TaxTMI 
TaxTMI 
TaxTMI 
2024 (1) TMI 177
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.... holding that the contracts between BGR, Chennai and RRVUNL as a composite and indivisible contract which tantamounts to a works contract? (ii) Whether the learned Tax Board has legally erred in holding that sale of Onshore Goods and Offshore Goods made by BGR-Chennai, BGR-Gurarat and BGR Maharashtra to RRVUNL as intra-state sale by BGR Rajasthan to RRVUNL and accordingly to be taxed under RVAT Act instead of CST? (iii) Whether in facts and circumstances of the case, the Respondent Department having assessed the transaction under Entry tax as goods brought by RRVUNL into the state, is estopped from contending that the sale of the said goods was made by BGR, Rajasthan to RRVUNL in the state of Rajasthan? (iv) Whether in the facts and circumstances of the case, the learned Tax Board has grossly erred in holding the State of Rajasthan can levy RVAT on a sale transaction when the assessment in relation to the said sale transaction has already been completed under CST Act in the state of Tamil Nadu, Maharashtra and Gujarat?" In STR Nos. 155-157/2020, preferred by the revenue: - "1. Whether in the facts and circumstances of the case the larger bench of the Rajasthan Tax Board was ....
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....visible work contract into three contract is nothing but a colourable device to avoid the tax due under the RVAT Act. It was further opined that the sale made under the first and second contract are intra-state sales, i.e. sale within the State of Rajasthan and not inter-state sales under Section 3 read with Section 6 of Central Sales Tax Act, 1956 (for short "CST Act"). 2.4. On the basis of survey and inspection report, the assessment order(s) were passed on 14.06.2013 wherein tax, interest, and penalty were levied on the assessee under the RVAT Act on 'deemed sale of goods' in execution of works contract. 2.5. The Appellate Authority, vide order dated 11.02.2014, quashed the assessment and demand orders and held that the sale made by the assessee is inter-state sale covered under Section 3 read with Section 6 of CST Act, and hence not exigible to state taxation. 2.6. The RTB, vide impugned order dated 19.03.2020, held that the contract between the parties was a composite and indivisible one and the disputed sale involved were intra-state sale and therefore affirmed the power of state government to levy VAT on the same. 2.7. The specific issues framed by the RTB were answered ....
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....ed in different States and resale of the same to RVUN is a sale as described under Clause (b) of Section 3 of CST Act? * In case the sale between BGRESL, Chennai and RVUN is a sale under clause (b) of Section 3, is it also a sale by BGRESL, Chennai exempted under Section 6(2) of CST Act? * In case the sale does not fulfill requirements of Section 3(b) or Section 6(2) or both, is it taxable under the provisions of RVAT Act? Answer to Question 3) * Purchase of onshore goods and subsequent sale of the same to RVUN does not constitute a sale as described under clause (b) of Section 3 CST Act. * The sale not qualifying under Section 3(b) automatically disqualified under Section 6(2) of CST Act. The subject sales are taxable under RVAT Act on being denuded the inter-State sale or export sale." 2.8. However, considering that the goods were 'goods of special importance' as per Section 14 of CST Act, while setting aside the penalty, the RTB remanded the matter back to the assessing authority with the following directions: "14. All the references made by the Learned Division Bench has been specifically answered by us as above. In view of this the D.B. will have nothing to decide....
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....ds; one for supply of on-shore goods; and one for civil works. The RRVUNL had prescribed the complete procedure to be followed by the petitioner while executing the contracts for supply of off-shore and on-shore goods. Even the vendors from whom the goods were to be procured in both these contracts were identified by the RRVUNL. (b) That the above mentioned two supply contracts (both On-shore and off-shore) occasioned movement of goods from one state to another and were duly assessed to tax under the provisions of CST in the hands of petitioner's branches at Maharashtra, Gujarat, and Chennai. Further, the supply contracts were issued by RVUNL inter alia providing for cost of CST. (c) That the title of the goods was transferred outside the state of Rajasthan, which is evident from Clause 31.3 of BID/NIT. (d) That even for the sake of argument, it is assumed that the subject sales were made by the Rajasthan branch of the assessee, even in that case, by virtue of movement of goods from one state to another, the subject sales would be inter-state sale not liable to tax under the RVAT Act. (e) Reliance is placed on Apex Court judgments of Hyderabad Engineering Vs. State of AP: (20....
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....o insertion of Article 366(29-A)(b) into the Constitution of India by way of 46th Constitutional Amendment, state government did not have power to tax the 'sale of goods' elements involved in a works contract. Article 366(29-A) (b) of the Constitution of India merely empowers the state government to separate the sale of goods element involved in a works contract and to levy tax on the same. Article 366(29-A)(b) of the Constitution of India does not provide for levy of tax on whole of works contract. (c) A works contract is no exception to inter-state sales. It has been held in Builders' Association of India vs. Union of India: (1989) 2 SCC 645 that Article 366(29-A)(b) of the Constitution of India only empowers the state to tax sale of goods involved in works contract but all the Constitutional restrictions under Article 286 and Entry 92A of Union List would apply on the same. Therefore, revenue has no power to tax sale of goods involved in execution of works contract as the same have been supplied during inter-state sales. Reliance is placed on Hon'ble Supreme Court judgments of Gannon Dunkerley and Co. Vs. State of Rajasthan: (1993) 1 SCC 364, Indure Ltd. vs. CTO (2010) 9 SC....
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....cution of works contract is available with the State of Rajasthan under Article 246 read with Entry 54 of List II just like any other transaction of sale or purchase taking place inside a state. In other words, the existence of a works contract does not change the fact that what is ultimately being taxed is sale and purchase of goods, which is subject to provisions of Article 286, Entry 92A of List-I of Constitution of India and the CST Act. (g) That this Court had struck down the provision in the erstwhile Rajasthan Sales Tax Act, 1994 which attempted to bring tax on inter-state sale of goods involved in the execution of works contract in the case of Triveni Engineering and Industries Ltd. v. State: (2001) 3 RLW 1752. 4.3. The third contention of the assessee is that because the subject sales have been assessed to tax under the CST Act, the same cannot be taxed again under the RVAT Act. In support of this contention, learned senior counsel for the assessee made the following submissions: (a) That it is undisputed in the present case that the subject sales under both the supply contract have been assessed to tax under the CST Act in the hands of the assessee in respective stat....
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....y by the Appellate Authority and the same has not been controverted by the RTB either. The Assessing Authority imposed penalty on the basis of only one transaction alleged to be an intra-state sale from Bhiwadi, Rajasthan. The allegation is erroneous because as per the contract issued by RVUNL the said supply was to be made from a vendor situated out of Rajasthan and was accordingly procured by the Petitioner from Himachal Pradesh, and the Assessing Authority has erroneously relied upon one inspection report which does not pertain to said supply, which is evident from the documents on record itself. Even otherwise, all the document, nature of business and explanation is on record, suggesting that there is no illegality or fabrication or anti-dating of documents. At the best, revenue may plead that the documents were not to the satisfaction. However, that does not alter the 'substantive' character of sales as the principle of 'Substantive Form' is well settled. 4.6. The sixth contention of assessee is that it is unfair for the State to first mandate the charging of CST on the supply of offshore and onshore goods and charging of RVAT only on local supplies while floating the....
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....he incidence of sale took place for the purpose of works contract. Learned AG has also highlighted the finding of RTB at para 9.10 and para 9.11 to submit that issuance of MDCC by RVUNL only confirmed the specification of the goods to be used in the execution of the works contract. Mere issuance of MDCC, by no conceivable means, can be said to be transfer of title or ownership, as the assessee was still required to deliver the goods and put them in a deliverable state. 5.3. That the terms and conditions of contract are relevant for determination of the intention of the parties. In the case in hand, RVUNL issued the single NIT for erection of the thermal power plant. The sale in the present case is not of individual goods but is of the thermal power plant constructed and installed by the assessee. It is submitted that in order to attract CST Act, the condition precedent is that it should be sale in the course of interstate trade or commerce. The goods which were used in the installation of plant shall fall within the expression 'deemed to be sale of those goods by the person executing works contract'. It is further submitted that installation of thermal power plant and sale thereof....
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....Rs. 785 crores, in which serious discrepancies were found. Therefore, it is contended that the penalty was wrongly set aside by the RTB. Reliance is placed on State of Gujarat and Ors. vs. Saw Pipes Ltd. (Neutral Citation: 2023/INSC/376): AIR 2023 SC 2113 and R.S. Joshi and Ors. vs. Ajit Mills Limited and Ors.: (1977) 4 SCC 98. 5.6. That the directions issued by the RTB of remanding the matter back for afresh consideration was beyond the scope of the pleadings and was never argued and therefore the said direction is erroneous. Reliance in this regard is placed on Trojan and Co. Ltd. vs. N.N. Nagappa Chettiar: AIR 1953 SC 235 and Bharat Amratlal Kothari vs. Dosukhan Samadkhan Sindhi & Ors.: AIR 2010 SC 475. 5.7. Reliance is also placed on Xerox Modicorp Limited vs. State of Karnataka: (2005) 7 SCC 380, CCT Kerala vs. K.T.C. Automobiles: (2016) 4 SCC 82, and Arihant Udhyog vs. State of Rajasthan and Ors.: (2017) 8 SCC 220. ANALYSIS 6. Heard the arguments advanced by learned counsels appearing for the respective sides, thoroughly scanned record of present STRs, and carefully considered the judgments cited by the learned counsels. 7. The contention of the Revenue is that the contr....
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....on which RVAT is leviable. 2. No penalty was imposed. 3. Matter remanded back to assessing officer with direction pertaining to benefit of notification dated 28.04.2006 for FY 2009-10 and rate of tax on goods of special importance. 8. The relevant provisions of law, which are required to be considered for adjudication of this case, are reproduced as under: "Article 286 of Constitution of India - Restrictions as to imposition of tax on the sale or purchase of goods (1) No law of a State shall impose, or authorise the imposition of, a tax on the supply of goods or of services or both, where such supply takes place (a) outside the State; or (b) in the course of the import of the goods or services or both into, or export of the goods or services or both out of, the territory of India. (2) Parliament may by law formulate principles for determining when a supply of goods or of services or both in any of the ways mentioned in clause (1). Article 366(29A) of Constitution of India: (29A) 'tax on the sale or purchase of goods' includes (a) a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuabl....
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....ment, repair or commissioning of any movable or immovable property; Section 2(g)(i)(ii) of CST Act: (g) "sale", with its grammatical variations and cognate expressions, means any transfer of property in goods by one person to another for cash or deferred payment or for any other valuable consideration, and includes, (i) a transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (ii) a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; Section 2(ja) of CST Act: (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; Section 3 of CST Act: Section 3- When is a sale or purchase of goods said to take place in the course of inter-State trade or commerce. A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase- (a) occasions the movemen....
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....levant extracts of some judgments on the issue. 9.1. In the case of Gannon Dunkerley (supra), the Apex Court observed as under: "40. ...We do not propose to go into this controversy because the question whether a deemed sale resulting from transfer of property in goods involved in the execution of a particular works contract amounts to 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 a sale in the course of import under Section 5 of the Central Sales Tax Act has to be decided in the light of the particular terms of the work contract and it cannot be decided in the abstract. As at present advised, we are not in a position to say that in no case, can there be a sale in the course of inter-State trade or commerce or an outside sale or a sale in the course of import in respect of a deemed sale resulting from transfer of property in goods involved in the execution of a works contract falling within the ambit of subclause (b) of clause (29-A) of Article 366 of the Constitution." 9.2. In the case of Hindustan Shipyard (supra), the Apex Court observed as under: "6. .......
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....tracts will contain a cross fall breach clause specifying that breach of one contract will constitute breach of the other. 2. Article 3.7 of all three contracts It is expressly agreed to by the EPC contractor that notwithstanding the fact that the contract is termed as engineering procurement and construction (EPC) contract or indicates the break-up of the contract consideration, or awarded three contracts for convenience of operation. It is infact one composite Contract on single source responsibility basis and the contractor is bound to perform the total contract in its entirely and non-performance of any part of portion of the contract shall be deemed to be a breach of the entire contract. CONTRACT PRICE The total Contract price for the entire scope of this contract as detailed in letter of intent is Rs. 4900.06 crores. This shall be firm till completion of the contract. TAX DEDUCTED AT SOURCE As regards the Indian Income Tax, surcharge on Income Tax, any cess thereof and any other similar tax etc, the RVUN shall not bear any liability whatsoever, irrespective of the mode of contracting. The contractor shall be liable and responsible for payment of all such taxes, if....
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....ng Over of Unit#1 and Unit#2 respectively.... INSURANCE- Clause 20. of GCC The risks that are to be covered under the insurance shall include, but not be limited to, the loss or damage in transit, storage, erection and commissioning, theft, pilferage, riot, civil commotion, weather conditions, accidents of all kinds, fire, war, risk etc. COMPLETION OF CONTRACT - CLAUSE 32 OF GCC 32.2 The conditions for "Final Completion" are as follows:- a) Taking-over of the Unit/plant as per SCC shall have occurred; b) A performance certificate to be issued after the completion of performance Guarantee Tests, shall have been issued. c) The Contractor shall have provided all outstanding final drawings and documentation as per Contract." Further, the project import certificated letter dated 06.07.2009 issued by the Chief Engineer (TD) of RVUNL and endorsed by the Secretary - Energy Department, Government of Rajasthan is also reproduced as under: "No. RVUN/CE(TD)/SE(TD-1)/TDM-IV/F. /D. 2236 Jaipur, dated 6/7/2009 To The Commissioner of Customs Customs House Mundra PORT Sub: Project Authority Certificate for Equipment required for setting up of 2*600 MW Kalisindh Thermal Po....
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.... proposal in lump-sum for the entire scope of work. (c) The bid was awarded to the assessee at approximately Rs. 4900.06 crores for the entirety of the project. (d) All three contracts contained a cross fall breach clause specifying that breach of one contract would constitute breach of others, giving a right to the RVUNL to terminate the other contracts also at the cost and risk of the contractor/assessee. This is quite enough to counter the contention of the assessee that the three contracts were independent and separate. (e) Award of three contracts could not and did not dilute the responsibility of the assessee to successfully complete the erection of the thermal power project as per the specification on single source responsibility basis. (f) There was a provision in the contract itself about tax deduction at source (for short "TDS") and accordingly TDS on Works Contract Tax was also deducted on composite value of the turnkey EPC Contract. (g) The letter dated 06.07.2009 also indicates that the goods were to be imported on CIF value for use in erection of the power project. (h) The separation of the contract into three parts was merely done for the convenience of p....
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....o be made on the basis of work executed at site and equipments brought on to the site by the contractor (GCC45.4.2) 7.12 Before clinching the issue we would like to have a view of what Hon'ble Supreme Court has said while deciding the nature of a Turnkey Project or a Composite Contract - 11. By way of Letter of Award dated 16.08.1988, N.T.P.C awarded two contracts to the Company for performing the work of erection of aforesaid plant on Turnkey Basis. Even though, two contracts were entered into between the parties but in nutshell it was only one contract for the simple reason that N.T.P.C kept a right with it with regard to cross fall breach clause meaning thereby that default in one contract would tantamount to default in another and whole contract was liable to be cancelled." Indure Ltd. Vs. CTO (2010) 9 SCC 461 (SC) 64. ........ It may be noted here that in all the cases that have been brought before us, there is a composite contract for the purchase and installation of the lift. The price quoted is a composite one for both...... But it is not in dispute that the preparatory work has to be done taking into consideration as to how the lift is going to be attached to the....
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....isible works contract for supply of material and erection and installation of equipments. They are so intertwined and interdependent that we are unable to accept them as separate and independent contracts and unhesitatingly hold them an indivisible Works Contract." 13. In the considered opinion of this Court, the RTB, after careful consideration of the entire record, had rightly concluded the contract to be a composite and indivisible EPC works contract on turnkey basis. The observation by the RTB reproduced above, are in content and form, flawless and thus this Court has no hesitation in affirming the view taken by RTB in this regard. 14. Now what remains to be seen is whether the subject sale of the goods were inter-state sales or intra-state sales. The assessee contends that the off-shore sales were inter-state sales covered under Section 3(a) of CST Act as the identified goods were supplied by the Gujarat and Maharashtra branch of the assessee directly to RVUNL and the Rajasthan branch of the assessee merely acted as a bailee. Similarly, the assessee contends that the sale of on-shore goods were also inter-state sales covered under Section 3(b) read with Section 6(2) of CST A....
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....ses to the buyer when the contract is made, and it is immaterial whether the time of payment of the price or the time of delivery of the goods, or both, is postponed. Section 21-Specific goods to be put into a deliverable state Where there is a contract for the sale of specific goods and the seller is bound to do something to the goods for the purpose of putting them into a deliverable state, the property does not pass until such thing is done and the buyer has notice thereof. Section 22- Specific goods in a deliverable state, when the seller has to do anything thereto in order to ascertain price Where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh, measure, test or do some other act or thing with reference to the goods for the purpose of ascertaining the price, the property does not pass until such act or thing is done and the buyer has notice thereof Section 26- Risk prima facie passes with property Unless otherwise agreed, the goods remain at the seller's risk until the property therein is transferred to the buyer, but when the property therein is transferred to the buyer, the goods are at the buyer's risk whethe....
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....ject. The title to the goods involved in the execution of works contract also, accordingly, only transferred to RVUNL upon completion of contract and upon final handing over of the project as the goods had been subjected to some process to be accommodated in the power project. The same is also evident by the project import certification letter dated 06.07.2009. In the present case, the goods claimed to be sold by the assessee to be part of inter-state sales were not sold to the RVUNL as goods, but utilized in erection of the thermal power project. Since the erection of thermal power project in the state of Rajasthan can only be termed as an intra-state transaction, the property in goods used in such erection, whether as goods or as some other form, would constitute an intra-state sale and accordingly be subject to RVAT. Therefore, this Court is in agreement with the finding rendered by the RTB in para 11.3, which is reproduced as under: "11.3. It is obvious from the provisions of S.4(2) of CST Act that a sale shall be deemed to take place inside a State, if the goods are within the State at the time the contract of sale is made (in case of specific or ascertained goods) or at the....