Works contract composition tax limited to goods component, not the entire contract value under sales tax law.

Section 17(6) of the Karnataka Sales Tax Act, 1957, as it stood before 1 April 1996, was construed consistently with Article 366(29-A)(b) of the Constitution to confine levy on works contracts to the transfer of property in goods involved in execution. The phrase "total turnover relating to transfer of property in goods" could not be expanded to cover the entire consideration for the works contract, because the constitutional fiction treats only the goods component as sale. Composition tax was therefore payable only on the turnover relatable to the transfer of property in goods, not on the whole contract value.

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Issues: Whether, under section 17(6) of the Karnataka Sales Tax Act, 1957 as it stood before 1 April 1996, the composition tax on civil works contracts was payable on the entire consideration of the contract or only on the turnover relatable to the transfer of property in goods involved in execution of the works contract.

Analysis: The expression used in section 17(6) was held to be drawn from Article 366(29-A)(b) of the Constitution of India. That constitutional provision enlarges the concept of sale so as to include only the transfer of property in goods involved in a works contract, and not the entire amount paid for execution of the contract. On that basis, the phrase "total turnover relating to transfer of property in goods" in section 17(6) could not be read as total turnover of the whole works contract, because such a construction would go beyond the statutory language and the constitutional scheme governing levy on works contracts.

Conclusion: The composition tax under section 17(6) was payable only on the turnover relating to the transfer of property in goods involved in the works contract, and not on the entire value of the contract.

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