TMI Blog2006 (2) TMI 593X X X X Extracts X X X X X X X X Extracts X X X X ..... ers' version. The petitioner M/s. Photographic Laboratory Pvt. Limited, is a private limited company incorporated under the Companies Act, 1956 with its place of business at SS Road Lakhtokia, Guwahati, Assam. Initially, it was a proprietorship concern up to December 31, 1996 in the name and style of M/s. SS Colour Lab of which Shri Sanat Kumar Dey [petitioner in W.P. (C) No. 5369 of 2002], was the proprietor. The petitioner-company, a new industrial unit under the Industrial Policy of Assam, 1991 has been granted the eligibility certificate and it is entitled to claim sales tax exemption for the period from March 18, 1994 to March 17, 2001. According to the petitioners, in course of business, they received photo negatives from various customers for the purpose of processing the same into positive photographs and prints for delivery thereof, against some job charges and that the process does not involve any sale of goods or transfer of property in goods as comprehended under Section 8(i)(e) of the Act. In response to the notices in the year 1997, asking them to explain why their business transactions would not be treated as "works contract" under the Act, they submitted their writt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. The approach of the respondent-authorities was opposed to the letter and spirit of the definition of the expression "tax on the sale or purchase of goods" provided in article 366(29A) of the Constitution of India, they pleaded. The above assertions were negated holding that in executing the works entrusted in course of their business, the petitioners were engaged in "works contract" as defined under Section 2(38)(iv) of the Act and thus chargeable to tax under Section 8(1)(e) of the Act, in view of article 366(29A) of the Constitution of India and entry No. 24 of Schedule VI of the Act. As photo papers, chemicals, etc., are involved at the delivery of the finished products to the customer, according to the respondents, there is a transfer of property in goods in execution of the job orders attracting tax liability under the Act. It being within the legislative competence of the State Legislature to enact the Act, in view of the constitutional empowerment traceable in article 246(3) of the Constitution of India and entry No. 54 to the State List, the demand was unassailable, they asserted. 6. Mr. Bora has argued that the petitioners' business transactions are exclusively ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, as is identifiable in item No. 24 of the Sixth Schedule thereof, it was well within the dominion of the respondents to decipher the transfer of property in goods involved therein and make due assessment of the tax payable in accordance with the said legislation. Any transfer of property in goods involved in a works contract being chargeable to tax as is explicit from Section 8(1)(e) of the Act, Mr. Choudhury, has urged that in the facts and circumstances of the case, the assessment and demand of tax is unexceptionable. According to him, the decision of the apex Court in Rainbow Colour Lab relied upon by the petitioners, is no longer a good law in the face of the subsequent decision of the apex Court in Associated Cement Companies Ltd. v. Commissioner of Customs . He maintained that in the teeth of the ratio in Associated Cement Companies Ltd. , the petitioners' assertions based on Rainbow Colour Lab and the other decisions of this Court structured thereon, are of no avail. 9. The learned Additional Advocate-General in order to trace the background of the insertion of Clause (29A) of article 366 of the Constitution of India referred to the decision of the apex Court in Bui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le VII of the Constitution of India, dealing with taxes on the sale or purchase of goods is couched in the following language : Entry No. 54. Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry No. 92-A of List I. 12. The Act, is therefore a statute enacted in exercise of the power conferred in Article 246(3) read with entry No. 54 of List II as above. The preamble proclaims that it is a legislation to amalgamate and consolidate the laws relating to levy of tax on the sale or purchase of goods in the State of Assam. 13. The word "sale" is defined in section 2(33) to mean with all the grammatical variations and cognate expressions, any transfer of property in goods by any person for cash, deferred payment or other valuable consideration, and includes : (i) ... (ii) any transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract. 14. Section 2(38) defines "works contract" to mean and includes any agreement for carrying out : (i) to (iii)... (iv) The fitting out or fabrication, assembling, altering, or reassembling blending, furnishing, improving, processing or other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of their business dealings, the same in my opinion, are well within the ambit of "works contract" envisaged in the above entry. Indeed, as observed hereinabove, the above aspect has not been assailed by the petitioners. The pleaded facts are also not in dispute having remained uncontroverted in absence of a counter by the respondents. With this background, it is now time to turn to the precedential law. 17. In Builders' Association of India Ltd. the apex Court while dealing with the challenge to the levy of sales tax on the turnover relating to works contract, following the above constitutional amendment and the consequential changes in the various State laws, dilated, inter alia, on the reasons for the insertion of Clause (29A) in article 366 of the Constitution of India. Referring to its earlier decision in State of Madras v. Gannon Dunkerley to the effect that a works contract was not divisible and therefore, the turnover of the goods used in the execution thereof, was not assessable to sales tax, the apex Court held the view that the amendment was brought about to define "tax on the sale or purchase of goods" to include a tax on the transfer of property in the goods (wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision of contracts involving the value of materials used incidentally in such contracts. It further held that the work done by the photographer is only in the nature of a service contract not involving any sale of goods and therefore struck down the levy. In coming to its conclusion, the apex Court took note amongst others of its earlier decisions in Hindustan Aeronautics Ltd. v. State of Karnataka [1984] 55 STC 314 and Everest Copiers v. State of Tamil Nadu . 19. The decision in Rainbow Colour Lab came up for consideration before apex Court in Associated Cement Companies Ltd. , where their Lordships were of the view that the decision rendered in Rainbow Colour Lab ran counter to the express provision contained in article 366(29A) and also the Constitution Bench decision in Builders' Association of India Ltd. . The relevant paragraph of the decision in Associated Cement Companies Ltd. is extracted hereinbelow for ready reference : In arriving at the aforesaid conclusion the court referred to the decisions of this Court in Hindustan Aeronautics Ltd. v. State of Karnataka and Everest copiers . But both these cases related to pre-Forty-sixth Amendment era where in a works con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to the above extracted paragraph from Associated Cement Companies Ltd. . 24. Significantly, the decision in Associated Cement Companies Ltd. is later in point of time and is also by a larger Bench. A plain reading of the observations contained in the quoted excerpt of the said decision and the conclusions recorded therein, in my considered view proclaims an unequivocal disapproval of the ratio in Rainbow Colour Lab case . Not only it has been observed therein that the decisions in Hindustan Aeronautic Ltd. and Everest Copiers on which the verdict of Rainbow Colour case rested, related to the pre-amendment period when the State had no jurisdiction in a works contract to impose sales tax on transfer of property in goods involved in the execution thereof, it was categorical in ruling that even if the dominant intention of the contract is to render a service, after the 46th Amendment of the Constitution, if such contract is a works contract, the State was empowered to levy sales tax on the materials used therein. The contrary view recorded in Rainbow Colour Lab , was held to be opposed to article 366(29A), as well as the Constitution Bench decision of the court in Builders' Assoc ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
