AND: 14. M/s. G.R. Engineering Private Limited,
M.R.P.L. Premises Katipalla, Mangalore – 575 030. (By S.G. Shinde, aged 58 years Deputy General Manger Project Accounts). ...COMMON RESPONDENT
(By Sri Y.S. Krishnamurthy, Adv., for R1 to 5;
Smt. Vani H, Adv., for R7; Sri T.N. Keshava Murthy, Adv. for R8 & 14; Sri G.Sarangan, Sr. Counsel, for Sri K.S.
33
Ramabhadran, Adv., for R9-11, Sri Madhusudan R. Naik, Sr. Counsel, for M/s. Naik & Naik Law Firm, Adv. for R12, ;
R6, R13 notice served.)
These Writ Appeal Nos.4828/2010 & 5430-5494/2011 are filed U/S 4 of the Karnataka High Court Act Praying to set aside the order passed in the Writ Petition Nos.29932-933/2009 C/W W.P.No.394/2010, 452/2010, 37800/2009, 37928-928/2009, 62/2008, 15683-694/2010, 15695-706/2010, 15707-718/2010, 11676/2010 and 29046-048/2009 dated 30/06/2010.
IN W.A. NOS. 740/2011 & 4273-95/2011 (T-RES)
BETWEEN: 1. State of Karnataka
By its Principal Secretary, Department of Finance, Vidhana Soudha, Bangalore.
2. The Assistant Commissioner of Commercial Taxes (Audit) – 16,
DVO-1, Sheshadripuram, Bangalore – 560 020.
3. Joint Commissioner of Commercial Taxes,
(Admn.), DVO-1, 7th Floor, VTK Building, Gandhi Nagar, Bangalore-560 009. …COMMON APPELLANTS
(By Smt. S. Sujatha, AGA.)
AND: M/s. Sarvashree Engineers & Contractors, # 10/1, 5th Cross,
34
Hotel Santhosh Complex, Gandhinagar, Bangalore – 560 009 by its Partner S.H. Siddappa ... COMMON RESPONDENT
(By Sri Atul K. Alur, Adv. for R1; R2 – Served.)
IN W.A. NOS.4285-95/2011 (T-RES)
BETWEEN: 1. State of Karnataka
By its Principal Secretary, Department of Finance, Vidhana Soudha, Bangalore.
2. The Deputy Commissioner of Commercial Taxes (T.P)–I,
Mysore. 3. The Joint Commissioner of Commercial
Taxes (Appeals), Mysore Division, Mysore. …COMMON APPELLANTS
(By Smt. S. Sujatha, AGA.) AND: M/s. P.G. Shetty Construction Technology Pvt. Ltd., Represented by its Managing Director, Sri. Somashekhar, Aged about 48 years, No.1056, Kavitha Vilas, M.G. Road, Chamarajpurm, Mysore. ... COMMON RESPONDENT
35
(By Sri Atul K. Alur, Adv. for R1; R2 – Served.) These Writ Appeal Nos. 740/2011 & 4273-95/2011
are filed U/S 4 of the Karnataka High Court Act Praying to set aside the order passed in the Writ Petition No.39590-39601/2010 C/W WP.40560 to 40571/2010(Tax) dated 10/01/2011.
IN W.A. NOS. 3441/2011& 5394-5404/2011 (T-RES)
BETWEEN: 1. State of Karnataka
By its Finance Secretary, Vidhana Soudha, Bangalore – 560 001.
2. The Deputy Commissioner of Commercial Taxes (Audit) – 52,
DVO-5, 2nd Floor, Abhaya Complex, Seshadripuram, Bangalore – 560 020. …COMMON APPELLANTS
(By Smt. S. Sujatha, AGA.)
AND: M/s. Navayuga Engineering Company Ltd. Crescent Heights, Flat No.2, Snehanagar, Amruthahalli Main Road, Bangalore – 560 092. (Represented by its Manager Mr. M.K.V. Prasad Rao, Aged 42 years) ... COMMON RESPONDENT
(By Sri A. Shankar & Sri M. Lava, Advs.)
36
These Writ Appeals are filed U/S 4 of the Karnataka
High Court Act Praying to set aside the order passed in the Writ Petition Nos.33313-33324/2010(T-RES) dated 26/10/2010.
IN W.A.NOS.16364/2011 & 16910-16923/2011(T-RES) BETWEEN: The Assistant Commissioner of Commercial Taxes, Audit 36, Gandhinagar, Bangalore – 560 009. …COMMON APPELLANTS
(By Smt. S. Sujatha, AGA.)
AND: M/s. Shuddha Developers No.45, 19th Main, B.T.M II Stage, Bangalore – 560 076. Represented by A. yoganarashimha Managing Patner. ... COMMON RESPONDENT
(By Sri C.S. Surya Kanth, Adv.) These Writ Appeals are filed U/S 4 of the Karnataka
High Court Act Praying to set aside the order passed in the Writ Petition Nos.9052-9065/2010 and WP No.9066/2011 (T-RES) dated 07/03/2011.
37
IN W.A. NOS. 3489/2011 & 5389-5393/2011 (T-RES)
BETWEEN: 1. State of Karnataka
By its Secretary Department of Finance Vidhana Soudha, Bangalore – 560 001.
2. The Deputy Commissioner of
Commercial Taxes (Audit) – 52, DVO-5, 2nd Floor, Abhaya Complex, Seshadripuram, Bangalore – 560 020. …COMMON APPELLANTS
(By Smt. S. Sujatha, AGA.)
AND: M/s. Shobha Developers Ltd. No.E-106, Sunrise Chambers No.22, Ulsoor Road, Bangalore – 560 042 Represented by its Senior Manager Finance Sri M. Radhakrishnan. ... COMMON RESPONDENT
(By Sri Atul K. Alur, Adv.) These Writ Appeals are filed U/S 4 of the Karnataka
High Court Act Praying to set aside the order passed in the Writ Petition Nos.37515-520/2010(T-RES) dated 03/12/2010.
38
IN W.A. NOS. 1214-1229/2012(T-RES)
BETWEEN: M/s. Indu Projects Limited No.1D, C-201, RMR Sunshine, East of NGEF, 2nd Main Road, Kasturi Nagar, Bangalore – 560 043. (Now Represented by its Sri Srinivas Australaya.) …COMMON APPELLANTS
(By Sri Atul K. Alur, Adv.)
AND: 1. State of Karnataka
Represented by its Finance Secretary, Vidhana Soudha, Bangalore – 560 001.
2. The Deputy Commissioner of
Commercial Taxes, (Audit) – 52, VAT Divisions I, 7th Floor, VTK Building, Gandhinagar, Bangalore – 560 009.
3. The Joint Commissioner of Commercial Taxes, (Admn) DVO I, Vanijya Terige Karyalaya, Gandhinagar, 1st Main,
Bangalore-560 009. ... COMMON RESPONDENTS
(By Smt. Sujatha, AGA.) These Writ Appeals are filed U/S 4 of the Karnataka
High Court Act Praying to set aside the order passed in the
39
Writ Petition Nos.2580-2595/2011(T-RES) dated 18/01/2011 & 15/02/2012. IN S.T.R.P. NOS. 90/2012 & 300-304/2013
BETWEEN: The State of Karnataka Represented by the Secretary, Finance Department, Vidhana Soudha, Bangalore - 560 001. …COMMON PETITIONER
(By Smt. S. Sujatha, AGA.)
AND: M/s. Anand Contractor, No.57, Shri ManjunathSwamy Krupa, 3rd Main, LIC Colony, Srirampuram, II Phase, MYSORE – 570 009.. ...COMMON RESPONDENT
These Petitions are filed under Sec.65(1) of KVAT Act 1957 against the order dated:10.11.2011 passed in STA. Nos.1252/2008 to 1259/2008 on the file of the Karnataka Appellate Tribunal, Bangalore, allowing the appeals.
IN S.T.R.P. NOS. 108/2011 & 246-268/2011 BETWEEN: The State of Karnataka Represented by the Commissioner of Commercial Taxes, Vanijya Therige karyalaya,
40
Gandhinagar, Bangalore - 560 009. …COMMON PETITIONER
(By Smt. S. Sujatha, AGA.)
AND: M/s. JMC Projects Limited, No.50, Gold Tower, 3rd Floor, Residency Road, Bangalore – 560 025. ...COMMON RESPONDENT
(By Sri Madhusudhan R. Naik, Sr. Counsel for M/s. Naik & Naik Law Firm, Adv.)
These Petitions are filed under Sec.65(1) of KVAT Act,
against the judgment dated:25.01.2011 passed in STA. Nos.2288-2311/2009 on the file of the Karnataka Appellate Tribunal, Bangalore, allowing the appeal. IN S.T.R.P. NOS. 314/2012 & 97-119/2013
BETWEEN: The State of Karnataka Represented by the Secretary, Finance Department Vidhana Soudha, Bangalore - 560 001. …COMMON PETITIONER
(By Smt. S. Sujatha, AGA.)
AND: M/s. Senthuran Construction Co., No.606, 80 Feet Road,
41
8th Block, Koramangala, Bangalore – 560 095. ...COMMON RESPONDENT
(By G. Sarangan, Sr. Counsel for Sri K.S. Ramabadran, Adv.)
These Petitions are filed under Sec.65(1) of Karnataka
Value Added Tax Act, 2003, against the order dated:30.09.2011 passed in STA. Nos.1536 to 1559/2009 on the file of the Karnataka Appellate Tribunal, Bangalore, allowing the appeals.
These Sales Tax Revision Petitions, Sales Tax Appeal
& Writ Appeals coming on for Admission this day, N.KUMAR J., delivered the following:
J U D G M E N T
As common question of law is involved in all these
batch of cases, they are clubbed together and decided by this
common order. However, for the purpose of clarity, the facts
in W.P.Nos. 29932-33/2009 and W.P. Nos.29046-48 of 2009
are set out hereunder.
FACTS IN W.P.Nos.29932-33/2009
2. The petitioner – M/s. Nagarjuna Construction
Company Limited is a Public Limited Company. It is
engaged in undertaking of turnkey projects and other works
42
contracts for governmental authorities or other private
bodies/parties. It is regularly assessed to tax, previously
under the Karnataka Sales Tax Act (hereinafter for short
referred to as ‘the KST Act’) and now under the provisions of
the Karnataka Value Added Tax Act, 2003 (hereinafter for
short referred to as ‘the KVAT Act’). Its registered number is
TIN: 29210136424. The petitioner has filed its returns in
Form VAT 100 and he has assessed to tax under the
provisions of Section 39(1) of the KVAT Act, 2003 for the
period April 2006 to December 2007 by the Deputy
Commissioner of Commercial Taxes. Accordingly, they have
paid taxes also.
3. A show cause notice under the provisions of
Section 63-A of KVAT Act, 2003 came to be issued on
30.08.2002 to revise the order of assessment. In the notice
it is stated that they have offered for taxes at the rate of 4%
on turnover of iron and steel, involved in the execution of the
works contract, it is not permissible. The reason being that
43
the schedule entry, the works contract of civil works finds a
separate entry in Sl.No.23 under the head ‘All other works
contracts not specified in any of the categories specified in
Sixth schedule and therefore, it attracts tax on the said
turnover at the rate of 12.5% as provided therein under the
said entry. In response to the notice issued, the petitioner
Company produced the monthly returns filed for the month
of March, 2006, details of computation of taxes for the
month of March, 2006, the details of computation of
materials utilized during the month and details of purchases
made. Books of accounts were also produced. After
considering the aforesaid material, the assessing authority
held that the incidence of tax in the execution of civil works
contract occurs at the time of incorporation/accretion of the
building materials during the course of execution of civil
works contract. In civil works contract there is end product
of taxable goods for taxation under the provision of the KVAT
Act. Therefore, the eligibility of taxes under the KVAT Act, is
to be made on the value of goods which are incorporated at
44
the time of use of the same in the execution and thereby, it
is known as deemed sale. Accordingly, the incidence of tax
occurs at that point. The petitioner has admitted the
turnover of sale value that is, transfer of property in goods
which are consumed for works contract during the particular
period and the same is in accordance with the provisions of
the KVAT Act. He did not feel it necessary to continue the
proceedings under Section 39(1) of the KVAT Act for
reassessment and therefore, the proceedings initiated for the
period March 2006 under Section 39(1) of the KVAT Act,
2003 was dropped.
4. The Joint Commissioner of Commercial Taxes by
virtue of the power conferred on him under Section 63(A) of
the KVAT Act, was of the view that the orders passed by the
assessing authority were prima facie erroneous and
prejudicial to the interest of the revenue of the State
warranting interference. Therefore, he issued a show cause
notice dated 13.08.2009 to the respondent. In the said show
45
cause notice it is stated that in the schedule entry, works
contract of civil works finds entry in serial No.23 under the
head “All other works contracts not specified in any of the
categories specified in VI schedule” and attracts taxes at
12.5%. However, the petitioner has offered the turnover of
civil works contract at the rate of 4% and 12.5%, which is
impermissible and not in accordance with the provisions of
VI schedule to the KVAT Act. Then he has referred to the
amounts involved in each subcontracts and was of the view
that the taxable turnover in the works contract after allowing
admissible deductions and exemptions is proposed to be
subjected to tax at 12.5% only. Therefore, he also proposed
to levy interest under Section 36 of the KVAT Act and also
penalty under Section 72(2) of the KVAT Act for the
difference of taxes proposed and paid.
5. The assessee in support of their defence for the
assessment period April 2006 to December 2007, produced
the certificates from sub-contractors along with the return
46
copies, VAT bills copies in support of their claim towards tax
collected and statement of input tax credit claimed along
with other details such as suppliers TIN, bill numbers and
tax amount etc. and objected to levy tax at the rate of 12.5%
on the turnover of declared goods i.e., iron and steel used in
works contracts in view of various High Court judgments
and requested the authority to consider the tax at the rate of
4% only on iron and steel consumption. On 15.09.2009 they
filed another objection statement setting out the
constitutional provisions, the reasons behind constitutional
amendment and the various provisions of the Act, Rules and
requested the revisional authority to drop the further
proceedings.
6. However, before further steps to be taken by the
revisional authority, they also preferred writ petition
challenging the show cause notice itself for declaration that
the provisions of Section 4 (1) (C) of the KVAT Act, 2003 that
authorizes levy of tax on works contract under item No.23 to
47
the VI schedule as illegal, void and unenforceable and for a
declaration that the respondent No.2 has no power,
competence or jurisdiction to levy and collect taxes under VI
schedule of the KVAT Act and direction to the respondent to
refrain from revising the reassessments that is already made
in terms of the valid law operative and sought for stay of all
further proceedings. After service of notice, the State entered
appearance. They contend that the civil works contract
undertaken by the petitioner company is qualified both
under serial No.23 of VI schedule to the Act. It is liable to
tax at the rate of 12.5%, whereas, the assessing authority
appropriated the contract receipts as taxable at 4% and
12.5% on the goods like cement etc. involved in the
execution of the contract works in the tax period. After
referring to the several judgments it was stated that iron and
steel or any goods which fetches tax at 4% or any other rate
under the Act, if involved in the execution of works contract
of civil nature or buildings, is liable to tax under serial No.23
of the VI schedule at 12.5% only. The assessing authority
48
has violated the provisions of the Act and therefore, such
orders are detrimental to the interest of the revenue and the
revisional authority was justified in initiating proceedings
under Section 63A of the Act. The petitioner has challenged
the show cause notice. A statutory remedy of preferring an
appeal is provided under the Act, without exhausting the
statutory remedy he has filed the writ petition. It is not
maintainable.
FACTS IN W.P.Nos.29046–48/2009
7. The assessee, M/s.G.R.Engineering Private
Limited, is a dealer registered under the provisions of KVAT
Act, 2003. During the month of October, 2008, they were
awarded by Mangalore Refinery and Petrochemicals Limited,
Mangalore (hereinafter referred to as ‘MRPL’ for brevity), with
the execution of composite works contract of residual
designing, detailed engineering, procurement of materials
and bought out components and fabrication, construction,
erection, inspection, testing, supply and commissioning of
49
four numbers of mounded LPG storage system for refinery
project at MRPL on turnkey project. The work included
like civil structural work such as earth excavation,
foundation work, construction, erection of RCC retaining
wall, concrete tunnels around mound vessels, piping work,
sand bed, soil strengthening, drains, electrical and
instrumentation works, installation of fire protection system,
cathodic protection system, testing and system performance
guarantee of LPG storage and transfer system to the entire
satisfaction of the contractee MRPL. As per the terms of the
contract, they have received amounts in advance towards the
preparatory work such as residual designing, engineering,
placement or orders and procurement of materials etc.,
required in the execution of works contract against the bank
guarantee executed in favour of the contractee MRPL. The
assessee procured M.S.Plates / Sheets which are declared
goods for use as raw material in the making of M.S.Sections
at the work site assigned to the petitioner by MRPL. The
work involves cutting of the M.S.sheets / plates to the
50
required shape and size, rolling and welding the same to
form M.S. rolled sections. The rolled M.S.sections are
thereafter required to be transported to the MRPL project site
at a later point of time and to be incorporated or embedded
in the immovable property namely the civil foundation
specially constructed at the project site, at which point of
time only there is transfer of property in M.S.rolled sections,
constituting a ‘deemed sale’ and liable to tax.
8. The assessee submits that commencing from the
month of November, 2008 the assessee received advance
amounts from MRPL towards preliminary work involved in
the execution of the contract such as design and
engineering, procurement of materials, etc. Even though
such advance amounts received did not represent any
consideration or turnover relating to transfer of property in
any goods, taking into consideration the provisions of Rule
3(1) read with Explanation thereto, the assessee filed returns
in form VAT 100 in respect of tax periods April, May and
51
June, 2009 and paid tax @ 4% in respect of declared goods
namely iron and steel and at the rate of 12.5% in respect of
other goods procured for use in the works contract. The said
returns filed in form VAT 100 are deemed as accepted by
virtue of the provisions of Section 38(1) of the Act.
Subsequently, the assessee also filed revised returns in
respect of these tax periods, which returns are also accepted
by the first respondent.
9. The place of the business of the assessee was
visited by the first respondent on 09.07.2009, and he verified
the work orders issued by the contractee MRPL as also the
Form A1 being the application made by the assessee before
the Assistant Commissioner of Central Excise, Mangalore
and the license granted to it. After looking into the entire
materials, the authorities came to the conclusion that the
assessee was engaged in the activities of manufacturing of
bullet tanks which are later to be installed in the MRPL
project site. Thus the nature of work fell under the VI
52
Schedule to the Act namely supply and installation of
manufactured bullet tanks at the MRPL project site.
Therefore, the authority came to the conclusion that even
M.S.plates / sheets used as raw material are declared goods,
the goods manufactured namely bullet LPG tanks were
altogether different commercial goods and liable to be taxed
at the rate of 12.5%. The notice under Section 39(1) of the
Act, dated 18.08.2009 proposing to levy tax at the rate of
12.5% on the amounts declared by the assessee was issued.
He also proposed to levy penalty under Section 72(2) of the
Act for having understated the tax liability as well as interest
under Section 36 of the Act. The assessee filed detailed
objections contesting the said proceedings by denying that
the assessee is not engaged in any activity of manufacture
and sale of any goods, much less mounded LPG storage tank
and that reliance on the description of activity in the license
issued by the Central Excise Department in concluding that
the assessee manufactured and sold mounded LPG storage
tanks was wholly wrong. He has not been awarded with
53
similar contract. The contract which was awarded to him
was a composite works contract. The only activity carried
out by it was the purchase of MS plates and preparation of
MS sections by cutting and rolling at the land allotted by
MRPL. At the time of transfer of property, MS sections
continued to be MS sheets and therefore, they are not liable
to pay at additional tax. Further they also contended that
levy of tax at 12.5% on amounts received in advance towards
preliminary work involved in the works contract is illegal and
contrary to the provisions of charging Section 4(1)(c) of the
Act. However, over ruling the said objections, the authorities
levied tax at the rate of 12.5% on the value of the steel
sheets used in the execution of the works contract and also
the said tax was levied on the mobilization advance received
as if the transfer of property to plates is altogether a different
goods and they also imposed interest and penalty. It is in
that background, the assessee approached this court by way
of writ petition.
54
POINTS FOR CONSIDERATION
10. The learned single Judge framed the following
two points for consideration in W.P.Nos.29932-33/2009:-
(a) Whether the State Government has the competence to
levy tax on the transfer of property in goods involved
in the execution of works contract (when the goods in
question are “declared goods” for the purpose of
Central Sales Tax Act, 1956) at more than one stage?
(b) Whether the explanation to Rule 3(1) of the KVAT
Rules which provides that any advance paid to a
contractor as part of the consideration of the goods
involved in the execution of the works contract could
be included in the “total turnover” in the month in
which the execution of the works commences even
before the goods are incorporated in the works?
55
FINDINGS OF THE LEARNED SINGLE JUDGE
11. The learned single Judge who heard the Writ
Petition held that a dealer registered under the Act shall be
liable to tax and that such tax is leviable on the taxable
turnover relating to transfer of property in goods whether as
goods or in some other form, involved in the execution of the
works contracts that are specified in the Sixth Schedule to
the Act and at the rates specified therein. The levy is subject
to the provisions of Sections 14 and 15 of the CST Act
relating to declared goods. Though tax at 12.5% is
applicable under Sl. No.23 of the Sixth Schedule to the Act
in respect of complete works contract involving transfer of
property in goods, an exception is provided in Section 4(1)
(C) of the KVAT Act itself, that in respect of declared goods
involved in the execution of the works contract, the rate of
tax shall be as provided in Section 14 of the CST Act at 4%.
Then relying on Section 7 of the Act it was held that, steel
and steel products used as raw material by the petitioners
are incorporated into their civil works or other works
56
contract in the same form except that the same may be
fashioned to suit the requirement, before the same merge
into the works which is thereafter identified as immovable
property. At the time of incorporation, steel and steel
products do not lose their nature or form and therefore
cannot be subjected to tax, as the said goods are already
subjected to tax as declared goods under the CST Act. He
further held that, the judgment of this Court in the case of
B.V. Subba Reddy has no application as it was rendered
under the KST Act and in the said Act there is no provision
akin to Section 7 of the KVAT Act.
12. In so far as the dispute regarding the levy of tax
at 12.5% in respect of advance amounts received is
concerned it was held that the explanation to Rule 3(1)
which was inserted on 27.5.2006 requires a registered dealer
to include the advance amounts received as part of total
turnover in the month in which the execution of works
contracts commence and pay tax thereon, even though there
57
is no transfer of property in any goods involved. The
explanation runs counter to the tenor of the charging Section
4(1)(C) and runs counter to the definition of “taxable
turnover”, “total turnover” and “turnover” under the Act. It
is also in direct conflict with Article 366 (29A) (b) of the
Constitution of India. Similarly, Section 7 of the KVAT Act
which creates a legal fiction that a transaction of sale is
completed for the purposes of the Act when payment is
received as advance is akin to bringing to tax an agreement
to sell goods, even before the property in the goods passes to
the buyer. Thus, he held it is plainly contrary to the very
definition of “sale” under the Act itself. Accordingly, he held,
to that extent the said provision is unconstitutional and
accordingly quashed the impugned notice.
13. Aggrieved by the said order of the learned single
Judge, the revenue is in appeal.
58
RIVAL CONTENTIONS
14. The learned Government Advocate Smt. Sujatha
assailing the impugned order contended that, after the
purchase of iron and steel, as is clear from the running
account bills raised by the petitioner the description
narrated is, “pre-fabricated steel reinforcement/structural
steel”. In the activity pertaining to preparation of plinth,
lintel, column, beam, roof, wall, etc., the iron and steel is not
used in the nascent form but the fabricated skeleton
structures are used as per the drawing and design provided
by the qualified persons. Sand, jelly, cement in the form of
readymade concrete (RMC) is poured into the said structure
and the iron is used for reinforcement of cement concrete
and therefore when this structure is incorporated into the
building, the time at which there is a transfer of property,
the iron and steel rods of various dimensions are not directly
transferred to the building as such, but as skeleton
structures in roof, columns, beams, structures. Such
skeleton structures is not a declared goods under Section 14
59
of the Act and therefore, the levy of tax under item No.23 of
the Sixth Schedule of the Act is valid and cannot be found
fault with at 12.5%. She also contended in a works contract
when advance amount is paid, it is towards the sale of
property which is involved in the execution of the works
contract and, therefore, the said amount has to be included
in the total turnover as provided in the explanation and
liable to pay tax and the learned single Judge was not
justified in holding otherwise and declaring the said
provision as unconstitutional to this effect.
15. Per contra, the learned senior counsel appearing
for the petitioner Sri Sarangan submitted that, in
interpreting this provision one has to keep in mind the object
with which Sections 14 and 15 are enacted. The legislature
wanted the goods mentioned in the aforesaid Section which
are in the nature of essential commodities to be available to
all the persons throughout the country. Though the
respective States have the power to tax under the respective
60
sales tax law or under the VAT Act, they cannot tax at a rate
more than what is prescribed under Section 15. In the
instant case, the iron rods after their purchase are cut into a
specified size. In order to cast a beam, pillar, these iron rods
are enclosed by a wire to bring it into a shape of a beam,
pillar, etc., and then RMC is poured into it. The object of
using the iron is to reinforce the cement concrete. Even after
transformation into a beam, iron and steel continues to be
rods. Even after the incorporation of beams and rods into a
building it becomes an immovable property, the character of
iron and steel continues to be the same. At the time of
incorporation the iron and steel do not lose its original
character and no new product comes into effect and
therefore Section 14 is attracted. Section 15 prohibits the
State from imposing tax thereon than what is prescribed in
Section 14. He further contended that, when under the Act,
when specific provisions are incorporated providing for a
legal fiction to the effect when exactly the property is
transferred by way of sale and when that happens only at
61
the time of incorporation of the goods into the building, the
amount paid as advance much earlier to that point of time
cannot be included in the total turnover for the purpose of
tax as incidence of tax is the day on which the property is
transferred and therefore the said provision runs counter to
the statutory provisions and constitutional provisions and
therefore, the learned single Judge was justified in declaring
it as unconstitutional to that extent and therefore no fault
could be found with the judgment of the learned single
Judge.
16. In the light of the aforesaid facts and the rival
contentions, the points that arise for our consideration in
these appeals are as under:-
POINTS FOR CONSIDERATION IN THESE APPEALS 1. Whether iron and steel, which are declared goods
under Section 14 of the CST Act, are used whether as
goods or in some other form involved in the execution
62
of the works contract specified in column No.2 of the
Sixth Schedule, whether the State is entitled to tax at
12.5% as against 4% prescribed under Section 14 of
the Act invoking item No.23 of the Sixth Schedule of
the Value Added Tax Act?
2. Whether the explanation to Rule 3(1) of the KVAT
Rules which provides that any advance paid to a
contractor as part of the consideration of the goods
involved in the execution of the works contract could
be included in the “total turnover” in the month in
which the execution of the works commences even
before the goods are incorporated in the works?
3. When the petitioner purchased M.S.plates / sheets
which are declared goods for use as a raw material
when it was transformed into M.S.section, at works
site and before it was incorporated in the construction
as bullet tanks, the levy of tax at the rate of 12.5%,
63
treating as not a declared goods is valid.? (W.P. Nos.
29046-48/2009?
STATUTORY PROVISIONS
17. In order to answer these questions we have to
look at the statutory provisions incorporated by the State
Legislature under the Act. Section 3 of the KVAT Act reads
as under:-
“3. Levy of tax
(1) The tax shall be levied on every sale
of goods in the State by a registered dealer or a
dealer liable to be registered, in accordance with
the provisions of this Act.
(2) The tax shall also be levied, and paid
by every registered dealer or a dealer liable to be
registered, on the sale of taxable goods to him, for
use in the course of his business, by a person
who is not registered under this Act.”
18. Section 4 of the Act prescribes the rates of tax.
It reads as under:-
64
“4. Liability to tax and rates thereof.
(1) Every dealer who is or is required to be
registered as specified in Sections 22 and 24,
shall be liable to pay tax, on his taxable turnover,
(a) in respect of goods mentioned in,-
(i) Second Schedule, at the rate of one
per cent,
(ii) Third Schedule, at the rate of four
percent in respect of goods specified
in serial number 30 and five per cent
in respect of other goods, and
(iii) Fourth Schedule, at the rate of
twenty per cent.
(b) in respect of.-
(i) cigarettes, cigars, gutkha and other
manufactured tobacco at the rate of fifteen
per cent;
(ii) other goods at the rate of thirteen and one
half per cent.
(c) in respect of transfer of property in goods
(whether as goods or in some other form)
65
involved in the execution of works contract
specified in column (2) of the Sixth
Schedule, subject to Sections 14 and 15 of
the Central Sales Tax Act, 1956 (Central
Act 74 of 1956), at the rates specified in the
corresponding entries in column (3) of the
said Schedule.
(2) Where goods sold or purchased are
contained in containers or are packed in any
packing material liable to tax under this Act, the
rate of tax applicable to taxable turnover of such
containers or packing materials shall, whether
the price of the containers or packing materials is
charged for separately or not, be the same as the
rate of tax applicable to such goods so contained
or packed, and where such goods sold or
purchased are exempt from tax under this Act,
the containers or packing materials shall also be
exempt.
(3) The State Government may, by
notification, reduce the tax payable under sub-
section (1) in respect of any goods subject to such
restrictions and conditions as may be specified in
the notification.
66
(3-A) Any notification issued under sub-
section (3), shall be valid until it is cancelled or
varied, notwithstanding that the tax payable in
respect of any such goods is modified by
amendment to this Act.
(4) Notwithstanding anything contained
in sub-section (1), subject to such conditions as
may be prescribed, a registered dealer, if he so
elects, may pay tax on the sale of goods specified
in serial number 60 of the Third Schedule or any
other goods, on the maximum retail price
indicated on the label of the container or pack
thereof or on such maximum retail price reduced
by an amount equal to the tax payable.
(5) Notwithstanding anything contained
in sub-section (1), a registered dealer shall be
liable to pay tax on the sale of cigarettes, cigars,
gutkha and other manufactured tobacco, on the
maximum retail price indicated on the label of the
container or pack thereof, after reducing from
such maximum retail price an amount equal to the
tax payable, where the total amount payable to
the dealer as the consideration for sale of such
goods exceeds five hundred rupees or any other
67
higher amount as may be notified by the
Commissioner.
(6) Where tax in respect of his purchase
of goods is collected in accordance with
sub-section (5),-
(a) a registered dealer whose sale of such
goods is not liable to tax under sub-section
(5), shall be eligible for refund or
adjustment of any amount of tax collected
on his purchase, which is in excess of the
tax payable on his turnover relating to sale
of such goods, and the burden of proving
that the tax has been collected and paid in
accordance with the said sub-section shall
be on the dealer;
(b) a person who is not a dealer liable to get
registered under the Act, may claim refund
of any amount paid by the selling dealer in
excess of the tax payable on the
consideration paid by him to such dealer in
such manner and subject to such
conditions as may be prescribed.”
68
19. Clause (c) was inserted by Act No. 4/2006 with
effect from 1.4.2006.
Chapter IV of the CST Act deals with goods of special
importance in inter-state trade or commerce. Section 14
reads as under:-
“14. Certain goods to be of special
importance in inter-State trade or
commerce.- It is hereby declared that the
following goods are of special importance in inter-
State trade or commerce.-
xxx xxx xxx
(iv) iron and steel, that is to say,-
(i) pig iron, sponge iron and cast iron including
ingot moulds, bottom plates, iron scrap,
cost iron scrap, runner scrap and iron skull
scrap;
(ii) steel semis (ingots, slabs, blooms and
billets of all qualities, shapes and sizes);
(iii) skelp bars, tin bars, sheet bars, hoe- bar
and sleeper bars;
(iv) steel bars (rounds, rods, squares, flats,
octagons and hexagons, plain and ribbed
69
or twisted, in coil form as well as straight
lengths);
(v) steel structurals (angles, joists, channels,
tees, sheet piling sections, Z-sections or any
other rolled sections);
(vi) sheets, hoops, strips and skelp, both black
and galvanised, hot and cold rolled plain
and corrugated, in all qualities, in straight
lengths and in coil form, as rolled and in
rivetted condition;
(vii) plates both plain and chequered in all
qualities;
(viii) discs, rings, forgings and steel castings;
(ix) tool, alloy and special steels of any of the
above categories;
(x) steel melting scrap in all forms including
steel skull, turnings and borings;
(xi) steel tubes, both welded and seamless, of
all diameters and lengths, including tube
fittings;
(xii) tin- plates, both hot dipped and electrolytic
and tinfree plates;
(xiii) fish plate bars, bearing plate bars, crossing
sleeper bars, fish plates, bearing plates,
70
crossing sleepers and pressed steel
sleepers,-- heavy and light crane rails;
(xiv) wheels, tyres, axles and wheel sets;
(xv) wire rods and wires-- rolled, drawn,
galvanised, aluminised, tinned or coated
such as by copper;
(xvi) defectives, rejects, cuttings or end pieces of
any of the above categories;”
20. Section 15 imposes restrictions and conditions
in regard to tax on sale or purchase of declared goods within
a State. Clause (a) of Section 15 reads as under:-
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”,
71
21. These provisions in the CST Act, 1956, has been
enacted in pursuance of Article 286 of the Constitution and
in particular Clause (3) which was introduced by way of
substitution by 46th amendment which came into effect on
12.02.1983.
22. The Apex Court in the case of MODI SPINNING
AND WEAVING MILLS CO. LTD. VS. COMMISSIONER OF
SALES TAX, PUNJAB AND ANOTHER REPORTED IN
(1965) STC V.60 PAGE 310, interpreting Clause (3) of
Article 286 of the Constitution of India and Section 14 of the
Central Sales Tax Act, has held as under:-
“Section 14 of the Central Sales Tax Act
declares certain goods to be of special importance
in inter-State trade or commerce and mentions
cotton of all kinds in unmanufactured state,
whether ginned or unginned. Section 15 then
provides as follows :-
"15. Restrictions and conditions in regard to
tax on sale or purchase of declared goods within
72
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 two per cent of
the sale or purchase price thereof, and such tax
shall not be levied at more than one stage;
(b)..........................
It is contended that by reason of the
declaration and S. 15(a) quoted above the rate of
tax is discrepant with s. 15 of the Central Sales
Tax Act, and sub-section (1) of s. 5 of the Punjab
General Sales Tax Act must fail as a law properly
enacted. This argument cannot be accepted
because Art. 286(3) under which the declaration
is made provides as follows :-
" 286(1)................
(2)....................
(3) Any law of a State shall, in so far as it
imposes, or authorises the imposition of, a tax on
73
the sale or purchase of goods declared by
Parliament by law to be of special importance in
inter-State trade or commerce, be subject to such
restrictions and conditions in regard to the
system of levy, rates and other incidents of the
tax as Parliament may by law specify."
The meaning or the intention of cl. (3) of Art.
286 is not to destroy all charging sections in the
Sales Tax Acts of the States which are discrepant
with s. 15(a) of the Central Sales Tax Act, but to
modify them in accordance therewith. The law of
the State is declared to be subject to the
restrictions and conditions contained in the law
made by Parliament and the rate in the State Act
would protanto stand modified. The effect of Art.
286(3) is now brought out by the second proviso
to s. 5(l). But this proviso is enacted out of
abundant caution and even without it the result
was the same.”
23. Therefore though the power of State Legislature
to impose tax is recognized, in so far as imposition of tax in
respect of the goods declared by Parliament by law to be of
74
special importance, the State Legislation has to yield to the
Parliamentary Legislation. In view of Section 14 of the CST
Act, iron and steel is declared as goods of special
importance. In other words, it is a declared goods. Section
15(a) of the CST Act, imposes a restriction to tax declared
goods within the State. Though the State Legislature has
been vested with the power to impose tax on such declared
goods, the tax payable under that law in respect of any sale
or purchase of such goods inside the State shall not exceed
5% of the sale or purchase price thereof.
24. Section 4(1)(c) of the Value Added Tax Act,
specifically provides for levy of tax on declared goods. It
provides that in respect of transfer of property in goods
whether as goods or in some other form involved in the
execution of works contract specified in column (2) of Sixth
Schedule, the tax leviable is at the rate specified in the
corresponding entries in column 3 of Sixth Schedule.
However, this is subject to Sections 14 and 15 of the Central
75
Sales Tax Act, 1956. Therefore, though the State
Legislature is empowered to levy tax in respect of transfer of
property in goods whether as goods or in some other form, if
such goods are covered under Sections 14 and 15 of the CST
Act, their power to levy tax is curtailed and they cannot
impose tax more than what is prescribed under Sections 14
and 15.
POINT No.1 – POWER OF THE STATE TO LEVY TAX ON
DECLARED GOODS
25. The Apex Court in the case of STATE OF
MADRAS VS. GANNON DUNKERLEY & CO. REPORTED IN
(1958) STC V.9 PAGE 353, in the concluding para have
summed up the law insofar as selling goods is concerned in
the context of Entry 48 as well as entry 97 in List I, which
reads as under:
“This conclusion entails that none of the
legislatures constituted under the Government of
India Act, 1935, was competent in the exercise of
the power conferred by s. 100 to make laws with
76
respect to the matters enumerated in the Lists, to
impose a tax on construction contracts and that
before such a law could be enacted it would have
been necessary to have had recourse to the
residual powers of the GovernorGeneral under s.
104 of the Act. And it must be conceded that a
construction which leads to such a. result must, if
that is possible, be avoided. Vide
Manikkasundara v. R. S. Nayudu (1). It is also a
fact that acting on the view that Entry 48
authorises it, the States have enacted laws
imposing a tax on the supply of materials in
works contracts, and have been realising it, and
their validity has been affirmed by several High
Courts. All these laws were in the statute book
when the Constitution came into force, and it is to
be regretted that there is nothing in it which offers
a solution to the present question. We have, no
doubt, Art. 248 and Entry 97 in List I conferring
residual power of legislation on Parliament, but
clearly it could not have been intended that the
Centre should have the power to tax with respect
to works constructed in the States. In view of the
fact that the State Legislatures had given to the
expression " sale of goods " in Entry 48 a wider
77
meaning than what it has in the Indian Sale of
Goods Act, that States with sovereign powers
have in recent times been enacting laws imposing
tax on the use of materials in the construction of
buildings, and that such a power should more
properly be lodged with the States rather than the
Centre, the Constitution might have given an
inclusive definition of " sale " in Entry 54 so as to
cover the extended sense. But our duty is to
interpret the law as we find it, and having
anxiously considered the question, we are of
opinion that there is no sale as such of materials
used in a building contract, and that the
Provincial Legislatures had no competence to
impose a tax thereon under Entry 48.
……. It is possible that the parties might
enter into distinct and separate contracts, one for
the transfer of materials for money consideration,
and the other for payment of remuneration for
services and for work done. In such a case, there
are really two agreements, though there is a
single instrument embodying them, and the
power of the State to separate the agreement to
sell from the agreement to do work and render
78
service and to impose a tax thereon cannot be
questioned, and will stand untouched by the
present judgment”.
26. Therefore, if the contract is indivisible and from
the contract it is not possible to make out what is the value
of the material and what is the value of the service rendered
and then the State legislatures had no competence to levy
tax in respect of the materials involved in the execution of
the works contract.
27. After this judgment, the Parliament brought in
46th Amendment to the Constitution inserting clause 29A as
under:-
“366. (29A) “tax on the sale or purchase of
goods” includes-
(a) xxx xxx xxx
(b) 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.”
79
28. The Apex Court in BUILDERS ASSOCIATION OF
INDIA AND OTHERS VS. UNION OF INDIA AND OTHERS
REPORTED IN (1989) STC VOL.73 PAGE 370, explaining
Clause (b) of Clause (29-A) of Article 366 of the Constitution
of India has held:
“Before proceeding further it is necessary to
understand what sub-clause (b) of clause (29-A)
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 as including all materials,
commodities and articles. It is true that in the
State of Madras v. Gannon Dunkerley & Co.
(Madras) Ltd., [1958] 9 STC 353; [1959] SCR 379,
this Court held that a works contract was an
indivisible contract and the turnover of the goods
used in the execution of the works contract could
not, therefore, become exigible to sales-tax. It was
in order to overcome the effect of the said decision
80
Parliament amended article 366 by introducing
sub-clause (b) of clause (29-A). Sub-clause (b) of
clause (29-A) states that 'tax on the sale or
purchase of goods' includes among other things a
tax on the transfer of property in the goods
(whether as goods or in some other form) involved
in the execution of a works con- tract. It does not
say that a tax on the sale or purchase of goods
included a tax on the amount paid for the
execution of a works contract. It refers to 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. The emphasis is on
the transfer of property in goods (whether as
goods or in some other form). The latter part of
clause (29-A) of article 366 of the Constitution
makes the position very clear. While referring to
the transfer, delivery or supply of any goods that
takes place as per sub-clauses (a) to (f) of clause
(29-A), the latter part of clause (29-A) says that
“such transfer, delivery or supply of any goods”
shall be deemed to be a sale of those goods by
the person making the transfer, delivery or supply
and a purchase of those goods by the person to
whom such transfer, delivery or supply is made.
81
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-clause (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 subject to the same
discipline to which any levy under entry 54 of the
State List is made subject to under the.
82
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 (29-A) 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. Similarly the restrictions
mentioned in clause (2) of Article 286 of the
Constitution which says that Parliament may by
law formulate principles for determining when a
sale or purchase of goods takes place in any of
the ways mentioned in clause (1) of Article 286
would also be attracted to a transfer of goods
contemplated under Article 366(29A)(b). Similarly,
clause (3) of Article 286 is also applicable to a tax
on a transfer of property referred to in sub-clause
(b) of clause (29-A) of Article 366. Clause (3) of
83
Article 286 consists of two parts. Sub-clause (a) of
clause (3) of Article 286 deals with a tax on the
sale or purchase of goods declared by Parliament
by law to be of special importance in inter-State
trade or commerce, which is generally applicable
to all sales including the transfer, supply or
delivery of goods which are deemed to be sales
under clause (29-A) of Article 366 of the
Constitution. If any declared goods which are
referred to in section 14 of the Central Sales Tax
Act, 1956 are involved in such transfer, supply or
delivery, which is referred to in clause (29-A) of
Article 366, the sales tax law of a State which
provides for levy of sales tax thereon will have to
comply with the restrictions mentioned in section
15 of the Central Sales Tax Act, 1956. Clause (b)
is an additional provision which empowers
Parliament to impose any additional restrictions
or conditions in regard to the levy of sales tax on
transactions which will be deemed to be sales
under sub-clause (b) or sub-clause (e) or sub-
clause (d) of clause (29-A) of article 366 of the
Constitution. We do not find much substance in
the contention urged on behalf of the States that
since sub-clause (b) of clause (3) of Article 286 of
84
the Constitution refers only to the transactions
referred to in sub-clauses (b), (c) and (d) of clause
(29-A) of Article 366, the transactions referred to
under those three sub-clauses would not be
subjected to any other restrictions set out in
clause (1) or clause (2) or sub-clause (a) of clause
(3) of Article 286 of the Constitution. It may be
that by virtue of sub-clause (b) of clause (3) of
Article 286 it is open to Parliament to impose
some other restrictions or conditions which are
not generally applicable to all kinds of sales. That
however cannot take the other parts of Article 286
inapplicable to the transactions which are
deemed to be sales under Article 366(29A) of the
Constitution. We are of the view that all transfers,
deliveries and supplies of goods referred to in
clause (a) to (f) of clause (29-A) 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 (29-A) of Article 366 of the Constitution are
subject to an additional restriction mentioned in
sub-clause (b) of Article 286(3) of the Constitution.
85
xxx xxxx
We, therefore, declare that sales tax laws
passed by the Legislatures of States levying
taxes on the transfer of property in goods
(whether as goods or in some other form) involved
in the execution of a works contract are subject to
the restrictions and conditions mentioned in each
clause or sub-clause of Article 286 of the
Constitution. We, however, make it clear that the
cases argued before and considered by us relate
to one specie of the genetic concept of 'works
contracts'. The case-book is full of the illustrations
of the infinite variety of the manifestation of
'works-contracts'. Whatever might be the
situational differences of individual cases, the
constitutional limitations on the taxing-power of
the States as are applicable to “works contracts”
represented by "Building-Contracts" in the context
of the expanded concept of "tax on the sale or
purchase of goods" as constitutionally defined
under Article 366(29-A), would equally apply to
other species of “works-contracts” with the
requisite situational modifications.
86
The constitutional amendment in Article
366(29-A) read with the relevant taxation-entries
has enabled the State to exert its taxing power in
an important area of social and economic life of
the community. In exerting this power particularly
in relation to transfer of property in goods
involved in the execution of 'works-contracts' in
building activity, in so far as it affects the
housing-projects of the underprivileged and
weaker sections of society, the State might
perhaps, be pushing its taxation-power to the
peripheries of the social limits of that power and,
perhaps, even of the constitutional limits of that
power in dealing with unequals. In such class of
cases 'Building-Activity' really relates to a basic
subsistential necessity. It would be wise and
appropriate for the State to consider whether the
requisite and appropriate classifications should
not be made of such building-activity attendant
with such social purposes for appropriate
separate treatment. These of course are matters
for legislative concern and wisdom.
87
29. The said provision also came up for
consideration before a Constitution Bench of the Apex Court
in the case of BUILDERS ASSOCIATION OF INDIA AND
OTHERS vs UNION OF INDIA AND OTHERS REPORTED IN
(1989) STC VOL.73 PAGE 370. It was held as under:-
“Before proceeding further it is necessary to
understand what sub-clause (b) of clause 29-A 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 as including all materials,
commodities and articles. It is true that in the
State of Madras v. Gannon Dunkerley & Co.
(Madras) Ltd., (supra) this Court held that a
works contract was an indivisible contract and
the turnover of the goods used in the execution of
the works contract could not, therefore, become
exigible to sales-tax. It was in order to overcome
the effect of the said decision Parliament
88
amended Article 366 by introducing sub-clause
(b) of clause (29-A)'. Sub-clause (b) of clause (29-
A) states that 'tax on the sale or purchase of
goods' includes among other things a tax on the
transfer of property in the goods (whether as
goods or in some other form) involved in the
execution of a works contract. It does not say that
a tax on the sale or purchase of goods included a
tax on the amount paid for the execution of a
works contract. It refers to 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. The emphasis is on the transfer of
property in goods (whether as goods or in some
other form). The latter part of clause (29-A) of
Article 366 of the Constitution makes the position
very clear. While referring to the transfer, delivery
or supply of any goods that takes place as per
sub clauses (a) to (f) of clause (29-A), the latter
part of clause (29-A) says that 'such transfer,
delivery or supply of any goods' shall be deemed
to be a sale of those goods by the person making
the transfer, delivery or supply and a purchase of
those goods by the person to whom such transfer,
delivery or supply is made. Hence, a transfer of
89
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 a 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-clause (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
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
90
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) out- side 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 (29-A) 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. Similarly the restrictions mentioned in
clause (2) of Article 286 of the Constitution which
says that Parliament may by law formulate
principles for determining when a sale or
purchase of goods takes place in any of the ways
mentioned in clause (1) of Article 286 would also
be attracted to a transfer of goods contemplated
under Article 366 (29A)(b). Similarly clause (3) of
Article 286 is also applicable to a tax on a
transfer of property referred to in sub-clause (b) of
clause (29-A) of Article 366. Clause (3) of Article
91
286 consists of two parts. Sub-clause (a) of clause
(3) of Article 286 deals with a tax on the sale or
purchase of goods declared by Parliament by law
to be of special importance in inter-State trade or
commerce, which is generally applicable to all
sales including the transfer, supply or delivery of
goods which are deemed to be sales under clause
(29-A) of Article 366 of the Constitution. If any
declared goods which are referred to in section 14
of the Central Sales Tax Act, 1956 are involved in
such transfer, supply or delivery, which is
referred to in clause (29-A) of Article 366, the
sales tax law of a State which provides for levy of
sales tax thereon will have to comply with the
restrictions mentioned in section 15 of the Central
Sales Tax Act, 1956. Clause (b) is an additional
provision which empowers Parliament to impose
any additional restrictions or conditions in regard
to the levy of sales tax on transactions which will
be deemed to be sales under sub-clause (b) or
sub-clause (e) or sub-clause (d) of clause (29-A) of
Article 366 of the Constitution. We do not find
much substance in the contention urged on behalf
of the States that since sub-clause (b) of clause (3)
of Article 286 of the Constitution refers only to the
92
transactions referred to in sub-clauses (b), (c) and
(d) of clause (29-A) of Article 366, the transactions
referred to under those three sub-clauses would
not be subject to any other restrictions set out in
clause (1) or clause (2) or sub-clause (a) of clause
(3) of Article 286 of the Constitution. It may be
that by virtue of sub-clause (b) of clause (3) of
Article 286 it is open to Parliament to impose
some other restrictions or conditions which are
not generally applicable to all kinds of sales. That
however cannot take the other parts of Article 286
inapplicable to the transactions which are
deemed to be sales under Article 366 (29A) of the
Constitution. We are of the view that all transfers,
deliveries and supplies of goods referred to in
clause (a) to (f) of clause (29-A) 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 (29-A) of Article 366 of the Constitution are
subject to an additional restriction mentioned in
sub-clause (b) of Article 286(3) of the
Constitution”.
93
30. The Apex Court in the case of GANNON
DUNKERLEY & CO. AND OTHERS VS. STATE OF
RAJASTHAN AND OTHERS REPORTED IN (1993) STC
VOL.88 PAGE 204, has held as under:
MEASURE OF TAX
On behalf of the contractors, it has been
urged that under a law imposing a tax on the
transfer of property in goods involved in the
execution of a works contract under entry 54 of
the State List read with Article 366(29-A)(b), the
tax is imposed on the goods which are involved in
the execution of a works contract and the
measure for levying such a tax can only be the
value of the goods so involved and the value of
the works contract cannot be made the measure
for levying the tax. The submission is further that
the value of such goods would be the cost of
acquisition of the goods by the contractor and,
therefore, the measure for levy of tax can only be
the cost at which the goods involved in the
execution of a works contract were obtained by
the contractor. On behalf of the States, it has
been submitted that since the property in goods
94
which are involved in the execution of a works
contract passes only when the goods are
incorporated in the works, the measure for the
levy of the tax would be the value of the goods at
the time of their incorporation in the works as
well as the cost of incorporation of the goods in
the works. We are in agreement with the
submission that measure for the levy of the tax
contemplated by Article 366(29-A)(b) is the value
of the goods involved in the execution of a works
contract. In Builders Association case [1989] 73
STC 370 (SC) ; [1989] 2 SCR 320 it has been
pointed out that in Article 366(29-A)(b), the
emphasis is on the transfer of property in goods
(whether as goods or in some other form) (page
396 of STC; 347 of SCR). This indicates that
though the tax is imposed on the transfer of
property in goods involved in the execution of a
works contract, the measure for levy of such
imposition is the value of the goods involved in
the execution of a works contract. We are,
however, unable to agree with the contention
urged on behalf of the contractors that the value
of such goods for levying the tax can be assessed
only on the basis of the cost of acquisition of the
95
goods by the contractor. Since the taxable event is
the transfer of property in goods involved in the
execution of a works contract and the said
transfer of property in such goods takes place
when the goods are incorporated in the works,
the value of the goods which can constitute the
measure for the levy of the tax has to be the value
of the goods at the time of incorporation of the
goods in the works and not the cost of acquisition
of the goods by the contractor. We are also unable
to accept the contention urged on behalf of the
States that in addition to the value of the goods
involved in the execution of the works contract the
cost of incorporation of the goods in the works
can be included in the measure for levy of tax.
Incorporation of the goods in the works forms part
of the contract relating to work and labour which
is distinct from the contract for transfer of
property in goods and, therefore, the cost of
incorporation of the goods in the works cannot be
made a part of the measure for levy of tax
contemplated by Article 366(29-A)(b).
Xxxxxxxx The value of the goods involved
in the execution of a works contract will,
therefore, have to be determined by taking into
96
account the value of the entire works contract and
deducting therefrom the charges towards labour
and services which would cover:
a) Labour charges for execution of the
works;
b) amount paid to a sub-contractor for
labour and services;
c) charges for planning, designing and
architect's fees;
d) charges for obtaining on hire or
otherwise machinery and tools used for
the execution of the works contract;
e) cost of consumables such as water,
electricity, fuel etc. used in the execution
of the works contract the property in
which is not transferred in the course of
execution of a works contract; and
f) cost of establishment of the contractor to
the extent it is relatable to supply of
labour and services;
g) other similar expenses relatable to
supply of labour and services;
97
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.
RATE OF TAX:
A question has been raised whether it is
permissible for the State Legislature to levy tax on
98
deemed sales falling within the ambit of Article
366(29-A)(b) by prescribing a uniform rate of tax
for all goods involved in the execution of a works
contract even though different rates of tax are
prescribed for sale of such goods. The learned
Counsel for the contractors have urged that it
would not be permissible to impose two different
rates of tax in respect of sale of the same article,
one rate when the article is sold separately and a
different rate when there is deemed sale in
connection with the execution of a works contract.
On behalf of the States it has been submitted that
it is permissible for the State to impose a
particular rate of tax on all goods involved in the
execution of a works contract which may be
different from the rates of tax applicable to those
goods when sold separately. In the field of
taxation the decisions of this Court have
permitted the legislature to exercise an extremely
wide discretion in classifying items for tax
purposes, so long as it refrains from clear and
hostile discrimination against particular persons
or classes. (See: East India Tobacco Company Vs.
State of Andhra Pradesh [1062] 13 STC 529 (SC)
at page 534. Imposition of sales tax at different
99
rates depending on the value of the annual
turnover was upheld in Kodar v. State of Kerala
[1974] 34 STC 73 (SC). Similarly, imposition of
purchase tax at different rates for sugar mills and
khandsari units was upheld in Ganga Sugar Co.
Ltd. v. State of U.P. and Ors., [ 1980] 45 STC 36
(SC). In our opinion, therefore, it would be
permissible for the State Legislature to tax all the
goods involved in the execution of a works
contract at a uniform rate which may be different
from the rates applicable to individual goods
because the goods which arc involved in the
execution of the works contract when
incorporated in the works can be classified into a
separate category for the purpose of imposing the
tax and a uniform rate may be prescribed for sale
of such goods.
The aforesaid discussion leads to the
following conclusions:-
(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
100
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 and 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 ambit
of article 366(29-A)(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 interstate
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 form) involved
101
in the execution of a works contract falling within
the ambit of Article 366(29-A)(b) is leviable on the
goods involved in the execution of a works
contract and the value of the goods which are
involved in the execution of works contract and
would constitute the measure for imposition of the
tax.
(5) In order to determine the value of the
goods which are involved in the execution of a
works contract for the purpose of levying the tax
referred to in article 366(29-A)(b), it is permissible
to take the value of the works contract as the
basis and the value of the goods involved in the
execution of the works contract can be arrived at
by deducting expenses incurred by the contractor
for providing labour and other services from the
value of the works contract.
(6) The charges for labour and services
which are required to be deducted from the value
of the works contract would cover (i) labour
charges for execution of the works, (ii) amount
paid to a sub-contractor for labour and services;
(iii) charges for obtaining on hire or otherwise
machinery and tools used for execution of the
102
works contract; (iv) charges for planning,
designing and architect's fees; and (v) cost of
consumables used in the execution of the works
contract; (vi) cost of establishment of the
contractor to the extent it is relatable to supply of
labour and services, (vii) other similar expenses
relatable to supply of labour and services, and
(viii) profit earned by the contractor to the extent it
is relatable to supply of labour and services.
(7) To deal with cases where the contractor
does not maintain proper accounts or the account
books produced by him are not found worthy of
credence by the assessing authority the
Legislature may prescribe a formula for deduction
of cost of labour and services on the basis of a
percentage of the value of the works contract but
while doing so it has to be ensured that the
amount deductible under such formula does not
differ appreciably from the expenses for labour
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.
103
(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.
31. The Supreme Court in the case of M/S.LARSEN
& TOURBO LIMITED & ANR. VS. STATE OF KARNATAKA
ANR. (2013 65 VST 1), explaining Sub-Clause (b) of clause
29A of Article 366 of the Constitution has held as under:
60. It is important to ascertain the meaning
of sub-clause (b) of clause 29-A of Article 366 of
the Constitution. As the very title of Article 366
shows, it is the definition clause. It starts by
saying that in the Constitution unless the context
otherwise requires the expressions defined in that
article shall have the meanings respectively
assigned to them in the article. The definition of
expression “tax on sale or purchase of the goods”
is contained in clause (29-A). If the first part of
clause 29-A is read with sub-clause (b) along with
latter part of this clause, it reads like this: tax on
104
the sale or purchaser of the goods” 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 and such transfer,
delivery or supply of any goods shall be deemed
to be a sale of those goods by the person making
the transfer, delivery or supply and a purchase of
those goods by the person to whom such transfer,
delivery or supply is made. The definition of
“goods” in clause 12 is inclusive. It includes all
materials, commodities and articles. The
expression, ‘goods’ has a broader meaning than
merchandise. Chattels or movables are goods
within the meaning of clause 12. Sub-clause (b)
refers to transfer of property in goods (whether as
goods or in some other form) involved in the
execution of a works contract. The expression “in
some other form” in the bracket is of utmost
significance as by this expression the ordinary
understanding of the term ‘goods’ has been
enlarged by bringing within its fold goods in a
form other than goods. Goods in some other form
would thus mean goods which have ceased to be
chattels or movables or merchandise and become
attached or embedded to earth. In other words,
105
goods which have by incorporation become part of
immovable property are deemed as goods. The
definition of ‘tax on the sale or purchase of goods
includes a tax on the transfer or property in the
goods as goods or which have lost its form as
goods and have acquired some other form
involved in the execution of a works contract.
61. Viewed thus, a transfer of property in
goods under clause 29-A(b) of Article 366 is
deemed to be a sale of the goods involved in the
execution of a works contract by the person
making the transfer and the purchase of those
goods by the person to whom such transfer is
made.
62. The States have now been conferred
with the power to tax indivisible contracts of
works. This has been done by enlarging the scope
of “tax on sale or purchase of goods” wherever it
occurs in the Constitution. Accordingly, the
expression “tax on the sale or purchase of goods”
in Entry 54 of List II of Seventh Schedule when
read with the definition clause 29-A, includes a
tax on the transfer of property in goods whether
as goods or in the form other than goods involved
106
in the execution of works contract. The taxable
event is deemed sale.
32. From the aforesaid judgments it is clear that, by
virtue of the legal fiction introduced by Article 366 (29-A)(b)
of the Constitution there is a deemed sale of the goods which
are involved in the execution of a works contract. The
expression “in some other form” in the bracket is of utmost
significance as by this expression the ordinary
understanding of the term ‘goods’ has been enlarged by
bringing within its fold goods in a form other than goods.
Goods in some other form would thus mean goods which
have ceased to be chattels or movables or merchandise and
become attached or embedded to earth. In other words,
goods which have by incorporation become part of
immovable property are deemed as goods. The definition of
‘tax on the sale or purchase of goods’ includes a tax on the
transfer or property in the goods as goods or which have lost
its form as goods and have acquired some other form
involved in the execution of a works contract. Therefore a
107
legal fiction is created by this deeming provision providing
for sale of goods at the time of incorporation of the goods in
the course of execution of any works contract. The liability
to tax even in respect of declared goods is to be determined
at the time of acquisition or purchase of such goods which is
involved in the execution of contract but at the time of
incorporation of such goods in the course of execution of any
works contract. As held by the Apex Court, a contractor
cannot insist that the value of the goods for the purpose of
levy of tax cannot be taken as the value of acquisition of
goods. It has to be the value of the goods at the time of
incorporation of the goods into the works contract. If after
acquisition of goods till it is incorporated into in the works
contract, there is no change of form, then, the value of the
goods at the time of incorporation would be the same as the
value of the goods at the time of acquisition. If after
acquisition of the goods, before incorporation, the goods is
transformed into a different form, then, it is the value of
different form of goods which is to be taken into
108
consideration. If the declared goods after purchase, before
incorporation is transformed into a different commercial
goods and if it ceases to be a declared goods at the time of
incorporation, then Section 15 has no application to the
facts of this case. Then the State Legislature is at liberty to
impose uniform rate of tax and in the Schedule if it does not
fall within any one of the specified items, then the residuary
item Sl.No.23 is applicable. But if the declared goods after
purchase and at the time of incorporation continue to have
the same characteristic, then the restriction imposed on the
State Legislature to levy tax under Section 15 is attracted.
Therefore in each case, when dispute arises, depending upon
the facts of the case, first, finding is to be recorded about the
characteristic of the goods which is at the time of
incorporation and then decide the levy of tax.
33. Sixth Schedule to the Act, of which reference is
made under Section 4(1)(c) of the KVAT Act, reads as under:
109
23. All other works contracts not specified in any of the above categories including composite contracts with one or more of The above categories Fourteen and one half percent
Fourteen and one half percent
Sixth Schedule exclusively deals with works contract and the
rate of tax. Sl.No.1 to 22 is the description of different types
of works contract and rate of tax payable is the same. Only
in respect of Item 23, which is in the nature of residuary
works contract, the rate prescribed is fourteen and one half
percent.
34. Reliance is placed on two judgments of the
Australian Court by the revenue in support of their
contentions. In the case of BUILDERS ASSOCIATION OF
INDIA AND OTHERS REPORTED IN (1989) STC VOL.73
PAGE 370, the Apex Court had an occasion to consider both
the judgments i.e., in the case of Sydney Hydraulic and
Central Engineering Co. v. Blackwood & Son, 8 NSWSR
10, and M.R. Hornibrook (Pty.) Ltd. v. Federal
110
Commissioner of Taxation., [1939] 62 C.L.R. 272, which
reads as under:
“It is useful to refer at this stage to the
corresponding law in Australia. In Sydney
Hydraulic and Central Engineering Co. v.
Blackwood & Son, 8 NSWSR 10, the Supreme
Court of New South Wales held that the works
contract entered into between the parties which
came up for consideration in that case was one to
do certain work and to supply certain materials
and not an agreement for the sale or delivery of
the goods. Accordingly, no sales tax was payable
thereon. In 1932 the legislature intervened and
amended the statute of 1930 by introducing a
new provision, section 3(4) in the following terms:
“For the purpose of this Act, a person shall
be deemed to have sold goods, if, in the
performance of any contract (not being a contract
for the sale of goods) under which he has
received, or is entitled to receive, valuable
consideration, he supplies goods the property in
which (whether as goods or in some other form)
passes, under the terms of the contract, to some
other person.”
111
After the above amendment there arose a
case in Australia regarding the liability of a
contractor to pay sales tax on the transfer of
goods involved in a works contract, namely, M.R.
Hornibrook (Pty.) Ltd. v. Federal Commissioner of
Taxation., [1939] 62 C.L.R. 272. The relevant
facts involved in that case were these. M.R.
Mornibrook (Pty.) Ltd. was a builder and a
contractor and in addition to manufacturing
ironwork and goods for use in contracts
undertaken, manufactured items of plants for its
own use. In the years 1934 and 1935, M.R.
Hornibrook (Pty.) Ltd., constructed under contract
for Hornibrook Highway Ltd. at a price set out in
the contract, the Hornibrook Highway connecting
Sandgate and Redcliffe, Queensland. Part of the
highway consisted of a bridge of 1 ¾ miles in
length over an arm of Moreton Bay. The bridge
was built on reinforced concrete piles, which were
driven into the bed of the sea in series of three in
line, each set of three being connected by a
headstock of reinforced concrete. The piles varied
in length depending upon the depth to which they
had to be driven into the bed of the sea. They
were made of a mixture of cement, crushed metal,
112
sand and water, and reinforced with steel bars.
The piles were constructed on the bank of
Moreton Bay adjacent to the site of the bridge.
The headstock was built in the same manner as
the piles. So far as was known, concrete piles of
the class used in the construction of the bridge
were not manufactured for sale anywhere in
Australia, nor were they an article of commerce in
Australia or anywhere else in the world. Such
piles had not been standardized because the
construction of each pile depended upon the
particular load which it was to carry and the
nature of the ground into which it was to be
driven, and therefore, each pile in a job might be
different from every other pile in it in length.
When the sales tax authorities made an
assessment in respect of the value of the piles,
M.R. Hornibrook (Pty.) Ltd. contended that the
said piles had no sale value within the meaning
of the Sales Tax Assessment Acts, that the said
piles were not a “manufacture” or “goods
manufactured” within the meaning of the Sales
Tax Assessment Acts, and that the said piles
formed part of a bridge and were built on the job
and were not article of commerce and were not
113
procurable from any third person and were not of
a class of goods manufactured for sale by any
person and therefore the price of piles was not
liable to payment of sales tax. Latham, C.J. with
whom Justice Rich and Justice Starke agreed
(Justice McTiernan dissenting) held as under:
"Sec. 3(4) of the Act, referred to in part f
above quoted, was at the relevant time in the
following form: 'For the purposes of this Act, a
person shall be deemed to have sold goods, if, in
the performance of any contract under which he
has received or is entitled to receive valuable
consideration he supplies goods, the property in
which (whether as goods or in some other form)
passes under the terms of the contract to some
other person.”
In my opinion the commissioner is right in
his contention that this provision applies to the
present case. The appellant-company, in the
performance of a contract for building a bridge
under which contract it was entitled to receive
and doubtless has received valuable
consideration, has supplied goods, namely,
reinforced concrete piles. Such piles are plainly
114
manufactured articles. They are chattels. They
were intended to be incorporated in a structure
and were so incorporated. They lost their identity
as goods in that structure. But this fact does not
prevent the piles from being goods any more than
it prevents bricks or stones or nuts and bolts from
being goods. The fact that the goods were
specially manufactured and designed for a
particular purpose cannot be held to deprive them
of the character of goods."
Sub-clause (b) of clause (29-A) of Article
366 of the Constitution of India more or less has
adopted the language used in section 3(4) of the
Australian Act.
35. From the aforesaid facts, it is clear that the
question before the Australian Court was not whether the
iron and steel used in the construction of piles seems to be a
declared goods at the time of incorporation of the same in
the bridge. The question which arose for consideration was,
by using iron and steel, piles were constructed on different
sizes, different lengths depending upon the depth to be
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driven under the bed of the sea. Thereafter, the headstock
was built in the same manner as that of the piles. Concrete
piles of the class used in the construction of the bridge were
not manufactured for sale anywhere in Australia, nor they
were an article of commerce in Australia or anywhere else in
the world. It is in that context, it was held that piles itself is
a goods in the structure which is used in construction of the
bridge and therefore, chargeable to tax. Therefore, the said
judgment has no application to the facts of the case.
36. Reliance was also placed on the judgment of this
Court in the case of B.V.SUBBA REDDY VS. DEPUTY
COMMISSIONER OF COMMERCIAL TAXES
(ASSESSMENTS), BIJAPUR AND ANOTHER REPORTED IN
(2008) VAT AND SERVICE TAX CASES VOL.11 PAGE 715,
where this Court has held as under:
12. Section 5B of the Act is the charging
provision. It says that notwithstanding anything
contained in Sub-section (1) or Sub-section (3) or
Sub-section (3C) of Section 5, but subject to Sub-
116
section (4), (5) or (6) of Section 5 of the Act, a
dealer is liable to tax on his taxable turnover of
transfer of property in goods (whether as goods or
in some other form) involved in the execution of
works contract for each year at the rates
mentioned at column (3) of the Sixth Schedule.
13. Entry No. 6 of the Sixth Schedule
provides for civil works like construction of
buildings, bridges, roads, etc. The rate of tax for
the relevant assessment year is 8 per cent.
14. It is not in dispute nor it can be
disputed by both sides that a contract had been
awarded to the petitioner for construction of a
bridge. For that purpose the dealer/contractor
has purchased iron and steel and has utilised the
same for the purpose of construction of the bridge.
Iron and steel purchased by him are used not in
the same form as iron and steel but are used for
the purpose of construction of a bridge. Therefore,
liability of the dealer would squarely come under
entry No. 6 of the Sixth Schedule to the Act.
Keeping this aspect of the matter in view, the
Tribunal has accepted the reasoning of the
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revisional authority while confirming the order
passed by the revisional authority.
37. Therefore, what follows from the aforesaid
judgments is that, the iron and steel is purchased from the
contractor are not used in the same form as iron and steel at
the time of incorporation of the same in the construction of
the bridge, the liability of the tax at serial No.23 is attracted.
If the iron and steel purchased by him is used in the same
form, it continues to be a declared goods and serial No.23 is
not attracted. The State has no power to levy tax more than
what is prescribed under Section 15 of the Act. Therefore,
the said judgment has no application to the facts of this
case.
38. Then reliance is placed on the judgment in the
case of ALGURAM HARINARAYAN RAM VS. ASSISTANT
COMMISSIONER OF SALES TAX, CUTTACK RANGE
118
REPORTED IN 1971 V.27 STC PAGE 385, wherein at paras
3 and 4 it has been held as under:-
“3. xxxxxxxxxxxxxxx Even though the
longer iron rods are cut into pieces, they continue
to remain as iron rods. The assessing authorities
were wrong in taxing the petitioners at five per
cent. under entry 68 which speaks of other
articles.
4. So far as the B.P. sheets are concerned,
the entry says that iron plates sold in the same
form in which they are directly produced by the
rolling mill are to be taxed at two per cent. Once
the plates are cut into pieces they cannot be said
to retain the form in which they were directly
produced by the rolling mill. The word 'form'
according to the Oxford Dictionary carries the
meaning 'shape or configuration'. Once the bigger
plate is cut into pieces according to the wishes of
the customers the plate cannot be said to retain
the form, at any rate the form which it had when
it was produced directly by the rolling mill. Such
cut iron plates were rightly assessed at five per
cent.”
119
39. As could be seen from the aforesaid reasoning,
there is an inconsistency between para No.3 and para No.4.
If an iron rod after it is cut, the pieces continue to remain as
iron rod. We fail to understand as to how a B.P. sheet after
it is cut into small plates, the same B.P.sheet transforms
into altogether a new product.
40. The Allahabad High Court in the case of
TRIVENI STRUCTURALS LIMITED VS COMMISSIONER,
TRADE TAX, U.P., LUCKNOW reported in (2009) 20 VST
760 (All), dealing with a case where after purchase of iron
and steel, it was used in the manufacturing of structure,
which were subsequently used in the execution of the works
contract. The Assessing authority levied the tax on the value
of the steel structure used in the execution of the works at
the rate of 8 percent. Levy of tax has been upheld by the
authorities. In that context, it was held that when the
Tribunal has recorded a categorical finding of fact, that the
items which were used in the execution of the works contract
120
were not the same which were purchased, then the said
structure ceases to be a declared goods and is liable to be
taxed under the State legislation. There is no quarrel with
the aforesaid proposition. Therefore, the question in each
case is, whether after purchase of iron and steel, before it is
incorporated into a building, bridge or any other structure in
the course of execution of the works contract, has it been
transformed altogether into another goods. If it is so, it
ceases to be a declared goods and taxable at the rate
prescribed under the State legislation. However, if the iron
and steel continues to be in the same form from the time it
was purchased and after it was incorporated in the buildings
or any work undertaken, it continues to be a declared goods
at the time of incorporation, the power of the State to levy
tax over and above what is prescribed under the CST is not
permissible.
41. In the instant case, it is not in dispute that the
petitioner purchased iron and steel for the purpose of
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execution of works contract. The nature of work involved is
civil work. The iron and steel which is purchased by the
petitioner is used in casting beams, pillars, slabs and roofs.
For the purpose of casting the said roofs, beams, iron and
steel is cut to a particular size and then are arranged in the
shape of beams, pillars, roof with the help of binding wire.
Thereafter, concrete mixture is poured into it. Merely
because iron and steel are cut into a particular length
depending on the requirement and they are bound by wire
and converted into a particular shape, the iron rod and steel
do not lose their original characteristic. It continues to be
the same product. Even after these beams, pillars, roofs are
cast, the rod and steel continues to be in the same position
in the building or the bridge which is constructed. At no
point of time the iron and steel is transformed into a new
product/goods. There is no value addition to the said steel
rods and beams. In fact, steel rods are used only to reinforce
the cement concrete. It is used because it is iron and steel
rod and it continues to be iron and steel rod even after the
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completion of the building or the bridge which is
constructed, in which these iron and steel rods are used.
Therefore it continues to be the declared goods. By virtue of
Section 15 of the CST Act, the State has an authority to
impose tax. It cannot impose tax more than the tax
prescribed in Section 15 of the Act.
42. Therefore the Assessing Authority was justified
in levying tax on these iron and steel rods at 4% and the
Revisional Authority was not justified in proposing tax at the
rate of 12.5% relying on Sl.No.23 of Sixth Schedule.
POINT NO. 2 – ‘TAX’ LEVIABLE AT WHAT STAGE
43. Section 15(a) of the CST Act, 1956 prior to
Finance Act 2002, read as under:
“15. xxxxx
(a) the tax payable under that law in
respect of any sale or purchase of such goods
inside the State shall not exceed 5% of the sale or
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purchase price thereof and such tax shall not
be levied at more than one stage.”
44. With the introduction of VAT which provides for
taxation at more than one stage, the aforesaid words are
omitted by Finance Act 2002. However, the learned Single
Judge did not notice this change in law while framing the
question for consideration.
45. Karnataka Value Added Tax Rules 2005, for
short, hereinafter referred to as ‘Rules’ provides for
determination of turnover in Rule 3. Sub-Rule(1) of Rule 3
reads as under:-
“3. Determination of turnover.- (1) The total
turnover of a dealer, for the purposes of the Act,
shall be the aggregate of.-
(a) the total amount paid or payable by
the dealer as the consideration for
the purchase of any of the goods in
respect of which tax is leviable under
sub-section (2) of Section 3;
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(b) the total amount paid or payable to
the dealer as the consideration for
the sale, supply or distribution of any
goods where such sale, supply or
distribution has taken place inside
the State, whether by the dealer
himself or through his agent;
(c) 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 including any amount
paid as advance to the dealer as a
part of such consideration;
(d) the total amount paid or payable to
the dealer as the consideration for
transfer of the right to use any goods
for any purpose (whether or not for
specified period);
(e) the total amount payable to the
dealer as the consideration in respect
of goods delivered on hire purchase
or any system of payment by
instalments;
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(f) the aggregate of the sale prices
received and receivable by the dealer
in respect of sale of any goods in the
course of inter-state trade or
commerce and export out of the
territory of India and sale in the
course of import into the territory of
India; and
(g) the value of all goods transferred or
despatched outside the State
otherwise than by way of sale.
46. By notification dated 27.05.2006, an explanation
was inserted with effect from 01.04.2006. The said
Explanation reads as under:
“Explanation.- Any amount paid as
advance to a dealer as a part of
consideration for transfer of property in
goods (whether as goods or in some other
form) involved in the execution of a works
contract shall be included in his total
turnover in the month in which execution of
such works contract commences.”
126
This explanation is challenged on the ground it is
ultravires.
47. The word ‘total turnover’ has been defined in
Section 2(35) of the KVAT Act. It reads as under:
“35) ‘Total turnover’ means the aggregate
turnover in all goods of a dealer at all
places of business in the State, whether or
not the whole or any portion of such
turnover is liable to tax, including the
turnover of purchase or sale in the course
of interstate 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 and
the value of goods transferred or
despatched outside the State otherwise
than by way of sale.”
48. The word ‘turnover’ has been defined in Section
2(36) of the KVAT Act. It reads as under:
“36) ‘Turnover’ means the aggregate amount
for which goods are sold or distributed or
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delivered or otherwise disposed of in any of
the ways referred to in clause (29) by a
dealer, either directly or through another, on
his own account or on account of others,
whether for cash or for deferred payment or
other valuable consideration, and includes
the aggregate amount for which goods are
purchased from a person not registered
under the Act and the value of goods
transferred or despatched outside the State
otherwise than by way of sale, and subject
to such conditions and restrictions as may be
prescribed the amount for which goods are
sold shall include any sums charged for
anything done by the dealer in respect of the
goods sold at the time of or before the
delivery thereof.”
The explanation reads as under:
“Explanation.-
The value of the goods transferred or despatched
outside the State otherwise than by way of sale,
shall be the amount for which the goods are
ordinarily sold by the dealer or the prevailing
market price of such goods where the dealer does
not ordinarily sell the goods.”
128
49. From the aforesaid definition it is clear that
turnover means the aggregate amount for which goods are
sold or distributed or delivered or otherwise disposed of in
any of the ways referred to in clause (29) by a dealer.
Therefore unless there is a sale of the goods, the amount
realized by way of such sale cannot form part of turn over.
50. Sub-Clause (b) of clause 29A of Article 366 of
the Constitution, which defines the tax on the sale or
purchase of goods 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.
51. Section 7 of the KVAT Act, reads as
under:-
“7. Time of sale of goods
(1) Notwithstanding anything contained
in the Sale of Goods Act, 1930 (Central Act 3 of
1930), for the purpose of this Act, and subject to
sub-section (2), the sale of goods shall be deemed
129
to have taken place at the time of transfer of title
or possession of incorporation of the goods in the
course of execution of any works contract
whether or not there is receipt of payment:
Provided that where a dealer issues a tax
invoice in respect of such sale within fourteen
days from the date of the sale, the sale shall be
deemed to have taken place at the time the
invoice is issued.
(2) Where, before the time applicable in
sub-section (1), the dealer selling the goods issues
a tax invoice in respect of such sale or receives
payment in respect of such sale, the sale shall, to
the extent that it is covered by the invoice or
payment, be deemed to have taken at the time
the invoice is issued or the payment is received.
(3) The Commissioner may on an
application of any dealer exempt such dealer
subject to such conditions as he may specify,
from the time specified in sub-section (1).”
52. Section 7 of the Act makes it explicitly clear that
notwithstanding anything contained in the Sale of Goods
130
Act, 1930, for the purpose of Value Added Tax Act, the sale
of goods shall be deemed to have taken place at the time of
transfer of title or possession or incorporation of the goods in
the course of execution of any works contract whether or not
there is receipt of payment.
53. Therefore the sale of goods takes place either by
transfer of title or by delivery of possession or at the time of
incorporation of the goods in the course of execution of any
works contract. It is a deeming provision. Therefore for any
amount to be included in the turnover, the condition
precedent is there should be a sale or delivery of possession
or incorporation of the goods in the course of execution of
any works contract. If none of these events have happened,
there is no turnover. In consideration of entering into the
works contract, if amounts are paid in advance as
mobilization advance, that amount is paid to the contractor
to take steps to execute the work. On the date the amount is
paid, the contractor neither transfers title in the property nor
131
delivers possession nor incorporates any goods in the work.
Therefore the question of treating the advance amount paid
as part of consideration for transfer of property in goods
would not become turnover and therefore the explanation
added to Rule 3 with the object of levying sales tax on
advance receipt runs counter to the aforesaid statutory
provisions as well as the constitutional provisions. Therefore
the learned Single Judge was justified in holding that the
explanation is unconstitutional. Therefore no fault could be
found in the said order of the learned Single Judge.
POINT NO. 3
54. In order to answer the said question, it is
necessary to find out that after purchase of MS.plates and
sheets, before it was incorporated, what are the activity
carried out by the assessee at the time of incorporation and
in what form the MS sheets were embedded to the earth.
55. Learned senior Counsel today, has given us the
written note explaining the activity that the assessee has
132
undertaken from the time MS sheets were purchased till the
time it was incorporated. It reads as under:
Nature of work:
Mounded LPG, storage system package for
phase III – refinery project of MRPL, Mangalore –
This includes residual process engineering,
design, detailed engineering preparation of all
drawings, schemes, procurement of material,
supply fabrication, construction, erection,
assembly, inspection, testing, cathodic protection,
civil works, structural work and RCC retaining
wall, concrete tunnels around mound vessels,
piping work sand bed, mound, hard stand, soil
strengthening, drains, electrical and
instrumentation works, fire protection system,
pumps and instrumentation, insulation, fire
proofing, site insulation of pumps, gauges
providing temporary works and equipments for
completion, pre-commissioning, commissioning,
required tools and tackles, complete all work in
respect of turnkey basis and system performance
guarantee of LPG storage and transfer system to
the entire satisfaction of inspection authority and
engineering in charge.
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Dimension of Mounded Vessels
1. Number of Vessels - 4 nos.
2. Diameter – 7000 mm each
3. Length – 97,058 mm each
4. Weight – 956 MT each
5. Thickness of Plate – 48 MM, 45 MM, 42
MM
As per the drawings are procured from Steel
Authority of India Ltd. For quantity of 3800 mt.
The plates so procured are used in the execution
of works contract i.e., for making sections. The
plates are rolled as per required diameter by
using rolling machine. The two ends are joined
by welding. The engineering inspection agency
will check the diameter and welding etc. as per
drawings and specifications are cleared for
further test like PWHT, radiography and hydro
testing. These rolled cells are called the sections
of the mounded vessel. There will be 44 sections.
These sections are painted and are transported to
the mound site to place on the foundation where
piece by piece it is erected, installed and welded
and fixed to the earth.
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56. The shape of the vessel looks like a bullet.
Hence, it is called bullet vessel. The major raw material
used in making sections and pipe spools are iron and steel
plates and pipes and consumables like electrodes, gases,
paint etc. The pipes are used for making pipe spools which
are subsequently transported to the mounded site for further
piping work around the system as per drawings and
specifications. For the above process of making sections and
pipe spools at fabrication yard, as per the excise rules, the
petitioner has taken the Central Excise Registration. Excise
duty is payable on the process/fabrication of sections and
pipe spools at the time of clearance. It is called a mounded
vessel because it has a shape of mound which includes the
civil activities like excavation, making RCC retaining wall,
drainage system and then cover up by sand filling. The
system is totally surrounded by sand covered with stones
and brick pitching keeping open only the inlets and outlets
of the vessel. The fittings such as valves, instruments, fire
fightings and security system are supplied directly to the
135
party which will get fitted to the system/package. These are
directly sold to the party under Section 6(a) of the CST. The
above work involved is total package for LPG mounded
storage system. The total price is a lump sum price on
Turnkey basis and break up of lump sum price mentioned in
the contract is for interim payment purpose only and not
break up of the work. However, the total contract price
remains same for the execution of entire contract. After
completing the above activities the total system is pre-
commissioned and then commissioned and handed over for
the operation.
57. The tax invoice is also made available to them.
It is dated 6.9.2010. The invoice is raised in the name of the
petitioner. The total costs towards supply of Bullet section
inside the Refiners Bullet Section is Rs.20,47,80,859. The
basic excise duty paid is Rs.2,04,78,086/- From the
aforesaid description it is clear that the plates so procured
are used in the execution of works contract i.e. for making
sections. The plates are rolled as per required diameter by
136
using rolling machine. The two ends are joined by welding.
These sections are painted and are transported to the mound
site to place on the foundation where piece by piece it is
erected, installed and welded and fixed to the earth. After all
sections are installed it becomes a vessel called bullet vessel.
Therefore, at the time of incorporation, the goods which is
transported is not in the form of plates but in the form of
sections. Therefore, the contention that at the time of
incorporation, the goods do not lose the character of a plate
cannot be accepted. In fact these plates are purchased for
the purpose of manufacturing of bullet tank. Having regard
to the size and weight of the bullet tank each mounded
vessel consists of 11 Sections and these sections are
fabricated and processed at the yard and then it is
embedded into the earth. When all these 11 sections are
embedded, it takes the shape of a bullet tank. It makes no
difference. Because the steel plates are purchased for the
purpose of manufacturing of the bullet tanks, the petitioner
has paid excise duty. If the petitioner were to use the steel
137
plates as it is, there was no liability to pay Central Excise
duty at all.
58. Section 2(f) of The Central Excise Act, 1944
defines what the manufacture under the Act means as
follows:-
“(f)”manufacture” includes any process-
(i) incidental or ancillary to the completion of a
manufactured product;
(ii) which is specified in relation to any goods
in the section or Chapter notes of [The First
Schedule] to the Central Excise Tariff Act, 1985(5
of 1986) as amounting to [manufacture; or]
(iii) which in relation to the goods specified in
the Third Schedule, involves packing or repacking
of such goods in a unit container or labelling or re-
labelling of containers including the declaration or
alteration of retail sale price on it or adoption of
any other treatment on the goods to render the
product marketable to the consumer;]
138
and the word “manufacture” shall be construed
accordingly and shall include not only a person
who employs hired labour in the production or
manufacture of excisable goods, but also any
person who engages in their production or
manufacture on his own account;]”
59. Similarly, Section 2(29BA) of the Income Tax
Act, 1961 defines what a manufacture as under:-
“(29BA) “manufacture”, with its
grammatical variations, means a change in a
non-living physical object or article or thing.-
(a) resulting in transformation of the
object or article or thing into a new and distinct
object or article or thing having a different name,
character and use; or
(b) bringing into existence of a new and
distinct object or article or thing with a different
chemical composition or integral structure;]
60. The work undertaken by the petitioner before
incorporation of the steel plates falls within the definition of
139
“manufacture” under both the enactments. In other words,
the steel plates before it was incorporated has undergone the
process of manufacture and ceased to be the steel plates and
it has taken the form of either section or bullet tank.
Therefore, the value of the steel plates at the time of
acquisition is not the same at the time of incorporation. It
was the declared goods at the time of acquisition. It ceased
to be declared goods at the time of incorporation. Before
incorporation there is value addition to the Steel plates by
the process of manufacture. Therefore, the prohibition
contained under Section 15 of the CST is not attracted and
the State Legislature has the power to levy tax in terms of
Item No.23 of Sixth Schedule on these goods as it does not
fall within any of the categories mentioned from Item Nos.1
to 22 and also for the reason that it is not a declared goods
as stipulated under Section 14 of the CST Act.
140
61. In that view of the matter, the authorities were
justified in levying tax at 12.5% in terms of Item No.23 of
Sixth Schedule on the bullet tanks.
62. All the connected revision petitions were allowed
by the Karnataka Appellate Tribunal relying on the judgment
of the learned Single Judge and accordingly, the appeals
were allowed. It is against that order, the State has
preferred these revision petitions before this Court. In view
of the fact that we have upheld the order of the learned
single Judge, insofar as levying of tax on iron and steel as
well as the provision relating to liability of tax on advance is
quashed, the said revision petitions are also liable to be
dismissed. Hence, we pass the following:-
O R D E R
Writ appeals are partly allowed.
(a) The finding of the learned single Judge that the
State Legislature has no competence to levy tax contrary to
141
Section 4(1)(C) of the Act used in construction activity is
upheld;
(b) The finding of the learned single Jude that
explanation to Rule 3(1) of the Rules is ultra vires Section 7
of the Act as well as Article 366 (29A)(b) of the Constitution
is upheld;
(c) The order passed by the authorities imposing tax
at 12.5% on steel sections of bullet tank is upheld.
In W.A.No.740/2011, the counsel for the assessee
submits that they have not claimed any concessional rate of
tax in respect of grills, gates and windows which are
manufactured out of iron and steel rods and they have
confined their claim only to the raw material used for the
construction of the beams, columns and pillars. In the light
of what we have stated above, they are entitled to the said
benefit.
142
Ordered accordingly. The parties to bear their own
costs.
Sd/- JUDGE
Sd/- JUDGE
Nvj/ckl/ksp/alb/-