TMI Blog1995 (11) TMI 407X X X X Extracts X X X X X X X X Extracts X X X X ..... at the law made by the Parliament under article 286(2) and 286(3)(b) read with article 269(3) of the Constitution is a condition precedent for exercise of the legislative power of the State to impose tax on transactions involving transfer of right to use any goods for any purpose and since no law has been enacted by Parliament in that regard, it is not open to the State Legislature to exercise power to impose such tax. The definition of "sale" in the Central Sales Tax Act has not been amended after the 46th Amendment to include within its ambit a transfer of the right to use any goods for any purpose and it cannot be treated to be a law made under articles 269(3) and 286(2) of the Constitution in relation to sales arising out of such transfers. In the absence of a common situs being involved in application of such legislations as in section 4 of the Central Sales Tax Act, levy under section 5-C is impermissible. It is submitted that it is not permissible for the State Legislature to define the expression "sale" so as to include within its ambit the sale or purchase of goods in the course of inter-State trade or commerce or in the course of import or export and thereby assume power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 269(3) and article 286(2) has been enacted by the Parliament relating to the taxable event in question. It is submitted that the basis of exigibility of tax under section 5-C of the Act is sub-clause (d) of clause (29-A) of article 366 of the Constitution. The Supreme Court in the case of Gannon Dunkerley Co. v. State of Rajasthan reported in [1993] 88 STC 204 has held that the provisions of sections 3, 4, 5 and sections 14 and 15 of the Central Sales Tax Act, 1956, are applicable to the transfer of property in goods involved in the execution of works contract covered by article 366(29-A)(b). The aforesaid conclusion of the Supreme Court is based on the reasoning (as could be inferred from the discussion in the judgment) that the Constitution (Forty-sixth Amendment) Act, 1982, has made it possible to divide single and indivisible works contract into one for sale of goods and other for supply of labour and services and the contract so far as it relates to sale of goods is a "sale" as defined in section 2(g) of the Central Sales Tax Act. Hence the provisions of the Central Sales Tax Act are held to be applicable to that part of the works contract. This reasoning adopted in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay for each year a tax under this Act on his total turnover in respect of the transfer of the right to use any goods mentioned in column (2) of the Seventh Schedule for any purpose (whether or not for a specified period) at the rates specified in the corresponding entries in column (3) of the said Schedule." 7.. The power to levy tax by the State arises from entry 54 of List II of the Seventh Schedule to the Constitution. What this entry authorises is tax on sale or purchase of goods as defined under article 366(29-A) of the Constitution subject to the limitations contained in article 286 amongst other provisions of the Constitution. Article 286(1) clearly mandates that no tax shall be imposed on sale or purchase which takes place-(a) outside the State, (b) in the course of import into or export out of India. Power is conferred on the Union particularly to legislate in respect of levy; of tax on sale or purchase of goods by the following provisions: Article 269(3); article 286(2); article 286(3)(a); article 286(3)(b) read with article 366(29-A)(b), (c), (d) and entries 92, 92-A, 92-B of List I. In respect of these transactions covered by article 286(1) and where power is conferre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the scheme of taxation itself includes such levy, which is impermissible in law. In an identical situation in Gannon Dunkerley Co. v. State of Rajasthan [1993] 88 STC 204 (SC) tax was levied on turnover which included the amount of sale price received or receivable for sale, transfer, delivery or supply of goods referred to in clause (o) wherein sale is referred. No part of the definition of "turnover" excluded any outside transactions. Considering the effect of these provisions, the Supreme Court held that the Legislature has not made any explicit provision for exclusion of transactions constituting deemed sales which take place in the course of inter-State trade or commerce or outside the State or in the course of import and export in relation to which the State Legislature lacks the competence to impose a tax under entry 54 of the State List. Nor has any provision been made with regard to sale of goods which are declared to be of special importance in inter-State trade or commerce and are governed by sections 14 and 15 of the Central Sales Tax Act. Hence, it was held that the said provision is invalid. 10.. The expression "total turnover" is identical with the expressi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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