TaxTMI 
TaxTMI 
2011 (8) TMI 995
X X X X Extracts X X X X
X X X X Extracts X X X X
.... sprinkler irrigation systems. The assessing authority vide order dated March 7, 1998 accepted the accounts books. He levied Central sales tax of an amount of Rs. 7,80,133 on the material value of the goods used in the execution of works contract at the rate of 10 per cent. Not being satisfied with the order of the assessing authority, the assessee filed First Appeal No. 402 of 2000. The first appellate authority vide order dated August 29, 2000 not only dismissed the appeal but also enhanced the tax liability by Rs. 58,184 by imposing tax at 10 per cent on total receipt. The assessee filed second appeal giving rise to the present revision which has been partly allowed under order dated July 21, 2003. The assessment order passed by the assessing authority has been restored after determining the material value of the goods used in execution of works contract at Rs. 7,80,133. The Tribunal has placed reliance upon the decision of the apex court in case of Gannon Dunkerley & Co. v. State of Rajasthan reported in [1993] 88 STC 204 (SC); [1993] UPTC 416 for upholding the tax levied. The Tribunal has held that the works contract stood divided into two parts automatically one for supply ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....horities. Reference has also been made to the judgment in the case of Tata Elxsi Limited v. State of Uttaranchal [2004] 134 STC 403 (Uttara); [2004] 24 NTN 16. Shri B.K. Pandey in reply however submits that the legal position with regard to works contract executed outside the State is no more res integra, the issue was examined in detail by the Constitution Bench of the Supreme Court in the case of Gannon Dunkerley & Co. v. State of Rajasthan reported in [1993] 88 STC 204 (SC); [1993] UPTC 416 specifically paragraphs 35, 36, 37 and 38 of the judgment. The learned standing counsel explains that the learned single judge in the case of Jindal Irrigation Limited [2010] 28 VST 126 (All); [2008] UPTC 1258 has relied and quoted paragraphs 41 to 44 of the judgment in the case of Gannon Dunkerley & Co. [1993] 88 STC 204 (SC); [1993] UPTC 416. These paragraphs 41 to 44 in fact deal with legislative competence of the State under entry 54 of the State List and have no bearing on the taxability in view of article 366(29A)(b) of the Constitution of India. The Tribunal is justified in dividing the works contract into two parts in the facts of the case. He submits that the issue for considerati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d that because of legal fiction so introduced under the aforesaid clause on being carried to its logical end would mean that a single works contract stands divided into two parts automatically by operation of law. There is a deemed sale of goods which are involved in the execution of the works contract. The contract stands divided into two parts one for sale of goods and other for supply of labour and services. It would be worthwhile to reproduce paragraphs 35 to 38 of the Constitution Bench judgment of the Supreme Court in the case of Gannon Dunkerley & Co. [1993] 88 STC 204 (SC); [1993] UPTC 416 which read as follows (pages 228 and 229 in 88 STC): "35. This would mean that as a result of the Forty-sixth Amendment, the contract which was single and indivisible has been altered by a legal fiction into a contract which is divisible into one for sale of goods and other for supply of labour and services and as a result such a contract which was single and indivisible has been brought at par with a contract containing two separate agreements. Since the provisions of sections, 3, 4 and 5 were applicable to such contracts containing two separate agreements, there is no reason why the sa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pecial importance in inter-State trade or commerce. 38. Since the question of levy of inter-State sales tax under section 6 of the Central Sales Tax Act is not in issue in these cases which only relate to imposition of sales tax by the States, we do not propose to go into the question, whether such a tax can be levied on deemed sales resulting from transfer of property in goods involved in the execution of a works contract without amending the definition of 'sale' in section 2(g) of the Central Sales Tax Act, so as to include such transfers within its ambit. It is, however, made clear that the absence of any amendment in the definition of 'sale' contained in section 2(g) of the Central Sales Tax Act, 1956, so as to include transfer of property in goods involved in execution of a works contract does not in any way affect the applicability of the sections 3, 4 and 5 and sections 14 and 15 of the Central Sales Tax Act to such transfers." From the aforesaid, it is clear that the contract entered into between the assessee and the Delhi Development Authority and the other contract between the assessee and National Building Construction Corporation stand divided into two....
X X X X Extracts X X X X
X X X X Extracts X X X X
....List read with sub-clause (b) of clause (29A) of article 366 of the Constitution, it is not permissible for the State Legislature to make a law imposing tax on such a deemed sale which constitutes a sale in the course of inter-State trade or commerce under section 3 of the Central Sales Tax Act or an outside sale under section 4 of the Central Sales Tax Act or sale in the course of import or export under section 5 of the Central Sales Tax Act. So also it is not permissible for the State Legislature to impose a tax on goods declared to be of special importance in interState trade or commerce under section 14 of the Central Sales Tax Act except in accordance with the restrictions and conditions contained in section 15 of the Central Sales Tax Act. 42. Having thus defined the ambit of the field available to the State Legislature for enacting a law imposing a tax on transfer of property in goods involved in the execution of a works contract, we may now examine some aspects of such a law to which reference has been made during the course of arguments by the learned counsel for the contractors. We propose to deal with these aspects separately. Definition of 'sale': 43. It has ....