1991 (12) TMI 253 - HC - VAT and Sales Tax

Summary

Issues:
Whether a building contractor executing works contract within the meaning of the Bihar Finance Act, 1981 is entitled to benefits of purchasing goods at concessional rates under the Central Sales Tax Act, 1956 by furnishing declaration in form C.

Analysis:
The petitioner, a registered dealer carrying out works contract, sought issuance of form C for purchasing goods in inter-State trade for use in works contract. However, the respondent refused to issue form C to contractors/builders. The petitioner contended that as a dealer under Bihar Finance Act and Central Sales Tax Act, they should not be denied form C benefits. The petitioner relied on legal precedents like Builders Association of India v. Union of India and Unitech Ltd. v. Commercial Tax Officer to support their claim.

The definition of "dealer" under the Bihar Finance Act includes persons engaged in buying, selling, or distributing goods. The concept of "works contract" under the Act involves construction, fitting out, or repair of immovable or movable property for valuable consideration. The petitioner, being a registered dealer under both Acts, falls within the ambit of a dealer involved in works contract.

Section 8(3)(b) of the Central Sales Tax Act specifies that goods intended for resale by a registered dealer can be purchased at concessional rates. The petitioner argued that goods purchased for use in works contract, upon furnishing form C, fall under the definition of "tax on sale or purchase of goods" as per the Constitution.

The legal fiction created by clause (29-A) of article 366 of the Constitution deems transfer of goods in works contract as a sale, entitling the seller to benefits under the Acts. The Supreme Court in Builders Association of India v. Union of India emphasized giving full effect to legal fictions and extending benefits to contractors involved in works contract.

A recent Full Bench decision by one of the judges held that works contractors become dealers under the Bihar Finance Act by virtue of the legal fiction in article 366(29-A) of the Constitution. This decision aligns with the Andhra Pradesh High Court's ruling in Unitech Ltd.'s case, supporting the entitlement of works contractors to privileges conferred under the Acts.

Ultimately, the High Court allowed the writ application, quashing the orders denying form C issuance to the petitioner. The judgment emphasized the legal fiction's implications and the entitlement of works contractors to benefits under the Acts.