2001 (2) TMI 992 - HC - VAT and Sales Tax

Inter-State Works Contract Subject to Central Sales Tax

Dewas Die Castings Pvt. Ltd. Versus Deputy Commissioner of Sales Tax, Ujjain Division and others

Dewas Die Castings Pvt. Ltd. Versus Deputy Commissioner of Sales Tax, Ujjain Division and others - [2001] 123 STC 548 (MP) Issues:1. Whether the petitioner is liable to pay Central sales tax on certain goods used in execution of works contract in the course of inter-State trade or commerceRs.Analysis:The judgment deals with the issue of whether the petitioner is liable to pay Central sales tax on goods used in execution of works contract in inter-State trade or commerce. The petitioner, engaged in the business of manufacturing machinery parts and undertaking job-work for parties outside the State, was assessed for Central sales tax on goods used in a specific contract. The assessing officer and revisionary authority held the petitioner liable for Central sales tax on certain purchases made outside the State. The petitioner challenged these orders through a writ petition.The petitioner argued that the State Legislature's amendment to include works contract under the State Sales Tax Act did not automatically empower authorities to tax inter-State sales under the Central Sales Tax Act. The petitioner contended that the definition of 'sale' under the Central Sales Tax Act needed amendment to tax inter-State sales in works contracts. The State supported the orders and sought their upholding.The Court considered the arguments presented and the Full Bench decision of another High Court. It analyzed the provisions of the Central Sales Tax Act, particularly Section 3, which deems a sale to be in the course of inter-State trade if it occasions the movement of goods between States. The Court cited previous Supreme Court judgments interpreting Section 3 and emphasized that if a contract stipulates the movement of goods between States, it constitutes an inter-State sale.The Court found that the contract between the petitioner and M/s. Bajaj Auto Limited explicitly provided for the movement of goods between States in the execution of the works contract. As per the contract's covenants, the sale of goods qualified as an inter-State sale, attracting liability for Central sales tax. The Court upheld the findings of the assessing and revisionary authorities, stating that the taxability was based on the contract's terms and not solely on the 46th Amendment. The Court concluded that the petitioner's challenge lacked merit, and the petition was dismissed without costs.