TMI Blog2017 (5) TMI 1396X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee in declaring the goods as exigible for tax under the works contract - the matter is remitted back to the 1st respondent for fresh consideration of the revision petition - petition allowed by way of remand. - OP. No. 28388 of 2000 (D) - - - Dated:- 12-4-2017 - A. M. Shaffique, J. FOR THE PETITIONER : ADVS.SRI.M.PATHROSE MATTHAI (SR.) SRI.A.KUMAR FOR THE RESPONDENT : SRI.V.K.SHAMSUDHEEN ORDER The original petition is filed challenging Exts. P5 and P6, by which the respondent authorities have imposed penalty on the petitioner on the allegation that there was suppression in payment of sales-tax under the Kerala General Sales Tax Act, 1963 (hereinafter referred as the KGST Act). 2. The short facts involved in the original petition are as under: Petitioner company entered into a contract with Cochin Refineries Ltd for execution of the work for DHDS/Hydrogen plant and other utilities. The work includes design, engineering, procurement, supply, transportation, fabrication, construction, erection, installation, testing and commissioning. It is stated that the work involved distinct transactions by way of importing high- tech equipments, inter-state pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department took the view that the sale to the awarder is not an intrastate sale and therefore it is part of turnover. It is in the said circumstances that proceedings were taken under section 45A. It is contended that inter-state sale is over the moment the goods are received by the branch of the assessee at Ernakulam. 5. Before proceeding further it is better to understand the manner in which Exhibit P5 order had been passed. A notice under section 45A of the KGST Act was issued alleging that there was evasion of tax for August 1999 and September 1999. After considering the objection filed by the assessee, it was held that the contractual provisions indicates that the assessee is the consignee of the goods which were removed from outside the State of Kerala pursuant to an agreement between the assessee and the supplier outside Kerala. That the goods thus purchased were inter-state or imported and delivered at the work site of the owner as per the instructions of the assessee or the entry of the name and address of the owner in the bills and in the lorry receipts does not alter the nature of inter-state sale or import coming under Sections 3 and 5 of the CST Act, because the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as goods or in some other form) involved in the execution of a works contract is not competent to impose a tax on such a transfer (deemed sale) which constitutes a sale in the course of inter-State trade or commerce or a sale outside the State or a sale in the course of import or export. 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 inter-State trade or commerce, or a sale outside the State or a sale in the course of import and export. The tax on transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract falling within the ambit of Article 366(29-A)(b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of sales or purchase of those goods as a separate article. 8. In CVAT v. ABB Ltd., (2016) 6 SCC 791, it is held as under :- 16. The legal principles enunciated in K.G. Khosla have been reiterated in State of Maharashtra v. Embee Corpn. and stand supported by the judgment in CIT v. Indian Explosives Ltd., as well as in Indure Ltd. v. CTO. In these cases, sale in course of imports was accepted without requiring privity of contract between the foreign supplier and the ultimate consumer in India. 17. The aforesaid conclusion leading to our concurrence with the views of the High Court is also based upon the salient facts, particularly the various conditions in the contract and other related covenants between DMRC and the respondent which have been spelt out in para 31 of the High Court judgment, enumerated and described as follows: (ABB Ltd. case, SCC OnLine Del) (1) Specifications were spelt out by DMRC; (2) Suppliers of the goods were approved by DMRC; (3) Pre-inspection of goods was mandated; (4) The goods were custom made, for use by DMRC in its project; (5) Excise duty and customs duty exemptions were given, specifically to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the terms of contract. It is therefore held that the concept of inter state sale does not apply to the facts of the said case and the assessee's argument that the turnover of works contract should be assessed only for the value of materials purchased or made in Kerala after excluding the value of goods brought from outside Kerala cannot be accepted. Similar view has been taken by Division Bench of this Court in Dosal Limited v. State of Kerala (2010) 18 KTR 211 (Ker). In this case also, in a short judgment, this Court held that sale becomes interstate sale only if the sale takes place in the course of movement of goods from one State to another or if it is made, by endorsement of title to goods in the course of movement of goods from one State to another. A contractor bringing materials from outside the State, stocking it in their own godown and later appropriating it to the work cannot claim that sale in the execution of works contract is an inter state sale from outside the State. It was held thatthe assessee has not billed the goods to the awarder in Kerala to claim the transaction as interstate sale. Further, the assessee brought the goods to Kerala, stocked it in the go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visaged the import of goods for fulfilling the contracts and it was for that reason that there was first the recommendation for issue of import licences by DGS D and then the actual issue of import licences and, as the contracts of sale visualised the import of goods for fulfilling them, the movement of goods in the course of import was occasioned by the contracts of sale to the DGS D, and, therefore, the sales to the DGS D were the sales which occasioned the movement of goods in the course of import. 16. There was no obligation under the contracts on the part of the DGS D to procure import licences for the petitioner. On the other hand, the recommendation for import licence made by DGS D did not carry with it any imperative obligation upon the Chief Controller of Imports and Exports to issue the import licence. Though under the contract DGS D undertook to provide all facilities for the import of the goods for fulfilling the contracts including an Import Recommendation Certificate, there was no absolute obligation on the DGS D to procure these facilities. And, it was the obligation of the petitioner to obtain the import licence. Therefore,even if the contracts envisaged the i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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