TaxTMI 
TaxTMI 
2011 (1) TMI 1190
X X X X Extracts X X X X
X X X X Extracts X X X X
....consideration of Rs. 370 crores. The petitioner entrusted the work on sub-contract to the third respondent. The work was either partially or fully completed during 2005-06 and 2006-07. The second respondent statedly suspended execution of the work, and kept it "on hold". The petitioner allegedly did not submit bills and, therefore, treated the value of the fibre cables laid as part of the work in progress and capitalised the same in the balance sheet. For the two assessment years, the petitioner filed returns declaring "nil" turnover. It was taken up for assessment. A show-cause notice dated February 10, 2010 was issued proposing to levy tax under section 4(7)(a) of the VAT Act at four per cent and/or 12.5 per cent on the material used in executing the work of laying cables involved in the works contract entrusted by the second respondent to the petitioner. The petitioner filed objections on March 19, 2010 and March 27, 2010 contending that they did not execute any works for determining output tax for the said assessment years, no running account bills (RA Bills) were raised during the financial years, and there was no transfer of goods in execution of works contract. The petitione....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to requisition the balance sheet. Non-submission of the same is bona fide on account of lack of proper and appropriate legal advice, and not on account of negligence. The petitioner did not sell or purchase material in the course of business activity either within the State or outside the State and, therefore, the first respondent had no jurisdiction to levy tax on non-existent sale. The senior counsel for the petitioners Sri S. R. Ashok submits that the petitioner did not transfer any material in execution of the works contract, in favour of the contractee, and they did not raise any bills against the contract. Therefore, levy of tax under section 4(7) is illegal. In the absence of incorporation and consequent appropriation of goods by the employer, namely, the second respondent, the taxable event essential for works contract does not exist. The burden of establishing that there was a sale is on the Department, and there is no such material before the first respondent to levy tax. The Special Counsel for Commercial Taxes Sri Krishna Kaundinya submits that the taxable event in a works contract occurs the moment the goods are incorporated whether they are appropriat....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... against A. P. Technologies Services Limited ; levy of tax at four per cent by adding the incorporation value of 10 per cent was not correct as the materials purchased were kept for being used in the works contract, and the proposal to tax non-creditable purchase by adding 10 per cent incorporation value is not correct as the material was purchased in the course of inter-State trade for captive consumption which was capitalised in the books of accounts during 2005-06. It appears, the petitioner did not produce books of accounts, profit and loss account, RA bills or any other record in support of the contention. Therefore, relying on section 16 of the VAT Act, the first respondent assessed the VAT payable by the petitioner under section 4(7) of the VAT Act. At the cost of repetition, it may be noticed that the vehement argument of the senior counsel is that the material was not appropriated in the works contract; the contractee had abandoned the project and, therefore, levy of tax under section 4(7) is illegal and without jurisdiction. To appreciate the contention, it is necessary to refer to the definitions of "dealer", "purchase price", "sale", "sale price" and "works contract". &....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of others, whether such consideration be cash, deferred payment or any other thing of value and shall include,- (i) the value of any goods as determined by the assessing authority,- (a) to have been used or supplied by the dealer in the course of execution of the works contract; or Other portion omitted 2. (45) 'Works contract' includes any agreement for carrying out for cash or for deferred payment or for any other valuable consideration, the building construction, manufacture, processing, fabrication, erection, installation, laying, fitting out, improvement, modification, repair or commissioning of any movable or immovable property." It is also necessary to read section 4(7)(a) and (b), which are the charging provisions in respect of works contracts. "4. (7) Notwithstanding anything contained in the Act,- (a) every dealer executing works contracts shall pay tax on the value of goods at the time of incorporation of such goods in the works executed at the rates applicable to the goods under the Act:- Provided that where accounts are not maintained to determine the correct value of goods at the time of incorporation, s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ome other form) involved in the execution of a works contract. The emphasis is on the transfer of property in goods (whether as goods or in some other form). The latter part of clause (29A) of article 366 of the Constitution makes the position very clear. While referring to the transfer, delivery or supply of any goods that takes place as per sub-clauses (a) to (f) of clause (29A), the latter part of clause (29A) says that 'such transfer, delivery or supply of any goods' shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made. . .' The object of the new definition introduced in clause (29A) of article 366 of the Constitution is, therefore, to enlarge the scope of 'tax on sale or purchase of goods' wherever it occurs in the Constitution so that it may include within its scope the transfer, delivery or supply of goods that may take place under any of the transactions referred to in sub-clauses (a) to (f) thereof wherever such transfer, delivery or supply becomes subject to levy of sales tax. . ." In Gannon Dunkerky [1993] 88 STC 204 (SC) ; [1....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... " . . .The various sub-clauses of clause (29A) of article 366 permit the imposition of tax thus : sub-clause (a) on transfer of property in goods; sub-clause (b) on transfer of property in goods ; sub-clause (c) on delivery of goods ; sub-clause (d) on transfer of the right to use goods; sub-clause (e) on supply of goods; and sub-clause (f) on supply of services. The words 'and such transfer, delivery or supply. . .' in the latter portion of clause (29A), therefore, refer to the words transfer, delivery and supply, as applicable, used in the various sub-clauses. Thus, the transfer of goods will be a deemed sale in the cases of sub-clauses (a) and (b), the delivery of goods will be a deemed sale in case of sub-clause (c), the supply of goods and services respectively will be deemed sales in the cases of sub-clauses (e) and (f) and the transfer of the right to use any goods will be a deemed sale in the case of sub-clause (d). . ." The expression "tax on sale or purchase of goods", being an inclusive definition, must be given wide meaning. The latter part of clause (29A) of article 366 of the Constitution of India contemplates that "such transfer, delivery or supply of any g....