Works contract tax base before 1 April 1988 remained limited to the goods component, not the full contract value.

For periods before 1 April 1988, composition tax under section 17(6) of the Karnataka Sales Tax Act, 1957 on works contracts was confined to the turnover relating to the transfer of property in goods involved in execution of the contract, not the entire contract value. The earlier unamended provision could not be expanded beyond the goods component transferred in the works contract, especially when read with the amended provision effective from 1 April 1988, which expressly shifted the base to the total consideration receivable. Applying Article 366 and the accepted understanding of works contracts, the broader levy was impermissible and the revisional order was unsustainable.

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Issues: Whether, for periods prior to 1 April 1988, composition tax under section 17(6) of the Karnataka Sales Tax Act, 1957 on works contracts was leviable on the total turnover relating to transfer of property in goods involved in execution of the works contract, or on the entire value of the works contract.

Analysis: The unamended provision applied to the total turnover relating to transfer of property in goods (whether as goods or in some other form) involved in execution of the works contract. The amended provision, effective from 1 April 1988, shifted the base to the total consideration received or receivable for the works contract. Reading the two versions together, and in the light of Article 366 of the Constitution of India and the governing understanding of works contracts, the expression in the unamended provision could not be expanded to cover the whole value of the contract. The tax base under the earlier law remained confined to the value of the goods component transferred in execution of the contract.

Conclusion: The levy for the pre-1 April 1988 periods was restricted to the turnover relating to transfer of property in goods involved in the works contract, and not the entire value of the contract; the revisional order was unsustainable.

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