TaxTMI 
TaxTMI 
2013 (11) TMI 106
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..../ passed by the commercial tax authorities under the U.P. Value Added Tax Act, 2008, for levying commercial tax on the sale of goods under the works contracts/ agreements in constructions as defined in Clause (m) of Section 2 read with Section 3F of the Act has been challenged on the ground that in such building contracts/ agreements no sale of goods is involved, and that what is sold or transferred is the constructed flats/ houses/ apartments as chattels. 3. All the writ petitions were entertained on the ground that in M/s Larsen & Toubro Limited & another vs. State of Karnakata and another, SLP (C) No.17741 of 2007 a two-Judge Bench of Hon'ble Supreme Court had disagreed with the opinion expressed in K. Raheja Development Corporation vs. State of Karnataka (2005) 5 SCC 162 in which imposition of sales tax on sale of goods in such contracts/ agreements and the constitutional validity of the provisions levying sales tax entered into before construction is complete was upheld and referred the matter for consideration of a larger bench. 4. The larger bench of Hon'ble Supreme Court heard and decided the reference on 26.9.2013, and has held that the opinion expressed in K. Raheja....
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....rials used in such contract if such contract otherwise has elements of works contract. The enforceability test is also not determinative. (vii) A transfer of property in goods under clause 29-A(b) of Article 366 is deemed to be a sale of the goods involved in the execution of a works contract by the person making the transfer and the purchase of those goods by the person to whom such transfer is made. (viii) Even in a single and indivisible works contract, by virtue of the legal fiction introduced by Article 366(29-A)(b), there is a deemed sale of goods which are involved in the execution of the works contract. Such a deemed sale has all the incidents of the sale of goods involved in the execution of a works contract where the contract is divisible into one for the sale of goods and the other for supply of labour and services. In other words, the single and indivisible contract, now by Forty-sixth Amendment has been brought on par with a contract containing two separate agreements and States have now power to levy sales tax on the value of the material in the execution of works contract. (ix) The expression "tax on the sale or purchase of goods" in Entry 54 in List II of S....
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....nd it remains a "works contract". (vii) If there is a termination and a particular unit is not resold but retained by the developer, there would be no works contract to that extent. (viii) If the agreement is entered into after the flat or unit is already constructed then there would be no works contract. But, so long as the agreement is entered into before the construction is complete it would be works contract. 114. In Article 366(29-A)(b), the term "works contract" covers all genre of works contract and it is not limited to one specie of the contract. In Raheja Development1, the definition of "works contract" in KST Act was under consideration. That definition of "works contract" is inclusive and refers to building contracts and diverse construction activities for monetary consideration viz; for cash, deferred payment or other valuable consideration as works contract. Having regard to the factual position, inter alia, Raheja Development1 entered into development agreements with the owners of the land and it also entered into agreements for sale with the flat purchasers, the consideration being payment in installments and also the clauses of the agreement the Court held ....
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....ovisions of the Act and they cannot be subjected to tax under the Act and that the action in imposing tax on such constructions treating them to be works contract was wholly without jurisdiction. The Court set aside the assessment order passed by the Assistant Commissioner, Trade Tax, Sector-I, Noida in so far as they relate to imposition of tax on construction of apartments/houses/flats and other construction in question. The Court held that the assessment order could not be sustained. 6. The State of UP filed Special Leave to Appeal (Civil) ..../2007 CC 11480-11481/2007 (State of UP & another vs. M/s Assotech Realty Pvt. Ltd) against the judgment dated 23.3.2007. The Supreme Court by an order dated 3.12.2007 disposed of the Special Leave to Appeal (C)....../2007 and connected Civil Appeal Nos. 5624-5625 of 2007 arising out of SLP (C) Nos.23378-79 of 2007, as follows:- "In our view thorough adjudication was required in this case. Writ petition filed in High Court by the respondent against the order of assessment was not maintainable. The respondent ought to have filed statutory appeal against the assessment order. What was the nature of the right conferred on the allottees o....