AI Drafter 
TaxTMI 
TaxTMI 
2023 (5) TMI 90
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....L) and is a dealer under the Act amenable to tax ? (ii) Whether the Tribunal was bound by its earlier orders in the cases of applicant itself as they have attained finality and, on the principle of "consistency", the Tribunal should not hold otherwise than what has been settled by its earlier Benches? 2 As would be seen from the reading of references, the aforesaid questions have arisen for determination of this Court in the background and context of following facts: M/S Power Grid Corporation of India Ltd. ["the assessee"] is a Government of India undertaking engaged, inter alia, in establishing its own grid stations and laying wires for transmission of electricity. It is in the execution of its aforesaid works, the assessee purchased some goods, material and machinery etc. from outside the State. The assessee has taken registration under the Central Sales Tax, 1956 ["the CST Act"]. The modus operandi adopted by the assessee for construction of its grid stations and laying wires etc. for transmission of electricity indicates that it first buys goods, material and requisite machinery from outside the State and thereafter hands over the same to the contractors for con....
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.... the contractors was erroneous and legally unsustainable. It was contended by the assessee that the goods owned by it were only handed over to the contractors for use and fixation and, therefore, their possession and ownership always remained with the assessee. It was, thus, argued that there was no transfer of property in goods and that no project was completed by the contractors during the year when the material/goods were supplied. It was the contention of the assessee that since the goods and material were used in self works or the works of the Corporation, as such, there was no question of executing any works contract by the Contractors. It was urged that there could be no sale of any goods or material to itself. The Tribunal considered these appeals and the grounds of challenge urged on behalf of the assessee in extenso and, after analyzing the rival contentions, came to the opinion that, in view of the admitted facts that the assessee had purchased goods from outside the State against C-Forms and handed over the same to the contractors for using them in the works contract, it was a foregone conclusion that the goods had been utilized by the assessee through its contractor....
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....aterials/goods from outside the State. The said material was purchased by the assessee against the C-Forms. The registration certificate of the assessee granted under the CST Act clearly refers to the nature of business as "works contract". Under column (A) of the said certificate of registration, the assessee is registered for import of tower material, conductors, sub-station material, steel, cement etc. for use in laying transmission lines and construction of sub-stations and other allied works. It has also come on record and which fact is neither denied by the assessee, nor any contrary material has been placed on record by the revenue that, on execution of the works involving use of aforesaid material, all the works, assets, along with material used therein would ensure to the benefit of State/utilities or organizations for valuable consideration viz. transmission charges. It is thus evident that the works contracts executed by the assessee through sub-contractors are meant for and transferred to other utilities or organizations. It is, thus, the case of the respondents that the goods involved in the execution of the works contract get transferred to State/utilities or organiza....
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....with or without any amenity in a hotel, restaurant or any other place of eating by whatever name called; Provided that where a composite charge is payable in respect of residential accommodation, food and drink, the sale price of food and drink included therein shall be determined in such manner as may be notified by the Government notification in the Government gazettee; (ii) All materials, articles and commodities, whether or not to be used in construction, fitting out, improvement or repair of movable or immovable property; (iii) Growing crops, grass, trees, plants including the produce thereof and other thing attacked to, or forming part of the land which are agreed to be served before sale or under contract of sale; and, (iv) Right to use any goods for any purpose, whether or not, for a specific period". 9 The definition of "sale" as it existed during the accounting year 1996-97 after it was amended by the Act No. XX of 1981 was as under: "Sale" with all its grammatical variations and cognate expressions means any transfer of property in goods (otherwise than by mortgage, hypothecation, charge or pledge) by any person for cash with or def....
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....ing of Section 2(h)(ii) and 2 h(iv) and the transfer of property in such goods (otherwise than by mortgage, hypothecation, charge or pledge) by any person for cash or deferred payment or for any other valuable consideration was a sale within the meaning of term as given in Section 2(L) of the GST Act. Even the transfer of property in goods or in some other form for cash or deferred payment or for any other valuable consideration involved in execution of works contract had also been brought within the purview of term "sale". 11 In light of the above, when we examine the case of the assessee in respect of the accounting year 1996-97, we clearly find that, handing over of the goods and material to the contractors for construction and laying of power grids, sub-stations and transmission lines of the assessee did not involve the transfer of right to use goods. Not only the ownership and dominion over the goods handed over to the contractors remained vested with the assessee, but the transfer or handing over of the goods and material to the contractors was without any consideration. It can, thus, be safely concluded that the transaction between the assessee and its contractor involvin....
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....he definition of "sale" had underwent substantial change. The definition of Goods w.e.f 15.05.1997 was as under: "Goods" means all kinds of movable property (not being actionable claim, newspapers, stock, shares, securities) and includes- [(1) food or any articles of food or other eatables or any drink (Whether or not intoxicating) supplied or served by way of or as part of any service or in any manner whatsoever, with or without any amenity (in a hotel, restaurant or any other place of eating by whatever name called); Provided that where a composite charge is payable in respect of residential accommodation food and drink, the sale price of food and drink included therein shall be determined in such manner as may be notified by the Government notification in the Government gazette;] [(i-a) services in the form of lodging facilities provided by hotels, services provided by beauty saloons, private nursing homes, services provided by photographers and advertisers rendered by way of or as part of any contract or in any other manner whatsoever involving skill and labour and such transaction shall be deemed to be a sale by the persons making the same].....
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.... (ii) in the case of unascertained or future goods, at the time of their appropriation to the contract of sale by the seller, whether the assent of the other party is prior or subsequence to such appropriations; (b) where there is a single contract of sale of goods situated at more places than one, the provisions of clause(a) shall apply as if there were separate contracts in respect of the goods at each of such places] 15 When we examine the controversy at hand in the light of amended definitions of "goods" and "sale", we find that, from 15.05.1997, the services provided in the shape of works contract, whether divisible or indivisible, involving transfer of property or not, were brought within the definition of "goods" and such transaction deemed to be a "sale" by the person making the same. The right to use any goods for any purpose, whether or not, for a specific period which was earlier also existing in the definition of "goods" remained unchanged. 16 So far as the definition of "sale" is concerned, the transfer of property in goods involved in execution of works contract came to be deleted. There was no other substantial change in the definition of "sale" ....
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....c period, was retained as a part of definition of "Sale". However, the transfer of property in works contract came to be excluded from the dentition of "Sale". 21 When we view the entire controversy raised in light of the definitions of "Goods" and "Sale" as were prevalent at the relevant point of time, it clearly transpires that the transfer of property in goods or some other form involved in the execution of works contract was a sale only up to 15.05.1997. The position, however, changed by deletion of clause (i) of Section 2(L) by the Act No. X of 1997 w.e.f 15.05.1997. The accounting years in question are from 1996-97 to 2001-02 and, therefore, except for the month of April and 15 days of May of the accounting year 1996-97, the transfer of property in goods involved in the execution of works contract was not a sale within the meaning of the term used in the GST Act and therefore, not exigible to sales tax under the Act. That would clearly mean that what is being taxed by the respondents is the transaction between the assessee and the contractors. 22 Indisputably, the goods in question were purchased by the assessee from outside the State against C-forms for which it had ne....
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....rms, as such, cannot escape its liability to pay tax on the goods/material used by it in works contract. Indisputably, the assessee is a dealer engaged in inter-State sale and purchases and registered under Section 7 of the CST Act. 26 Form a reading of Section 7 of the CST Act, it becomes abundantly clear that every dealer liable to pay tax would require mandatory registration under the Act. A person, who is registered under Section 7 of the CST Act, is necessarily a dealer liable to pay tax under the Act. A dealer, in terms of Section 2(b) of the CST Act, is a person who carries on business of buying, selling, supplying or distributing goods, directly or indirectly, for cash, or for deferred payment, or commission, remuneration or any other valuable consideration. In terms of Section 8 of the CST Act, every dealer, who in the course of inter-State trade or commerce, sells to a registered dealer goods of the description referred to in sub-section 3, which would include goods used in the generation or distribution of electricity or any other form of generation, shall be liable to pay tax under the CST Act which shall be 3%/4% of his turn over or at the rate applicable to the sal....
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....ST Act. To avoid this liability of the contractor, the assessee, in terms of a supply contract separately executed, purchased the goods and material from the contractor from outside the State and delivered the same to the self-same contractor to be used in different works of the assessee. Mr. Subash Dutt calls it a tax planning, but we see it as a shrewd move on the part of the assessee to defeat the provisions of the GST Act. 29 We are aware that the aforesaid observations of ours may not directly impact the outcome of the references, but we are sure that if the Authorities under the GST Act lift the veil, they would certainly find that the two agreements styled as labour contract and supply contract are, in essence, a single composite contract to execute the works of the assessee by the contractor. If that exercise is done by the Authorities under the GST Act, the contractor, who has executed the works contract of the assessee, may fall in the GST net. In that eventuality, even the assessee, who is supposed to deduct the tax at source while making payments to the contractors could also be held liable. Be that as it may, with the aforesaid observations, we leave it to the Tax A....