TMI Blog1989 (8) TMI 307X X X X Extracts X X X X X X X X Extracts X X X X ..... [1989] 73 STC 370; 1989 BLT 151 these points were no more available. 2.. The points which survived were the validity of rule 13-A which was introduced in the Bihar Sales Tax Rules, 1983, by notification dated 8th October, 1986 and how far the petitioners were liable to pay sales tax on works contract entered into by and between them and the persons in whose benefit building, factory, etc., were being constructed (hereinafter to be referred to as "the employer"). 3.. The petitioners are the association of contractors, its members and other contractors. The contractors entered into contracts known as works contract with different employers for execution of various jobs. Consequent to the amendment in the Bihar Finance Act, 1981 ("the Act" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 70, no sales tax was payable on labour. But rule 13-A did not speak about labour alone and, therefore, it cannot be struck down as a whole. The contractors are liable to pay sales tax on such goods which are supplied for value by the employers, viz., cement, bricks, iron and steel, etc., and used in execution of the works contract. Reliance was placed on N.M. Goel and Co. v. Sales Tax Officer, Rajnandgaon [1989] 72 STC 368 (SC); AIR 1989 SC 285. 6.. These were replied on behalf of the petitioners by submitting that rule 13-A speaks about labour alone. The ratio decidendi in Goel Co. [1989] 72 STC 368 (SC) has no application to these cases as in that case it was question of payment of entry tax. Further, ratio in Goel Co. [1989] 72 STC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (i) of clause (a) of sub-section (1) of section 21 on account of labour charges in case of works contract from gross turnover shall be equal to the following percentage in respect of different types of works contract. PERCENTAGE Per cent (1) (a) Earthwork in all types of soil and in all works on 100 canals, roads, embankments, small dams, etc., by manual labour; and exclusive labour rate contracts. Per cent (b) Earthwork in all types of soil in all works on 20 canals, roads, embankments, dams, etc., by machines. (c) Construction of earth dams with earth moving 25 machines. (2) (a) Construction of masonry/concrete dams, barrages, 30 bridges of more than 15 meters length, water towers and P.H.E.D. installations, and lift irrig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has been provided. In other words, tax is levied on labour charge. Neither sale nor purchase of any goods is involved when a contractor spends on account of labour. "Labour" cannot said to be a goods even within the definition of "goods" in the Act. From the gross turnover, the total amount spent by the contractor as labour charges in execution of the works contract shall have to be excluded. Rule 13-A cannot be sustained and must be held to be ultra vires. 10.. In view of the judgment in Builders Association [1989] 73 STC 370 (SC), the parties agreed that a contractor is liable to pay tax if in execution of works contract, he supplied goods, e.g., bricks, cement, etc., which were used for the completion of the contract and employer pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecovered from the contractor, the amount so paid will not be included in the taxable turnover. 12.. From the judgment in Goel Co. [1989] 72 STC 368 (SC), it appears that the company was a building contractor and was registered as dealer under the Madhya Pradesh General Sales Tax Act. The tender of the company for construction of godown and ancillary building was accepted by the Central Public Works Department (C.P.W.D.). In the tender so submitted by the company, the prices of the materials to be used for construction including cost of iron, steel and cement were included. The C.P.W.D. however had agreed to supply from its stores iron, steel and cement for construction work and to deduct the prices of materials so supplied and consumed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to be consumed for execution of the works contract and the price of which the contractor is made liable to pay, the contractor shall be deemed to have sold the goods to the employer and the contractor is liable to pay tax under the Sales Tax Act. In view of this legal position, notwithstanding the submission made on behalf of the States in Builders Association [1989] 73 STC 370 (SC), it must be held that if there is an agreement between the contractor and the employer under which the employer agrees to supply building materials to the contractor to be used in the work, and the contractor is made liable to pay the price of those materials, there is sale of goods by the contractor and he shall be liable to pay tax on such sale. The legal po ..... X X X X Extracts X X X X X X X X Extracts X X X X
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