TMI Blog2005 (2) TMI 810X X X X Extracts X X X X X X X X Extracts X X X X ..... e from approved manufacturers who have manufactured goods as per specific designs and standards and after inspection by the railway inspection body, i.e., Railway Index and Technical and Economic Services (RITES) at the manufacturer's Depot and after receiving such goods, used the same in the works contract. Before the assessing authority it was claimed that the goods used in the execution of works contracts, were imported from outside the State of U. P. in the course of export and as such, the transactions were covered under sections 3, 4 and 5 of the Central Sales Tax Act, 1956 and therefore, were liable to be excluded from the gross turnover in view of section 3-F(2)(b)(i) of the U. P. Trade Tax Act. The assessing authority, however, has not allowed such claim and levied tax on the value of goods imported from outside the State of U. P. after adding 15 per cent profit. The first appeal filed by the opposite party was allowed and the claim of the opposite party was accepted and the tax levied on the alleged turnover of imported goods, has been deleted. The Commissioner of Trade Tax filed appeals before the Tribunal, which have been dismissed by the impugned order. Being aggri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as inserted in article 366 and clause (3) of article 286 was substituted. The other amendments introduced by it are not relevant for this case. Clause (29A) of article 366 is in the following terms: (29A) tax on the sale or purchase of goods includes (a) a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (b) 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; (c) a tax on the delivery of goods on hire purchase or any system of payment by instalments; (d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; (f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food, or any other article for human consumption or any drink (whether or not intoxicating) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e power to impose tax on sale or purchase of goods under entry 54 of the State List read with article 366(29A)(b), the State Legislature, while imposing 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 is not competent to impose a tax on such a transfer (deemed sale) which constitutes a sale in the course of inter-State trade or commerce or a sale outside the State or a sale in the course of import or export. (2) The provisions of sections 3, 4, 5 and sections 14 and 15 of the Central Sales Tax Act, 1956, are applicable to a transfer of property in goods involved in the execution of a works contract covered by article 366(29A)(b). (3) While defining the expression 'sale' in the sales tax legislation it is open to the State Legislature to fix the situs of a deemed sale resulting from a transfer falling within the ambit of article 366(29A)(b) but it is not permissible for the State Legislature to define the expression 'sale' in a way as to bring within the ambit of the taxing power a sale in the course of inter-State trade or commerce, or a sale outside the State or a sale in the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. (8) While fixing the rate of tax, it is permissible to fix a uniform rate of tax for the various goods involved in the execution of a works contract, which rate may be different from the rates of tax fixed in respect of sales or purchase of those goods as a separate article. The apex court further held (pages 230, 231 and 232 of 88 STC) as follows: 40. On behalf of the States it has been seriously contended that a deemed sale resulting from transfer of property in goods involved in the execution of a works contract can never be a sale in the course of inter-State trade or commerce and it cannot be an outside sale or a sale in the course of import since the transfer of property in the goods takes place only at the stage when the goods are incorporated in the works and that can take place only in the State where the work is required to be executed. On behalf of the contractors, on the other hand, it has been urged that a works contract can involve transactions constituting a sale in the course of inter-State trade and commerce as well as an outside sale or sale in the course of import and that is a matter which will have to be considered in accordance with the principle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of property in goods involved in the execution of a works contract, it is not permissible for the State Legislature to locate the situs of such sale in a manner as to treat a sale in the course of inter-State trade or commerce or a sale outside the State or a sale in the course of import and export, as a sale inside the State and thereby assume the power to impose a tax on sales which are actually sales in the course of inter-State trade or commerce or outside sales or sales in the course of import and export. In this regard, it may be stated that so far as sales in the course of inter-State trade or commerce are concerned, the position is wellsettled that the situs of the sale or purchase is wholly irrelevant as regards its inter-State character. See Bengal Immunity Company Limited v. State of Bihar [1955] 6 STC 446 (SC) at 481; [1955] 2 SCR 603 at 650. In Onkarlal Nandlal v. State of Rajasthan [1985] 60 STC 314 (SC); [1985] Suppl. 3 SCR 1075, it has been observed: 'There is, in our opinion, no antithesis between a sale in the course of inter-State trade or commerce and a sale inside the State. Even an inter-State sale must have a situs and the situs may be in one State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (whether as goods or in some other form) involved in the execution of a works contract; at such rate not exceeding fifteen per cent as the State Government may, by notification, declare and different rates may be declared for different goods or different classes of dealers. (2) For the purposes of determining the net turnover referred to in sub-section (1), the following amounts shall be deducted from the total amount received or receivable by a dealer in respect of a (a) transfer referred to in clause (a) of sub-section (1) whether such transfer was agreed to during that assessment year or earlier, (i) the amount representing the value of the goods covered by sections 3, 4 and 5 of the Central Sales Tax Act, 1956; (ii) the amount representing the value of the goods exempted under section 4; (iii) the amount received as penalty for default in payment or as damages for any loss or damage caused to the goods by the person to whom such transfer was made; (b) transfer referred to in clause (b) of sub-section (1), (i) the amount representing the value of the goods covered by sections 3, 4 and 5 of the Central Sales Tax Act, 1956; (ii) the amount representing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as may be prescribed and different percentages may be prescribed for different types of works contract. In the case of Sahney Steel and Press Works Ltd. v. Commercial Tax Officer reported in [1985] 60 STC 301 (SC); [1986] UPTC 105 and in the case of Union of India v. K.G. Khosla and Co. Ltd. reported in [1979] 43 STC 457 (SC); [1979] UPTC 751, the apex court held that it is immaterial whether a complete sale precedes the movement of goods or follows the movement of goods or for that matter takes place while the goods are in transit. What is important is that the movement of the goods and the sale must be inseparably connected. In the case of Commissioner of Sales Tax v. Bakhtawar Lal Kailash Chand Arhti reported in [1992] 87 STC 196; [1992] UPTC 971, the apex court held as follows: Sri Sehgal, learned counsel for the State of Uttar Pradesh contended that the purchases made by the respondent-dealer in the State of U. P. were completed purchases. Once a purchase is complete in the State of Uttar Pradesh, he contends, it is immaterial whether the goods are later despatched to another State or sold within the State. For the purpose of the U. P. Sales Tax Act, it is enough that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an inter-State sale. The observations relied upon by Sri Sehgal do not constitute the ratio of the decision and cannot come to the rescue of the appellant-State. Indeed, if one looks to the language employed in clause (a) of section 3 it seems to suggest that the movement of goods follows upon and is the necessary consequence of the sale or purchase, as the case may be, and not the other way round. In the present case, the facts are not in dispute, namely, that the goods have been imported from outside the State of U. P. for use in the execution of works contract. The relevant terms which are referred by the Tribunal in its order are reproduced below: (i) The goods to be supplied and used in the works contract, are to be produced only from those manufacturers which are approved by Cone/Contraction as per condition No. 12.19 of the tender document. (ii) The goods to be procured from such manufacturers are necessarily to be inspected by the inspection body (RITES) of the contractee at the site of manufacturers, for which inspection fee is paid by Indian Railways to RITES as per condition Nos. 2, 4, 5 of the tender document. (iii) Specific Railway Identification Codes wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Garrison Engineer, Dehradun for supplying and fixing of aluminium doors, windows, ventilators and fixed glazed partition, etc. It is also admitted that the goods that were so transported from Delhi consisted of the materials required for the fabrication of the doors, windows, etc. Therefore, the movement of goods from Delhi to U. P. was in pursuance of a works contract and it was that works contract which occasioned the movement of goods from one State to another, i.e., from Delhi to U. P. Section 3-F of the U. P. Trade Tax Act under which the assessments were made, was amended and a new section 3-F was substituted by Act 31 of 1995 with retrospective effect from September 13, 1985. Sub-section (2) of section 3-F provides the manner in which the turnover in respect of transfer of property in goods involved in the execution of a works contract shall be determined. Sub-clause (i) of sub-clause (b) of sub-section (2) of section 3-F provides that the amount representing the sale value of the goods covered by sections 3, 4 and 5 of the Central Sales Tax Act, 1956 shall be deducted from the total amount received or receivable by a dealer in respect of a works contract. Patently th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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