Declared goods in works contracts are taxable only at the Fourth Schedule rate, not a higher levy under general works contract taxation.

Steel used in executing a works contract, when it retained its character as declared goods, was subject to the specific rate and point of levy prescribed in the Fourth Schedule to the Karnataka Sales Tax Act, 1957. Section 5B, which taxes transfer of property in goods involved in works contracts, operated subject to section 5(4), and the statutory limitation for declared goods could not be ignored. On that reading, steel used in the same form in the contract could not be taxed at a higher rate under section 5B alone, and the 10 per cent levy was unsustainable.

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Issues: Whether steel used in the execution of a works contract, when treated as declared goods, could be taxed only at the rate prescribed for declared goods under the Fourth Schedule to the Karnataka Sales Tax Act, 1957, notwithstanding levy under section 5B of that Act.

Analysis: Section 5B levies tax on transfer of property in goods involved in the execution of works contracts, but it expressly operates subject to section 5(4). Section 5(4) specifically governs declared goods and mandates levy at the rate and point specified in the Fourth Schedule. Since steel was found to have been used in the same form in the works contract, the assessment authority could not ignore the statutory limitation contained in section 5(4). The contrary view that section 5B by itself authorised taxation at the higher rate was inconsistent with the express legislative scheme.

Conclusion: The assessee was entitled to have the value of steel taxed only at the Fourth Schedule rate, and the higher levy at 10 per cent was unsustainable.

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