1992 (11) TMI 254 - SUPREME COURT

Whether in the absence of an amendment in the Central Sales Tax Act specifically applying its provisions to a transfer of property in goods involved in the execution of a works contract, the provisions of sections 3, 4 and 5 contained in Chapter II can be held applicable to such a transfer?

Held that:- Appeal allowed. The High Court has upheld the validity of sub-section (3) of section 5 by taking into account the provisions of sub-rule (2) of rule 29 but, while considering the said provisions the High Court has failed to notice that under clause (i) of sub-rule (2) of rule 29, transfer of property in goods involved in the execution of a works contract, on which no tax is leviable under section 5, are not required to be deducted from the turnover. The High Court also failed to attach importance to the use of the word "turnover" (instead of word "taxable turnover') in sub-section (3) of section 5 as a result of which the amplitude of the incidence of tax has been widened so as to include transactions which are outside the sphere of taxation available to the State Legislature under entry 54 of the State List. We are, therefore, unable to uphold the decision of the High Court in this regard.

Since the invalidity of section 5(3) goes to the root of the imposition of tax and in the absence of the said provision the tax cannot be levied, the appellants in the appeals are entitled to succeed.