TaxTMI 
TaxTMI 
2022 (1) TMI 561
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.... petition filed under Article 226 of the Constitution of India, the petitioner has assailed (i) the assessment order dated 10.08.2010 (Annexure-5) passed by the Deputy Commissioner of Taxes, Jorhat (respondent no.4), and (ii) the revisional order dated 18.02.2015 (Annexure-7) passed by the Additional Commissioner of Taxes, Assam (respondent no.3). The respondent authorities had considered paint consumed during restoration and reconditioning of vehicles at Authorised Service Station as transfer of property of paints and nature of works was considered as works contract in spite of the fact that on the same work, the Central Government was collecting service tax. Thus, the only issue which is required to be determined is whether Assam Value Added Tax (VAT for short) can be levied on paints by the Taxation Department of the State by treating the nature of works as works contract resulting in transfer of property in paints during the restoration and reconditioning work. 3) Referring to the statements made in the writ petition, the learned counsel for the petitioner has submitted that when damaged vehicles come into the workshop of the petitioner, the condition of the vehicle is inspe....
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....sam VAT Act and it has been submitted that paint is covered by the definition of goods and therefore, it cannot be interpreted to be a "consumable". It is submitted that paint is a goods which becomes imbedded to the vehicle and therefore, by referring to the power to impose tax on sale of goods as per the Article 366 (29A) of the Constitution of India, it is submitted that the State is not taxing service, but as the goods like paint can be divisible from the works contract, the sale of goods can be lawfully subjected to tax incidence. Accordingly, it is submitted that the writ petition is devoid of any merit and the same be dismissed. In support of his submissions, the learned Advocate General has placed reliance on the following cases, viz., (i) Larsen & Toubro Limited & Anr. v. State of Karnataka & Anr., (2014) 1 SCC 708; (ii) Md. Ekram Khan & Sons v. Commissioner of Trade Tax, (2004) 6 SCC 183; (iii) Costal Chemicals Ltd. v. Commercial Tax Officer, A.P. & Ors., (1999) 8 SCC 465 . 6) The learned standing counsel for respondent nos. 6 to 9 has submitted that she was not contesting the stand of the petitioner as the petitioner was paying due service tax. 7) Considered the su....
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.... a. Section 2(20) "goods" means all materials, commodities and articles and all other kinds of movable property, whether tangible or intangible, and includes,- (i) livestock. (ii) computer software, subscriber identification module (SIM) cards and the like, (iii) all materials (whether as goods or in some other form) involved in the execution of works contracts, transfer of right to use or hire purchase or payment by installments, or those to be used in the fitting out, improvement or repair of movable or immovable property; (iv) growing crops, grass, trees, plants and things attached to or forming part of the land which are agreed to be severed before the sale or under the contract of sale, but does not include newspapers, electricity, money, actionable claims, stocks, shares and securities; b. Section 2(38) "raw material" means goods used as an ingredient in the manufacture of any other goods or any article consumed in the process of manufacture which has a direct nexus with the finished product or to which the finished product can directly be attributed but it does not include stores, fuel and lubricants required in the proce....
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....ses shall, for the purposes of this Act, be deemed to have taken place,- (a) when the goods are transferred from a principal to his selling agent and from the selling agent to the purchaser, or (b) when the goods are transferred from the seller to a buying agent and from the buying agent to his principal, if the agent is found in either of the cases aforesaid, (i) to have sold the goods at one rate and passed on the sale proceeds to his principal at another rate, or (ii) to have purchased the goods at one rate and passed them to his principal at another rate, or (iii) not to have accounted to his principal for the entire collection or deduction made by him, in the sales or purchases effected by him on behalf of his principal, or (v) to have acted for a fictitious or non-existent principal; d. Section 2(44) "sale price" means the amount of valuable consideration paid or payable to a dealer for any sale made including any sum charged for anything done by the dealer in respect of goods at the time of or before delivery of the goods other than the cost of freight or delivery or the cost of installation in cases where such c....
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....cash, deferred payment or other valuable consideration; (e) A tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; (f) A tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, And such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made; 13) In the case of Costal Chemicals (supra) , cited by the learned Advocate General, the appellant claimed concessional tax on natural gas which it was purchasing as fuel for the manufacture of paper and paper products and under the said context, it was held by the Supreme Court of India that natural gas was not consumable. Therefore, in the light of the facts and law involved in the said cited case of C....
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....hat petitioner Company was the contractor for prospective flat purchaser. Under the definition of the term "works contract" as quoted above the contractor must have undertaken the work of construction for and on behalf of the contractor for cash, deferred (sic. payment) or any other valuable consideration. According to the Department, Development Agreement is not works contract but the Tripartite Agreement is works contract which, prima facie, appears to be fallacious. There is no allegation that the Tripartite Agreement is sham or bogus. 13. For the aforestated reasons, we direct the Office to place this matter before the Hon'ble Chief Justice for appropriate directions in this regard, as we are of the view that the judgment of Division Bench in the case of Raheja Development (supra) needs re-consideration by the larger Bench ." 16) The learned Advocate General has in extensio referred to the case of Larsen & Toubro Ltd. (supra) , giving much stress on paragraphs 55 to 60, 66, 72, 80 to 82, 87 to 92, 95, 96, 97, 107 to 113 and 116 thereof. Some of the paragraphs, which are relevant for the purpose of this order are extracted below:- "55. Clause 29-A was in....
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....han 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 or 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. 57. Viewed thus, 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. 58. The States have now been conferred with the power to tax indivisible contracts of works. This has been done by enlarging the scope of "tax on sale or purchase of goods" wherever it occurs in the Constitution. Accordingly, the expression "tax on the sale or purchase of goods" in Entry 54 of List II of Seventh Schedule when read with the definition clause 29-A, includes a tax on the transfer of....
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.... 66. The Forty-sixth Amendment leaves no manner of doubt that the States have power to bifurcate the contract and levy sales tax on the value of the material involved in the execution of the works contract. The States are now empowered to levy sales tax on the material used in such contract. In other words, clause 29-A of Article 366 empowers the States to levy tax on the deemed sale. *** *** *** 72. In our opinion, the term 'works contract' in Article 366(29-A)(b) is amply wide and cannot be confined to a particular understanding of the term or to a particular form. The term encompasses a wide range and many varieties of contract. The Parliament had such wide meaning of "works contract" in its view at the time of Forty-sixth Amendment. The object of insertion of clause 29-A in Article 366 was to enlarge the scope of the expression "tax of sale or purchase of goods" and overcome Gannon Dunkerley (1) (supra). Seen thus, even if in a contract, besides the obligations of supply of goods and materials and performance of labour and services, some additional obligations are imposed, such contract does not cease to be works contract. The additional obligations in the ....
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....contract to provide for labour and services alone. Nothing in Article 366(29-A)(b) limits the term "works contract". 97.4. Building contracts are species of the works contract. 97.5. A contract may involve both a contract of work and labour and a contract for sale. In such composite contract, the distinction between contract for sale of goods and contract for work (or service) is virtually diminished. 97.6. The dominant nature test has no application and the traditional decisions which have held that the substance of the contract must be seen have lost their significance where transactions are of the nature contemplated in Article 366(29-A). Even if the dominant intention of the contract is not to transfer the property in goods and rather it is rendering of service or the ultimate transaction is transfer of immovable property, then also it is open to the States to levy sales tax on the materials used in such contract if such contract otherwise has elements of works contract. The enforceability test is also not determinative. 97.7. 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 t....
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.... Petition (SLP for short) before the Supreme Court of India, which was dismissed and therefore, the said judgment has attained finality. Paragraphs 9 to 13, 17 to 19 and 21 to 23 thereof are quoted below:- "9. The first question that we are required to answer is whether exposed photographic film rolls and negatives are "goods" within the meaning of Section 2(15) of the Act. If they are not "goods" then they fall outside the purview of a works contract which includes any agreement for processing or otherwise treating or adapting any goods. 10. In Rainbow Colour Lab & Anr. v. State of M.P. & Ors, (2000) 2 SCC 385 the Supreme Court accepted the test of marketability of goods for the purposes of deciding whether a contract is a works contract or not as laid down in Bavens v. Union of India, 1995 (97) STC 161. Although Rainbow Colour Lab was overruled on another issue, the marketability of goods remained intact as a proposition of law. 11. That the test of marketability of goods has not been overrules is clear from BSNL v. Union of India, (2006) 3 SCC 1. In that case, the Supreme Court referred with approval to Tata Consultancy Services Ltd v. State of A.P., (....
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....s and negatives are not "goods" the provisions of Sections 7, 8 and Schedule VI of the Act do not come into play at all. When a customer goes to the appellants to have his exposed photographic film rolls developed or negatives processed, there may be an agreement for the transfer of property in the chemicals used in the processing or otherwise treating or adapting the exposed photographic film rolls and negatives. But since they are not "goods" within the meaning of the Act, the question of taxing the "sale" of the chemicals does not at all arise. 19. The above discussion undoubtedly leads to only one conclusion which is that the conversion of exposed photographic film rolls into negatives and then into positive photographs or the conversion of negatives into positive photographs is nothing but a rendering of service specific to a customer and is a matter of skill and expertise of the developer it is not a works contract. *** *** *** 21. The issue in our case is whether the exposed photographic film rolls and negatives are "goods" or not. We have held that they have no utility and are not marketable. As such, they are not "goods". Consequently, a contract for p....
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....ether the denting and painting work is marketable, the answer is in the negative. In this regard, the submission of the learned counsel for the petitioner appears to be correct that when a person goes to a workshop for getting a denting and painting job done on a vehicle, there is no contract for sale of purchase of any article, commodity or thing, but it is a contract for labour and service. The marketability test, thus, appears to be the first test to decide the issue, which is decided in favour of the petitioner as the painting work on a vehicle, of its own, not marketable. Based on the finding recorded in paragraph- 56 of the case of Larsen & Toubro Ltd. (supra) , as quoted herein before, the second test appears to be whether the denting and painting job is something which becomes embedded on earth and to the said query, the answer would be in the negative and in favour of the petitioner. 19) Now if we consider a new vehicle, a vehicle is made of thousands of components, each having its unique character. Nonetheless, though a vehicle is a composition of numerous unique components, it is impermissible for the taxing authority to tax individual item of the vehicle. Similarly, ....