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TMI Blog2013 (12) TMI 1586X X X X Extracts X X X X X X X X Extracts X X X X ..... .R.P. NOS. 291/2011 & 250-261/2012 , S.T.R.P. NOS. 292/2011 & 228-233/2012 , S.T.R.P. NOS. 293/2011 & 292-310/2012 , S.T.R.P. NO. 6/2012, S.T.R.P. NOS. 18/2012 & 217-227/2012, W.A. NO.3306/2011 & W.A. NOS.5405-5415/2011, W.A. NO.4828/2010 & W.A. NOS.5430-5494/2011 (T-KST), W.A. NO.740/2011 & W.A. NOS.4273-4295/2011 (T-RES), W.A. NO.3441/2011 & W.A. NOS.5394-5404/2011 (T-RES), W.A. NOS.16364/2011 & 16910-16923/2011 (T-RES). W.A. NO.3489/2011 & W.A. NOS.5389-5393/2011 (T-RES). W.A. NOS.1214-1229/2012 (T-RES). S.T.R.P. NOS. 90/2012 & 300-304/2013,. S.T.R.P. NOS. 108/2011 & 246-268/2011, S.T.R.P. NOS. 314/2012 & 97-119/2013 G.Sarangran and K.S. Ramababran JJ. Judgement As common question of law in all these batch of cases, they are clubbed together and decided by this common order. However, for the purpose of clarity, the facts in W.P Nos. 29932-33/2009 and W.P. Nos. 29046-48 of 2009 are set out hereunder. FACTS IN W.P. Nos. 29932-33/2009 2. The petitioner- M/s. Nagarjuna Construction Company limited is a Public Limited Company. It is engaged in undertaking of trunkey projects and other works contracts for governmental authorities or other private bodies/parties. It is regularly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the KVAT Act. He did not feel it necessary to continue the proceedings under section 39(1) of the KVAT act for reassessment and therefore, the proceedings initiated for the period March 2006 under section 39(1) of the KVAT act, 2003 was dropped. 4. The Joint Commissioner of Commercial Taxes by virtue of the power conferred on him under section 63(A) of the KVAT ACT, was of the view that the orders passed by the assessing authority were prima facie erroneous and prejudicial to the interest of the revenue of the State warranting interference. Therefore, he issued a show cause notice it is stated that in the schedule entry, works contract of civil works finds entry in serial No. 23 under the head " All other works contracts specified in VI schedule" and attracts taxes at 12.5%. However, the petitioner had offered the turnover of civil works at the rate of 4% and 12.5%, which is impermissible and not in accordance with the provisions of VI schedule to the KVAT Act.Then he has referred to the amounts involved in each subcontracts and was of the view that the taxable turnover in the works contract after allowing admissible deductions and exemptions is proposed to be subjected to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ldings, is liable to tax under serial No. 23 of the Schedule at 12.5% only. The assessing authority has violated the provisions of the act and therefore, such orders are detrimental to the interest of the revenue and the revisional authority was justified in initiating proceedings under section 63A of the Act. The petitioner has challenged the show cause notice. A statutory remedy of preferring an appeal is provided under the Act, without exhausting the statutory remedy he has filed the writ petition. It is not maintainable. FACTS IN W.P. Nos.29046-48/2009 7. The assessee, M/s GR Engineering Private Limited is a dealer registered under the provisions of KVAT Act, 2003. During the month of October, 2008, they were awarded by Mangalore Refinery and Petrochemicals Limited, Mangalore (hereinafter referred to as 'MRPL' for brevity), with the execution of composite works contract of residual designing, detailed engineering, procurement of materials and bought out components and fabrication, construction, errectyion, inspection, testing, supp;y and commissioning of four mrmbers of mounded LPG Storage system for refuinery project at MRPL on trunkey project. The work included like civil s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the first respondent. 9. The place of the business of the assessee was visited by the first respondent on 09.07.2009, and he verified the work orders issued by the contractee MRPL as also the Form A1 being the application made by the assessee before the Assisteant Commissioner of Central Excise, Mangalore and the license granted to it. After looking into the entire materials, the authorities came to the conclusion that the assessee was engaged in the activities of manufacturing of bullet tanks which are later to be installed in the MRPL project site. Thus the nature of work fell under the VI Schedule to the Act namely supply and installation of manufactured bullet tanks at the MRPL project site. Therfore, the authority came to the conclusion that even M.S.Plates/ sheets used as raw materials are declared goods, the goods manufacture namely bullet LPG tanks were altogether different commercial goods and liable to be taxed at the rate of 12.5%. The notice under section 39(1) of the Act, dated 18.08.2009 proposing to levy tax at the rate of 12.5% on th e amounts declared by the assessee was issued. He also proposed to levy penalty under section 72(2) of the Act for having under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that a dealer registered under the Act shall be liable to tax and that such tax is leviable on the taxable turnover relating to transfer of property in goods whether as goods or in some other form, involved in the execution of the works contracts that are specified in the Sixth Schedule to the Act and at the specified therein. The levy is subject to the provisions of Sections 14 and 15 of the CST Act realting to declared goods. Though tax at 12.5% is applicable under Sl.No. 23 of the Sixth Schedule to the Act in respect of complete works contract involving transfer of property in goods, an exception is provided in section 4(1) (C) of the KVAT Act itself, that in respect of declared goods involved in the execution of the works contract, the rate of tax shall be as provided in Section 14 of the CST Act at 4%. Then relying of Section 7 of the Act It was held that, steel and steel products used as raw material bythe petitioners are incorporated into their civil works or other works contract in the same form except that the same may be fashioned to suit the requirement, before the same merge into the works which is thereafter identified as immovable property. At the time of incorpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporated into the building, the time at which there is a transfer of property, the iron and steel rods of various dimendions are not directly transferred to the building as such, but as skeleton structures in roof, columns, beams, structures. Such skeleton structures is not a declared goods under Section 14 of the Act and therefore, the levy of tax under item No. 23 of the Sixth ?Schedule of the Act is valid and cannot be found fault with at 12.5% she also contended in a wprks contract when advance amount is paid, it is towards the sale of property which is involved in the execution of the works contract and, therefore, the said amount has to be included in the total turnover as provided in the explanation and liable to pay tax and the learned single Judge was not justified in holding otherwise and declaring the said provisions as unconstitutional to this effect. 15. Per contra, the learned senior counsel appearing for the petitioner Sri Sarangan submitted that, in interpreting this provision one has to keep in mind the object with Sections 14 and 15 are enacted. The legislature wanted the goods mentioned in the aforesaid section which are in the nature of essential commodities t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lanation to Rule 3(1) of the KVAT Rule which provides that any advance paid to a contractor as part of the consideration of the goods involved in the execution of the works contract could be included in the "total turnover" in the month in which the execution of the works commences even before the goods are incorporated in the works? When the petitioner purchased M.S. plates/ sheets which are declared goods for use as a raw material when it was transformed into M.S.Section, at works site and before it was incorporated in the construction as bullet tanks, the levy of tax at the rate of 12.5%,treating as not a delared goods is valid? (W.P. Nos. 29046-48/2009? STATUTORY PROVISIONS 17. In order to answer these questions we have to look at the statutory provisions incorporated by the state Legislature under the Act. Section 3 of the KVAT Act reads as under:- "3. Levy of tax The tax shall be levied on every sale of goods in the State by a registered dealer or a dealer liable to be registered, in accordance with the provisions of this Act. The tax shall also be levied, and paid by every registered dealer or a dealer liable to be registered, on the sale of taxable goods to him, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntained in Sub-section (1), a registered dealer shall be liable to pay tax on the sale of Cigrattes, cigars, gutkha and other manufactured tobacco, on the maximum retail price indicated on the label of the container or pack thereof, after reducing from such maximum retail price an amount equal to the tax payable to the dealer as the consideration for sale of such goods exceeds five hundered rupees or any other higher amount as may be notified by the Commissioner. Where tax in respect of his purchase of goods is collected in accordance is collected with sub-section(5),- * A registered dealer whose sale of such goods is not liable to tax under sub-section (5) shall be eligible for refund or adjustment of any amount of tax collected on his purchase, which is in excess of the tax payable on his turnover relating to sale of such goods, and the burden of proving that the tax has been collected and paid in accordance with the said sub-section shall be on the dealer; * A person who is not a dealer liable to get registered under the act, may claim refund of any amount paid by the selling dealer in excess of the tax payable on the consideration paid by him to such dealer in such manner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bars, crossing sleeper bars, fish plates, bearing plates, crossing sleepers and pressed steel sleepers,-- heavy and light crane rails; * wheels, tyres axcles and wheel sets; * wire rods and wires-rolled, drawn, galvanished, aluminized, tinned or coated such as by copper; * defectives, rejects, cuttings or end pieces of any of the above categories;" 20. Section 15 imposes restrictions and conditions in regard to tax on sale or purchase of declared goods within a State. Clause (a) of section 15 reads as under:- 15. Restrictions and conditions in regard to tax on sale or purchase of declared foods within a state.-Every sales- tax laws of a state shall, in so far as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely :-- (a) the tax payable under that law in respect of any sale or purchase of such goods inside the state shall not exceed four percent of the sale or purchase price thereof." 21. These provisions in the CST Act, 1956, has been enacted in pursuance of Article 286 of the constitution and in particular clause (3) which was introduced by way of substitution b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... caution and even without it the result was the same." 23. Therefore though the power of state legislature to impose of tax in respect tax is recognized, in so far as imposition of tax in respect of the goods declared by parliament by law to be of special importance, the state legislation has to yield to the Parliamentary Legislation. In view of Section 14of the CST Act, iron and steel is declared as goods of special importance. In other words it is a declared goods. Section 15(a) of the CST Act, imposes a restriction to tax declared goods, the tax declared goods within the state. Though the State Legislature has been vested with the power to impose tax on such declared goods, tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed 5% of the sale or purchase price thereof. 24. Section 4(1) (c) of the value added Tax Act, specifically provides for levy of tax on declared goods. It provides that in respect of transfer of property in goods whether as goods or in some other form involved in the execution of works contract specified in column (2) of Sixth Schedule, the tax leviable is at the rate specified in the corresponding entri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should more properly be lodged with the stated rather than the centre, the condtitution might have given and inclusive definition of "sale" in Entry 54 so as to cover the extended sense. But our duty is to interpret the law as we find it, and having anxiously considered the question, we are of opinion that there is no sale as such of materials used in a building contract, and that the Provincial Legis;atures had no competence to impose a tax thereon under Entry 48. ............It is possible that the parties might enter into distinct and separate contracts, one for the transfer of materials for money consideration, and the other for payment of remuneration for services and for work done. In such a case, there are really two agreements, though there is a single instrument embodying them, and the power of the State to separate the agreement to sell from the agreement to do work and render service and to impose a tax thereon cannot be questioned, and will stand untouched by the present judgement." 26. Therefore, if the contract is indivisible and from the contract it is not possible to make out what is the value of the material and what is the value of the service rendered and then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 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 goods under sub-clause.(b) of clause (29-A) is deemed to be a sale of the goods involved in the execution of works contract by the person making the transfer and a purchase of those goods by the person to whom such transfer is made. The object of the new definition introduced in clause (29-A) of article 366 of the constitution is, therefore, to enlarge the scope of "tax on slae or purchase of goods" wherever it occurs in the constitution so that it may include within its scope the transfer, deliver or supply of goods that may take place under any of the transactions referred to in sub-clause (a) to (f) thereof wherever such transfer, delivery or supply becomes subject to levy of sales tax. So construed the expression "tax on the sale or purchase of goods" in entry 54 of the State List, therefore, includes a tax on transfer of property in goods(whether as goods or in some other form) involved in the execution of a works contract also The tax leviable by virtue of sub-clause (29-A) of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 66 of the constitution. We do not find much substance in the contention urged on behalf of the states that since sub-clause(b) of clause (3) of Article 286 of the constituition refers only to the transactions referred to in sub- clause (b), (c) and (d) of clause (29-A) of Article 366, the transactions referred to under those three sub- clause would not be subjected to any other restrictions set out in clause (1) or clause (2) or sub-clause (a) of clause (3) of Article 286 of the constitution. It may be that by virtue of sub-clause (b) of clause (3) of Article 286 it is open to Parliament to impose some other restrictions or conditions which are not generally applicable to all kinds of sales. That however cannot take the other parts of Article 286 in applicable to the transactions which are deemed to be sales under Article 366 (29A) of the Constitution. We are of the view that all transfers, deliveries and supplies of goods referred to in clause (a) to (f) of clause (29-A) of Article 366 of the constitution are subject to the restrictions and conditions mentioned in clause (1) , clause (2) and sub-clause (a) of clause (3) of Article 286 of the Constitution and the transfers and deli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concern and wisdom. 29. The said provision also came up for consideration before a constitution Bench of the Apex Court in the case of BUILDERS ASSOCIATION OF INDIA AND OTHERS VS UNION OF INDIA AND OTHERS REPORTED IN (1989) STC VOL. 73 PAGE 370. It was held as under:- "Before proceedings further it is necessary to understand what sub-clause (b) of clause 29-A of article 366 of the constitution means. Article 366 is the definition clause of the constitution means. Article 366 is the definition clause of the constitution. It says 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 expressions 'goods' is defined in clause (12) of Article 366 of the constitution as including all materials, commodities and articles. It is true that in the State of Madras v. Gannon Dunkerley & co. (Madras) Ltd., (Supra) this court held that a works contract was an indivisible contract and the turnover of the goods used in the execution of the works contract could not, therefore, become exigible to sales- tax. It was in order to overcome the effect of the said decision Parliament amen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry 54 of the state list is made subject to under the constitution. The position is the same when we look at Article 286 of the Constitution. Clause (1) of Article 286 says that no law of a state shall impose, or autorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place-(a) out-side the state; or (b) in the course of the import of the goods into, or export of the goods out of, the territory of India. Here again we have to read the expression a tax on the sale or purchase of goods found in article 286 as including the transfer of goods referred to in sub-clause (b) of clause (29-A) of Article 366 which is deemed to be a sale of goods and the tax leviable thereon would be subject to the terms of clause (1) of Article 286. Similarly the restrictions mentioned in clause (2) of Article 286 of the constitution which says that Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1) of Article 28+ would also be attracted to a transfer of goods contemplated under Article 366 (29A) (b). Similarly clause (3) of Article 286 is also applicable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r sub-clauses (b).(c) and (d) of clause (29-A) of Article 366 of the constitution are subject to an additional restriction mentioned in sub-clause (b) od article 286(3) of the Constitution." 30.The Apex court in the case of GANNON DUNKERLEY & CO. AMD OTHERS VS. STATE OF RAJASTHAN AND OTHERS REPORTED IN (1993) STC VOL.88 PAGE 204, has held as under: MEASURE OF TAX On behalf of the contractors, it has been urged that under a law imposing a tax on the transfer of property in goods involved in the execution of a works contract under entry 54 of the state list read the Article 366(29-A) (b), the tax is imposed on the goods which are involved in the execution of a works contract and the measure for levying such a tax can only be the value of the goods so involved and the value of the works contract cannot be made the measure for levying the tax. The submission is further that the value of such goods would be the cost of acquisition of the goods by the contractor and ,therefore, the measure for levy of tax can only be the cost at which the goods involved in the execution of a works contract were obtained by the contractor. On behalf of the states, it has been submitted that since the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges towards labour and services which would cover: * labour charges for execution of the works; * amount paid to the sub-contractor for labour and services; * charges for planning, designing and architects's fees; * charges for obtaining on hire or otherwise machinery and tools used for the execution of the works contract; * cost of consumables such as water, electricity fuel etc. used in the execution of the works contract the property in which is not transferred in the course of execution of works contract; and * cost of establishment of the contractor to the extent it is relatable to supply of labour and services; * other similar expenses relatable to supply of labour and services * profit earned by the contractor to the extent it is relatable to supply of labour ans services; The amounts deductible under these heads will have to be determined in the light of the facts of a particular case on the basis of the material produced by the contractor. We may, however, make it clear that apart from the deductions referred to above, it will be necessary to exclude from the value of the works contract the value of the goods which are not taxable in view of section 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on leads to the following conclusions:- 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 399(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 inter-state trade of commerce or a sale outside the state or a sale in the course of import or export. The provisions of sections 3, 4 and 5 and sections 14 and 15 of the Central Sales Tax Act, 1956 are applicable to a transfer of property in goods involved in the execution of a works contract covered by article 366(29-A) (b) While defining the expression "sale" in the sales tax legislation it is open to the state Legislature to fix the situs of a deemed sale resulting from a transfer falling within the ambit of article 366(29-A) (b) but it is not permissible for the state legislature to define the expression "sale" in a way as to bring within the ambit of the taxing power a sale in the course of interstate trase or commer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the rate of tax it is permissible to fix a uniform rate of tax for the various goods involved in the execution of the work contract which rate may be different from the rates of tax ficed in respect of sales or purchase of those goods as a separate article. 31. The supreme court in the case of M/s Larsen & Tourbo Limited & anr Vs. State of Karnataka Anr. (2013 65 VST 1), explaining sub clause of clause 29A of Article 366 of the Constitution has held as under: 60. It is important to ascertain the meaning of sub-clause (b) of Clause 29 A of Article 366 of the constitution. As the very title of the Article 366 shows, it is the definition clause. It starts by saying that the Constitution unless the context otherwise requires the expressions defined in that article shall have the, meaning respectively assigned to them in article. The definition of expression "tax on sale or purchase of the goods" is contained in Clause (29-A). If the first part of vlause 29-A is read with the sub-clause (b) along with latter part of this clause, it reads like this : tax on the sale or purchase of a goods includes a tax on the transfer of property in goods (whether as goods or in some other form) in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) of the constitution there is a deemed sale of the goods which are involved in the execution of a works contract. The expression " in some other Form" in the bracket is of utmosr significance as by this expression the ordinary understanding of the term 'goods'has been enlarged by bringing within its fold goods in a form other than goods. Goods is some other from would thus mean goods which have ceased to be chattel or movables or merchandise and become attached or embeddes to earth . In other words goods which have by incorporation become part of immovable property are deemed as goods. The definition of "tax on sale or purchase of goods' includes a tax on the transfer or property in the goods as goods or which have lost its form as goods and have acquired some other form involved in the execution of a works contract. Therefore a legal fiction is created by this deeming provision providing for sale of goods at the time of incorporation of the goods in the course of execution of any works contract. The liability to tax even inrespect of declared goods is to be determined at the time of acquisition or purchase of such goods which is involved in the execution of contract but at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 370, The apex court had no occasion to consider both the judgements i.e., in the case of Sydney Hydraulic and Central Engineering Co. Blackwood & Son,8 NSWSR 10,and M.R. Hornibrook (Pty.) Ltd. V. Federal Commissioner of taxation., [1939] 62 CLR 272, which reads as under: "It is useful to refer at this stage to the corresponding at this stage to the corresponding law in Australia. In Sydney Hydraulic and Central Engineering Co. Blackwood & Son,8 NSWSR 10, the supreme court of New South Wales held that the works contract entered into between the parties which came up for consideration in that case was one to do certain work and to supply certain materials and not an agreement for the sale or delivery of the goods. Accordingly, no sales tax was payable thereon. In 1932 the legislature intervened and amended the statue of 1930 by introducing a new provisions, section 3(4) in the following terms: "For the purpose of this Act, a person shall be deemed to have sold goods, if in the performance of any contract (not being a contract for the sale of goods) under which he has received, or is entitled to receive, valuable consideration, he supplies goods the property in which (whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f goods manufactured for sale by any person therefore the price of piles was not liable to payment of sales tax. Latham, C.J. with Whom Justice Rich and Justice Starke tax. Latham, C.J. with whom Justice Rich and Justice Starke agreed (Justice McTiernan dissenting) held as under: " Sec.3(4) of the Act, referred to in part above quoted was at the relevant time in the following form: For the purposes of this Act, a person shall be deemed to have sold goods, if ,in the performance of any contract under which he has received or is entitled to receive valuable consideration he supplies goods, the property in which (whether as goods or in some other form) passes under the term of the contract to some other person." In my opinion the commissioner is right in his contention that this provision applies to the present case. The appellant- company, in the performance of a contract for buildings a bridge under which contract it was entitled to receive and doubtless has received valuable consideration, has supplied goods, namely, reinforced concrete piles. Such piles are Plainly manufactured articles. They are chattels. They were intended to be incorporated in a structure and were so incorpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of tax for the relevant assessment year in 8 percent. 14. It is not in dispute nor it can be disputed by both sides that a contract had been awarded to the petitioner for construction of a bridge. For that purpose the dealer/ contractor had been purchased iron and steel and has utilized the same for the purpose of the construction of the bridge. Iron and steel purchased by him are used not in the form as iron and steel but are used for the purpose of construction of a bridge. Therefore, the liability of the dealer would squarely come under entry No. 6 of the sixth schedule to the Act. Keeping this aspect of the matter in view, the Tribunal has accepted the reasoning of the revisional authority while confirming the order passed by the revisional authority. 37. Therefore, what follows from the aforesaid judgements is that, the iron and steel is purchased from the contractor are not used in the same form as iron and steel at the time of incorporation of the same in the construction of the bridge, the liability of the tax at serial No.23 is attracted. If the iron and steel purchased by him is used in the same form, it continues to be a declared goods of serial No. 23 is not attra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d structure ceases to be a declared goods and is liable to be taxed under the State legislation. There is no quarrel with the aforesaid proposition. Therefore the question in each case is, whether after purchase of iron and steel, before it is incorporated into a building, bridge or any other structure in the course of execution of the works contract, has it been transformed altogether into another goods. If it is so, it ceases to be declared goods and taxable at the rate prescribed under the State Legislation. However, if the iron and steel continues to be in the same from the time it was purchased and after it was incorporated in the buildings or any work undertaken, it continues to be a declared goods at the time of incorporation the power of the state to levy tax over and above what is prescribed under the CST is not permissible. 41. In the instant case, it is not in dispute that the petitioner purchased iron and steel for the purpose of execution of works contract. The nature of work involved is civil work. The iron and steel which is purchased by the petitioner is used in casting beams, pillars, slabs and roofs. For the purpose of casting the said roofs, beams, iron and stee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid or payable by the dealer as the consideration for the purchase of any of the goods in respect of which tax is leviable under sub-section (2) of section 3; * The total amount paid or payable to the dealer as the consideration for the sale, supply or distribution of any goods where such sale, supply or distribution has taken place inside the State whether by the dealer himself of through his agent; * The total amount paid or payable to the dealer as the consideration for teansfer of property in goods (whether as goods or in some other form) involved in the execution of works contract including any amount paid as advance to the dealer as a part of such consideration * The total amount paid or payable to the dealer as the consideration for transfer of the right to use any goods for any purpose(whether or not for specified period); * The total amount payable to the dealer as the consideration in respect of goods delivered on hire purchase or any system of payment by installments; * The aggregate of the sale prices received by the dealer in respect and receivable by the dealer in respect of sale of any goods in the course of inter-state trade or commerce and export out of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealer where the dealer does not ordinarily sells the goods." 49. From the aforesaid definition it is clear that turnover means the aggregate amount for which goods are sold or distributed or delivered of otherwise disposed of in any of the ways referred to in clause (29) by a dealer.Therefore unless there is a sale of the goods, the amount realized by way of such sale cannot form part of turnover. 50. Sub-clause (b) of clause 29A of Article 366 of the constitution, which defines the tax on the sale or purchase of 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 cpontract. 51. Section 7 of the KVAT Act, reads as under:- "7. Time of sale of goods Notwtihstanding anything contained in the sale of Goods Act, 1930 (central Act 3 of (1930, for the purpose of this Act, and subject to sub-section(2), the sale of goods shall be deemed to have taken place at the time of transfer of title or possession of incorporation of the goods in the course of execution of any works contract whether or not there is receipt of payment Provided that where a dealer issues a tax invoice in respect of such saled wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of MS plates and sheets, before it was incorporated, what are the activity carried out by the assessee at the time of incorporation and in what form the MS sheets were embedded to the earth. 55.Learned senior counsel Today, has given us the written note explaining the activity that the assessee has undertaken from the time MS sheets were purchased till the time it was incorporated. It reads as under: Nature of Work: Mounded LPG, storage system package for phase III- refinery project of MRPL, Mangalore- This includes residual process engineering, design detailed engineering preparation of drawing, schemes, procurement of material, supply fabrication, construction, erection, assembly, inspection testing cathodic protection, civil works, structural work and RCC retaining wall, concrete tunnels around mound vessels piping work and steels electrical and instrumental works, fire protection system, Pumps and instrumentation, insulation, fire proofing, site insulation of pumps, gauges providing temporary works and equipments for completion pre-commissioning, commissioning, required tools and tackles complete all work in respect of trunkey basis and system performance gurantee of LPG sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e mentioned in the contract is for interim payment purpose only and not break up of the work. However, the total contract price remains same for the execution of entire contract. After completing the above activities the total system is pre-commissioned and then commissioned and handed over for the operation. 57. The tax invoice is also made available to them. It is dated 6.9.2010. The invoice is raised in the name of the petitioner. The total costs towards supply of bullet section inside the Refiners Bullet Section is Rs. 20.47.80.859. The basic excise duty paid is Rs. 2,04,78,086/- From the aforesaid description it is clear that the plates so procured are used in the execution of works contract, i.e. for making sections. The plates are rolled as per required diameter by using rolling machine. The two ends are joined by welfing. These sections are painted and are transported to the mound site to place on the foundation where piece by piece it is erected, installed and welded and fixed to the earth. After all sections are installed it becomes a vessel called bullet vessel. Therefore, at the time of incorporation, the goods whixh is transported is not in the form of plates but in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In other words, the steel plates before it was incorporated has undergone the process of manufacture and ceased to tbe the steel plates and it has been taken the form of either section or bullet tank. Therefore, the value of the steel plates at the time of acquisition is not the same at the time of incorporation. It was the declared goods at the time of acquisition. It ceased to be declared goods at the time of incorporation. Before incorporation. Before incorporation there is value addition to the steels plates by the process of manufacture. Therefore, the prohibition contained under section 15 of the CST is not attracted and the state legislature has the power to levy tax in terms of Item No.23 of Sixth Schedule on these goods as it does not fall within any of the categories mentioned from Item Nos. 1 to 22 and also for the reason that it is not a declared goods as stipulated under section 14 of the CST Act. 61. In that view of the matter, the authorities were justified in levying tax at 12.5% in terms of Item No.23 of Sixth Schedule on the bullet tanks. 62. All the connected revision petitions were allowed by the Karnataka Appellate Tribunal relying on the Judgement of the l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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