TMI Blog1994 (6) TMI 198X X X X Extracts X X X X X X X X Extracts X X X X ..... as adopted, the said power was divided between Parliament and State Legislature, under entry 92 in List I and entry 54 of List II of the Seventh Schedule to the Constitution of India (for short "the Constitution"). 4.. Parliament was empowered to impose taxes on the sale or purchase of newspapers and on advertisements published therein and under entry 54 in List II, the State Legislatures were empowered to impose taxes on the sale or purchase of goods, other than newspapers. 5.. With regard to imposition of sales tax on goods involved in the execution of works contracts, where the contract was single and indivisible, the question arose whether there was a "sale" of those materials within the meaning of that word in entry 48 in List II of the Seventh Schedule to the GI Act and entry 54 in List II of the Seventh Schedule to the Constitution. 6.. There was a sharp cleavage of opinion among the High Courts on that question. This Court, in Gannon Dunkerley Co. (Madras) Ltd. v. State of Madras [1954] 5 STC 216; AIR 1954 Mad. 1130 took the view that the expression "sale of goods" in entry 48 in List II of the GI Act and entry 54 in List II of the Constitution had the same meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sible, there is no sale of goods because in such a contract the agreement between the parties is that the contractor should construct the building according to the specifications contained in the agreement and in consideration therefor receive payment as provided therein and in such an agreement, there was neither a contract to sell the materials used in the construction; nor does the property pass therein as movables. The apex Court therefore laid down that it was not within the competence of the Provincial Legislature under entry 48 in List II of the Seventh Schedule to the GI Act, to impose a tax on the supply of materials used in such a contract treating it as a sale. The said decision, though rendered in the context of entry 48 in List II of the Seventh Schedule to the GI Act, was equally applicable to the provisions found in entry 54 in List II of the Seventh Schedule to the Constitution. 11.. While laying down such a rule, the apex Court at page 387 of STC (427 of SCR), observed: "It is possible that the parties might enter into distinct and separate contracts, one for the transfer of materials for money consideration, and the other for payment of remuneration for servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw specify." 16.. After the Forty-sixth Amendment, various State Legislatures amended their sales tax legislations to make provision for imposition of sales tax in relation to works contracts. The constitutional validity of the Forty-sixth Amendment as well as the amendments made in the State legislations on that basis were challenged before the apex Court in appeals as well as writ petitions filed under article 32 of the Constitution. The said matters were disposed of by its judgment in Builders Association of India v. Union of India [1989] 73 STC 370; [1989] 2 SCR 320. Two points were raised therein. They are: (i) the Forty-sixth Amendment was unconstitutional for the reason that it had not been ratified by the Legislatures of not less than one-half of the States by resolutions passed to that effect by those Legislatures before the Bill which led to the amendment in question was presented to the President for assent; and (ii) it was not open to the States to ignore the provisions contained in article 286 of the Constitution and the provisions of the Central Sales Tax Act, 1956 (Act No. 74 of 1956-for short "the Central Act"), while making assessment under the sales tax la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson making the transfer and a purchase of those goods by the person to whom such transfer is made. The object of the new definition introduced in clause (29-A) of article 366 of the Constitution is, therefore, to enlarge the scope of 'tax on sale or purchase of goods' wherever it occurs in the Constitution so that it may include within its scope the transfer, delivery or supply of goods that may take place under any of the transactions referred to in sub-clauses (a) to (f) thereof, wherever such transfer, delivery or supply becomes subject to levy of sales tax. So construed the expression 'tax on the sale or purchase of goods' in entry 54 of the State List, therefore, includes a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract also. The tax leviable by virtue of sub-clause (b) of clause (29-A) of article 366 of the Constitution thus becomes subject to the same discipline to which any levy under entry 54 of the State List is made subject to under the Constitution." 20.. Explaining the effect of the Forty-sixth Amendment, on the powers of the State to levy sales tax, the apex Court further said at pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estrictions and conditions." 21.. After referring to the provisions of clause (1) of article 286, where the expression, "a tax on the sale or purchase of goods" is used, the apex Court at page 397 of STC (348 of SCR), observed: "Here again we have to read the expression 'a tax on the sale or purchase of goods' found in article 286 as including the transfer of goods referred to in sub-clause (b) of clause (29-A) of article 366 which is deemed to be a sale of goods and the tax leviable thereon would be subject to the terms of clause (1) of article 286." 22.. With reference to clauses (2) and (3) of article 286, at page 397 of STC (348 of SCR), it further observed: "Similarly, the restrictions mentioned in clause (2) of article 286 of the Constitution which says that Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1) of article 286 would also be attracted to a transfer of goods contemplated under article 366(29-A)(b). Similarly, clause (3) of article 286 is also applicable to a tax on a transfer of property referred to in sub-clause (b) of clause (29-A) of article 366. Clause (3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Constitution are subject to an additional restriction mentioned in sub-clause (b) of article 286(3) of the Constitution." 24.. The contention urged on behalf of the States that the properties that are transferred to the owner in the execution of a works contract are not the goods involved in the execution of the works contract, but a conglomerate, that is the entire building that is actually constructed, was rejected by the apex Court and it was observed at page 402 of STC (354 of SCR), that after the Forty-sixth Amendment, it is not possible to accede to the plea of the States that what is transferred in a works contract is the right in the immovable property. The apex Court also rejected the plea put forward on behalf of the States that the Fortysixth Amendment had conferred on the States a larger freedom than what they had before in regard to their power to levy sales tax under entry 54 of the State List. It was held that the Forty-sixth Amendment does no more than making it possible for the States to levy sales tax on the price of goods and materials used in works contract as if there was a sale of such goods and materials. 25.. Since the apex Court interpreted the releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count the conditions and restrictions imposed by article 286 of the Constitution and the provisions of the CST Act. (10) The assessing authorities are required to ascertain whether the sale of goods involved in the execution of works contract had taken place in favour of the person who had assigned the contract outside the State in which works contract is being executed or whether any part of the goods so used in a works contract had been imported from abroad on account of the person, who had assigned the contract or whether any part of the goods, such as iron and steel, etc., which are declared goods, had already suffered sales tax at an earlier point in the State and whether on such goods the tax which was being levied exceeded the limit prescribed by section 15 of the Central Act. (11) The assessing authority must also take into consideration whether the sale of the goods in question had been exempted under the sales tax laws of the State from payment of sales tax or whether it had suffered payment of tax earlier, where the sales tax law of the State had prescribed that the sale of such goods would be subjected to the levy of sales tax at a single point. 27.. Pursuant to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 20) defines "goods" thus: "'goods' means all kinds of movable property (other than newspapers, actionable claims, stocks and shares and securities) and includes all materials, commodities, and articles including goods (as goods or in some other form) involved in the execution of works contract or those goods to be used in the fitting out, improvement or repair of movable property) and all growing crops, grass or things attached to, or forming part of the land which are agreed to be severed before sale or under the contract of sale;" (underlining* was substituted by Act 28 of 1984 with effect from May 29, 1984). (c) Items (i) to (v) with effect from May 29, 1984 and item (vi) with effect from February 2, 1983 in the definition of "sale" under clause (n) of section 2 of the Principal Act had been substituted by Act 28 of 1984, which read as under: "(n) 'sale' with all its grammatical variations and cognate expressions means every transfer of the property in goods (other than by way of a mortgage, hypothecation, charge or pledge) by one person to another in the course of business for cash, deferred payment or other valuable consideration and includes (i) a transfer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deferred payment or other valuable consideration, the building, construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, modification, repair or commissioning, of any movable or immovable property." (f) Rules 6-A and 6-B of the Rules, inserted by Notification S.R.O. No. A. 235(a)/84 dated October 1, 1984, read as under: "6-A. Notwithstanding anything contained in rule 5, the total turnover in relation to a works contract shall be the total amount payable for the execution of the works contract inclusive of the value of all goods and the labour and other charges involved in the execution of the contract. 6-B. In determining the taxable turnover of a works contract, the amounts specified in the following clauses, shall, subject to the conditions specified therein, be deducted from the total turnover- (a) Where under the contract, the transfer of property takes place in the form of finished goods or the contractor is required to build, construct, manufacture, process, fabricate, or otherwise procure or supply any finished goods(i) the charges for freight and delivery of the finished goods; and (ii) any amount charged for, in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formers 12 26-6-1986 Provided that the taxable turnover shall not be less than the market price of the same or similar finished goods sold otherwise than under a works contract." (g) The introduction of section 3-B, the Fourth Schedule of the Principal Act and amendment to rule 6-13 by Act 42 of 1986 reflect as below: (i) "Section 3-B: Levy of tax on the transfer of goods involved in works contract.-Notwithstanding anything contained in section 3, 4, 5, 7 or 7-A but subject to the other provisions of this Act, every dealer referred to in item (vi) of clause (g) of section 2 whose total turnover relating to the business of transfer of property in goods involved in the execution of a works contract is not less than fifty thousand rupees and every casual trader or agent of a non-resident dealer in respect of such business whatever be his turnover for the year, shall pay for each year a tax on his turnover of transfer of property in goods involved in the execution of works contract mentioned in column (2) of the Fourth Schedule at the rates specified in the corresponding entries in column (3) of the said Schedule. Explanation.-Where any works contract involves more than one i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 1984 (referred to therein as "the 1984 Amendment Act") is concerned, the Division Bench upheld its constitutional validity by observing in paragraph 19 (at page 305) thus: "19. The challenge to the amendments introduced by the 1984 Amendment Act on the basis of the Constitution (Forty-sixth Amendment) Act, 1982, could no longer survive after the decision of the apex Court in the First Builders Association case [1989] 73 STC 370. The challenge to the said provisions, therefore, fails and shall consequently stand rejected." 31. The Bench, by adopting the technique of construction, known as "reading down", upheld the constitutional validity of section 3-B of the Principal Act and in so doing, the said section had been read down to tax only the transfer of property in goods involved in the execution of works contract and not any and every turnover, notwithstanding the fact that the word, "turnover", in contrast to "taxable turnover" had been used therein. It was observed in that connection that the use of the word "turnover", in contrast to "taxable turnover" is not a pernicious or vitiating factor, provided the provisions in the Principal Act or the Rules ensure properly that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des for levying tax on the turnover relating to transfer of property in goods involved in execution of works contract in "some other from" exceeds the scope of levy of the said charging section and is therefore, not sustainable had been considered by the Bench, which ultimately negatived it. The Bench would say, that with the amendment to the definition of "sale" in section 2(n) of the Principal Act, which serves as the interpretation clause for the Act as a whole encompassing all categories of transfer of property in goods, whether as goods or in some other form, the word "goods" in section 3-B has to be considered in the sense in which it has been defined, so as to include a transfer of property in goods or in some other form and the dichotomy which existed prior to the Forty-sixth Amendment to the Constitution and the consequent amendments carried out in the local sales tax laws of the States concerned, could not be said to exist any longer and that in view of the legal fiction created by clause (29-A) of article 366 of the Constitution, it is difficult to hold that the properties that are transferred to the owner in the execution of a works contract are not the goods involved i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and are struck down as unenforceable in law; consequently any orders passed and any action initiated on the basis of such rules shall also be invalid in law; (d) The liability or otherwise of the dealers/assessees under the Tamil Nadu General Sales Tax Act, 1959 and the Rules made thereunder, de hors our decision striking down rules 6-A and 6-B shall not stand in any manner affected or undermined by this decision; (e) The State shall be at liberty to bring to life, force and effect section 3-B by appropriate legislation, including subordinate legislation in accordance with the principles and dicta laid down by the Supreme Court of India in the decisions in (i) Gannon Dunkerley Co. v. State of Rajasthan [1993] 88 STC 204; [1992] 2 MTCR 474 and (ii) Builders Association of India v. State of Karnataka [1993] 88 STC 248; [1992] 2 MTCR 542; (f) Nothing in this order shall affect the right of the Revenue to initiate or continue or pursue and proceed to decide or pass orders or assess and recover the tax due as and when the law is validly made and in accordance with law and (g) These writ petitions, shall stand ordered and finally disposed of in the above terms." 35.. The ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 3, every dealer referred to in item (vi) of clause (g) of section 2 shall pay, for each year, a tax on his taxable turnover of transfer of property in goods involved in the execution of works contract at the rates mentioned in sub-section (2) of section 3, or, as the case may be, in section 4. Explanation.-Where any works contract involves more than one item of work, the rate of tax shall be determined separately for each such item of work. (2) The taxable turnover of the dealer of transfer of property involved in the execution of works contract shall, on and from the 26th day of June, 1986, be arrived at after deducting the following amounts from the total turnover of that dealer: (a) all amounts involved in respect of goods involved in the execution of works contract in the course of export of the goods out of the territory of India, or in the course of import of the goods into the territory of India or in the course of inter-State trade or commerce; (b) all amounts for which any goods specified in the First Schedule or Second Schedule, are purchased from registered dealers liable to pay tax under this Act and used in the execution of works contract in the same form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) to (8) of section 3 or section 3-A or section 3-13 but subject to the provisions of sub-section (1) of section 3" was substituted for the expression, "Notwithstanding anything contained in section 3 or 3-A"; and (b) The expression, "whatever be the quantum of turnover in that year" occurring in the fag end of old section 4 had been omitted in the new section 4. (iv) Section 7-C (newly added by insertion) "Section 7-C: Payment of tax at compounded rates by civil works contractor.-(1) Notwithstanding anything contained in section 3-B, every Dealer referred to in item (vi) of clause (g) of section 2, in so far as civil works contract is concerned, may, at his option, instead of paying tax in accordance with section 3-B, pay, on the total value of the civil works contract executed by him in a year, tax calculated at the rate of two per cent of such total contract value of the civil works executed by him in that year. (2) Any dealer who executes civil works contract may apply to the assessing authority along with the first monthly return for the financial year, his option to pay the tax under sub-section (1) and shall pay the tax during the year in monthly instalments and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective writ petitions. (a) When those W.M.Ps. came up for hearing, learned counsel for the respective petitioners-assessees and learned Additional Government Pleader (Taxes) agreed for the disposal of the main writ petitions themselves and consequently, all of them had been listed for hearing and arguments were heard. 38.. From the nature of the submissions, emerged from the array of learned counsel for the respective petitioners-assessees and learned Additional Government Pleader (Taxes) representing the respective respondents in all these actions, the following points, in pith and substance, arise for consideration: (1) The non obstante clause in section 3-B (old), which overrides section 4 (before amendment) is in violation of the provisions of the Central Act. (2) Section 3-B (old) is inadequate to charge a construction contract and even sub-section (1) of section 3-B (as substituted) levies tax on transfer of property "in goods" alone and not transfer of property "in some other form" and as such, it cannot at all be stated that the power of the State to levy tax on transfer of property in goods in some other form, although inheres in the States by virtue of the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning with a view to give the enacting part of that section or rule, in case of conflict, an overriding effect over the provisions of the Act mentioned in that clause. In this case before us, though the non obstante clause would indicate that section 3-B should prevail despite anything to the contrary in sections 3, 4, 5 and 7 or 7-A, the immediately following phrase 'but subject to the other provisions of this Act' makes the mandate clear that it would be subject to the other governing provisions." (paragraph 25, pages 310-311) "27. The contentions of the learned counsel for the petitioners that though in the execution of a works contract, transfer of property in goods is involved whether as goods or in some other form, section 3-B which is the charging provision as well as rules 6-A and 6-B conspicuously omits to provide for the levy in respect of the property in goods in some other form, otherwise than as goods and consequently such category of transfer of property is not and cannot be subjected to tax under section 3-B of the Act and the rules made thereunder, have no merit or substance. With the amendment to the definition of 'sale' in section 2(n) of the main Act which serve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lustrated items in the Table appended to clause (b) of rule 6-B of the Rules. The apex Court had an occasion to consider the legality and propriety of fixing a percentage for deduction, on account of the labour and other charges in the second Builders Association of India case [1993] 88 STC 248; [1992] 2 MTCR 542 which arose under the Karnataka Sales Tax Act. While repelling the challenge in this regard, the apex Court held that charges for labour and services cannot be uniform for all types of works contract and they would vary with the nature of the contract and services, and consequently, it is permissible for the rule-making authority to categorise all works contracts into different categories and prescribe a different percentage of the value of the contract for the purpose of deduction of amounts towards labour charges and other charges. There is also no merit, in our view, in the plea that the rule-making authority himself can make as many classifications as there were categories enumerated in the Fourth Schedule to the Act, while providing for deduction for labour and other like charges. The classification for the purposes of fixing the rate of taxation and the classificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Larsen and Toubro Limited [1993] 88 STC 289. 41.. Useful reference may be made at this juncture as to what the apex Court of this country has said as to the binding effect of a decision in the case of T. Govindaraja Mudaliar v. State of Tamil Nadu AIR 1973 SC 974. Among several challenges, what came up for consideration was, whether the question regarding the validity of Chapter IV-A of the Motor Vehicles Act, 1939, on the ground of infringement of article 19(1)(f) of the Constitution, which though open, was not raised in earlier writ petitions, can ever be raised in subsequent writ petitions, notwithstanding the fact that the validity of the said chapter had been upheld in all previous decisions. Their Lordships, in answering the said question expressed in a scintillating fashion, at paragraph 10 (page 978) thus "10. The argument of the appellants is that prior to the decision in R.C. Cooper's case [1970] 3 SCR 530; AIR 1970 SC 564 it was not possible to challenge Chapter IV-A of the Act as violative of article 19(1)(f) owing to the decision of this Court that article 19(1)(f) could not be invoked when a case fell within article 31 and that was the reason why this Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the validity of Chapter IV-A of the Act has been upheld on all previous occasions and merely because the aspect now presented based on the guarantee contained in article 19(1)(f) was not expressly considered or a decision given thereon will not take away the binding effect of those decisions on us." 42.. In view of what has been stated as above, it is not open to the petitioners-assessees in all these actions to reagitate the same and consequently point Nos. 1 to 3 are answered in the negative. 43.. Point No. 4: It is but necessary to recapitulate at this juncture that the charge created under section 3-B by the Act 42 of 1986, with effect from June 26, 1986, though held to be valid, had, however, been made dormant and liable to be benumbed by striking down rules 6-A and 6-B, the machinery provisions, with a direction for the prescription of relevant statutory provisions to activate, revitalise and bring to life such charging provision, by a Division Bench of this Court in the case of Larsen and Toubro Ltd. [1993] 88 STC 289 and in accordance with such a direction, Act 25 of 1993 had been passed, introducing the machinery provisions (deduction provisions), as forming part an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trade or commerce. Under section 15 of the same Act, every sales tax law of a State in so far as it imposes or authorises imposition of tax on the sale or purchase of the declared goods was to be subjected to restrictions and conditions as set out therein. One of the conditions was that the tax payable under the State law in respect of such declared goods shall not exceed 4 per cent of the sale or purchase price thereof and that such tax shall not be levied at more than one stage. The second condition was that where the sales tax was levied under the State law in respect of the sale or purchase inside the State of any declared goods, and such goods were sold in the course of inter-State trade or commerce, the tax so levied and if paid was to be refunded to such person in such manner and subject to such conditions as may be provided in any law in force in that State. Section 4 of the principal Act in accordance with the Constitution and the Central law, provides that the tax under this Act shall be payable by a dealer on the sale or purchase inside the State of declared goods at the rate and only at the point specified against each in the Second Schedule on the turnover in such g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e works contract to sales tax. It is not as if sales tax is calculated on each and every item of goods involved in the execution of works contract and then totalled up in determination of the quantum of tax payable by the assessee. This is not done, because of the peculiar features of the works contract. Transfer of property involved in execution of the works contract takes place at the time of incorporation and not earlier. Therefore, the transfer value at the time of incorporation has to be taken into account for levy of tax. The methodology therefore adopted is that "taxable turnover" is arrived at by the process of deduction of amounts, as had been specified in sub-section (2) of section 3-B from the total contract receipt of the contractor, taking it as "total turnover". In the illustration, the contract receipt is Rs. 500. Therefore, the taxable turnover is arrived at by the process of deduction from Rs. 500, as contemplated by sub-section (2) of section 3-B and what remained is taxed as taxable turnover under sub-section (1) of section 3-B. In the illustration, the contractor purchases declared goods within the State from registered dealer for Rs. 40. The profit margin is Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was the reason for the deduction given for such goods at the purchase value under section 3-B(2)(b) and such being the case, the contention of the other side, as noted above, has to necessarily bristle next to nothing. 50.. To the submissions emerging from the State as well as from the petitioners-assessees, I am unable to affix my seal of approval. The submissions as above appear to be captivating and attracting at first sight, on a cursory glance or survey of salient provisions adumbrated under section 3-B(2)(b), if made, treating section 3-B (as substituted) as an independent and distinct, not having any sort of a connection with the provisions of the Principal Act, in the sense of it not having been controlled by any other provision. But, on a harmonious reading of section 3-B(1) (as substituted) and section 4 (as amended), it is clear that section 3-B(1), the charging provision, is not only subject to the mandatory provision of sub-section (2) thereof, but also subject to the provisions contained in section 4 (as amended), in the sense of disciplining section 3-B(1) charging sale or purchase inside the State of declared goods at the rate and only at the point specified agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approving the view of this Court is distinguishable for the simple reason, as rightly contended by learned Additional Government Pleader (Taxes) that in order to claim deduction in respect of second sales of goods in the First and Second Schedules, unlike section 3-B(2)(b), rule 6(g) of the Rules does not contain any such restriction, as purchase from a registered dealer liable to pay tax. Rule 6 uses the word "dealer", which is in contra distinction to the words used in section 3-B(2)(b), namely, "registered dealer". The insistence on proof of a condition for purposes of deduction as an anti-tax evasion measure is a reasonable restriction, which the State is entitled to specify and hence, the reliance on the aforesaid decision of the Supreme Court cannot at all be stated to advance or improve the case of the petitioners-assessees to any extent whatever. 53.. Equally untenable is the contention, as relatable to profit margin of the contractor of such goods being included in the taxable turnover and thereby getting taxed in respect of the goods involved in the execution of the works contract by a sub-contractor, who is an unregistered dealer. 54.. The inadequacy of section 3- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efully referred to here. (a) It was claimed on behalf of the dealers that by reason of restrictions imposed by section 15 of the Central Act, the levy of tax under the Tamil Nadu Sales Tax Act (referred to therein as "the Tamil Nadu Act") was not permissible. The discussion leading to the conclusion on such a sort of contention is reflected as below: "Section 14 of the Central Act declares certain goods enumerated there to be of special importance in inter-State trade or commerce'. The list of goods given there at No. (iv), as it stood in 1968, was: (iv) iron and steel, that is to say,- (a) pig iron and iron scrap; (b) iron plates sold in the same form in which they are directly produced by the rolling mill; (c) steel scrap, steel ingots, steel billets, steel bars and rods; (d) (i) steel plates, } (ii) steel sheets, } sold in the same form in which they (iii) sheet bars and tin bars, } are directly produced by the rolling (iv) rolled steel sections, } mill. (v) tool alloy steel; } By the Central Sales Tax (Amendment) Act 61 of 1972, clause (iv) was redrafted. It now reads as follows: '(iv) iron and steel, that is to say, (i) pig iron and cast iron includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an elucidation of the 'definition' of iron and steel, was that the 'definition' had led to varying interpretations by assessing authorities and the courts so that a comprehensive list of specified declared iron and steel goods would remove ambiguity. The Select Committee, which recommended the amendment, called each specified category 'a sub-item' falling under 'iron and steel'. Apparently, the intention was to consider each 'sub-item' as a separate taxable commodity for purpose of sales tax. Perhaps some items could overlap, but no difficulty arises in cases before us due to this feature. As we have pointed out, the statement of reasons for amendment spoke of section 14(iv) as a 'definition' of 'iron and steel'. A definition is expected to be exhaustive. Its very terms may, however, show that it is not meant to be exhaustive. For example, a purported definition may say that the term sought to be defined 'includes' what it specifies, but in that case, the definition itself is not complete. Although, we have looked at the subsequent amendment of 1972 in order to find an indication of the original intention, because subsequent history of legislation is not irrelevant, yet, we think ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to a general category 'land' were held to introduce, 'the most general concept' when followed, inter alia, by the words 'right in or over land'. We think that the precise meaning of the words 'that is to say' must vary with the context. Where, as in Megh Raj's case AIR 1947 PC 72, the amplitude of legislative power to enact provisions with regard to 'land' and rights over it was meant to be indicated, the expression was given a wide scope because it came after the word 'land' and then followed 'rights over land' as an explanation of 'land'. Both were wide classes. The object of using them for subject-matter of legislation, was obviously to lay down a wide power to legislate. But, in the context of single point sales tax, subject to special conditions when imposed on separate categories of specified goods, the expression was apparently meant to exhaustively enumerate the kinds of goods on a given list. The purpose of an enumeration in a statute dealing with sales tax at a single point in a series of sales would, very naturally, be to indicate the types of goods each of which would constitute a separate class for a series of sales. Otherwise the listing itself loses all meaning and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articular substances out of which these commodities may have been made. As soon as separate commercial commodities emerge or come into existence, they become separately taxable goods or entities for purposes of sales tax. Where commercial goods, without change of their identity as such goods, are merely subjected to some processing or finishing or are merely joined together, they may remain commercially the goods which cannot be taxed again, in a series of sales, so long as they retain their identity as goods of a particular type. " (pages 321-325) "Section 4 of the Tamil Nadu Act lays down: '4. Tax in respect of declared goods.-Notwithstanding anything contained in section 3, the tax under this Act shall be payable by a dealer on the sale or purchase inside the State of declared goods at the rate and only at the point specified against each in the Second Schedule on the turnover in such goods in each year, whatever be the quantum of turnover in that year.' Item No. 4 of the Second Schedule specifies the rates of tax in accordance with the Central Act. It reproduces section 14(iv) of the Central Act. On an amendment of section 14(iv) of the Central Act, serial No. 4 of the Seco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . squares on the ground that the M.S. rounds out of which they were produced had suffered tax already. The position will be different as far as M.S. rounds sold in this State are concerned. They are commercially the same as the M.S. rounds that were purchased from the State out of which the M.S. rounds sold were made. Consequently, we are of the opinion that out of the three articles sold in the State of Tamil Nadu, namely, M.S. rounds, M.S. angles and M.S. squares, only M.S. rounds will be entitled to the benefit of exemption from tax on the ground that the M.S. rounds had suffered tax already, and that the M.S. angles and M.S. squares will not get the benefit of such exemption." 58.. In State of Tamil Nadu v. India Metal Industries [1980] 46 STC 304, it is suffice to state that a Division Bench of this Court, followed the ratio of the apex Court in Pyare Lal Malhotra's case [1976] 37 STC 319, after noticing the earlier Bench decision in Syam Steel Rolling Mills (P.) Ltd. [1977] 40 STC 156 (Mad.). 59.. In view of the decisions, as aforesaid, it goes without saying that the contention that the requirement of "the same form" in respect of "declared goods involved in the execution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds are not identical but distinctively dissimilar, connoting different meanings. 62.. The Concise Oxford Dictionary of Current English (Eighth Edition, 1990) at page 585, gives the meaning for the word, "identical" as, "1. (of different things) agreeing in every detail; 2.. (of one thing viewed at different times) one and the same.......... and at page 687, for the word "like" as, "similar to, characteristic of." 63.. In the light of the meaning for the word, "like", as extracted above, I am of the view that the words, "other like charges" included in the expression, "labour and other like charges", immediately followed by the phraseology "not involving any transfer of property in goods" will take in its fold not only reasonable profit margin of a contractor in respect of labour charges, but also the extent of the cost of establishment, relatable to the supply of labour and services, apart from the cost of actual labour charges, besides the cost of consumables, which do not involve any transfer of property in goods in the execution of works contract. 64.. The discussion under the heading "measure of tax" by the apex Court in the case of Gannon Dunkerley Co. v. State of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods which can constitute the measure for the levy of the tax has to be the value of the goods at the time of incorporation of the goods in the works and not the cost of acquisition of the goods by the contractor. We are also unable to accept the contention urged on behalf of the States that in addition to the value of the goods involved in the execution of the works contract the cost of incorporation of the goods in the works can be included in the measure for levy of tax. Incorporation of the goods in the works forms part of the contract relating to work and labour which is distinct from the contract for transfer of property in goods and, therefore, the cost of incorporation of the goods in the works cannot be made a part of the measure for levy of tax contemplated by article 366(29-A)(b). With regard to the determination of the value of the goods which are involved in the execution of a works contract the submission of the learned counsel appearing for the State is that a more convenient mode for such determination is to take the value of the works contract as a whole and deduct therefrom the cost of labour and services rendered by the contractor during the course of execu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sold. The said price includes the cost of bringing the goods to the place of sale. Similarly, for the purpose of ascertaining the value of goods which are involved in the execution of a works contract for the purpose of imposition of tax, the cost of transportation of the goods to the place of works has to be taken as part of the value of the said goods. The charges mentioned in item No. (vii) relate to the various expenses which form part of the cost of establishment of the contractor. Ordinarily the cost of establishment is included in the sale price charged by a dealer from the customer for the goods sold. Since a composite works contract involves supply of materials as well as supply of labour and services, the cost of establishment of the contractor would have to be apportioned between the part of the contract involving supply of materials and the part involving supply of labour and services. The cost of establishment of the contractor which is relatable to supply of labour and services cannot be included in the value of the goods involved in the execution of a contract and the cost of establishment which is relatable to supply of material involved in the execution of the work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds involved in the execution of a works contract will have to be determined after making these deductions and exclusions from the value of the works contract." 64A. In view of what has been stated above, section 3-B (both prior to and after March 12, 1993) cannot be stated to be violative of article 286(3)(a) of the Constitution as well as sections 14 and 15 of the Central Act. 65.. Point No. 7: This question hinges upon the validity of the newly added section 7-C, as being violative of article 14 of the Constitution. This section applies exclusively to civil works contractors, who are exempt from maintaining accounts required under section 40 of the Principal Act and rule 26 of the Rules, but are required to maintain only accounts relating to payments received by them to the civil works contracts executed by them. According to this section, a civil works contractor may, at his option, instead of paying tax in accordance with section 3-B, pay on the total value of the civil works contract executed by him in a year, tax calculated at 2 per cent of such total contract value of the civil works executed by him in that year. This sort of a special treatment given to civil works cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed. Mrs. Chitra Venkataraman, learned Additional Government Pleader (Taxes) in her own style made incisive and crisp submissions, in the process of repelling those submissions emerging from the host of learned counsel appearing for the respective petitioners-assessees, befitting the occasion, without causing, in the least, any sort of difficulty for the court in the determination of the issues involved. The enthusiasm exhibited by Mr. S. Sivanandam, learned counsel by participating in the discussion, in response to the invitation extended by the court, as amicus curiae is quite laudable. 68.. In fine, the conclusions and findings are summarised as below: (1) Section 3-B (both prior to and after March 12, 1993) is not violative of article 296(3)(a) of the Constitution as well as sections 14 and 15 of the Central Act. (2) Reasonable profit margin of the contractor on declared goods involving in the execution of a works contract should also go in deduction from the "total turnover" for arriving at "taxable turnover". (3) The extent of cost of establishment of the contractor as relatable to the supply of "labour and services" and "reasonable profit margin on labour", besides " ..... X X X X Extracts X X X X X X X X Extracts X X X X
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