TMI Blog2015 (4) TMI 784X X X X Extracts X X X X X X X X Extracts X X X X ..... ated charges from the gross turnover as defined under Section 2(1)(u) of the Act while arriving at the “sale price” in a works contract. It is not a charging provision which creates any liability for assessing VAT in a “works contract”. It is in the definition clause of the Act and the provision does not embrace within its ambit something which is otherwise prohibited by law. Thus, the said provision does not suffer from any vice or defect of unconstitutionality. Rule 25(2) of the Rules provides for deduction of charges towards labour, services and other like charges and where they are not ascertainable from the books of accounts maintained by a developer etc., the percentage rates are prescribed in the table provided in the said rule. It is necessarily required to provide mechanism to tax only the value addition made to the goods transferred after the agreement is entered into with the flat purchaser. The 'deductive method' thereunder does not provide for any deduction which relate to the value of the immovable property. The legislature has not made any express provision for exclusion of value of immovable property from the works contract and its method of valuation has been le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .4.2014 The State Government shall bring necessary changes in the Rules in consonance with the above observations. Under sub-section (1) of Section 42 of the Act, where the works contractor gets the construction work executed through a subcontractor, whether in whole or in part, it shall be the joint and several liability of the contractor and the sub-contractor. Sub-section (2) of Section 42 thereof clarifies that a contractor shall not be under any liability to pay tax in respect of a “works contract”, if the same has been paid by a sub-contractor and that his assessment has become final. This provision only safeguards the interest of the revenue in the event of failure on the part of the sub contractor to discharge his liability of tax in respect of transaction entered by the sub contractor with the contractor. The provision, thus, cannot be said to be arbitrary, discriminatory or unreasonable in any manner. The provision wherein the tax was to be assessed in the hands of the developers even where the property was transferred by the sub-contractor was clearly untenable in law and was liable to be quashed. Under sub-section (1) of Section 42 of the Act, where the works ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Advocate and Ms. Megha Suri, Advocate for the petitioner (in CWP No. 7908 of 2014). Mr. Rajesh Goyal, Advocate for Mr. Pritam Saini, Advocate for the petitioner (in CWP No. 8093 of 2014). Mr. Amar Pratap Singh, Advocate and Mr. Amrinder Singh, Advocate for the petitioner (s) (in CWP Nos. 9314, 9364, 9370, 9456, 11072, 110911 and 13684 of 2014). Mr. Sanjay Singh, Advocate for Mr. Karanvir Singh Khehar, Advocate for the petitioner (in CWP No. 11696 of 2014). Mr. Vikram Jeet Singh, Advocate for Mr. Aman Pal, Advocate for the petitioner (in CWP No. 12170 of 2014). For the Respondent : Ms. Tanisha Peshawaria, DAG, Haryana with Mr. M.K. Dutta, Advocate for State of Haryana. JUDGMENT Ajay Kumar Mittal, J. 1. This order shall dispose of a bunch of 65 petitions bearing CWP Nos. 5730, 5731, 5746, 5751, 5753, 5754, 5755, 6043, 6044, 6050, 6051, 6119, 6132, 6135, 6142, 6143, 6148, 6149, 6165, 6199, 6224, 6250, 6363, 6845, 7138, 7440, 7441, 7575, 7614, 7720, 7832, 7833, 7834, 7908, 8093, 8338, 8339, 9314, 9342, 9364, 9370, 9456, 9748, 10027, 10029, 10030, 10342, 10404, 10405, 10408, 10409, 10411, 10412, 10413, 10422, 11072, 11091, 11696, 12107, 12387, 12429, 12667, 13684, 1807 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eable to VAT. Consequently, a circular dated 4.6.2013 was issued regarding making of assessments on builders and developers. Subsequently, vide circular dated 10.2.2014, the circular dated 7.5.2013 was varied and value of the land was sought to be included for imposition of VAT. Notices (Annexure P-3 Colly) for re-assessment for the year 2010-11 under Section 17 of the Act were issued for imposing tax on the transaction of sale of flats, floors and villas amounting to ₹ 42,98,90,718/- as being under assessed. The petitioner filed reply (Annexure P-4) to the said notices. However, no response was received in this regard. The developer being engaged in the sale of immovable property where stamp duty was paid and also there being no mechanism provided under the Act for computation of tax, the imposition of tax insisted by the authorities was unconstitutional and beyond the provisions of the Act and Rules. Hence, the present writ petitions. Upon notice, respondents No.2 and 3 contested the writ petitions by filing written statement. It was pleaded therein that the issue regarding applicability and levy of VAT on builders and developers engaged in the activities of construction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to challenge the order passed under the Act. Further, this Court vide order dated 19.1.2012 passed in CWP No. 16751 of 2011 [reported as (2013) 57 VST 453] relegated the petitioner therein to the appellate authority to challenge the assessment order before it. The respondents knowing well that sale of land was not taxable under the Act being immovable goods, issued notice only for computing the tax liability on sale of goods liable to tax involved in the execution of the works contract under the Act and no notice proposing levy of tax on value of land has been issued by them. According to the respondents, the circulars dated 7.5.2013 (Annexure P-2), dated 4.6.2013 and dated 10.2.2014 were issued by respondent No.2 which related to works contractors and developers/ builders so as to remove some confusion amongst the departmental officers in determining the gross turnover and deductions allowable therefrom and consideration which was liable to tax. The said circulars in no way interfere with the quasi judicial functions of the Assessing Officers. It was further pleaded that there is transfer of property in goods in the said execution of the contract and the transfer is for a consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ro Limited's case (supra) had held that the State had the power to charge tax only on value additions in goods, property in which gets transferred after entering into agreement with the buyer. It was further contended that when the definition of 'works contract' was to be read with the definition of 'sale price', it was clear that the assessment had to be framed keeping in view pure and simple works contractors and not developers. Even no tax can be charged on the developer in respect of materials transferred directly by the subcontractor as Section 42 of the Act provides for levy of tax on the developer only in cases where property had been transferred by the subcontractor who fails to discharge his liability. Further, Section 42 of the Act stipulates joint and several liability of the contractor and subcontractor involved in the execution of the works contract. Section 42(2) of the Act provides that in case the main contractor proves to the satisfaction of the assessing authority that the tax has been paid by the sub-contractor and the assessment of such tax has become final, then he shall not be liable to pay tax on the sale of such goods. According to the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble property. Further, the State had furnished an affidavit specifically stating that there was no proposal to tax land component in the case of developers/builders. It was argued that the other provisions of the Act and the Rules, the validity of which have been challenged by the petitioners, were in conformity with law. 7. We have heard learned counsel for the parties. 8. Noticing the contentions of learned counsel for the parties, the following primary issues emerge for our consideration:- (i) Whether the developers and builders are works contractors and the agreement between the developer/builder/promoter and the prospective purchaser to construct a flat and thereafter sell the same with some portion of land, authorises the State to impose VAT thereon? (ii) If the answer to the first issue is in the affirmative, whether the method of valuation of VAT on such agreements, can directly or indirectly, include the value of land by following the method of calculation of the taxable turnover in the manner expressed by the Commissioner vide circulars dated 7.5.2013, 4.6.2013 and 10.2.2014 and also in terms of Explanation (i) to Section 2(1)(zg) of the Act and Rule 25(2) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... works contract includes any agreement for carrying out for cash, deferred payment or other valuable consideration, the assembling, construction, building, altering, manufacturing, processing, fabrication, installation, fitting out, improvement, repair or commissioning of any movable or immovable property. Goods have been described under Section 2(1)(r) of the Act as under:- (r) goods means every kind of movable property, tangible or intangible, other than newspapers, actionable claims, money, stocks and shares or securities but includes growing crops, grass, trees and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale. The definition of gross turnover falls under Section 2(1)(u) of the Act in the following terms:- (u) gross turnover when used in relation to any dealer means the aggregate of the sale prices received or receivable in respect of any goods sold, whether as principal, agent or in any other capacity, by such dealer and includes the value of goods exported out of State or disposed of otherwise than by sale; Explanation. - (i) The aggregate of prices of goods in respect of tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) turnover of sale of goods in the course of the import of the goods into the territory of India; (d) turnover of sale of goods in the course of the export of the goods out of the territory of India; (e) turnover of export of goods out of State; (f) turnover of disposal of goods otherwise than by sale; (g) turnover of sale of exempted goods in the State; (h) turnover of sale of goods to such foreign diplomatic missions/consulates and their diplomats, and agencies and organisations of the United Nations and their diplomats as may be prescribed; and (i) turnover of sale of goods returned to him, subject to such restrictions and conditions as may be prescribed, and to the remainder shall be added the purchases taxable under subsection (3) of section 3, if any, Note. - 1. In this sub-section turnover means. - (i) for the purpose of clauses (a), (b), (c), (d), (g) and (h), the aggregate of the sale prices of goods which is part of the gross turnover; (ii) for the purpose of clauses (e) and (f), the aggregate of value of goods exported out of State or disposed of otherwise than by sale, as the case may be, which is part of the gross turnover; and (iii) for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking the application as may be prescribed. 15. Section 42 of the Act provides for levy of tax on the developer even in cases where property had been transferred by the sub-contractor. The said Section reads thus:- 42. Joint and several liability of certain class of dealers. -(1) Where a works contractor appoints a sub-contractor, who executes the work contract, whether in whole or in part, the contractor and the subcontractor shall both be jointly and severally liable to pay tax in respect of transfer of property in goods whether as goods or in some other form involved in the execution of the works contract by the subcontractor. (2) If the contractor proves to the satisfaction of the assessing authority that the tax has been paid by the sub-contractor on the sale of the goods involved in the execution of the works contract by the subcontractor and the assessment of such tax has become final, the contractor shall not be liable to pay tax on the sale of such goods but he shall be entitled to claim input tax, if any, in respect of them if the same has not been availed of by the sub-contractor. (3) Where an agent purchases or sells any goods on behalf of a principal, suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... XX XX 17. Rule 49 of the Rules deals with lump-sum tax as under:- 49. Lump sum scheme in respect of contractors. (1) A contractor liable to pay tax under the Act may, in respect of a work contract awarded to him for execution in the State, pay in lieu of tax payable by him under the Act on the transfer of property (whether as goods or in some other form) involved in the execution of the contract, a lump sum calculated at four per cent of the total valuable consideration receivable for the execution of the contract, by making an application to the appropriate assessing authority within thirty days of the award of the contract to him, containing the following particulars: (1) Name of the applicant contractor: (2) TIN: (Append application for registration, if not registered or not applied for registration) (3) Name of the contractee: (4) Date of award of the contract; (5) Place of execution of the contract: (6) Total cost of the contract: (7) Period of execution: and appending therewith a copy of the contract or such part thereof as relates to total cost and payments. (2) The application shall be signed by a person authorised to make an applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contracts awarded to him thereafter shall not be liable to pay lump sum in lieu of tax payable under the Act but in respect of the other contract(s) he shall continue to pay lump sum in lieu of tax payable under the Act till the completion of each of such contract(s). (9) A lump sum contractor may, when rate of lump sum is revised, opt out of the scheme of payment of lump sum in lieu of tax payable under the Act by appearing before the appropriate assessing authority himself or through an authorised agent within ninety days of such revision and expressing in writing his intention to opt out of the scheme of payment of lump sum. Such contractor shall be liable to pay lump sum for the period before the revision in lump sum rate at the un-revised rate and in respect of transfer of property in any goods, whether as goods or in some other form, involved in the execution of the contract(s) thereafter he shall be liable to pay tax as a contractor not being a lump sum contractor. 18. In order to appreciate rival submissions, legislative history of the taxability of 'works contract' needs to be noticed. 19. The power to levy sales tax was conferred on the legislatures of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and indivisible, there was no sale of goods and it was not within the competence of the Provincial Legislature under Entry 48 in List II in Schedule VII of the Government of India Act, 1935, to impose a tax on the supply of the materials used in such a contract treating it as a sale. The Supreme Court had noted in subsequent decisions that the said decision though was rendered on the basis of the provisions in the Government of India Act, 1935 was equally applicable to the provisions found in Entry 54 of List II of Schedule VII of the Constitution. By virtue of this decision, no sales tax could be levied on the amounts received under a works contract by a building contractor even though he had supplied goods for the construction of the buildings. 22. In the year 1982 Parliament passed the 46th Amendment amending the Constitution in several respects in order to bring many of the transactions, in which property in goods passed but were not considered as sales for the purpose of levy of sales tax, within the scope of the power of the States to levy sales tax. By the 46th Amendment a new clause, namely clause (29A) was introduced in Article 366 of the Constitution. Clause (29A) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticle 366 is the definition clause of the Constitution. It provides that in the Constitution unless the context otherwise requires, the expressions defined in that article have the meanings respectively assigned to them in that article. The expression 'goods' is defined in clause (12) of Article 366 of the Constitution as including all materials, commodities and articles. Sub-clause (b) of clause (29-A) states that 'tax on the sale or purchase of goods' includes among other things a tax on the transfer of property in the goods (whether as goods or in some other form) involved in the execution of a works contract. The emphasis is on the transfer of property in goods (whether as goods or in some other form). While referring to the transfer, delivery or supply of any goods that takes place as per sub-clauses (a) to (f) of clause (29-A), the latter part of clause (29-A) stipulates that 'such' transfer, delivery or supply of any goods' shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made. Hence, a transfer of property in g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than making it possible for the States to levy sales tax on the price of goods and materials used in works contracts as if there was a sale of such goods and materials. We do not accept the argument that sub-clause (b) of Article 366(29A) should be read as being equivalent to a separate entry in List II of the Seventh Schedule to the Constitution enabling the States to levy tax on sales and purchases independent of Entry 54 thereof. As the Constitution exists today the power of the States to levy taxes on sales and purchases of goods including the deemed sales and purchases of goods under clause (29A) of Article 366 is to be found only in Entry 54 and not outside it. We may recapitulate here the observations of the Constitution Bench in the case of Bengal Immunity Company Ltd. (supra) in which this Court has held that the operative provisions of the several parts of Article 286 which imposes restrictions on the levy of sales tax by the States are intended to deal with different topics and one could not be projected or read into another and each one of them has to be obeyed while any sale or purchase is taxed under Entry 54 of the State List. 41. We, therefore, declare that sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resaid heads of deduction for labour and services. But there may be cases where the contractor has not maintained proper accounts or the accounts maintained by him are not found to be worthy of credence by the assessing authority. In that event, a question would arise as to how the deduction towards the aforesaid heads may be made. On behalf of the States, it has been urged that it would be permissible for the State to prescribe a formula on the basis of a fixed percentage of the value of the contract as expenses towards labour and services and the same may be deducted from the value of the works contract and that the said formula need not be uniform for all works contracts and may depend on the nature of the works contract. We find merit in this submission. In cases where the contractor does not maintain proper accounts or the accounts maintained by him are not found worthy of credence it would, in our view, be permissible for the State legislation to prescribe a formula for determining the charges for labour and services by fixing a particular percentage of the value of the works contract and to allow deduction of the amount thus determined from the value of the works contract fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Kodar v. State of Kerala : [1975] 1 SCR 121 . Similarly, imposition of purchase tax at different rates for sugar mills and khandsari units was upheld in Ganga Sugar Co. Ltd. v. State of U.P. and Ors., : [1980] 1SCR 769 . In our opinion, therefore, it would be permissible for the State Legislature to tax all the goods involved in the execution of a works contract at a uniform rate which may be different from the rates applicable to individual goods because the goods which are involved in the execution of the works contract when incorporated in the works can be classified into a separate category for the purpose of imposing the tax and a uniform rate may be prescribed for sale of such goods. 51. The aforesaid discussion leads to the following conclusions:- (1) In exercise of its legislative power to impose tax on sale or purchase of goods under Entry 54 of the State List read with Article 366 (29-A)(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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he extent 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 the value of the works contract but while doing so it has to be ensured that the amount deductible under such formula does not differ appreciably from the expenses for labour and services that would be incurred in normal circumstances in respect of that particular type of works contract. It would be permissible for the legislature to prescribe varying scales for deduction on account of cost of labour and services for various types of works contract. (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. 27. On another occasion, where the developers were undertaking to build for the prospective purchasers on paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... K. Raheja Development Corporation, (as Holders) agree to sell to the Prospective Purchaser an undivided 0.42% share, right, title and interest in the said land described in the First Schedule hereunder written (with no right to the Prospective Purchaser to claim any separate sub-division and/or right to exclusive possession of any portion of the said land) for a lump sum agreed and quantified consideration of ₹ 3,25,000/- (Rupees three lacs twenty five thousand only) to be paid by the Prospective Purchaser to the Holders at the time and in the manner stated in Clause 2 hereof; b) K. Raheja Development Corporation, (as Developers) agree to build the said building named `Raheja Towers', having the specifications and amenities therein set out in the Second Schedule hereunder written and as Developers for the prospective Purchaser, the Developers shall build for and as unit/s to belong to the Prospective Purchaser, the said premises (details whereof are set out in the Third Schedule hereunder written) for a lump sum agreed and quantified consideration of ₹ 5,07,000/- (Rupees five lacs seven thousand only) to be paid by the Prospective Purchaser to the Developers at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt by way of interest or otherwise. On the Holder/Developers terminating this Agreement under this Clause, they shall be at liberty to dispose off the said Unit/s and the said fractional interest in the land to any other person as they deem fit, at such price as they may determine and the Prospective Purchaser shall not be entitled to question such sale, disposal or to claim any amount from them. 20. Thus the Appellants are undertaking to build as developers for the prospective purchaser. Such construction/development is to be on payment of a price in various installments set out in the Agreement. As the Appellants are not the owners they claim a lien on the property. Of course, under clause 7 they have right to terminate the Agreement and to dispose off the unit if a breach is committed by the purchaser. However, merely having such a clause does not mean that the agreement ceases to be a works contract within the meaning of the term in the said Act. All that this means is that if there is a termination and that particular unit is not resold but retained by the Appellants, there would be no works contract to that extent. But so long as there is no termination the construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction between contract for sale of goods and contract for work (or service) is virtually diminished. (vi) The dominant nature test has no application and the traditional decisions which have held that the substance of the contract must be seen have lost their significance where transactions are of the nature contemplated in Article 366(29-A). Even if the dominant intention of the contract is not to transfer the property in goods and rather it is rendering of service or the ultimate transaction is transfer of immovable property, then also it is open to the States to levy sales tax on the materials used in such contract if such contract otherwise has elements of works contract. The enforceability test is also not determinative. (vii) A transfer of property in goods under clause 29- A(b) of Article 366 is deemed to be a sale of the goods involved in the execution of a works contract by the person making the transfer and the purchase of those goods by the person to whom such transfer is made. (viii) Even in a single and indivisible works contract, by virtue of the legal fiction introduced by Article 366 (29-A)(b), there is a deemed sale of goods which are involved in the exec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long as construction is for and on behalf of the purchaser, it remains a works contract under the Act. 30. Further, the essential conditions to be fulfilled for sustaining levy of tax on the goods deemed to have been sold in execution of a works contract are as under:- (i) there must be a works contract, (ii) the goods should have been involved in the execution of a works contract, and (iii) the property in those goods must be transferred to a third party either as goods or in some other form. These conditions are fulfilled in a building contract or any contract to do construction. In a contract to build a flat, necessarily there will be an element of sale of goods included therein and therefore, building contracts are species of the works contract. Still further, a contract comprising of both a works contract and a transfer of immovable property, such contract is not denuded of its character of being a works contract. Article 366 (29A)(b) of the Constitution of India does contemplate a situation where the goods may not be transferred in the form of goods but may be transferred in some other form which may even be in the form of immovable property. No doubt, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be a works contract. If at the time of construction and until the construction was completed, there was no contract for construction of the building with the flat purchaser, the goods used in the construction cannot be deemed to have been sold by the builder since at that time there is no purchaser even if building is intended to be sold after construction would be of no consequence. The value addition made to the goods transferred after the agreement is entered into with the flat purchaser can only be made chargeable to tax by the State Government. Taxing the sale of goods element in a works contract under Article 366 (29A)(b) read with Entry 54 List II of Schedule VII of the Constitution of India is permissible even after incorporation of goods provided tax is directed to the value of the goods at the time of incorporation and does not purport to tax the transfer of immovable property. No tax can be charged from the developer/builder/promoter or contractor in respect of the value of goods incorporated in the works contract after the agreement with the flat purchaser on which the subcontractor has already paid the tax. 32. Next, it was claimed by learned counsel for the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elateable to value of materials. Rule 25(2) of the Rules only provide for deductive method in the event of labour and services but does not reduce the value of immovable property. The legality of both the provisions was put to test by the learned counsel for the petitioners. 34. Grievance was also raised relating to validity of Instructions dated 7.5.2013, 4.6.2013 and 10.2.2014 (Annexure P-2 Colly). Instructions No. 952/ST-1 dated 7.5.2013 (Annexure P-2) issued by respondent No.2 provides that the agreements/contracts entered by developers with prospective buyers for sale of apartments/ flats before the completion of construction constitutes 'works contract' and thus VAT was imposable on such transactions. Clause 4 of the said circular relates to measure of tax and deduction towards labour and other like charges. Circular dated 4.6.2013 was issued regarding making of assessments on builders and developers. In view of legal position enunciated hereinbefore, there is no illegality in the issuance of circulars dated 7.5.2013 and 4.6.2013. However, Circular issued on 10.2.2014 relates to lump sum tax under composition tax scheme and has been dealt with while analyzing the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... birth. This is peculiarly true of constitutions. They are not ephemeral enactments, designed to meet passing occasions. They are, to use the words of Chief Justice Marshall, designed to approach immortality as nearly as human institutions can approach it . The future is their care and provision for events of good and bad tendencies of which no prophecy can be made. In the application of a constitution, therefore, our contemplation cannot be only of what has been, but of what may be. Under any other rule a constitution would indeed be as easy of application as it would be. Under any other rule a constitution would indeed be as easy of application as it would be deficient in efficacy and power. Its general principles would have little value, and be converted by precedent into impotent and lifeless formulae. Rights declared in the words might be lost in reality. And this has been recognised. The meaning and vitality of the Constitution have developed against narrow and restrictive construction. 37. The rule of interpretation requires that such meaning should be assigned to the provision which would make the provision of the Act effective and advance the purpose of the Act. This s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... islature has not made any express provision for exclusion of value of immovable property from the works contract and its method of valuation has been left to the discretion of the rule making authority to prescribe. 40. The State had filed an affidavit dated 24.4.2014 of Shri B.L. Gupta, Additional Excise and Taxation Commissioner, Haryana, wherein paras 3 to 8 read thus:- 3. That it is affirmed that the developers/work contractors, being assessed as normal VAT dealers, are entitled to all deductions admissible as per Law/Rules. 4. That as per the provisions contained in the Haryana VAT Act, 2003 and the rules framed thereunder, the tax is to be levied on transfer of property in goods involved in the execution of works contract. It is clarified that the definition of the word 'goods', as available in Section 2(1) (r) of the Haryana Value Added Tax Act, 2003, does not include immovable property, that is, land. 5. That the Act ibid, which is relatable to entry 54, List II Seventh Schedule of the Indian Constitution does provide for levy of tax on sale or purchase of goods except newspaper. 6. That having regard to above, neither any tax is leviable nor can it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of sale by transfer of property in goods (whether as good or in some other form) involved in the execution of a works contract. Sub rule (1) and (1A) thereof which is relevant, reads thus:- (1) The value of the goods at the time of the transfer of property in the goods (whether as goods or in some other form) involved in the execution of a works contract may be determined by effecting the following deductions from the value of the entire contract, in so for as the amounts relating to the deduction pertain to the said works contract:-- (a) labour and service charges for the execution of the works; (b) amounts paid by way of price for sub-contract , if any, to subcontractors; (c) charges for planning, designing and architect s fees; (d) charges for obtaining on hire or otherwise, machinery and tools for the execution of the works contract; (e) cost of consumables such as water, electricity, fuel used in the execution of works contract, the property in which is not transferred in the course of execution of the works contract; (f) cost of establishment of the contractor to the extent to which it is relatable to supply of the said labour and services; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing contracts. It broadly specifies the deduction which are admissible from the entire contract, inter alia, on account of labour, service charges, charges for planning, designing, architect fees and similar other expenses specified therein. The rates for deductions are specified in the table where the contractor has not maintained proper accounts which enables proper evaluation of the different deductions noted hereinbefore. However, sub rule (1A) in Rule 58 of the MVAT Rules, 2005 was inserted therein by a notification dated 01.06.2009. The rule has provided that in the case of construction contracts where the immovable property, land or as the case may be, interest therein is to be conveyed and the property in the goods involved in the execution of the construction contract is also transferred, then it is such transfer of goods alone which is liable to tax. The value of the goods at the time of transfer is to be calculated after making the deduction of the cost of the land from the total agreement value. The method for determining the cost of the land has also been specified thereunder. It stipulates that the cost of the land shall be determined in accordance with the guidelines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd any other thing done prior to the date of entering of the agreement of sale is to be excluded from the agreement value. The value of goods in a works contract in the case of a developer etc. on the basis of which VAT is levied would be the value of the goods at the time of incorporation in the works even where property in goods passes later. Further, VAT is to be directed on the value of the goods at the time of incorporation and it should not purport to tax the transfer of immovable property. Consequently, Rule 25(2) of the Rules is held to be valid by reading it down to the extent indicated hereinbefore and subject to the State Government remaining bound by its affidavit dated 24.4.2014 The State Government shall bring necessary changes in the Rules in consonance with the above observations. 46. Adverting to the issue of challenge to Section 42 of the Act is concerned, according to the learned counsel for the petitioners the assessing VAT liability on the developer when the goods have been transferred by the sub-contractor was in clear contravention of States 's power vide Entry 54 List II of Seventh Schedule. Therefore, the provision wherein the tax was to be assessed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of primary challenge to the validity of Explanation (i) to Section 2(1)(zg) of the Act and Rule 25(2) of the Rules, we felt the necessity to examine the issue in these petitions. 50. The plethora of case law is a pointer to the proposition that wherever alternative remedies are available, the writ court should be loath in interfering in such matters. However, certain exceptions have been carved out by various judicial pronouncements of the Apex Court and also the High Courts. 51. A Division Bench of this Court in Jindal Strips Limited and another v. State of Haryana and others (1996) 100 STC 45 after considering the various pronouncements of the Apex Court and other High Courts on the subject in extenso, laid down the exceptions to alternative remedy in the matter relating to exercise of writ jurisdiction as under:- From the various judicial precedents, enumerated above, this Court is of the considered opinion that availability of an alternative remedy for nonentertainment of a petition under Article 226 of the Constitution cannot be of universal application. It is true that ordinarily when the statute provides an alternative remedy, and particularly when there is comple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the period of limitation prescribed under the statute for filing an appeal has expired. The exceptions can be multiplied but the court does not wish to be exhaustive in detailing all the exceptions. As mentioned above, by and large, it will be dependent upon the facts and circumstances of each case. 52. The principle of law enunciated in the pronouncements relied upon by learned State counsel for alternative remedy is concerned, are well recognized. However, in the facts and circumstances enumerated hereinbefore, the remedy of writ jurisdiction cannot be shut down particularly when the vires of Explanation (i) to Section 2(1)(zg) of the Act, Rule 25(2) of the Rules and circulars issued by the Excise and Taxation Commissioner have been challenged in the writ petitions. In so far as the petitioners have raised individual issues regarding non-taxability of their transactions on merits, it shall be open for them to raise all these issues before the Assessing Authority/revisional authority in accordance with law. It shall also be open to the petitioners to agitate their grievance regarding refund of stamp duty, if any, before appropriate authority in accordance with law. 53. To ..... X X X X Extracts X X X X X X X X Extracts X X X X
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