Declared goods in works contracts remain capped by CST restrictions, limiting State tax to three per cent.

Declared goods involved in a works contract remain subject to the constitutional limits on State taxation, including article 286 and the statutory restrictions in sections 14 and 15 of the Central Sales Tax Act, 1956. The deemed sale created by article 366(29A)(b) does not remove those limits. Accordingly, declared goods used in execution of a works contract cannot be taxed above the section 15 ceiling of three per cent, while the Assam Value Added Tax Act, 2003 continues to apply at the ordinary rate to goods that are not declared goods. The commentary states that a 12.5 per cent levy on declared goods was without jurisdiction.

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Issues: Whether declared goods involved in the execution of a works contract under the Assam Value Added Tax Act, 2003 can be taxed at 12.5 per cent, or whether the ceiling under section 15 of the Central Sales Tax Act, 1956 limits the tax rate to three per cent.

Analysis: The constitutional amendment inserting article 366(29A)(b) created a deemed sale in respect of transfer of property in goods involved in a works contract, but did not free such deemed sales from the constitutional and statutory restrictions governing State taxing power. The scheme of article 286, read with sections 14 and 15 of the Central Sales Tax Act, 1956, continues to apply to declared goods even when they are involved in works contracts. The restriction under section 15 is general in character and controls the State's power to levy tax on declared goods, while the Assam VAT Act, 2003 may validly impose the ordinary rate on goods that are not declared goods.

Conclusion: Declared goods used in execution of a works contract cannot be taxed at a rate exceeding three per cent, and the impugned order levying 12.5 per cent on such goods was without jurisdiction.

Final Conclusion: The writ petitions were allowed and the authorities were held bound to apply the statutory ceiling applicable to declared goods, while undeclared goods remained taxable at the regular rate under the State law.

Ratio Decidendi: A deemed sale in a works contract remains subject to the constitutional limitations and to the statutory restrictions imposed on declared goods by sections 14 and 15 of the Central Sales Tax Act, 1956.

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