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2015 (8) TMI 447 - ANDHRA PRADESH HIGH COURT

2015 (8) TMI 447 - ANDHRA PRADESH HIGH COURT - [2015] 85 VST 309 (T&AP) - Levy of sales tax / CST on manufacturing of cine wall posters - nature of activity - sale or works contract - printing the wall poster as per the requirement of the customer - Revision of order by the commissioner – Whether Commissioner could have revised order of ADC on ground that appeal should not have been entertained as it was filed belatedly – Held that:- Commissioner, in his earlier notice, did not propose to revise .....

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vise order of ADC hereby set aside – Decided against revenue.

Printing and Supply of cine-walls – Held that:- In order to constitute sale it is necessary that there is agreement between parties for purpose of transferring title to goods, agreement must be supported by money consideration and property should actually pass in goods – For being classified as works contract transaction, under consideration, must be composite transaction involving both goods and services – If transaction .....

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reparation of negatives of wall-posters, was exclusively job work involving skill and labour, hence price charged thereof could not be subject to sales tax – However, second part of work involving printing of positive prints of wall- posters, was deemed to be works contract and, as such, tax was levied – Activity of printing and supply of cine wall-posters cannot be considered as failing under terms fitting out, improvement or repair, as supply of cine wall-posters was not supply of goods; and t .....

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during the relevant period – Decided against revenue.

Payment of Tax – Against refund order – Whether Commissioner could have directed appellants to pay tax under APGST, 1957, and CST, 1956, when order of ADC setting aside order of assessing authority withholding refund under Section 33-BB had attained finality – Held that:- As appellants had already paid tax, consequence of order of ADC was that they were entitled to claim refund of tax paid earlier –Upon revisional order of Commissi .....

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sactions were not sale of goods, but it was not disputed that appellants have collected tax from their customers on manufacture, printing and supply of cine wall- posters – Doctrine of unjust enrichment is just and salutary doctrine – As appellants were not exigible to tax during relevant period, appellants cannot be permitted to retain amount collected by them from their customers as that would resulted in their unjust enrichment – Onus was on appellants to show that they have not collected tax .....

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than) These appeals are preferred, under Section 23(1) of the APGST Act against the order passed by the Commissioner of Commercial Taxes dated 23.07.2003, setting aside the orders of the Appellate Deputy Commissioner, Guntur and Vijayawada, and restoring the orders of the assessing authority. It would suffice, for the purpose of adjudicating this batch of special appeals, if the facts in Special Appeal No.49 of 2003 are noted. The appellants herein, manufacturers of cine-wall posters, were final .....

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h skill, at several stages, before the cinema wall posters came into existence; the following steps were involved in the process of manufacture of cine wall posters (1) preparing the design; (2) taking photographs of the design; (3) developing negatives, of the design, of the required size; (4) taking as many negatives as there were colours i.e., one negative for each colour; (5) giving touches to each negative; (6) exposing the negative on zinc or aluminium sheets; (7) attaching the zinc or alu .....

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h negative absorbed a particular colour content of the design; in taking the negatives, a high degree of skill was exercised by blacking out the unnecessary colour, and absorbing only the desired colours by the use of filters; maximum care was taken, in fixing the timing of taking the photographs, as it involved different types of work, such as line work, solid work, figure work, screen work etc; any mis-adjustment of timing would have lead to loss of the costly negative; depending upon the size .....

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customer on the basis of the skill of the manufacturer; and these transactions would not come under the purview of sale of goods, or sale of any material, as it involved a high degree of skill and labour. The Appellate Deputy Commissioner, following the judgment of the Sales Tax Appellate Tribunal, (STAT for short) in T.A. No.310 of 1991 in the case of M/s. Foto Colours, upheld the appellants contention, and allowed the appeals. Subsequently, the Appellate Deputy Commissioner passed another orde .....

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ld not be set aside, and the order passed by the assessing authority not be restored. The Commissioner observed that the dominant element, in the supply of wall posters, was not skill and labour; different materials namely paper, colours, and ink were involved; photographs, taken for private use, could be considered as works of art and skill; wall posters, which were printed on a large scale for the purpose of advertisement, had commercial value; they did not involve skill and labour; what was r .....

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re; a random analysis of the cost of expenditure, involved in the manufacture and printing of cine-wall posters, revealed that the assessee was spending roughly 10% of the total cost on workers salaries, 2% on artists charges, and 80% on printing and processing; the predominant element, in the supply of wall posters, was not skill and labour, but material ie paper, ink and different colours; wall posters should not be compared to photographs, as photographs were of a private nature, and were per .....

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se notice dated 30.09.1996, the appellants contended that the primary difference between a contract for work and service, and a contract for sale, was that in the former there was, in the person performing or rendering service, no property in the thing produced as a whole, notwithstanding that a part or even the whole of the material used by him may have been his property; the finished product, supplied to a particular customer, was not a commercial commodity in the sense that it could not be so .....

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e wall poster was to sustain interest of the audience in the film even after the film had run for a considerable length of time. The appellants then narrated in detail the process of preparation of these wall posters commencing from its design till its eventual printing. They contended that there was no bargain, between the appellants and their customers, to sell paper, ink and colour; the only bargain between them was the wall poster which was required to be produced as per the agreed design; t .....

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it to any other person in the market, as he did not have any title over the property i.e., the wall poster; the transaction was in the nature of a works contract involving skill and labour; the design owner was the customer; once the customers design was reproduced in the form of wall posters, the customer became its owner; the title, in the wall poster, remained vested in the customer even though the design was reproduced in the form of a wall poster; as the title in the wall poster was vested .....

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f the design into a wall poster, with all the effects which the design contained; as the purpose and significance of the wall poster was the impact it would have on the public, the customer was concerned only about the final outcome of the wall poster; bargaining for paper or inks was never the subject matter of the contract; the contract was only to convert the design into a wall poster, and was a supply of skill and labour; the work was developed on the property belonging to the customer; and .....

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or even the whole of the materials used by him may have been his property; where the finished product, supplied to a particular customer, was not a commercial commodity in the sense that it could not be sold in the market to any other person, the transaction was only a works contract; the difference between a contract for work or service, and a contract for sale, was whether property was vested in the person performing or rendering the service; where the finished product, supplied to a particul .....

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at the property in the goods stood transferred automatically to the buyer, the moment the wall poster was printed; these wall posters were used by the customers for publicity, and the transfer of property was effected by the selling dealer when the goods were handed over to the buying dealer; the selling dealer had to develop the poster as per the specifications clearly mentioned by the buying dealer, and once the buying dealer was satisfied that the wall posters confirmed to the specifications, .....

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terial for the film; these posters were resold by them to distributors, and to the exhibitors; the exhibitors in B and C class centres bought the wall posters, and in some cases the distributors themselves screened the shows in theatres using wall posters as publicity material for themselves; it only showed that it was a commodity put up for sale; it had all the ingredients of a commercial commodity; it was not meant for personal and exclusive use of any individual; the very fact that the dealer .....

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essence of the process was a sale of the finished product and not a case where work and labour alone was involved. Rejecting the objections raised by the appellant, the Commissioner set aside the order of the Appellate Deputy Commissioner and restored the order of the Commercial Tax Officer. Aggrieved thereby the appellant herein filed Special Appeal No.25 of 1997 and batch before this Court. A Division bench of this Court, in its order in Special Appeal No.25 of 1997 and batch dated 09.12.2002, .....

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support of their claim that the activity undertaken by them did not involve an element of sale; the appellant did not place relevant material before the Commissioner; and they had pleaded that, if an opportunity was given to them, they would place all the relevant material before the Commissioner who should decide matters on the basis of such material, keeping in view the effect of the 46th amendment to the Constitution, which came into force in the year 1982. The Division bench was of the view .....

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recting him to rehear these matters under Section 20 of the APGST Act by giving them an opportunity to place all relevant material in support of their case. The Commissioner was also directed to indicate the date of hearing to enable the appellants to participate in the hearing. The Commissioner was requested to decide the appeals as expeditiously as possible and within a period of six months from the date of receipt of a copy of the order. The Division bench made it clear that the Commissioner .....

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on petition of 165 days; the Appellate Deputy Commissioner had mechanically condoned the enormous delay, without examining the fact whether such delay was because of good and sufficient cause as envisaged under Section 19 of the APGST Act; there was non-application of mind by the Appellate Deputy Commissioner, and he had failed to deal with and dispose of the condone delay application in the manner expected of a quasi-judicial authority, which resulted in the ultimate order being passed; the App .....

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such a contract must be termed as a contract of sale, but not a contract for work or service; printing and the subsequent sale of cine wall posters on a large scale for advertising purposes had commercial value, and any skill and labour involved therein was only incidental; what had to be seen was not the complicated process of making a commodity, but the basic object of the transaction; the nature of the transaction was the sale of cinema wall posters which was the subject matter of the transa .....

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mers; and the order of the Appellate Deputy Commissioner necessitated revision. In reply thereto, the appellants filed their written submissions on 03.07.2003 stating that the delay condonation application was filed before the Appellate Deputy Commissioner wherein they had stated that the mistake in payment of tax was a mutual mistake, on their part as well as that of the assessing authority, as the tax paid and collected was contrary to the established position of law; thereafter the ADC had is .....

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ial Taxes earlier; the irregularity in conducting the appeal was neither pleaded nor raised nor argued in the High Court in the Special Appeals; it could not, therefore, be a ground in the extended revision proceedings under Section 20(1) read with Section 20(5) of the APGST Act; and the decision of the ADC, on condonation of delay, was allowed to become final at the volition of, and at the behest of, the department. On the question of unjust enrichment, the appellants contended that the proceed .....

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of limitation had expired. On merits, the appellants produced a copy of the agreement of lease entered into between the film producers and various district lessees, and the affidavits given by them. They contended that the salient features of the agreement of lease included the requirement of the lessee returning all prints and publicity material to the lessor on expiry of the lease; the lessees were given the right to exploit the film for the purpose of distribution and exhibition; the exclusiv .....

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developing negatives of the photographs of the required size, taking as many negatives as there were colours, giving touches to each negative, exposing negatives on zinc or alluminium sheets, attaching the zinc or alluminium sheets to the printing machines, and printing on paper as many times as there were plates. The appellants referred extensively to the provisions of the Copy Rights Act and the APGST Act, and to several judgments, in support of their contention that there was no sale involve .....

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work and labour were alone involved; and all the objections raised by the dealer were untenable and were liable to be rejected. The Commissioner, Commercial Taxes set aside the order of the Appellate Deputy Commissioner, and restored the order of the assessing authority. Aggrieved thereby the present appeals. The points which arise for consideration in these appears are: 1. Whether the Commissioner (Commercial Taxes) could have revised the order of the Appellate Deputy Commissioner on the ground .....

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93 ? 3. Whether the Commissioner (Commercial Taxes) could have directed the appellants to pay tax under the Andhra Pradesh General Sales Tax Act, 1957, and the Central Sales Tax Act, 1956, on such transactions when the order of the Appellate Deputy Commissioner, setting aside the order of the assessing authority withholding refund under Section 33-BB of the Andhra Pradesh General Sales Tax Act, 1957, had attained finality? 4. Are the appellants entitled to retain the tax collected by them under .....

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l; the Commissioner had earlier chosen to revise the order of the Appellate Deputy Commissioner only to the extent he held that printing and supply of cine wall-posters was a job of skill and labour, and not of sale; the order of the Appellate Deputy Commissioner, condoning the delay, was not the subject matter of the earlier revision; it is the appellants who had preferred the appeal against the earlier order of revision; the matter was remanded to the Commissioner to enable the appellants to p .....

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ored. After the appellants submitted their reply thereto by their letter dated 30.09.1996, the Commissioner, by his order dated 21.03.1997, set aside the order of the Appellate Deputy Commissioner, and restored the order of the assessing authority. It is relevant to note that the Commissioner, in his notice dated 10.01.1996, did not propose to revise the order of the Appellate Deputy Commissioner on the ground that he could not have entertained the appeal after the limitation prescribed for pref .....

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d under the provisions of the said Act. It is only to this limited extent was the Commissioner permitted to re-hear the matter, and decide the revision afresh. It was, therefore, not open to the Commissioner to revise the order of the Appellate Deputy Commissioner on grounds other than those referred to in his show cause notice dated 30.09.1996. The Commissioner exceeded his jurisdiction in passing the order dated 23.07.2003, and thereby setting aside the order of the Appellate Deputy Commission .....

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sed or proceeding recorded by any authority under the provisions of this Act, other than an order passed or proceeding recorded by a Joint Commissioner or the Deputy Commissioner under sub-section (4C) of Section 14, could, within thirty days from the date on which the order or proceeding was served on him, appeal to the prescribed authority. The proviso thereto enabled the appellate authority to admit an appeal, preferred after a period of thirty days, if he was satisfied that the dealer had pa .....

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e order of the assessing authority, after condoning the delay. Even otherwise the delay, which the Appellate Deputy Commissioner condoned, was not so inordinate as to have necessitated interference in revision proceedings by the Commissioner. Viewed from any angle the order of the Commissioner, seeking to revise the order of the Appellate Deputy Commissioner on this ground, must be and is accordingly set aside. Point No.2: Sri V. Bhaskar Reddy, Learned Counsel appearing on behalf of the appellan .....

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ct was given a restricted meaning under the APGST Act during the said period, and did not include the works contracts of printing and supply of cine wall-posters; it is only by way of an amendment from 01.04.1995 was the restricted meaning, given earlier to the term works contract, removed and the definition given an extended meaning; while printing and supply of cine wall-posters is a works contract, it was not among the works contract specified under Section 2(t) of the APGST Act during the re .....

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r the CST Act, the Commissioner erred in revising the order of the Appellate Deputy Commissioner. On the other hand Sri Shaik Jilani Basha, Learned Special Standing Counsel for Commercial Taxes, would submit that the order of the Commissioner is valid; these transactions relate to sale of cine wall-posters, and are not works contracts; and, even if they are held to be works contracts, the assessing authority is entitled to levy tax on the deemed sale of goods involved in such works contracts. Le .....

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e or purchase of the goods includes 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 and 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. The definition of goods, in Article 366(12), is inclusive. It includes all materials, comm .....

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ds has been enlarged bringing within its fold goods in a form other than as goods. Goods in some other form would thus mean goods which had ceased to be chattel or movables or merchandise, and had acquired some other form. 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. (Larsen and T .....

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ld not be split, and the State Legislatures lacked legislative competence to levy sales tax on a transaction which was not a sale of goods simpliciter. (Pro Lab (2015) 78 VST 451 (SC). In view of the forty-sixth amendment to the Constitution, the States now have the power to bifurcate the contract, and to levy sales tax on the value of the material used in the execution of a works contract. In other words, Article 366 (29- A) empowers the States to levy tax on the deemed sale of goods. (Larsen a .....

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the contract which was single and indivisible has been altered by legal fiction into a contract which is divisible into one for sale of goods and the other for supply of labour and service and, as a result, such a contract, which was single and indivisible, has been brought on par with a contract containing two separate agreements; (ii) 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, there .....

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ing made by Parliament under Article 286(3)(b), the exercise of the legislative power of the State under Entry 54 in List II, to impose tax of the nature referred to in sub-clause (b) of Article 366 (29-A), would be subject to the restrictions and conditions in regard to the system of levy, rates and other incidents of tax contained in the said law; and (iv) the measure for the levy of tax contemplated by Article 366 (29-A)(b) is the value of the goods involved in the execution of a works contra .....

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levy of the tax is the value of the goods at the time of incorporation of the goods in the works, and not the cost of acquisition of the goods by the contractor. (Larsen and Toubro Ltd. (2013) 65 VST 1 (SC)). In order to constitute a sale it is necessary that there should be an agreement between the parties for the purpose of transferring title to the goods, the agreement must be supported by money consideration, and that, as a result of the transaction, the property should actually pass in the .....

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e of Goods Act (1990, Fifth Edition, at page 53; Hindustan Shipyard Limited4). A contract may involve both a contract of work and labour and a contract of sale of goods. The distinction between a contract for the sale of goods and a contract for work (or service) has almost diminished in matters of composite contracts involving both (a contract of work/labour and a contract for sale) for the purposes of Article 366 (29-A)(b). Now, by legal fiction under Article 366(29- A)(b), it is permissible t .....

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abour and service pales into insignificance in determining the nature of the contract. (Kone Elevator India (P) Ltd. .(2014) 7 SCC 1); Larsen and Toubro Ltd. Larsen). While examining the exercise of divisibility, the dominant intention behind such a contract, namely, whether it was for sale of goods or for services, is rendered otiose or immaterial. It follows as a sequitor that, by virtue of Article 366(29-A), the State Legislature is now empowered to segregate the goods part of the works contr .....

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. (2013) 65 VST 1 (SC) Pro Lab (2015) 78 VST 451 (SC)). The contention that processing and printing of cine-wall posters etc. is essentially a service, wherein the cost of paper, chemical or other material used in processing and developing negatives, photo prints etc. is negligible, is founded on the dominant intention theory which is no longer valid in view of the 46th Amendment to the Constitution. (Pro Lab (2015) 78 VST 451 (SC)). As the dispute, in this batch of appeals, is whether the subje .....

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. (Larsen and Toubro Ltd. (2013) 65 VST 1 (SC)). For being classified as a works contract the transaction, under consideration, must be a composite transaction involving both goods and services. If a transaction involves only service, i.e. work and labour, then it cannot be treated as a works contract. (Pro Lab. (2015) 78 VST 451 (SC)). After the 46th constitutional amendment, the narrow meaning given earlier to the term "works contract" no longer survives. Once the characteristics or .....

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particular form. The term encompasses a wide range and many varieties of contracts. The Parliament had such a wide meaning of a works contract in view, at the time of the forty-sixth amendment. Even if in a contract, besides the obligations of supply of goods and materials and performance of labour and services, some additional obligations are imposed, such a contract does not cease to be a works contract. The additional obligations in the contract would not alter the nature of the contract so l .....

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iament had all genre of works contract in view when clause 29-A was inserted in Article 366. (Pro Lab. (2015) 78 VST 451 (SC); Larsen and Toubro Ltd. (2013) 65 VST 1 (SC)). In Kone Elevator India (P) Ltd. .(2014) 7 SCC 1), the Supreme Court held that if there are two contracts, namely, purchase of the components of the lift from a dealer, it would be a contract for sale and similarly, if a separate contract is entered into for installation, that would be a contract for labour and service; but a .....

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tal characteristics of a works contract were satisfied in such contracts. The power to make laws is conferred on Parliament and the State Legislatures under Articles 245 and 246 of the Constitution. Article 246(1) confers exclusive power on Parliament to make laws with respect to any of the matters enumerated in List-I of the VII Schedule to the Constitution. Article 246(3) enables the State Legislatures, subject to clauses (1) and (2), to make laws for such State or any part thereof with respec .....

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both in Entry 92A of List-I and Entry 54 of List-II of the VII Schedule, must be given the meaning referred to in Article 366 (29A) of the Constitution of India. The expression tax on the sale or purchase of goods in both the aforesaid entries would include 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. The tax leviable, by virtue of sub- clause (b) of clause (29-A) of Article 366 of the Constitution, thus becom .....

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r clause (29A) of Article 366, is to be found only in Entry 54 and not outside it. (Builders Association of India v. Union of India (1989) 73 STC 370). The States have now been conferred the power to tax indivisible works contracts, by enlarging the scope of tax on sale or purchase of goods wherever it occurs in the Constitution. Accordingly, the expression tax on the sale or purchase of goods in Entry 54 of List II of the Seventh Schedule, when read with the definition clause 29-A of Article 36 .....

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t for sale of goods involved in the works contract, and (ii) for supply of labour and service, and levy sales tax on the value of the material used in the execution of the works contract. (Larsen and Toubro Ltd. (2013) 65 VST 1 (SC). As Article 246(1) and (3), read with Entry 92A of List-I and Entry 54 of List-II of the VII Schedule to the Constitution, enable Parliament and the State Legislatures respectively to make laws levying tax on the sale or purchase of goods referred to in the respectiv .....

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e to tax on the deemed sale of goods involved in the execution of a works contract. It is necessary to now examine the law as it stood for the years prior to 31.03.1995, since all the appeals relate to assessments made under the APGST and CST Acts for assessment years prior to 1991-92. Special Appeal Nos.49, 50, 52, 55, 56, 58, 59, 64, 65, 66, 71, 72 and 73 of 2003 are the appeals which arise out of the revisional order passed by the Commissioner, Commercial Taxes under the provisions of the APG .....

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eration or in the supply or distribution of goods by a society (including a co-operative society), club, firm or association to its members, but not to include a mortgage, hypothecation or pledge of, or a charge on, goods. Under Explanation VI thereto, (as inserted by Act 18 of 1985 w.e.f.1.7.1985), whenever any goods were supplied or used in the execution of a works contract, there was deemed to be a transfer of property in such goods, whether or not the value of the goods so supplied or used i .....

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such consideration be cash, deferred payment or any other thing of value, included the value of any goods, as determined by the assessing authority, to have been used or supplied by the dealer in the course of execution of a works contract. Section 5 of the APGST Act related to levy of tax on sales or purchases of goods and, under sub-section (1) thereof, every dealer (other than a casual trader and an agent of a non-resident dealer) whose total turnover for a year was not less than ₹ 2,00 .....

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erty or the fitting out, improvement or repair of any movable property. Section 2(t) was amended, subsequently, by Act 22 of 1995 w.e.f. 01.04.1995 and, after its amendment, included any agreement for carrying out for cash or for deferred payment or for any other valuable consideration, the building construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, modification, repair and commissioning of any moveable or immovable property. While the definitio .....

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s being shorthand for the longer one. Alternatively an interpretation clause may be used by the draftsman not to define the meaning of an expression appearing in the statute but to extend it beyond the ordinary meaning which it would otherwise bear. An indication that this may be its purpose is given if it purports to state what the expression includes instead of what it means. (Inland Revenue Commissioners v. Joiner ). Generally, when the definition of a word begins with means it is indicative .....

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y such things as they signify according to their natural import, but also those things which the clause declares that they shall include. (P. Kasilingam v. P.S.G. College of Technology (1995 Supp (2) SCC 348; Gough v. Gough ; Punjab Land Development and Reclamation Corpn. Ltd. v. Presiding Officer, Labour Court ((1990) 3 SCC 682 ) ; Dilworth v. Commissioner of Stamps ; Mahalakshmi Oil Mills v. State of A.P. .((1989) 1 SCC 164 ) ; Municipal Corpn. of Greater Bombay v. Indian Oil Corpn. Ltd. (1991 .....

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y including some ingredients or elements which otherwise do not admit of such inclusion, and to give a different colour and meaning to the defined word. (Feroze N. Dotivala (2003) 1 SCC 433 )). The appellants-assessees herein, respondents in M/s. Dinakar Litho Printers Pvt. Ltd. (Judgment in T.R.C.No.80 of 2002 and batch dated 31.03.2015), were printers and dealers in cine-wall posters. The revisional and appellate authorities had treated the business transactions of the assessees as sale of goo .....

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uestions of law, framed for consideration in the revision cases filed before the High Court by the Revenue, were (1) whether the activity of preparing negatives and positives for delivery to customers was a job work as contended by the dealers, or a sale transaction; and (2) whether the STAT was justified in setting aside the orders of the lower authorities and remanding the matter to the assessing authority. Before the Division Bench, it was represented by the learned counsel for the parties, t .....

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on the first limb i.e., preparation of negatives of wall-posters, was liable to be set aside. The Division Bench remanded the matter to the assessing authority with a direction to make fresh assessment after treating the entire work as a works contract. While the subject transactions, undoubtedly, constitute a works contract as it is a composite contract of sale of goods and of labour and services, it is not all types of works contracts which could be subjected to tax under the APGST Act prior .....

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vement or repair of any movable property". In order to bring any activity within the term "works contract', the activity was required to fall within the ambit of any of these terms which were not defined or explained in the Act. As such its meaning had to be ascertained from the dictionary. The terms "fitting out", is referred to in the Law Lexicon, to mean "to supply things fit and necessary"; the word "improvement", is referred to in the Oxford dicti .....

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ot a supply of goods which are fit and necessary; and there is no improvement or repair of the cine wall-posters printed and supplied by the appellants. (Nagarjuna Cotton Pressing Factory (1999) 29 APSTJ 130). Consequently these transactions did not constitute the specified works contracts referred to in Section 2(t), and were therefore not exigible to tax under the APGST Act during the relevant assessment years prior to 31.03.1995. Special Appeal Nos.51, 53, 54, 57, 60, 61, 62, 63, 67, 68, 69 a .....

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Article 286. 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. As a result of Article 286(1), the legislative power conferred under Entry 54 of the State List does not extend to imposing tax on a sale or purchase of goods which takes place outside the State or which takes place in the course of import or export of goods. In view of the aforesaid limitations, impo .....

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State or sales in the course of import or export. Consequently it is not permissible for a State to frame the legislative enactment, in exercise of the legislative power conferred by Entry 54 of the State List, in a manner as to assume the power to impose tax on such transactions, and thereby transgress these constitutional limitations. When a law is enacted by Parliament under Article 286(3) the legislative power of the States under Entry 54 in the State List has to be exercised subject to the .....

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er of property in goods involved in the execution of a works contract covered by Article 366(29-A)(b). (Gannon Dunkerley & Co. (1993) 88 STC 204). While enacting a law, imposing a tax on sale or purchase of goods under Entry 54 of the State List read with Sub-clause (b) of Clause (29-A) of Article 366 of the Constitution, it is not permissible for the State Legislature to make a law imposing tax on such a deemed sale which constitutes a sale in the course of inter-State trade or commerce und .....

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kerley & Co. (1993) 88 STC 204; Pro Lab (2015) 78 VST 451 (SC)). Section 2(g) of the CST Act, prior to its substitution by Finance Act 20 of 2002 w.e.f. 13.05.2002, defined sale, with its grammatical variations and cognate expressions, to mean any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration, and to include a transfer of goods on the hire-purchase or other system of payment by instalments, but not to include a .....

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relates to liability to tax on inter-State sales and, under sub-section (1) thereof, subject to the other provisions contained in the Act, every dealer shall be liable to pay tax under the Act on all sale of goods, other than electrical energy, effected by him in the course of inter-State trade or commerce during any year on and from the date so notified. It is only after the amendment of the definition of sale under Section 2(g) of the CST Act, with effect from 13.05.2002, that the deemed sale .....

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e sale of any goods in the course of inter-State trade or commerce made during any prescribed period, and determined in accordance with the provisions of the CST Act and the rules made thereunder. Prior to 01.04.2005, works contract was not defined under the CST Act. Section 2(ja) of the CST Act, as inserted by Act No.18 of 2005 w.e.f.1.4.2005, defines works contract to mean a contract for carrying out any work which includes assembling, construction, building, altering, manufacturing, processin .....

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contracts, they are not among the works contracts which fell within the definition of works contracts under Section 2(t) of the APGST Act prior to 01.04.1995. It is only after 13.05.2002 were works contracts included within the definition of sale under the CST Act. As the assessment years, to which these appeals relate, are long prior thereto, the subject transactions were not liable to tax either under the APGST Act or the CST Act. Point No.2 is answered accordingly. Point No.3: Sri V. Bhaskar .....

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refore, open to the Commissioner to direct the appellants to pay tax under the APGST Act and the CST Act on these transactions; the appellants are not liable to be taxed on these transactions; and, even if they have paid the tax which was later refunded to them, they cannot now be asked to repay the said amount as any action, for forfeiture of refund, can only be made within three years. The assessing authority assessed the appellants to tax on the transactions of manufacture, printing and suppl .....

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claim refund of the tax paid by them earlier. The assessing authority, however, withheld the refund order exercising powers under Section 33-BB of the APGST Act. Section 33-B of the APGST Act related to refund on appeal and, where as a result of any order passed in appeal or other proceeding under the Act, refund of any amount became due to the assessee, the assessing authority was required to refund the amount to the assessee, without his having to make any claim in that behalf, or adjust or ap .....

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llection of tax as invalid, and ordered the refund of any tax collected, the refund was to be restricted to the period of three years immediately preceding the judgment or the order. The appellant preferred an appeal against the order of the assessing authority, withholding refund under Section 33-BB, and the Appellate Deputy Commissioner set aside the said order of the assessing authority. The Appellate Deputy Commissioner directed refund of the tax paid by the appellant-assessee only because h .....

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a sale of goods or material and as transactions involving a high degree of skill and labour, ceased to remain in force; and the order of the assessing authority, wherein it was held that the transaction amounted to sale, stood restored. As a result thereof, the appellants-assessees were liable to pay tax, under the APGST and CST Acts, on such transactions. The mere fact that the subsequent order of the Appellate Deputy Commissioner, whereby the order of the assessing authority withholding refund .....

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CST Acts. It is of no consequence, therefore, that the subsequent order of the Appellate Deputy Commissioner, setting aside the order of the assessing authority withholding refund of tax under the APGST and CST Acts, has attained finality. The Commissioner was not disabled from revising the earlier order of the Appellate Deputy Commissioner merely because he did not revise the subsequent order which was only a consequence of the earlier order. This point is answered in the affirmative, and in fa .....

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ct transactions as sale of goods and levying tax under the APGST and CST Acts is no longer valid, the question which still remains to be examined is whether the appellants-assessees can be permitted to retain the amounts collected by them from their customers on the manufacture, printing and supply of cine wall-posters. While the appellants may not be liable to pay tax under the APGST and CST Acts, as the subject transactions are not sale of goods, but are works contracts other than those specif .....

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as been collected from him contrary to law. The power of the Court is not meant to be exercised for unjustly enriching a person. The doctrine of unjust enrichment is, however, inapplicable to the State. The State represents the people of the country. No one can speak of the people being unjustly enriched. (Mafatlal Industries Ltd. v. Union of India (1997) 5 SCC 536 ). A claim for refund can succeed only if the petitioner alleges and establishes that he has not passed on the burden of tax/duty to .....

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he has suffered any real loss or prejudice. The real loss or prejudice is suffered, in such a case, by the person who has ultimately borne the burden, and it is only that person who can legitimately claim its refund. But where such person does not come forward, or where it is not possible to refund the amount to him for one or the other reason, it is just and appropriate that the amount is retained by the State, i.e., by the people. There is no immorality or impropriety involved in such a propos .....

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the relevant period, the appellants cannot be permitted to retain the amount collected by them from their customers as that would resulted in their unjust enrichment. As long as the revisional order of the Commissioner remained in force, the appellants were liable to tax under the Act. It is only by the order now passed by us, has the matter been put at rest, and the appellants have been held not liable to pay tax on the manufacture and supply of cine wall-posters. The period of limitation for .....

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customers to whom they supplied the cine wall-posters manufactured and printed by them. CONCLUSION: As noted hereinabove the assessment years, to which the revisional orders of the Commissioner, Commercial Taxes related are all prior to the assessment years 1991-92 both under the APGST and CST Acts. During the aforesaid period, the term works contract was given a restricted meaning under the APGST Act, and the works contract of manufacture, printing and supply of cine wall-posters did not fall .....

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