TMI Blog2015 (2) TMI 796X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties had entered into distinct and separate contracts one for the transfer of materials and other for payment of service and for work done. The provisions of Sections 3, 4 and 5 of the Central Sales Tax Act were applicable where there were two separate contracts. As a result of the Fortysixth Amendment, the contract which was single and indivisible has been altered by a legal fiction into a contract which is divisible into one for sale of goods and other for supply of labour and services and as a result such a contract which was single and indivisible has been brought on a par with a contract containing two separate agreements. Since the provisions of Sections 3, 4 and 5 were applicable to such contracts containing two separate agreements, thee is no reason why the said provisions should not apply to a contract which, though single and indivisible, by legal fiction introduced by the Fortysixth Amendment, has been altered into a contract which is divisible into one for sale of goods and other for labour and services. If the legal fiction introduced by Article 366 (29- A) (b) is carried to its logical end it follows that even in a single and indivisible works contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it imbibed inseparation and indivisible but depends upon the construction of the contracts and the intention of the parties to be gathered therefrom. The Deputy Commissioner has simply proceeded on the basis that though the separate contracts are entered into between the parties but they are on a turn key basis, it partakes the character of indivisible and inseparable works contract exigible to the State Sales Tax. There is no finding recorded in the impugned order on the nature of the transaction reflected in the books maintained by the petitioner and the return filed in this regard. Since the same required a voluminous documents to be looked into which this Court has no occasion to look into it, it is not possible to ascertain whether the sale of transfer of property in goods in connection with the Inter State Sale or by import can be segregated and the said authorities is incompetent to levy tax under the State Legislation. - it would be proper that the Deputy Commissioner should re-look the judgment in the light of the law enunciated above and to record his findings and the reasons in relation thereto. The order impugned is thus set aside. - Matter remanded back - Following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence of alternative efficacious remedy. It would appear from the judgment delivered on 9th September, 2013 that the only point raised before this Court was that the order of assessment is passed without affording an opportunity of hearing and the said point having raised this Court held that the impugned order is capable of being challenged before the Taxation Tribunal constituted under the West Bengal Taxation Tribunal Act, 1987 and by virtue of Section 5 and 6 of the Tribunal Act, the jurisdiction of the High Court is excluded. The said judgment was assailed by the petitioner before the Division Bench who set aside the said order and remanded the matter to the Trial Court for reconsideration in the light of the observations made therein. The order dated 19th March, 2014 passed by the Division Bench would reveal that a question was formulated as to whether the assessing officer has not usurp the jurisdiction under West Bengal Value Added Tax when he has taxed the transactions not liable to tax under the provision of the said Act. The Division Bench observed: The learned trial Court shall consider the question as to whether the transactions are covered by the Central Sales T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are capable of being divided into a supply and service and the state is competent to legislate so far as the imposition of sales tax on the component of supply. He further submits that if the contract is composite and not capable of separated, the state is not incompetent to charge the sales tax. By referring the contracts, it is submitted that those are turn key contracts and the supply cannot be delinked as the intention of the parties are to be set up a complete operative plant. He thus submits that whether the work contracts are separable and divisible is a question which can be agitated before the Taxation Tribunal and this Court, therefore, should not usurp the power of the Taxation Tribunal in view of the embargo created under Section 5 and 6 of the West Bengal Tax Tribunal Act, 1987. Before proceeding to deal with the points formulated by the Division Bench, it would be beneficial to look at the historical background which prompted the amendments to be introduced by the Constitution (Forty-sixth Amendment) Act, 1982. Before India got independence, the Government of India Act, 1935, confers the legislative power on the provincial legislatures to impose taxes on sale of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dment which runs thus:- (29-A) 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 or 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), where such supply or service, is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of inter-State sale trade or in course of import. In the celebrated judgment delivered in case of M/s Gannon Dunkerley and Co. and Ors. -Vs- State of Rajasthan Ors reported in (1993) 1 SCC 364, the Constitution Bench held : 31. The legislative power of the States under Entry 54 of the State List is subject to two limitations - one flowing from the entry itself which makes the said power subject to the provisions of Entry 92-A of List I , and the other flowing from the prohibition contained in Article 286. Under Entry 92-A of List I, Parliament has the power to make a law in respect of taxes on sale or purchase of goods other than newspapers where such sale or purchase takes place in the course of inter-State trade or commerce. The levy and collection of such tax is governed by Article 269. This shows that the legislative power under Entry 54 of the State List is not available in respect of transactions of sale or purchase which take place in the course of inter-State trade or commerce. Similarly clause (1) of Article 286 prohibits the State from making a law imposing or authorising the imposition of a tax on the sale or purchase of goods where such sale or purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch decision was that without amending the Central Sales Tax Act in relation to the transfer of property in goods involved in execution of works contract, Sections 3, 4 and 5 of the Central Sales Tax Act can still be pressed in action. The Constitution Bench answered in following : 34. The question is whether in the absence of an amendment in the Central Sales Tax Act specifically applying its provisions to a transfer of property in goods involved in the execution of a works contract, the provisions of Sections 3, 4 and 5 contained in Chapter II can be held applicable to such a transfer. In this context, it may be mentioned that prior to the Forty-Sixth Amendment, a distinction was being made between a works contract which was entire and indivisible and a works contract composed of two distinct and separate contracts-one, for transfer of materials and other, for payment of remuneration for services and for work done. The non-availability of the legislative power of the States under Entry 54 of the State List, as construed by this Court in the Gannon Dunkerley case was confined, in its appliction, to works contracts falling in the first category, i.e., contracts which were ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o boggle when it comes to the inevitable corollaries of that state of affairs. 36. If the legal fiction introduced by Article 366 (29- A) (b) is carried to its logical end it follows that even in a single and indivisible works contract thee is a deemed sale of the goods which are involved in the execution of a works contract. Such a deemed sale has all the incidents of a sale of goods involved in the execution of a works contact where the contract is divisible into one for sale of goods and the other for supply of labour and services. 37. For the reasons aforesaid, we are of the view that even in the absence of any amendment having been made in the Central Sales Tax Act (after the Forty-sixth Amendment) expressly including transfers of property in goods involved in execution of a works contract, the provisions contained in Sections 3, 4 and 5 would be applicable to such transfers and the legislative power of the State to impose tax on such transfers under Entry 54 of the State List will have to exercised keeping in view the provisions contained in Sections 3, 4 and 5 of the Central Sales Tax Act. For the same reasons Sections 14 and 15 of the Central Sales Tax Act would also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e arrived at by deducting expenses incurred by the contractor for providing labour and other services from the value of the works contract. (6) The charges for labour and services which are required to be deducted from the value of the works contract would cover (I) labour charges for execution of the works, (ii) amount paid to a sub-contractor for labour and services; (iii) charges for obtaining on hire or otherwise machinery and tools used for execution of the works contract; (iv) charges for planning, designing and architect s fees; and (v) cost of consumables used in execution of the works contract; (vi) cost of establishment of the contractor to the extent it is relatable to supply of labour and services; (vii) other similar expenses relatable to supply of labour and services; and (viii) profit earned by the contractor to the extend it is relatable to supply of labour and services. (7) To deal with cases where the contractor does not maintain proper accounts or the account books produced by him are not found worthy of credence by the assessing authority the legislature may prescribe a formula for deduction of cost of labour and services on the basis of a percentage of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract of bailment as it is deemed sale within the meaning of the legal fiction engrafted in clause (29-A) (d) of Article 366 of the Constitution wherein the location or delivery of goods to put to use is immaterial. Before proceeding further, this Court feels that it would not be proper if the judgment rendered by the Supreme Court in case of The Indure Ltd. Anr. -Vs- Commercial Tax Officer Ors reported in JT 2010(10) SC 109 is not noticed. In the said report a tender was invited by National Thermal Power Corporation Limited (NTPC) for submitting the bid for Ash Handling Plant Package in relation to Farraka Super Thermal Power Project, Stage-II through a global tender. The involvement of the work therein was on a turnkey basis. In course of commissioning the works contract, an import of MS Pipe was made which was found exigible to State Sales Tax. A point was taken whether the goods imported in course of the works contract can be covered under Section 5(2) of the Central Sales Tax Act and is exempted from the said purview. It is held that since the aforesaid goods were imported into India for completion of the project on turnkey basis; by virtue of Article 286 (1) (b) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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