Karnataka High Court
State Of Karnataka Through ... vs Birla Gtm Entrepose Ltd. And Anr. on 19 January, 2005
Equivalent citations: ILR2005KAR4932, [2006]144STC16(KAR), 2005 AIR - KANT. H. C. R. 626, (2005) 58 KANTLJ(TRIB) 254
Bench: H.L. Dattu, A.C. Kabbin
JUDGMENT Dattu, J.
1. The questions of law raised in these two appeals by the revenue is identical and therefore, these petitions were heard together and are being disposed of by this common order.
2. The revenue is before this Court feeling aggrieved by the order passed by the Karnataka Appellate Tribunal, Bangalore, in appeal No. 496/1998 dated 23.12.1998 (STRP No. 64/1999) and appeal No. 303/1999 dated 10.12.1999 (STRP No. 57/2000). The Tribunal by the impugned orders has allowed the assesses's appeal by setting aside the order passed by the first appellate authority in confirming the order passed by the Assessing Authority for the relevant assessment year, wherein he had rejected the exemption claimed by the assessee on the works contract undertaken and executed for the Karnataka Electricity Board as the works contract coming under Entry 55 of Fifth Schedule and had levied tax as the works contract falling under Entry 11 of the Sixth Schedule to the Karnataka Sales Tax Act, 1957 (hereinafter referred to as 'Act, (1957)
3. The facts in STA No. 496/1998 (STRP No. 64/1999) is noticed for the disposal of these revision petitions. It is as under:
The respondent company is a public limited company, incorporated under the pro visions of the Companies Act, 1956. It is also registered as a dealer both under the provisions of the Karnataka Sales Tax Act, 1957 and the Central Sales Tax Act, 1956. It is borne on the files of the Deputy Commissioner of Commercial Taxes (Assessments). Shimoga (herein after referred to as the 'Assessing Authority'). During the assessment year 1993-1994, the respondent-company had undertaken the execution of works contract with the Karnataka Electricity Board for laying of 220 K. V. double circuit transmission line between Davanagere and Shimoga on turnkey basis.
4. The assessee-company had filed its annual returns for the assessment year 1993-1994. The Assessing Authority, after rejecting the returns filed, has concluded the assessment under Section 5-B read with Section 12(3) of the Act vide his order 13.8.1997, determining the total and taxable turnover at Rs. 1,06,94,781.10 ps. and Rs. 48,45,542.00 respectively and has levied tax in a sum of Rs. 5,64,926.00 holding that the works contract executed by the respondent-company as one falling under Entry-11 of the Sixth Schedule to the Act. It is relevant at this stage itself to notice that the assessee-company in its reply to the proposition notice issued by the Assessing Authority proposing to levy tax under Section 5-B of the Act, had claimed exemption from tax in respect of the works executed on turnkey basis to Karnataka Electricity Board, on the ground that the said works contract would fall under Entry 55 of Fifth Schedule as it stood then. The assessee-company had also contended that the works undertaken by the company for the Karnataka Electricity Board for laying 220 KV double circuit transmission line would involve preliminary and final survey alignment tower spotting, design and testing of transmission and supply of towers, erection of the complete line, including power conductors, ground wire insulators and all hardware connected with the same on turnkey basis. The assessee-company also had contended that even if the works undertaken by it falls under Entry 11 of the Sixth Schedule, the structural steel purchased in the course of interstate trade cannot be included in the taxable turnover of the assessee-company in view of the decision of the Apex Court in the case of Cannon Dunkerley and Co., and Ors. v. State Of Rajasthan and Ors., (1993) 88 STC 204. The other contention of the assessee was that the materials used in the works contract undertaken by it is liable to be taxed at 4% instead of 10% as proposed in the pre-assessment notice, since the material purchased by the assessee-company is a declared commodity.
5. Aggrieved by the said order passed by the Assessing Authority, the assessee-company had carried the matter in an appeal before the Joint Commissioner of Commerical Taxes, inter alia contending that the laying of power transmission line between Davanagere-Shimoga by the assessee-company for Karnataka Electricity Board does not fall under Entry 11 of the Sixth Schedule but falls under Sl. No. 55 of the Fifth Schedule as it stood then, and also had contended that the Assessing Authority was not justified in law to levy tax on structural steel purchased in the course of interstate trade for the purpose of execution of works contract and lastly, the Assessing Authority was also not justified in levying turnover tax on the turnover of interstate purchases with respect of structural steel.
6. The first Appellate Authority by his order dated 31.1.1998, has partly allowed the appeal, only to the extent of charging KST at 4% on the deemed sales turnover of reinforced steel used in the execution of works contract undertaken by the assessee-company to Karnataka Electricity Board and also has exempted the turnover tax under Section 6-B of the Act on the said turnover and accordingly, has directed the Assessing Authority to issue revised demand notice.
7. The assessee-company, aggrieved by the order passed by the Joint Commissioner of Commercial Taxes (Appeals) has preferred second appeal before the Karnataka Appellate Tribunal in Appeal No. 496/1998. The Tribunal by it order dated 23.12.1998 has allowed the appeal and thereby has set aside the orders passed by the Appellate Authority as well as the Assessing Authority and further, has remanded the matter to the Assessing Authority to pass a fresh assessment order in the light of the observations made by them in the course of the order.
8. The revenue, aggrieved by the order passed by the Tribunal, is before this Court in these revision petitions filed under Section 23(1) of the Act: The questions of law raised for our consideration are as under:
"I. Whether the Tribunal was right in law in treating the works contract executed by the respondent-company with the KEB falls under Entry 55 of Fifth Schedule of the KST Act and not under Entry 11 of Sixth Schedule to the Act?
II. Whether the Tribunal was right in law in holding that the goods brought from outside the State for the purpose of execution of works contract cannot be subject to levy of tax under the State law?
III. Whether the Tribunal was right in law in holding that the levy of turnover tax at 10% on the value of re-inforcement of steel used in the works contract is not justified?"
9. The assessee is a public limited company. It has its head office at New Delhi and a branch office at Kote Road, Shimoga. For the assessment year in question, the assessee-company had undertaken the works contract of laying 220 KV Double Circuit Power transmission line between Davanagere and Shimoga on total turnkey basis which involves preliminary and final survey, alignment tower spotting, design and testing of transmission line towers, fabrication and supply of towers, erection of complete line including power conductors, all hardware connected with the same, including testing and commissioning for a consideration of Rs. 8,77,92,905.00 of which the amount received during the assessment year 1993-1994 is Rs. 1,05,12,219.37 ps. including taxes payable. In the annual returns filed, the assesses-company had reported the total and taxable turnover at Rs. 69,23,940.00 and Rs. 'nil' respectively. Their case before the assessing authority as well as the first Appellate Authority was that the entire receipts for the works does not fall under Entry 11 of Sixth Schedule to the Act but falls under Entry 55 of the Fifth Schedule as it then stood.
10. The first question before us is, whether the works contract executed by the assessee-company is an item which would fall under Entry 11 of the Sixth Schedule to the Act or whether the entire contract receipts received by the assessee-company are not liable to tax as the works undertaken by them would fall under Entry 55 of the Fifth Schedule to the Act. To resolve the controversy between the parties, the entries in the Schedule to the Act referred above require to be noticed and therefore, they are extracted. Entry 11 of the Sixth Schedule of the Act is as under:
"11. Supplying and fitting of electrical goods, supply and installations of electrical equipments including transformers."
11. Entry 55 of the Fifth Schedule as it stood before its deletion by Act No. 15 of 1996 with effect from 5.9.1996 is as under:
"55. Transfer of property in goods (whether as goods or in some other form) involved in the execution of works contract other than those specified in the sixth schedule."
12. The first part of the Entry 11 of Sixth Schedule speaks of supply and fitting of electrical goods. The second part of the entry speaks of, supply and installation of electrical equipments. The Assessing Authority, while concluding the assessements for the assessment year 1993-1994, had levied tax under Entry 11 of Sixth Schedule to the Act, on the basis that the works contract undertaken by the assessee-company is in the nature of supply and fittings of electrical goods. However, the first Appellate Authority while confirming the assessment order passed by the assessing authority holds that the works contract executed by the assessee-company should be considered as that of supply and installation of electrical equipments so as to fall under the second limb of Entry 11 of the Sixth Schedule to the Act. That only means that the works contract executed by the assessee-company is in the nature of supply and installation of electrical equipments'. Sri. Indra Kumar, learned Counsel appearing for the respondent- company would submit, that the works contract undertaken by the assessee-company cannot be considered either as supply and fitting of electrical goods' as held by the Assessing Authority nor it can be considered as supply and installation of electrical equipments' as held by the first appellate authority and the works contract executed by the assessee-company should be treated as transfer of property in goods (whether as goods or in some other form) involved in the execution of works contract and therefore should be treated as an item falling under Entry 55 of Fifth Schedule to the Act as it stood during the relevant assessment year. The learned Counsel would further submit, that the works undertaken by the assessee-company is that of laying of double circuit transmission line on turnkey basis and that the said work cannot be considered as one involving either supply and fitting of electrical goods or installation of electrical equipments and therefore, it requires to be considered as transfer of property in goods falling under Entry 55 of Fifth Schedule to the Act and therefore, the tax liability determined on the turnover of the assessee-company under Section 5-B of the Act is wholly arbitrary, illegal and contrary to the provisions of the Act. However, Sri Anand, learned Government Advocate, would submit that the nature of works carried out by the assessee-company, is only supply and installation of 220 KV double circuit transmission line between Davanagere and Shimoga on total turnkey basis, and therefore, the authorities under Act are justified in treating that the works carried out by the assessee-company would fall under Entry 11 of Sixth Schedule to the Act and secondly, by no stretch of imagination, the work carried out by the assessee-company can be considered as an item falling under Entry 55 of Fifth Schedule to the Act.
13. The levy of tax on works contract was made applicable by an amendment to the Karnataka Sales Tax Act, by the Act No. 24 of 1984 with effect from 1.4.1984 by inserting the charging Section 5-B of the Act. Under the charging provision, every dealer, subject to Sub-sections (4), (5) or (6) of Section 5 of the Act, shall pay for each year, the tax on his taxable turnover of transfer of property in goods (whether as goods or in some other form) involved in the execution of works mentioned in column (2) of the sixth-Schedule at the rates specified in the corresponding entries in column (3) of the said Schedule. The definition of 'sale' in the definition clause is correspondingly amended to include works contract. The definition 'sale' after its amendment, apart from others, would include every transfer of the property in goods by one person to another in the course of trade or business for cash or deferred payment or other valuable consideration and include a transfer of property in goods (whether as goods or in some other form) involved in the execution of works contract. The object of the new definition introduced, is to enlarge the scope of tax on 'sale or purchase of goods' to include within its scope the transfer of property in goods, whether as goods or in some other form involved in the execution of a works contract.
14. Section 8 of the Act grants exemption from tax on the sale of goods specified in the Fifth Schedule. By Act No. 14 of 1987. Entry 55 was inserted in the Fifth Schedule to the Act with effect from 1.4.1986 and it was omitted with effect from 5.9.1996. The entry as it stood then read as "Transfer of property in goods (whether as goods or in some other form) involved in the execution of works contract other than those specified in the Sixth Schedule". That only means 'work contract' other than those specifically mentioned in the Sixth Schedule are exempted from levy of tax under the Act.
15. Now the question is, whether the contract that was awarded and works contract executed by the assessee-company would fall under Entry 11 of Sixth Schedule, which speaks of supplying and fitting of electrical goods, supply and installation of electrical equipments including transformers'? or does it fall under Entry 55 of the Fifth Schedule to the Act?
16. There is a divergent opinion even among the authorities under the Act in so far as the works contract executed by the assessee-company to the contractee, namely, Karnataka Electricity Board. The Assessing Authority is of the view that the works contract executed by the assessee-company would fit into the description of the first part of Entry 11 of the Sixth Schedule, namely, supplying and fitting of electrical goods, where as, the first Appellate Authority is of the view that the works contract executed by the assessee- company to Karnataka Electricity Board is in the nature of supply and installation of electrical equipments. Against this finding and conclusion reached by the first Appellate Authority, the revenue has not carried the matter further before any superior forum and therefore, the only inference that can be drawn is, according to the authorities under the Act, the works contract executed by the assessee- company would fit into second part of entry 11 of the Sixth Schedule to the Act. At the cost of repetition, it may be observed that the second part of the entry speaks of, firstly, supply and secondly, installation of electrical equipments. The word supply also has the same meaning as 'sale' so long as consideration is for supply of goods. The enlarged definition of tax on the sale or purchase of goods' inserted as Clause (29-A) in Article 366 of the Constitution has been availed by the, State Government and accordingly, the Legislature has amended the definition of the word 'sale' and also has introduced charging Section 5-B of the Act, to levy tax on sales involved in composite contracts for work like buildings, bridges, roads, etc., which were not previously taxable under the Act, will now be taxable, whether or not the sales of goods are separable from the contracts for construction, erection, installation and other works. In composite contract, the property over the goods does not pass to the buyer as movable property but only as an integral part of the immovable property and therefore, even the implied sales of goods comes within the definition of 'sale'. A composite contract for work is essentially a contract for work in which the use of the materials is only accessory or incidental to the execution of work. The other types of composite contract work need not be discussed for the purpose of this case.
17. It is not mere supply of electrical equipments, which would fall under Entry 11 of Sixth Schedule. The supply of the electrical equipments should be coupled with 'installation'. The word 'and' used in between the word 'supply and installation' should be read conjunctively and not disjunctively. The context in which the word 'and' is used cannot be understood as 'or' while interpreting the Entry 11 of Sixth Schedule. Therefore, meaning of the expression installation of electrical equipments' assumes significance. The words 'installation' and 'electrical equipments' are not defined in the Act. Therefore, these expressions require to be understood, firstly, with reference to their dictionary meaning and secondly, the way they are understood in common parlance and trade circles. The word 'installation' is defined in the book- The Law Lexicon (The Encyclopaedic Law Dictionary")-Second Edition (Reprint) 2001. to mean the bringing of an entire piece of plant on to a site and putting into position on the site. It does not mean that putting together of parts piece by piece, pipe by pipe, bolt by bolt, weld by weld, until it gradually becomes one whole. It also means 'the action of setting up or fixing in position for service or uses' as mechanical apparatus set up or put in position for use'. The word 'Electrical and Mechanical Products' is explained by the Allahabad High Court in the case of Great Eastern Electroplates Ltd., v. Regional Provident Commissioner, AIR 1996 AH 495 and in that, the Court has observed that the scope of the words 'electrical and mechanical products' is not to cover all products which are made by means of mechanical or electrical process, but it means products which are used or utilised for the purpose of producing electricity or implements and other apparatus. The word 'equipment' only means the implement used in operation or activity.
18. The Legislature in its wisdom has used immediately after the words 'installation of electrical equipments' the expression 'including transformers', which use of the words is only intended to convey that all the apparatus or equipments including transformers which are used for distribution of electrical energy would come under Entry 11 of Sixth Schedule to the Act. Keeping these settled principles in view, we have looked into the correspondence made by the contractee, namely, Karnataka Electricity Board with the assessee-company. In that, the 'project description' is provided and the same is as under:
"Project Description : The project envisages construction of 400 KV double circuit transmission line between Sirsi to Davangere to, an approximate distance of 104 KMs."
19. In the documents produced before us, it is further stated that a Nuclear Power Station (Kaiga Stage-I) of two units each of 235 MWs is under construction at Kaiga situated on the left bank of Kalinadi River near Karwar. The 400 KV double circuit line from Kaiga to Sirsi and then to Davanagere is now proposed for power evacuation from the Kaiga Atomic Power Plant. The other associated 400 KV and 220 KV line works are also under construction.
20. The scope of the work would include design, supply of tower parts and other materials like insulators, conductors, ground wire, insulators/conductor, hard ware and accessories and grounding materials etc. It also includes erection and commissioning of 400 KV DC line from Sirsi to Davanagere to an approximate distance of 104 KMs. The scope of work includes detailed and check survey, tower spotting, preparation of tower profiles, design and supply, erection and commissioning and all other pertinent works like tower foundations, protection works, tower erection, stringing, grounding after measurement of resistively of soil etc., for commissioning of the above 400 KV DC lines on total turnkey basis.
21. The nature of the contract and the complexity invovled therein, the scope and obligation of the parties to the contract, contract value, payment terms, insurance coverage, transfer of ownership, or title in goods supplied, liquidated damages, etc., stipulated in the contract between the parties would clearly indicate that the nature of works contract entrusted to the contractor by the contractee, namely Karnataka Electricity Board is not in the nature of mere supply and installation of electrical equipment. The nature of work that is involved, beginning with designing till its erection and commissioning and the complex process involved cannot be equated with bringing an entire piece of plant and putting into position on the site of the contractee. Therefore, the nature of contract executed by the contractor is not one of the types of works contract specified in the Sixth Schedule to the Act and in view of this, the authorities under the Act are not justified in holding that the works contract executed by the assessee company would fall under Entry 11 of the Sixth Schedule, thereby levying tax under Section 5-B of the Act.
22. The next question that requires to be considered and decided is whether the authorities under the Act are justified in levying tax on the goods used in the works contract which have been brought in from outside the State for the purpose of execution of works contract pursuant to a contract awarded by the contractee.
23. The first appellate authority while affirming the order passed by the assessing authority observes in his order, that, the assessee company has procured materials for use in the execution of works contract undertaken to Karnataka Electricity Board not only from within the State but also from outside the State and even if the assessee company has procured the goods from outside the State, they cannot be treated as interstate sales, because the work under taken is on total turnkey basis. The other reason assigned by the first appellate authority is that the goods that are bought or brought from outside the State are self and the deemed sales of the goods by the assesseee company to the Karnataka Electricity Board and sales took place only when the goods so brought were appropriated and then used in the works undertaken by the Karnataka Electricity Board. It is observed by the first appellate authority that it is only after the appropriation and use of the goods, does deemed sale of the goods take place to the Karnataka Electricity Board which is liable to tax under the Act. The first appellate authority has also observed in his order that mere bringing of goods from outside the State does not create the taxable event and therefore, there is nothing to hold that the good so used in the execution of work by the assessee company are as a result of interstate sale and what the contractee/Karnataka Electricity Board had agreed for is the work of power transmission line between Shimoga and Davanagere on a total turnkey basis and they have not contracted for purchase of any goods as such, much less from outside the State and therefore, the assessee company is liable to pay tax under Section 5-B of the Act on the Structural Steel purchased from outside the State and used in the execution of works contract.
24. Sri E.R Indrakumar, learned Counsel for the assessee company would contend that in view of the principle laid down by the Apex Court in the case of Cannon Dunkerely and Co., and Ors. v. State of Rajasthan and Ors. (supra) and in the case of Builders Association of India v. State of Karnataka, (1989) 73 STC 370 the materials exclusively proceed and used in the execution of works contract by a dealer under the interstate movement of goods cannot be subjected to levy under the charging provisions of State Law relating to works contract. The learned Counsel would further contend that the first appellate authority failed to appreciate the well settled legal position that when the interstate movement of goods takes place as a result of the contract, the transaction partakes the character of interstate sales falling under Section 3(1) of the CST Act and that it does not matter where the property in goods passes.
He argues that the settled legal position is that the appropriation or situs of passing of property in goods for the purpose Section 3(a) of the CST Act is immaterial and that therefore, the first appellate authority was not justified in confirming the levey of tax on the goods used in the works contract which have been brought in from outside the State for the purpose of execution of works contract. At the time of hearing of the petition, the learned Counsel has also relied on the observations made by this Court in the case of Shetty Leasing (India) Limited and Anr. v. Union of India and Anr., (1996) 100 STC 533, Binani Industries Limited v. Assistant Commissioner of Commercial Taxes and Ors., (2003) 129 STC 199 the decision of Gauhati High Court in the case of Projects and Services Centre and Anr. v. State of Tripura and Ors., (1991) 82 STC 89- the decision of Andhra Pradesh High Court in the case of Larsen and Toubro Limited v. Commissioner of commercial taxes, (2003) 132 STC 272 and lastly, the decision of Gujarat High Court in the case of State of Gujarat v. Elecon Engineering Company, (1993) 90 STC 74.
25. Sri Anand, learned Government Advocate tries to justify the order passed by the authorities under the Act in line with their findings and conclusion.
26. The Tribunal in its order, without any discussion on this aspect of the matter and without even referring to the terms of the contract, according to which the movement of the materials took place from outside the State into Karnataka, has made a passing observation that in respect of goods brought from outside the State for the purpose of execution of works contract under interstate movement cannot be subjected to levy of tax under the State Law. The Tribunal makes a casual reference to the law declared by the Apex Court in Gannon Dunkerley's case-88 STC 204 and Builder's Association of India's case-73 STC 370.
27. The first appellate authority also in his order does not refer to any of the terms of contract between the parties in so far as purchase of structural steel from outside the State and used in the execution of works contract.
28. The parties to these proceedings even before this Court have not produced the relevant documents to decide whether the second issue decided by the Tribunal is in accordance with law laid down by the Apex Court in Gannon Dunkerley's case and also Builder's Association's case. Infact, the Apex Court in Gannon Dunkerley's case has observed "that the question whether a deemed sale resulting from transfer of property in goods involved in the execution of a particular works contract amounts to a sale in the course of interstate trade or commerce under Section 3 of the Central Sales Tax Act or an outside sale under Section 4 of the Act or sale in the course of import under Section 5 of the Act has to be decided in the light of the particular terms of the works contract and it cannot be decided in the abstract".
The Court has further observed that "it is beyond the competence of the State Legislature to make a law imposing or authorising the imposition of a tax on transfer of property in good involved in the execution of works contract in respect of transactions which take place in the course of interstate trade or commerce or transactions which constitute sales outside the State or sales in the course of import or export. The Court has also observed that the taxable event is a transfer of property in goods involved in the execution of a works contract and the said transfer of property in such goods takes place when the goods are incorporated in the works, the value of the goods at the time of incorporation of the goods in the works being the relevant factor and not the cost of acquisition of the goods by the contractor. In so far as the value of the goods invovled in the execution of a works contract, it was held that "it will have to be determined by taking into account the value of the entire works contact and deducing therefrom the charges towards labour and services which would cover (a) labour charges for the execution of the works;(b) amount paid to a sub-contractor for labour and services: (c) charges for planning, designing and architect's feed; (d) charges for obtaining on hire or otherwise machinery and tools used in the execution of works contract; (e) cost of consumables such as water, electricity, fuel, etc., used in execution of the works contract, the property in which is not transferred in the course of execution of works contract; (f) cost of the establishment of the contractor to the extent it is relatable to supply of labour and services; (g) other similar expenses relatable to supply of labour and services; (h) profit earned by the contractor to the extent it is relatable to supply of labour and services. The amount deductible under these heads will have to be determined in the light of the facts of the particular case". Therefore, the principles laid down for determination of the value of the goods invovled in the execution of works contract requires to be determined as envisaged by the Apex Court in Gannon Dunkerley's case-(1993)88 STC 204.
29. In Builder's Association's case - 88 STC 204 at page 254, the aforesaid principle is reiterated. In that, the Court has observed:
"The value of the goods involved in the execution of a works contract, will therefore, have to be determined by taking into account the value of the entire works contract and deducting therefrom the charges towards labour and services which would cover;
(a) labour charges for execution of the works;
(b) amount paid to a sub-contractor for labour and services;
(c) charges for planning, designing and architect's fees;
(d) charges for obtaining on hire or otherwise machinery and tools used for the execution of the works contract;
(e) 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 a works contract; and
(f) cost of establishment of the contractor to the extent it is relatable to supply of labour and services;
(g) other similar expenses relatable to supply of labour and services;
(h) profit earned by the contractor to the extent it is relatable to supply of labour and services;
The amount 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 Sections 3, 4 and 5 of the Central Sales Tax Act and goods covered by Sections 14 and 15 of the Central Sales Tax Act as well as goods which are exempt from tax under the sales tax legislation of the State. The value of goods involved in the execution of a works contract will have to be determined after making these deductions and exclusions from the value of the works contract."
30. In Builder's Association of India v. Union of India, (1989) 73 STC 370 it was declared that the sales tax laws passed by the Legislatures of the States levying taxes on the transfer of property in goods (whether as goods or in some other form) involved in the execution of works contract were subject to restrictions and conditions mentioned in each clause or Sub-clause of Article 286 of the Constitution. The Court also mentioned that it had been held by the Supreme Court that "if the movement of goods from one State to another is the result of a covenant or an incident of contract of sale, then the sale is an inerstate sale. If the movement of goods is as a result of contract and is an incident of an agreement between the parties, the transaction will remain a sale in the course of interstate trade, no matter in which State the delivery of the goods is taken by the purchaser. The passing of property in a particular State is not the relevant criteria for determining whether a sale is an interstate sale or not".
31. In 20th Century Finance Corporation Limited and Anr. v. State of Maharashtra, (2000) 111 STC 182 the Supreme Court which interpreting the expression transfer of the right to use goods' in the State Laws of Sales Tax, has held that the levy of tax on this class of transactions included within the meaning of sale, was not on the use of goods but on the transfer of the right to use them, the place where the goods may be located was of no relevance, provided they were in existence. The taxable event would be the execution of the contract for the transfer of the right and the situs (or location) of the deemed sale would be the place where that contract was executed.
32. This Court is Shetty Leasing (India) Ltd., and Anr. v. Union of India and Ors. (supra) and Binani Industries Limited v. Assistance Commissioner of Commercial Taxes (supra) has followed the principles laid down by the Apex Court in 20th Century Finance Corporation's Case.
33. In Projects and Services Centre and Anr. v. State of Tripura (supra) the contractor had his place of business in West Bengal, and purchased goods in several States outside Tripura and executed works contract in Tripura utilising those goods. The Agartala Bench of Gauhati High Court held that the sales of the goods involved interstate movement of the goods and the fact that the goods were used in works contract in Tripura or that the property over them passed in that State did not in any way affect the interstate nature of the transactions.
34. hi the aforesaid judgment, the terms of contract according to which the movement of the materials took place outside the State of Tripura into Tripura are not available in the judgment. Therefore, it is difficult to express any opinion one way or the other whether the said judgment could be applied to decide the issue before us.
35. The Andhra Pradesh High Court in the case of Larsen and Toubro Limited v. Commissioner of Commerical Taxes(supra) the Gujarat High Court in the case of State of Gujarat v. Elecon Engineering Co., (supra) with reference to the terms of the contract between the contractor and the contractee have taken the view that the particular transaction that they were deciding is interstate movement of goods and therefore, State Tax Law cannot be applied and the levy of tax under the State Act cannot be levied.
36. In the present case, neither the assessement records that were produced before us nor the documents that were placed before us at the time of hearing of the petitions, disclose the nature of contract in so far as purchase of steel-structural from outside the State and used in the execution of contract that was awarded by the contractee to the contractor. In our opinion, for the decision on the second issue that we have raised for our consideration and decision, the same is absolutely necessary and as observed by the Apex Court in Cannon Dunkerley's case- the question whether a deemed sale resulting from transfer of property in goods involved in the execution of works contract amounts to a sale in the course of interstate trade or commerce requires to be decided in the light of the particular terms of the contract and it cannot be decided in the abstract and therefore, in our opinion, on this issue, the matter requires to be remanded back to the Tribunal for fresh consideration of the matter in the light of the terms of the contract between the parties and further keeping in view the legal principles enunciated by the Supreme Court, since the Tribunal is the last fact finding authority.
37. In so far as the levy of turnover tax on the declared goods under the KST Act is concerned, the issue does not require a lengthy discussion in view of the proviso appended to Section 6-B of the Act. Therefore, this issue requires to be answered in favour of the assessee and against the revenue.
38. In the result, these revision petitions are partly allowed. The impugned orders passed by the Karnataka Appellate Tribunal in STA No. 496/1998 dated 23.12.1998 (STRPNo. 64/1999) and in STA No. 303/1999 dated 10.12.1999 (STRPNo. 57/2000) are modified to the extent indicated in the course of our order. The matter is remanded back to the Tribunal to consider the second issue after looking into the terms of the contact between the parties and in the light of the law declared by the Apex Court in Gannon Dunkerley's case -88-STC 204 and Builder's Association's case-73 STC 370, and after affording an opportunity of hearing to the parties, hi the facts and circumstances of the case, parties are directed to bear their own costs. Ordered accordingly.