Works contract tax valuation upheld where purchase price of outside-State goods was used only to compute turnover.

The Bombay High Court upheld the Maharashtra works contract tax provisions, holding that they were within the State's legislative competence and not unconstitutional on the ground urged. After the Forty-sixth Amendment, the State may tax the value of goods involved in the execution of a works contract. The impugned provisions did not levy tax on an outside-State sale or purchase as such; section 2(m) merely adopted the purchase price of goods brought from outside the State as the basis for determining sale price, and section 2(p) used that value to compute turnover. The provisions were treated as a valuation mechanism for goods transferred in works contracts within the State.

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Issues: Whether the Maharashtra Sales Tax on the Transfer of Property in Goods involved in the Execution of Works Contract (Re-enacted) Act, 1989 was unconstitutional or beyond legislative competence insofar as it treated the purchase price of goods brought from outside the State as the sale price for computing turnover in works contracts.

Analysis: The challenge was rejected in light of the settled position that, after the Forty-sixth Amendment, the State can levy tax on the value of goods involved in the execution of a works contract. The impugned provisions did not seek to tax an outside-State sale or purchase as such. Section 2(m) merely prescribed the purchase price of goods brought from outside the State as the basis for determining sale price, and section 2(p) used that value to compute turnover. The provision was treated as a mechanism for valuation of goods transferred in the execution of a works contract within the State, not as a levy on the extraterritorial purchase transaction.

Conclusion: The Act was held to be within the legislative competence of the State and not unconstitutional on the ground urged; the challenge failed.

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