TaxTMI 
TaxTMI 
2006 (7) TMI 622
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....essed, vide assessment orders, dated October 18, 2004 and March 11, 2005, the tax liabilities of the petitioner for the assessment years 2002-03 and 2003-04, respectively and issued notices of demands accordingly. The petitioner complied with the notices of demands, so issued. However, subsequent thereto, the Assistant Commissioner of Taxes, Tinsukia, vide notice, dated March 3, 2006, informed the petitioner that there was an irregularity in allowing deduction of turnover amounting to Rs. 57,96,189 used in works contract. The petitioner was, therefore, directed to show cause as to why the assessment for the assessment years 2002-03 and 2003-04 should not be revised and interest should not be levied. Being aggrieved by the said notice, the petitioner has instituted the present writ proceeding challenging, as already indicated hereinabove, the said notice as well as the provisions of section 8(3)(iv)(a) of the Act of 1993, as the same stands amended with effect from October 19, 2001. I have heard Mr. K.K. Gupta, learned counsel for the petitioner and Mr. S.K. Dubey, learned counsel for the State-respondents. Mr. K.K. Gupta, learned counsel appearing on behalf of the petitioner, has....
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....ontract as a movable property. The apex court held that it would pass if it is an agreement between the parties; but if there is no such agreement and the contract is only to construct the building, then, the materials used therein would become the property of the other party to the contract only in accordance with the theory of accretion. To avoid misconception, it was clarified that this conclusion has reference to those works, which are entire and indivisible. The apex court, again, in Pandit Banarsi Das Bhanot v. State of Madhya Pradesh reported in [1958] 9 STC 388, following the decision, in Gannon Dunkerley [1958] 9 STC 353 (SC), held that in building construction, which is one, entire and indivisible, there is no sale of materials (1)Reported in [2006] 146 STC 432 (Gauhati) and, hence, it is beyond the powers of the State Legislature to impose tax on supply of those materials, which are used in such works contract. Consequent upon the decisions in Gannon Dunkerley [1958] 9 STC 353 (SC) and Pandit Banarsi Das Bhanot [1958] 9 STC 388 (SC), it became impossible for the States to bring the works contract, involving supply of materials, within the State's sales tax enactments....
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....aw specify." What is, now, of utmost importance to note is that article 366(29A) of the Constitution was certainly not enacted to confer larger benefits on the persons engaged in carrying out works contract, who transfer the property and goods used, in such works contract, to the other person to the contract. The object of the amendment was to bring into the tax net of the State Legislature those transactions, which would not have, otherwise, been brought to, or fallen under the State's sales tax enactment. The change, in the form, referred to in article 366(29A), is not a change in the form of the goods to other commercially distinct and taxable goods. The change of form, referred to therein, is the change in the goods into another form, which by itself would not have been taxable, but because of what article 366(29A) conveys. Before dealing with the validity of section 8(3)(iv)(a) of the Act of 1993, it is pertinent to look at article 286 of the Constitution of India. This article puts restrictions on the State Legislature's power to impose sales tax on sale and purchase of goods. Article 286 runs as under: "Article 286. Restrictions as to imposition of tax ....
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....-State trade or commerce or in the course of import into, and export out of, the territory of India. It is in exercise of the authority under article 286 that the Central Sales Tax Act, 1956, has been enacted. From what has been pointed out above, it is clear that the legislative power of the State, under entry 54 of State List, to impose tax on sale or purchase of goods is subject to two limitations. One limitation, which flows from the entry itself, is that the State's legislative power "is subject to the provisions of entry 92A of List I" and the other one flows from the restrictions contained in article 286. Under entry 92A of List I, Parliament has the power to make laws in respect of taxes on sales and purchases, which take place in the course of inter-State trade and commerce. The levy and collection of such tax is governed by article 269. This shows that the State's Legislative powers, under entry 54, do not extend to imposing of tax on sale and purchase of goods, which takes place outside the State or in the course of import or export of goods. In view of these limitations imposed by the Constitution on the legislative power of the State under entry 54 o....
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....e sold in the course of inter-State trade or commerce, and tax has been paid under this Act in respect of the sales of such goods in course of inter-State trade or commerce, the tax levied under such law shall be reimbursed to the person making such sale in the course of inter-State trade or commerce in such manner and subject to such conditions as may be provided in any law in force in that State; (c) where a tax has been levied under that law in respect of the sale or purchase inside the State of any paddy referred to in sub-clause (i) of clause (ii) of section 14, the tax leviable on rice procured out of such paddy shall be reduced by the amount of tax levied on such paddy; (ca) Where a tax on sale or purchase of paddy referred to in subclause (i) of clause (i) of section 14 is leviable under that law and the rice procured out of such paddy is exported out of India, then, for the purposes of sub-section (3) of section 5, the paddy and rice shall be treated as a single commodity; (d) each of the pulses referred to in clause (via) of section 14, whether whole or separated, and whether with or without husk, shall be treated as a single commodity for the purposes of levy of tax un....
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....son as to why the provisions of sections 3 and 5 of the Central Sales Tax Act, 1956, should not be made applicable to a contract, which is, though single and indivisible, by legal fiction introduced by the 46th Amendment, has been altered into a contract, which is divisible into one for sale of goods and the other for labour and services. If the legal fiction, introduced by article 366(29A)(b), is carried to its logical conclusion, it would clearly follow that even in a single and indivisible works contract, there is a deemed sale of goods, which are involved in the execution of a works contract. Such deemed sale has all the incidents of a sale of goods involved in the execution of works contract, where the contract is divisible into one for sale of goods and the other for supply of labour and services. Even in the absence of any amendment having been made in the Central Sales Tax Act (after the 46th Amendment) expressly including transfer of property in goods involved in the execution of works contract, the provisions, contained in the sections 3, 4 and 5, would be applicable to such transfers and in consequence thereof, the legislative powers of the State to impose tax on such tr....
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....s Tax Act, the tax levied under the local Sales Tax Act shall have to be reimbursed. That being the case the provisions of section 15(a) makes an inroad into the texture of local law so that the charging provisions of the State law will have to be read subject to, and in conformity with, the provisions of section 15 and policy, which clause (a) underlines. From what have been observed above, it is transparent that clause (3) of article 286 is also applicable to the tax on the transfer of property referred to in sub-clause (b) of clause (29A) of article 366. As discussed earlier, clause (3) of article 286 consists of two parts. Sub-clause (a) of clause (3) of article 286 deals with the tax on the sale or purchase of goods declared by Parliament to be of special importance in the course of inter-State trade and commerce, which is generally applicable to all sales including the transfer, supply or delivery of goods, which are deemed to be sales under article 366(29A) of the Constitution. If any declared goods, referred to in section 14 of the Central Sales Tax Act are involved in such transfer, supply or delivery, which is referred to in clause (29A) of article 366, sales tax law, in....
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.... works contract, which runs as under: "(iv) in respect of goods involved in any works contract specified in Schedule VI. (a) the turnover relating to the declared goods purchased locally in Assam on payment of tax, and (b) so much of the labour and other charges incurred by the dealer after the transfer of property in the goods involved in the works contract or at the option of the dealer such percentage towards labour and other charges of the gross turnover after deducting therefrom the turnover relating to declared goods as is specified in that Schedule." From clause (iv)(a) of section 8(3) of the Act of 1993, it is clear that in case declared goods are purchased locally in Assam on payment of tax and are used in the execution of the works contract, the same shall be allowed as deduction from the gross turnover for the purpose of levy of tax. From the perusal of the Schedules of the taxable goods, contained in the Act of 1993, I find that the declared goods, as prescribed in section 14 of the Central Sales Tax Act, have been made taxable at the rate of four paise in a rupee. In fact, Schedule III, attached to the Act of 1993, makes it clear that declared goods, not ....