AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2007 (2) TMI 73
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....g when a sale or purchase of goods takes place in the course of inter-State trade or commerce or outside a State or in the course of imports into or export from India, to provide for the levy, collection and distribution of taxes on sales of goods in the course of inter-State trade or commerce. 4. The said Act did not contain any provision to levy tax on works contract, despite insertion of Clause 29A in Article 366 of the Constitution of India. The question of levy of sales tax on works contract, inter alia, came up for consideration before this Court in M/s. Gannon Dunkerley and Co. and Others etc. v. State of Rajasthan and Others etc. [1993 (1) SCC 364]. While noticing that the 1956 Act did not contain any definition of works contract, this Court held: "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 with out amending the definition of sale in Section 2(g)....
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....on of a works contract. It was held: "The value of the goods involved in the execution of a works contract will, therefore, have to be determined by taking into account the value of the entire works contract and deducting therefrom the charges towards labour and services which would cover - (a) Labour charges for execution of the works; (b) amount paid to a sub-contractor for labour and services; (c) charges for planning, designing and architect's fees; (d) charges for obtaining on hire or otherwise machinery and tools used for the execution of the works contract; (e) cost of consumables such as water, electricity, fuel, etc. used in the execution of the works contract the property in which is not transferred in the course of execution of a works contract; and (f) cost of establishment of the contractor to the extent it is relatable to supply of labour and services; (g) other similar expenses relatable to supply of labour and services; (h) profit earned by the contractor to the extent it is relatable to supply of labour and services. The amounts deductible under these heads will have to be determined in the light of the facts of a particular case on the basis of the m....
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.... of quantum of tax and furthermore by reason of the provisions of Sections 9 and 13 of the 1956 Act, the mode and manner having been provided in terms whereof the quantum of tax is required to be determined, the impugned judgments are unassailable. 12. Our attention, in this connection, has been drawn to Section 3-F of the 1948 Act and Rule 44B of Uttar Pradesh Trade Tax Rules, 1948. It was urged that only because no rules have been framed, the same by itself would not lead to the conclusion that the provisions of the Act cannot be given effect to. 13. Before embarking on the questions raised at the Bar, we may notice the legislative background and history. A Constitution Bench of this Court in State of Madras v. Gannon Dunkerley & Company (Madras) Ltd. [1959 SCR 379], inter alia, held that in an indivisible contract no sales tax could be imposed on the supply of materials used therein treating it as a sale, as the same did not involve any sale of goods. 14. The constitutional provision was amended by the Constitution (Forty-sixth Amendment) Act, pursuant to the recommendations of the Law Commission of India in its 61st report whereby and whereunder a new clause 29A was inserted....
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....bsp; ....... ...... (e) ...... ....... ...... (f) ...... .......  ....
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....t' in the following terms: "(ja) "works contract" means a contract for carrying out any work which includes assembling, construction, building, altering, manufacturing, processing, fabricating, erection, installation, fitting out, improvement, repair or commissioning of any movable or immovable property." 17. Section 13 of the 1956 Act was also amended. The amended provision reads thus: "92. - Amendment of Section 13, - In Section 13 of the Central Sales Tax Act, in sub-section (1), clause (aa) shall be re-lettered as clause (ab) thereof, and before clause (ab) as so re-lettered, the following clause shall be inserted, namely: "(aa) the manner of determination of the sale price and the deductions from the total consideration for a works contract under the proviso to clause (h) of section 2." 18. Section 6 is the charging provision making a dealer liable to pay tax under the said Act on all sales of goods other than electrical energy effected by him in the course of inter-State trade or commerce during any year on and from the date so notified therefor. Section 8A provides for determination of turnover. We may at this juncture notice the provisions of Sections 9(2) and 13(3....
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....ed Section 3F of the 1948 Act, sub-section (1) whereof reads as under: "3F. Tax on the right to use any goods or goods involved in the execution of works contract: (1) Notwithstanding anything contained in section 3 or section 3AAA or section 3D but subject to the provisions of sections 14 and 15 of the Central Sales Tax Act, 1956, every dealer shall, for each assessment year, pay a tax on the net turnover of - (a) transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment of other valuable consideration; or (b) transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract, at such rate not exceeding twenty per cent as the State Government may, by notification, declare and different rates may be declared for different goods or different classes of dealers." 20. Sub-section (2) of Section 3F of the 1948 Act provides for the amounts which were to be deducted from the total amount received or receivable by a dealer in respect of a transfer referred to in clause (a) of sub-section (1), where such transfer occurred during that assessment year or also for the purpos....
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....ks contract, and whether the execution of such works contract commenced during the year or earlier, and includes any advance received by the dealer towards valuable consideration for the works contract." "Rule 44-C. Determination of turnover relating to the transfer of right to use goods.- The tax under Section 3F on the turnover relating to the business of transfer of the right to use any goods for any purpose shall be computed on the net turnover. In determining the net turnover, the amounts specified below shall be deducted if they are included in the gross turnover - (a) the amount representing the valuable consideration received for such transfer in respect of goods exempt from tax under Section 4; (b) the amounts received as penalty for defaults in payment or as damages for any loss or damage caused to the goods by the person to whom such transfer was made. Explanation. - For the purpose of this rule, gross turnover shall mean the total amount received or receivable by a dealer in an assessment year as valuable consideration for the transfer of the right to use the goods whether such transfer was agreed to during that assessment year or earlier: Provided that in cases wh....
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....e true that, further amendments had been made in the year 2005 and for certain purposes, the subsequent legislations may also be considered for the construction of a statute, but in our opinion, it is not necessary to do so. 25. A taxing statute indisputably is to be strictly construed. [See J. Srinivasa Rao v. Govt. of Andhra Pradesh & Another - 2006 (13) SCALE 27]. It is, however, also well-settled that the machinery provisions for calculating the tax or the procedure for its calculation are to be construed by ordinary rule of construction. Whereas a liability has been imposed on a dealer by the charging section, it is well-settled that the court would construe the statute in such a manner so as to make the machinery workable. 26. In J. Srinivasa Rao (supra), this Court noticed the decisions of this Court in Gursahai Saigal v. Commissioner of Income-tax, Punjab [(1963) 3 SCR 893] and M/s. Ispat Industries Ltd. v. Commissioner of Customs, Mumbai [2006(9) SCALE 652]: "In Gursahai Saigal v. Commissioner of Income-Tax, Punjab [(1963) 3 SCR 893], the question which fell for consideration before this Court was construction of the machinery provisions vis-a-vis the charging provision....
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.... in the open market on the valuation date": It was urged that no rules were framed in respect of the valuation of land and buildings. But s. 7 only directs that the valuation of any asset other than cash has to be made subject to the rules. It does not contemplate that there shall be rules before an asset can be valued. Failure to make rules for valuation of a type of asset cannot therefore affect the vires of s. 7. It was also said that s. 7 (1) which requires that the asset shall be valued at the price which is would fetch if sold in the open market on the valuation date, was expropriatory. This contention was not raised in the petition, and no ground is made out for holding that the rate at which wealth tax is levied is expropriatory." 29. The question which, in our opinion, is required to be posed and answered, is as to whether there exist sufficient guidelines for determination of the turnover in the hands of the Assessing Authority for the purpose of levy of tax. The 1956 Act provides for levy of tax. Works contract has been brought within the purview of sale. Wherever the said words have been used, the new definition, therefore, would be applied. Section 8 provides for rat....
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....tate Government to make rules. The State rules would be independent of the Central Government rules. The only fetter is that the State Rules should not be inconsistent with the provisions of the Central Rules or the Act. [See Hanuman Prasad Singhania v. CTO - 27 STC 289 at 301]. 32. If the State Rules have been made applicable using Rule 9 of the State Rules, it makes not only the original rule duly applicable in the case of assessment of Central sales tax law, but also as amended from time to time. 33. So long as, therefore, the Central Government does not make any rules, the determination of turnover may be carried out by the Assessing Authority in terms of the State Rules, in view of Section 13(3) of the 1956 Act read with Rule 9 of the Central Sales Tax Act (U.P.) Rules, 1957. The rules made by the State Government as also the provisions of the Act are incorporated by reference. When a provision is incorporated by reference, it need not be so stated again and again. [See Nagpur Improvement Trust etc. v. Vasantrao and Others etc. (2002) 7 SCC 657 and Sneh Enterprises (supra)]. 34. Validity of Rule 9 of the Central Tax Act (U.P.) Rules, 1957 is not under challenge. Furthermore....
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....In that context, the last limb of Section 9(2) of the Central Act viz, and the provisions of such law ... shall apply accordingly mean that the provisions of the State Act are applicable for the purpose of assessment, reassessment, collection and enforcement of payment of tax including penalty payable under the Central Act. The words of the last part of Section 9(2) viz, shall apply accordingly relate clearly to the words and for this purpose with the result that the provisions of the State Act shall apply only for the purpose of assessment, reassessment, collection and enforcement. The doctrine of ejusdem generis shows that the genus in Section 9(2) of the Central Act is for this purpose. In other words, the genus is assessment, reassessment, collection and enforcement of payment. The genus is applicable in regard to the procedure for assessment, reassessment, collection and enforcement of payment. The genus is from whom to collect and against whom to enforce. It is apparent that the extent of liability for tax as well as penalty is not attracted by the doctrine of ejusdem generis in the application of the provisions of the State Act in regard to assessment, reassessment, collecti....