TMI Blog1998 (12) TMI 604X X X X Extracts X X X X X X X X Extracts X X X X ..... stant Commissioner and remanded the matter for fresh consideration. After passing the order for the year 1988 to 1989, the matter was taken before the Appellate Assistant Commissioner who dismissed the appeal and when the matter was taken up to the second appellate authority, namely, Tamil Nadu Taxation Appellate Tribunal, it remanded the matter once again to the assessing officer to consider the claim of exemption applying strictly section 3-B(2)(b) of the Tamil Nadu General Sales Tax Act, 1959 (hereinafter called as the Act ). The petitioner would submit that there is no element of sale in his transaction, however, invoking section 3-B(2)(b) of the Act, the materials used by him have been taxed and the appellate authorities have frequently remanded the matter as they were not certain about the remedy contemplated under section 3-B of the Act and as the legal position has not been decided properly, the vires of section 3-B(2)(b) of the Act have to be considered. Further, in S.P. No. 406 of 1998 in A.P. No. 412 of 1998 dated August 5, 1998 pertaining to the year 1991-92 a conditional stay was granted directing the petitioner to pay 25 per cent of taxes on or before September 4, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Tribunal for the second time, as already this question be considered by this Tribunal in O.P. No. 1964 of 1998 upholding the validity of the provision, in the light of the decisions of the High Court. When these matters were taken up, the learned counsel in O.P. No. 1708 of 1998 was not ready and sought for adjournment. As the Full Bench was constituted to hear this matter, adjournment was refused, and all the contentions raised in the affidavit filed in O.P. were carefully considered for the disposal of the petition. In the other two matters, the learned counsel confined their representations to the points raised in the affidavits of the petitioners. 4.. To put it concisely, from the averments of the affidavits, the validity of section 3-B is attacked on three grounds. The first ground is the wording in the same form found in sub-section (2)(b) to section 3-B of the Act. The second ground is section 3-B(2)(b) is contrary to the article 366(29A) of the Constitution of India as the definition of sale under section 2(n)(ii) is not in consonance with the constitutional provisions under 46th amendment to the Constitution. The third ground relates to the percentage fixed towa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed; (c) all amounts relating to the sale of any goods involved in the execution of works contract which are specifically exempted from tax under any of the provisions of this Act; (d) all amounts paid to the sub-contractors as consideration for execution of works contract whether wholly or partly; ........................ (e) all amounts towards 'labour charges and other like charges' not involving any transfer of property in goods, actually incurred in connection with the execution of works contract, or such amounts calculated at the rate specified in column (3) of the Table below, if they are not ascertainable from the books of accounts maintained and produced by a dealer before the assessing authority. THE TABLE Serial No. Type of works contract Labour or other charges as a percentage value of the works contract 1. Electrical contracts 15 2. All structural contracts 15 3. Sanitary contracts 25 4. Watch and/or clock repair contracts 50 5. Dyeing contracts 50 6. All other contracts 6. Section 3-B of the Act has been substituted after the 46th amendment to article 366 of the Constitution and clause (29A) is the relevant passage in the article which read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as invalid. This attack has been considered by the Bench of the Madras High Court in Tamil Nadu Mosaic Manufacturers Association v. State of Tamil Nadu reported in [1995] 97 STC 503 and the Bench gives the following answer: 11. Having regard to the legal position stated above, we see no infirmity in sub-section (2)(b) of section 3-B which says that in computing the taxable turnover of a dealer of transfer of property involved in the execution of works contract he is entitled to deduct all the amounts for which any goods specified in the First or Second Schedule are purchased from registered dealers and used in the execution of works contract in the same form in which such goods were purchased. If the goods purchased by a dealer is a distinct commercial commodity falling under a particular sub-item of section 14 such commodity should be used in the execution of the works contract either in the form in which such goods were purchased or in some other form falling under the very same sub-item of section 14 as the goods purchased, to enable the dealer to get deduction from the total turnover under section 3-B(2)(b). In other words, if the declared goods purchased by the dealer fal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point of taxation. Vide [1982] 49 STC 147 (MP) (Commissioner of Sales Tax v. Bansal Brothers), [1987] 66 STC 358 (Mad.) (Vasu General Traders v. State of Tamil Nadu) and [1995] 96 STC 60 (Mad.) (Heat Transfer Developments v. State of Tamil Nadu). Under these circumstances, we are of the view that there is no shifting of the charge or taxing at more than one stage violating section 15 of the Central Sales Tax Act when sub-section (2)(b) of section 3-B insists proof of purchase of goods from registered dealers liable to pay tax. For all the reasons, stated above, we are of the view that the condition prescribed in sub-section (2)(b) of section 3-B that in order to claim deduction from the total turnover in respect of the amounts for which the goods specified in First or Second Schedule are purchased, such goods must be purchased from registered dealers liable to pay tax, will not result in levying tax at more than one stage, contravening section 15(a) of the Central Sales Tax Act. Point No. 2 is answered accordingly. From the above thorough consideration of all contentions it is made clear that the exemption allowed for the goods involved in the works contract, when remained i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... labour charges, it is contended in T.P. No. 2971 of 1997 that 30 per cent towards the labour charges fixed at that time to claim deduction is arbitrary, as the rest of the 70 per cent is taxable and therefore this provision has to be struck down. This aspect also has been considered by the Bench of the High Court in Tamil Nadu Mosaic Manufacturers Association v. State of Tamil Nadu [1995] 97 STC 503 and the Bench would observe as follows: (a) labour charges for execution of the works; (b) amount paid to a sub-contractor for labour and services; (c) charges for planning, designing and architect's fees; (d) charges for obtaining on hire or otherwise machinery and tools used for the execution of the works contract; (e) cost of consumables such as water, electricity, fuel, etc., used in the execution of the works contract the property in which is not transferred in the course of execution of a works contract; and (f) cost of establishment of the contractor to the extent it is relatable to supply of labour and services; (g) other similar expenses relatable to supply of labour and services; and (h) profit earned by the contractor to the extent it is relatabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant that section 3-B is invalid because sub-section (2)(e) limits the expenses towards labour charges and other like charges only to the actual charges incurred in connection with the execution of the works contract without providing for the inclusion of the profit margin of the contractor. Accordingly, the question raised in points Nos. 3 and 4 are answered in the negative. 13.. Of course the above observations relate to amended section 3-B of the Act after introduction of Act 25 of 1993. The points raised in T.P. No. 2971 of 1997 do not survive after the introduction of Act 25 of 1993. 14.. So the Bench of the Madras High Court has thoroughly considered the pros and cons of section 3-B and it has ultimately held that the section is valid. It also has affirmed the decision of the single judge in Kamatchi Lamination (P) Limited v. State of Tamil Nadu reported in [1994] 95 STC 378. As a matter of fact the petitioners in that case took the matter on appeal to Supreme Court, but they withdrew the appeal without pressing it, as is reported in [1996] 103 STC 363 (South Indian Photographic and Allied Traders Association v. State of Tamil Nadu). As the points raised in these O.Ps. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
