Binding Supreme Court precedent on works contracts upheld turnover tax on a joint development arrangement.

Turnover tax levied on a joint development arrangement was sustained because the transaction was treated as a works contract on materially similar facts to an earlier Supreme Court ruling. The Karnataka High Court held that the Supreme Court's pronouncement on the definition and taxability of works contracts was binding under Article 141 and could not be displaced by reliance on other decisions. It observed that any reconsideration of that precedent had to be sought before the Supreme Court. The challenge to the levy therefore failed, and the writ petition dismissal was upheld.

---

---

Issues: Whether turnover tax levied under section 28(6) of the Karnataka Sales Tax Act on the appellant's joint development arrangement was unsustainable on the ground that the transaction was not a works contract and whether the earlier Supreme Court ruling on works contracts was binding and applicable.

Analysis: The facts were found to be materially similar to those considered earlier by the Supreme Court in relation to a development agreement under which the developer supplied materials and labour and marketed the constructed area. The Court held that the earlier ruling on the definition and taxability of a works contract governed the present case. It further held that, under article 141 of the Constitution of India, the Supreme Court's pronouncement is binding on all courts, and that this Court could not displace that authority merely because other decisions were cited. The Court observed that if reconsideration of that ruling was sought, the proper course was to approach the Supreme Court.

Conclusion: The challenge to the levy failed, and the order dismissing the writ petition was upheld.

Final Conclusion: The tax levy on the development transaction was sustained because the binding Supreme Court precedent on works contracts was applied to substantially similar facts.

Ratio Decidendi: A binding Supreme Court decision on the taxability of a transaction as a works contract must be followed by all courts when the material facts are substantially similar, and subordinate courts cannot disregard it on the basis of contrary earlier authorities.

---