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2016 (8) TMI 1188
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....h contract and the terms upon which the same was to be executed stands enshrined in an agreement dated 24 January 2002. The relevant terms of the said contract are as under: "Whereas it has been decided to award the work of laying underground cable falling in the jurisdiction of Telecom District Bareilly to M/s A.A. Cables Layers Ltd., 25A, Model Town Bareilly. M/s A.A. Cable Layers Ltd., 25A, Model Town Bareilly..... 3. The contractor will coordinate between the BSNL and agencies like PWD/ Municipality/BDA/UPSEB etc. for road cutting. Until road cutting permission is obtained, contractor will not get cable issued for laying. 4. The cable and other stores will be supplied by the BSNL. The contractor will execute the work strictly according to the work order and diagram supplied by the BSNL as per BSNL specifications and standards under the supervision of BSNL officers. 5. The BSNL will not take any responsibility for providing any facility to the labours employed by the contractor. The BSNL will supply underground cable, joining kits, DP boxes, cabinets and other store items required for the job. The contractor will be responsible for their safet....
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....o dismiss the appeal on 16 December 2003. The matter was taken to the Tribunal, which by its judgment and order dated 4 May 2006, has proceeded to affirm the view taken by the assessing authority and the first appellate authority. It is in the above backdrop that the instant revisions have come to be preferred before this Court. Sri Bharatji Agrawal, learned Senior Counsel appearing in support of these revisions has contended that the contract awarded was for job work and would not fall within the meaning of a works contract as defined by the 1948 Act. He has further submitted that even if it were assumed that the property in goods utilized for execution of any civil work stood transferred in terms of the contract, the levy of penalty with reference to the entire payment made under the contract would be wholly unjustified. He submits that the levy of penalty was liable to be restricted only to the value of the goods, which in the opinion of the department, stood transferred in the execution of the works contract. Sri Agrawal further contends that no exercise of bifurcation was undertaken by the department nor was any enquiry instituted in order to ascertain the value of the good....
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....o pay tax on the net turnover on a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract in terms of section 3F. While determining the net turnover in terms of sub section (2), various deductions are allowed to be made from the total amount received or receivable under the works contract. Sub section (2) insofar as is relevant for our purposes reads as under: "(2) For the purposes of determining the net turnover referred to in subsection (1), the following amounts shall be deducted from the total amount received or receivable by a dealer in respect of a-- (a) xxxxxxxxxxxxx (b) transfer referred to in clause (b) of subsection (1), (i) the amount representing the sales value of the goods covered by Sections 3, 4 and 5 of the Central Sales Tax Act, 1956; (ii) the amount representing the value of the goods exempted under Section 4; (iii) the amount representing the value of the goods, on the sale or purchase whereof tax has been levied or is leviable under this Act at some earlier stage; (iv) the amount representing the value of the goods manufactured in a ne....
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....such payment to the contractor, either in cash or in any other manner, deduct an amount equal to four per centum of such sum towards part or, as the case may be, full satisfaction of the tax payable under this Act on account of such works contract: Provided that the Assessing Authority may, if satisfied, that it is expedient in the public interest so to do and for reasons to be recorded in writing order that in any case or class of cases no such deduction shall be made or, as the case may be, such deduction shall be made at lesser rate: Provided further that where any deduction has been made by a contractor from the payments made to his subcontractor in accordance with subsection (2), the amount of such payments shall be deducted from the amount on which deduction is to be made under this subsection: Provided also that where the goods referred in this subsection are covered by Sections 3, 4 or 5 of the Central Sales Tax Act, 1956, no amount shall be deducted under this subsection in respect of such goods. (6) If any such person, as is referred to in subsection (1) or subsection (2), fails to make the deduction or, after deducting, fails to deposi....
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....g out, fabrication and commissioning, it cannot be said that the contractor did not engage in any of the above-mentioned endeavors. The contract as noted above in essence required the contractor to install, lay out and commission the underground cable. The work also required him to bear all costs and expenses relating to the digging of trenches, construction of pillars in and upon which the underground cable was to rest. The payment terms as agreed to between the parties was linked to the work done. In fact clause 13 in specific terms provided that 90% of the payment would be released against bills in support of actual physical work completed. Regard may also be had to the approved rates for laying of cables which formed part of this agreement and classified the rates at which the contractor would obtain payment for the following activities: (a) digging and reinstating trenches; (b) supply of bricks; (c) horizontal boring of road crossing; (d) laying and fixing of GI pipes; (e) construction of cement concrete foundation; and (g) making of joint pits. The tacit admission of the revisionist in respect of the above activities be....
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....tly held that the dominant intention theory or test is not liable to be employed in the case of contracts which stand covered and fall within the scope and ambit of Article 366 (29A). To put this issue beyond the pale of controversy, one may usefully refer to what a Constitution Bench of the Supreme Court held in Kone Elevator India Private Limited Vs. State of Tamil Nadu (2014) 7 SCC 1: "37. Having dealt with the aforesaid authorities, as advised at present, we shall refer to certain authorities as to how the term "works contract" has been understood in the contextual perspective post the constitutional amendment. In Hindustan Shipyard Ltd. (supra), the Court observed that the distinction between a contract of sale and a works contract is not free from difficulty and has been the subject-matter of several judicial decisions. It is further observed that neither any straitjacket formula can be made available nor can such quick-witted tests devised as would be infallible, for it is all a question of determining the intention of the parties by culling out the same on an overall reading of the several terms and conditions of a contract. Thereafter, the two Judge Bench set out ....
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.... "goods" has been enlarged by bringing within its fold goods in a form other than goods. Goods in some other form would thus mean goods which have ceased to be chattels or movables or merchandise and become attached or embedded to earth. In other words, goods which have by incorporation become part of immovable property are deemed as goods. The definition of "tax on the sale or purchase of goods" includes a tax on the transfer of property in the goods as goods or which have lost its form as goods and have acquired some other form involved in the execution of a works contract." 44. On the basis of the aforesaid elucidation, it has been deduced that a transfer of property in goods under Clause (29A)(b) of Article 366 is deemed to be a sale of 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. One thing is significant to note that in Larsen and Toubro (supra), it has been stated that after the constitutional amendment, the narrow meaning given to the term "works contract" in Gannon DunkerleyI (supra) no longer survives at present. It has been observed in the said ca....
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....lone; and (iv) once the characteristics of works contract are met with in a contract entered into between the parties, any additional obligation incorporated in the contract would not change the nature of the contract." (emphasis supplied) Bearing in mind the principles elucidated by the Constitution Bench, it is clear that the submission of the learned Senior Counsel cannot be accepted. In fact the acceptance of the submissions advanced would lead to the introduction and application of the dominant intention theory to a works contract which stands forbidden in light of the provisions of Article 366 (29A). Having thus found that the contract in question was a works contract, the Court then proceeds to consider the impact of the provisions of Section 8D. Section 8D (1) imposes an unequivocal obligation upon a person making payment to a contractor engaged in a works contract to deduct tax. The tax which is liable to be deducted is with reference to the liability discharged on account of valuable consideration paid for the transfer of property in goods in pursuance of a works contract. The civil work element undertaken by the contractor would necessarily entail a transf....