2009 (6) TMI 946 - HC - VAT and Sales Tax

Works contract - inter-state sale - The petitioners claimed exemption on the ground that movement of goods from outside the State to Kerala is under contract of sale and so much so it is an inter-State sale assessable outside Kerala - Held that - transfer of property in goods admittedly took place in Kerala when the goods are appropriated to the contract that is by laying pipe in the location identified by the awarder. Until then the goods were retained by the petitioner at their risk in their godown. A trader making inter-State purchase or bringing goods on stock transfer and selling the same later becomes liable for payment of tax under the Kerala General Sales Tax Act on sale of such goods. The position is not different so far as contractors are concerned, who bring goods from outside the State either as stock transfer or as inter-State purchase, stock them in their godown and later use them in the execution of works contract - the Tribunal rightly held that the transfer of materials in the course of execution of work in Kerala does not amount to inter-State sale of goods from Mumbai to Kerala - petition dismissed - decided against petitioner.

Summary

Issues:
Assessment of sales tax on works contract for pipe-laying work involving stock transfer and inter-State purchase of materials.

Analysis:
The judgment pertains to connected revisions filed by the assessee challenging the order of the Sales Tax Appellate Tribunal for the assessment years 1999-2000 to 2001-02. The petitioner was engaged in pipe-laying work for transferring petroleum products, involving the supply of pipes and materials. The main contention was the exemption claimed on the value of pipes and materials brought on stock transfer and inter-State purchase. The assessing officer held that the transactions were local sales assessable to works contract in Kerala. The first appellate authority allowed the exemption, but the Tribunal reversed the decision, leading to the revisions. The Tribunal found that the goods brought on stock transfer and inter-State purchase were appropriated to the contract in Kerala, making the entire material value assessable for works contract tax in Kerala.

The Tribunal's findings emphasized that the transfer of materials in the course of execution of work in Kerala did not constitute an inter-State sale. The court noted that the petitioner brought goods to Kerala, stocked them, and later used them in the works contract, with the transfer of property occurring in Kerala during the execution of the contract. The court distinguished the case from inter-State sales, stating that bringing goods from outside the State and later using them in the contract did not qualify as inter-State sales. The court highlighted that the petitioner did not bill the goods as inter-State sales and retained ownership until the goods were appropriated to the contract in Kerala.

The court rejected the petitioner's claim for exemption, affirming the Tribunal's decision that the transfer of materials during the execution of the works contract in Kerala did not amount to inter-State sales. The court held that contractors bringing goods from outside the State for works contracts are liable for tax under the Kerala General Sales Tax Act, similar to traders making inter-State purchases. Ultimately, the court dismissed the revision petitions, upholding the Tribunal's decision regarding the assessment of sales tax on the works contract involving stock transfer and inter-State purchase of materials.