Works contract taxation required a valid charging provision; remaining Rajasthan law could not sustain the levy after invalidation.

After section 5(3) of the Rajasthan Sales Tax Act, 1954 and rule 29(2)(i) of the Rajasthan Sales Tax Rules, 1955 were struck down, sales tax could not be levied on goods and materials involved in works contracts under the remaining provisions. The Forty-sixth Amendment expanded the concept of sale to cover transfer of property in goods in works contracts, but a valid State charging provision was still required. Section 5(3) was the specific levy provision for such contracts, and its invalidity went to the root of the charge. The remaining provisions, the circular, and the deduction mechanism could not substitute for an express statutory foundation, so a fresh charging provision was necessary.

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Issues: Whether, after the invalidation of section 5(3) of the Rajasthan Sales Tax Act, 1954 and rule 29(2)(i) of the Rajasthan Sales Tax Rules, 1955, sales tax could still be levied on the goods and materials involved in the execution of a works contract under the remaining provisions of the Act and the Rules.

Analysis: The Forty-sixth Amendment enlarged the meaning of tax on the sale or purchase of goods so as to include the transfer of property in goods involved in the execution of a works contract, but the levy remained subject to the constitutional limitations and to a valid charging provision under the State law. The relevant statutory scheme treated works contract turnover as the basis of levy and section 5(3) was the specific charging provision for such contracts, operating differently from section 5(1), which applied to ordinary sales on taxable turnover. The earlier Supreme Court decision had held section 5(3) invalid and had stated that the invalidity of that provision went to the root of the levy and that, in its absence, tax could not be imposed. The remaining provisions and the administrative circular could not create a charge by implication, and a taxing statute requires an express statutory foundation for levy. The existing deduction mechanism also did not provide for all the deductions required to determine the taxable value of the goods involved in the works contract as explained by the Supreme Court.

Conclusion: Sales tax could not be levied on works contracts under the existing Rajasthan enactment after section 5(3) and rule 29(2)(i) were struck down, and a fresh charging provision was necessary.

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