Works contract taxation upheld where statutory inclusion of contractors as dealers fits the deemed sale constitutional framework.

The inclusion of works contractors within the definition of "dealer" under the Andhra Pradesh General Sales Tax Act was upheld because, after the Forty-sixth Amendment, article 366(29-A)(b) permits the transfer of property in goods involved in a works contract to be treated as a deemed sale. The challenge of illegality, arbitrariness, and constitutional invalidity failed because the petitioners did not show any independent infirmity in the amended scheme, and the cases cited were distinguished as addressing different issues. The amended provisions governing works contracts were therefore held valid and operative within the constitutional framework.

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Issues: Whether the inclusion of "works contractor" in the definition of "dealer" under section 2(1)(e) of the Andhra Pradesh General Sales Tax Act, 1957 and the application of the amended provisions governing works contracts were illegal, arbitrary, or unconstitutional.

Analysis: The amendment was tested against article 366(29-A)(b) of the Constitution of India, which enlarges the concept of sale to include the transfer of property in goods involved in the execution of a works contract. On that constitutional footing, the inclusion of works contractors within the statutory definition of dealer was held to be in conformity with the amended constitutional scheme. The petitioners failed to show any independent illegality, arbitrariness, or constitutional infirmity in the statutory provision, and the precedents relied on by them were distinguished as dealing with different questions, namely the nature of particular contracts and source-based deduction provisions, rather than the validity of including works contractors as dealers.

Conclusion: The inclusion of works contractors in section 2(1)(e) and the consequential application of the amended provisions were upheld, and the challenge was rejected.

Ratio Decidendi: After the Forty-sixth Amendment, the State is competent to tax the value of goods involved in the execution of a works contract as a deemed sale, and a statutory inclusion of works contractors within the definition of dealer is valid when it operates within that constitutional framework.

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