Works-contract turnover tax cannot be levied again on sub-contractor payments already treated as exempt; purchase tax was upheld.

Amounts paid to sub-contractors that were already accepted as exempt in the works-contract assessment could not be re-included in the contractor's total turnover for turnover tax under section 6B, and deduction could not be denied merely for want of proof that the sub-contractors disclosed the turnover in returns when their registration was established. The authorities had to first examine whether the amount was taxable in the sub-contractors' hands, so the turnover-tax levy on that component was not sustainable. By contrast, purchase tax under section 6 on purchases of sand and jelly was upheld on the record.

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Issues: (i) Whether amounts paid by the contractor to sub-contractors in the course of a works contract could be included in the contractor's total turnover and subjected to turnover tax under section 6B of the Karnataka Sales Tax Act, 1957, and whether deduction under rule 6(4)(n)(iii) of the Karnataka Sales Tax Rules, 1957 was wrongly denied. (ii) Whether purchase tax under section 6 of the Karnataka Sales Tax Act, 1957 was leviable on purchases of sand and jelly.

Issue (i): Whether amounts paid by the contractor to sub-contractors in the course of a works contract could be included in the contractor's total turnover and subjected to turnover tax under section 6B of the Karnataka Sales Tax Act, 1957, and whether deduction under rule 6(4)(n)(iii) of the Karnataka Sales Tax Rules, 1957 was wrongly denied.

Analysis: The assessment had already accepted exemption under section 5B of the Karnataka Sales Tax Act, 1957 in respect of the amounts paid to the sub-contractors. Once those amounts were treated as outside the contractor's taxable turnover for the works contract, they could not again be brought into the contractor's total turnover for levy under section 6B. The authorities erred in taxing the same amount in the hands of the contractor without first examining, on the basis of the sub-contractors' records, whether the turnover was exigible in their hands. The denial of deduction was also not sustainable merely because proof of disclosure in monthly or annual returns by the sub-contractors was not produced, when their registration under the Act was established.

Conclusion: The levy of turnover tax under section 6B on the amounts paid to sub-contractors could not be sustained against the contractor, and the assessee succeeded on this issue.

Issue (ii): Whether purchase tax under section 6 of the Karnataka Sales Tax Act, 1957 was leviable on purchases of sand and jelly.

Analysis: The authorities had considered the material and submissions and held that the purchaser was liable to purchase tax. No reason was found to disturb that determination on the record.

Conclusion: The levy of purchase tax under section 6 was upheld against the assessee.

Final Conclusion: The revision petition succeeded only in relation to the turnover tax and deduction issues concerning sub-contract payments, while the purchase tax liability was maintained.

Ratio Decidendi: Amounts already accepted as exempt in the works-contract assessment cannot be re-included in the contractor's total turnover for turnover-tax purposes, and tax on the same works-contract component must be examined in the hands of the proper taxable person to avoid double taxation.

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