Uniform tax on goods in a works contract applies despite separately quoted material prices.

In a works contract involving supply of electrical materials and cable wires, the Karnataka VAT framework permits a uniform tax rate on goods involved in execution of the contract. Separately quoted prices for cable wires do not, by themselves, make the contract divisible or require the goods to be taxed at a lower rate as if they were separate sales. The statutory levy under section 4(1)(c) was therefore upheld, and the contention that a lesser rate should apply to the cable wires was rejected.

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Issues: Whether, in respect of works contract involving supply of electrical materials and cable wires with separately quoted prices, the levy of uniform tax under section 4(1)(c) of the Karnataka Value Added Tax Act, 2003 was valid notwithstanding the contention that the contract was divisible and the materials should attract a lower rate of tax.

Analysis: The contract was treated as a works contract involving transfer of property in goods by way of deemed sale. The Tribunal had proceeded on the basis that the cable wire price was separately stated in the contract and, on that reasoning, had held the contract to be divisible. However, the governing principle from the constitutional and sales tax framework is that, in a works contract, the State is competent to levy tax on the goods involved in execution of the contract and to prescribe a uniform rate for such goods. Once the legislature has expressly authorised uniform taxation under section 4(1)(c), the assessee cannot avoid that levy merely by asserting that some items are separately priced in the contract and should attract a lower rate.

Conclusion: The uniform levy of tax was valid, and the contention that cable wires supplied in the works contract should be taxed at a lesser rate failed.

Final Conclusion: The question of law was answered against the assessee and the revision was allowed in favour of the State.

Ratio Decidendi: Where the statute authorises a uniform rate of tax on goods involved in the execution of a works contract, separately quoted material prices do not by themselves defeat the statutory levy or justify application of a lower rate as if the supply were a separate sale.

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