TMI Blog2015 (3) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that the sale of prestressed cement concrete pipes falls within the definition of sale of goods under the Act. - In view of the alternative remedy available to the petitioner-Company, we are not inclined to reconsider and review the findings, based upon the terms of the agreement read along with the work orders. The legal proposition with regard to definition of 'works contract' in Article 366(29A)(b) of the Constitution of India, has been explained in the recent judgment in Larsen and Toubro Limited and Anr. Vs. State of Karnataka and Anr. For sustaining levy of tax on goods, deemed to have been sold in execution of a works contract, three conditions namely (i) there must be a works contract; (ii) goods should have been involved in execution of a works contract; and (iii) property in those goods must be transferred to a third party, either as goods or in some other form, have been amply clarified. A contract may involve both, a contract of work and labour, and a contract for sale. A transfer of property in goods under clause 29A(b) of Article 366, is deemed to be sale of goods involved in execution of a works contract by a person making transfer and purchase of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8-99 and 1999-2000, and are directed against the order dated 25.02.2002, passed in S.B. Civil Writ Petition No.724/2002 and six other connected writ petitions. D.B. Civil Special Appeal Nos. 117/2002, 120/2002 and 118/2002, arising out of the proceedings of Assessment Years 1989-90, 1990-91 and 1991-92, against the order dated 24.02.2002, passed in S.B. Review Petition Nos.14/2000, 10/2000 and 16/2000. D.B. Civil Special Appeal Nos.6/2012 and 5/2012, arise out of the proceedings of Assessment Years 1992-93 and 1993-94, challenging the order dated 01.03.2012, in S.B. Civil Review Petition Nos.12/2000 and 13/2000, passed in the light of the order dated 24.02.2002 by a coordinate Bench of this Court in S.B. Review Petition Nos.14/2000, 10/2000 and 16/2000. 2. M/s Indian Hume Pipe Co. Ltd. with its registered office at Construction House, Walchand Hirachand Marg, Mumbai, is engaged in manufacturing and laying of pipelines for water supply schemes of various State Governments including the State of Rajasthan. It had also entered into contracts for execution of civil construction works including laying of pipelines for water supply. 3. The Public Health Engineering Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minary objection has been raised by learned counsel appearing for the Revenue, that the order passed by the Deputy Commissioner(Appeals), Commercial Taxes, Ajmer, dated 24.05.1997 under Section 84 of the Rajasthan Sales Tax Act, 1994 (for short, 'the Act of 1994'), is subjected to further appeal before the Rajasthan Tax Board, both, on merits and for rejection of the application for grant of exemption under Rule 10A and 10B of the Rules, made under the Act. 7. It is submitted by learned counsel appearing for the petitioner-Company that the subject contracts are composite/indivisible work contracts. The terms and conditions of the work orders and the agreements as also the nature of work undertaken, clearly establishes that the contract is not a divisible contract. The primary and dominant object of the contract awarded to the petitioner is, laying, jointing etc. of pipes and commissioning of pipelines etc. The work of manufacture and supply of pipes is merely incidental or ancillary thereto. The contract for commissioning of pipelines though involving manufacturing and supplying of pipes, can be completed only by carrying out extensive civil works such as laying, jointi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the contract was a divisible contract; one for supply of pipes etc. amounting to sale, and other for laying of pipes. 11. In Larsen and Toubro Limited and Anr. Vs. State of Karnataka and Anr., 2014(1) SCC 708, decided on 26.09.2013, a three Judge Bench of the Hon'ble Supreme Court has held that the term 'works contract' in Article 366(29A)(b) of the Constitution of India, is amply wide and cannot be confined to a particular understanding of term, or to a particular form. Once characteristics or elements of works contract are satisfied in a contract, then irrespective of additional obligations, such contract would be covered by term 'works contract'. The term 'works contract' in Article 366(29A)(b), takes within its fold, all genre of works contract and is not restricted to one specie of contract to provide for labour and services. For sustaining levy of tax on goods, deemed to have been sold in execution of a works contract, three conditions must be fulfilled; (i) there must be a works contract, (ii) goods should have been involved in execution of a works contract, and (iii) property in those goods must be transferred to a third party, either a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchaser, goods used in construction could not be deemed to have been sold by builder since at that time there was no purchaser and that building was intended for sale ultimately after construction does not make any difference. Raheja Development's case was held to lay down a correct legal position. 12. The Supreme Court further held in Larsen and Toubro Limited and Anr.(supra), that the value of the goods which can constitute the measure of the levy of the tax, has to be the value of the goods at the time of incorporation of goods in the works even though property in goods passes later. Taxing the sale of goods element in a works contract is permissible even after incorporation of goods, provided tax is directed to the value of goods at the time of incorporation and does not purport to tax the transfer of immovable property, (para 124). 13. The Supreme Court, referring to the circulars and the notifications issued by the Maharashtra Government, held that the circular is a trade circular, which is clarificatory in nature only. The notifications enabled the registered dealer to opt for a composition scheme. (para 125) 14. On the aforesaid declaration of law of the Hon& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Commercial Taxes Department, and therefore, the preliminary objection was not held sustainable. He further observed that the only question which remains to be considered, was whether the petitioner is entitled to exemption, which in fact is a scheme of composition of tax payable in respect of sale of goods, the property in which passes as a result of execution of work contract at the fixed rate, notified by the State Government in that regard under Rule 10-B of the Rules. 19. The issue, according to the petitioner, was decided against it by learned Single Judge of this Court in S.B. Civil Writ Petition No.724/2002, and six other connected matters on 25.02.2002, in which it was held that the petitioner is not entitled to any exemption on the principle of strict construction of exemption. It was urged that the judgment dated 25.02.2002, does not decide the question of interpretation of exemption Notification, and the grant of exemption to the petitioner under Rule 10-B of the Rules. 20. Learned Single Judge ordered that the matter may be heard together with Special Appeals arising out of the judgment dated 25.02.2002, passed in S.B. Civil Writ Petition No.724/2002, and six o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e matter, he was of the view that the impugned order does not require to be reviewed by the Court. The review petitions were consequently dismissed. 24. It is pertinent to notice that the Rajasthan Taxation Tribunal, constituted under the Rajasthan Taxation Tribunal Act, 1995, was constituted exercising powers under Article 226 and 227 of the Constitution of India. The Act was found to be constitutionally invalid, and was thus repealed by the State of Rajasthan by the Rajasthan Taxation Tribunal(Repeal) Act, 1999 (Act No.5 of 1999), which came into force on 30.04.1999. Section 5 of the Repealed Act, provides that all matters and proceedings pending before the Tribunal on the date of commencement of this Act shall stand transferred to the High Court for disposal. The review petitions pending in the Tribunal were thus transferred to the High Court, and were decided and dismissed by order dated 24.04.2002. 25. In these appeals, namely D.B. Civil Special Appeal Nos.117/2002, 120/2002 and 118/2002, arising out of the judgment on review petitions, passed by learned Single Judge, we do not find any good ground to interfere, as learned counsel for the appellant had admitted that he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , treated the supply of pipes by the petitioner to the PHED, to be sale within the meaning of Section 2(o) of the Act of 1994. 29. Learned Single Judge held that substantial part i.e. 75% of the material supplied by the petitioner, constituted a sale within the meaning of Section 2(o) of the Act, on which the petitioner was liable to pay sales tax. If the petitioner had paid any works contract sales tax to the PHED, if and when any certificate from the Department is produced before the Sales Tax Department, the Assessing Authority was required to adjust that amount against the total amount of sales tax. The Assessing Authority as well as the Appellate Authority had applied their mind to the contents of the Notification dated 28.04.1993, and Rule 10(B) of the Sales Tax Rules and had rightly held that manufacturing and supply of PSC pipes, jointing material specials, valves anchor blocks etc., do not fall within the scope of buildings, bridges, dams, roads and canals. The agreement was clearly in two parts, namely sale and supply of PSC pipes, jointing material specials, valves anchor blocks etc., and the remaining part being supply of labour and services. The petitioner was thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the recent judgment in Larsen and Toubro Limited and Anr. Vs. State of Karnataka and Anr.(supra), decided on 26.09.2013. For sustaining levy of tax on goods, deemed to have been sold in execution of a works contract, three conditions namely (i) there must be a works contract; (ii) goods should have been involved in execution of a works contract; and (iii) property in those goods must be transferred to a third party, either as goods or in some other form, have been amply clarified. A contract may involve both, a contract of work and labour, and a contract for sale. A transfer of property in goods under clause 29A(b) of Article 366, is deemed to be sale of goods involved in execution of a works contract by a person making transfer and purchase of those goods to a person, to whim such transfer is made. A single and indivisible contract has been brought on par with a contract containing two separate agreements, empowering the State to levy sales tax on value of material in execution of works contract. 35. In view of the clarification of law with regard to imposition of tax on the sale of goods in the works contract, in the judgment of Larsen and Toubro Limited and Anr. Vs. State of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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