Karnataka High Court
Urc Construction Limited vs The Deputy Commissioner Of Commercial ... on 15 December, 2005
Equivalent citations: ILR2006KAR713, (2008)11VST896(KARN), 2006 (3) AIR KAR R 104
Author: D.V. Shylendra Kumar
Bench: D.V. Shylendra Kumar
ORDER D.V. Shylendra Kumar, J.
1. Writ Petition by a dealer registered under the provisions of the Karnataka Sales Tax Act, 1957 (for short 'the Act') who also executes what is known as 'works contract' in respect of which the value of the goods involved in such works contract is subject to tax in terms of Section 5B of the Act read with provisions of Schedule-VI to the Act.
2. The petitioner is aggrieved by the assessment order dated 27-9-2002 passed by the assessing authority determining the tax liability of the petitioner who it is averred exclusively carries on the works contract as a civil contractor and can be subjected to tax under Section 5B of the Act; that the assessing officer while so determining the tax liability in respect of the goods involved in the execution of the works contract undertaken by the petitioner which goods are cement, steel, ready mix concrete water etc., with only that portion of the assessment order levying tax on the value of the steel involved in the execution of works contract at 10% which is the rate applicable to civil works contract as per Entry-VI of Schedule-VI of the Act as it is contended though steel being a 'declared goods' within the meaning of Section 14 of the Central Sales Tax Act, 1956 and notified as such and having regard to the provision of Section 5B read with Section 5(4) of the Act, this part of the goods involved in the execution of the works contract, namely, value of the steel which has gone into the execution of works contract could have been taxed only at 4%, the rate as is mentioned at Entry-II of IV Schedule to the Act which schedule provides the rate at which declared goods are to be subjected to tax.
3. This is the only bone of contention as between the petitioner-assessee and the revenue and in terms of the assessment order, the assessing officer having taken the view that the steel having gone into the execution of the works contract, was of the view as the tax was being levied under Section 5B of the Act, the request of the assessee concerned to levy the tax on iron and steel under Section 5(4) of the Act cannot be accepted and therefore proceeded to levy tax on the value of steel involved in the execution of works contract also at 10%.
4. The petitioner by passing the appellate remedy of appeal to the Joint Commissioner under Section 20 of the Act, has approached this Court praying for relief on the premise that the question is a pure question of law involving interpretation of provisions of Section 5B of the Act and the scope of levy under Section 5B and no other disputed fact is involved in this matter and also on the premise that many matters involving similar questions are pending before this Court.
5. Petition was admitted on 6-2-2003. Respondents had been put on notice who have entered appearance through Sri. Vedamurthy, learned Government Pleader. Statement of objections has also been filed.
6. A preliminary objection is also raised that as the petitioner has the right of appeal under Section 20 of the Act itself, there is no need for entertaining this writ petition.
7. The normal rule in the exercise of writ jurisdiction is not to examine a matter in this jurisdiction whenever the petitioner has an efficacious alternative statutory remedy and to relegate the aggrieved person to avail of such remedy than to undertake to examine the grievance in writ jurisdiction.
8. However, as the matter had been admitted and as the writ petition did not involve any disputed questions of fact and the decision being dependent on a pure question of law i.e., understanding or interpreting the provisions of Section 5B of the Act, the matter has been taken up for consideration.
9. I have heard Sri. Keshavamutthy, learned Counsel for the petitioner and Sri. Vedamurthy, learned Government Pleader appearing for the respondents.
10. Submission of Sri. Keshava Murthy, learned Counsel for the petitioner is that the provisions of Section 5B of the Act makes it very clear that this section which is the charging section for levy of tax on works contract is subject to the provisions of Section 5(4) of the Act. Section 5(4) of the Act is a provision which occurs in the main charging section of the Act and indicates that notwithstanding any other provisions of the Act including Section 5B, the rate of tax leviable in respect of the goods known as 'declared goods' within the meaning of this phrase as it occurs under the Central Sales Tax Act, 1956, the rate is as indicated in Schedule-IV to the Act in respect of such goods and not at any other rate in any other provision of law.
11. Section 5B and Section 5(4) read as under:
5-B. Levy of tax on transfer of property in goods (whether as goods or in some other form) involved in the execution of works contracts-
Notwithstanding anything contained in Sub-section (1) or [Sub-section (3) or Sub-section (3-C) of Section 5, but subject to Sub-section (4), (5) or (6) ] of the said section, every dealer shall pay for each year, a tax under this Act on his taxable turnover of transfer of property in goods] (whether as goods or in some other form] involved in the execution of works contract mentioned in column (2) of the Sixth Schedule at the rates specified in the corresponding entries in column (3) of the said Schedule.
5. Levy of tax on sale or purchase of goods -(4) Notwithstanding anything contained in Sub-section (1) [or Section 5-B or Section 5-C] a tax under this Act shall be levied in respect of the sale or purchase of any of the declared goods mentioned in column (2) of the Fourth Schedule at the rate specified in the corresponding entries of columns (4) and (3) of the said Schedule on the dealer liable to tax under this Act on [his taxable turnover] of sales or purchases in each year relating to such goods.
12. Submission of behalf of the petitioner is that even when the value of the goods involved in execution of any works contract is subjected to tax in terms of Section 5B of the Act and at the rate as stiputaled in Schedule-VI to the Act, the provisions of Section 5(4) controls such levy of tax; that though a different rate of tax might have been mentioned in respect of any goods which are consumed in execution of works contract and are normally subjected to tax at the rate as mentioned in Schedule-VI, in so far as declared goods are concerned, if they are part of goods which go into the execution of the works contract, such declared goods can be levied to tax only at the rate as mentioned in Schedule-IV to the Act in respect of that particular goods.
13. It is for the reason Sri. Keshavamurthy, learned Counsel for the petitioner submits that in so far as steel which had gone into the execution of the works contract and the value of which had been determined by the assessing officer is subjected to tax at the rate of 10% which is the rate otherwise applicable to the other declared goods which are involved in the works contract is not applicable; that the assessing officer is wrong in assessing the tax liability on the value of steel also at 10%; that it should have been only at 4% as provided for under Section 5(4) read with Section 5B of the Act and therefore to this extent the order is bad, being contrary to the very statutory provisions.
14. In this regard, learned Counsel for the petitioner would draw the attention of the Court to the decision of the Supreme Court in the case of Ganon Dunkerley And Co. and Ors. v. State of Rajasthan and Ors. 1993 (88) STC 204 and submits that the Supreme Court having noticed that the amendment brought about to the definition of the phrase "tax on sale or purchase of goods" under Article 366[29-A][b] of the Constitution of India, which after the Forty Sixth Amendment included a tax on the transfer of the property in any goods involved in the execution of a works contract and not on other components such as labour or service or even such other components though goods which are not otherwise taxable and the Supreme Court also having indicated in the case of Builders Association of India v. Union of India 1989 73 STC 370 that the limitation under the Constitution on the State Legislature to levy tax as imposed under Article 286 of the Constitution of India continue to operate and therefore the levy of tax under the State enactment being further subject to the provisions of the Central Sales Tax Act, 1956, the same having been recognised and given effect to in terms of Section 5(4) of the Act, the provisions of Section 5B also making a provision to yield the levy of tax under Section 5B itself to Section 5(4) which in turn is to bring he entire legislation to be in consonance with the requirement of Article 286 of the Constitution of India, submits that the levy of tax under Section 5B of the Act on goods like steel which is a declared goods can only be at 4% and therefore to this extent, the assessment order is bad.
15 Sri. Vedamurthy, learned Government Pleader appearing on behalf of the respondents, while has raised the preliminary objection about the tenability of the writ petition, which I am of the view, may have to be overruled as the present writ petition involves examination of pure questions of law, particularly, the interpretation of the provisions of Section 5B of the Act, has nevertheless, contended that the question is now covered by the decision of the division Bench of this Court in the case of B of Subba Reddy v. Deputy Commissioner of Commercial Taxes and Anr. STRP No. 34/2003 DD: 12-8-2004 rendered in terms of the order and placing reliance on this decision, submits that the division Bench of this Court having taken the view that the levy of tax under Entry-VI of the Vl-Schedule being one in respect of works contract in the nature of construction of bridges and the stand of the assessee therein who had sought for levy of iron and steel involved in the construction of a bridge to be at the rate of 4% having been negatived and the view of the assessing officer and as affirmed upto the Tribunal that it has to be at 10% having been upheld by this Court, the decision squarely covers the present case also and therefore the writ petition has to be dismissed.
16. In this regard, learned Government Pleader submits that iron and steel if while being used in the exercise of the works contract, namely, the construction of the building had been used in a different form i.e., not as iron and steel itself, then the assessee cannot contend that it is still 'steel' a declared goods and therefore should be levied to tax only at 4% and not at 10%.
17. I have perused the decision of the division Bench of this Court is STRP No. 34/2003. A perusal of this order indicates that the question did not really arise in the revision petition as has been raised in the present writ petition. But, moreover the decision appears to have been rendered more on an admission or concession on the part of the petitioner therein who did not dispute that iron and steel that had been purchased by the petitioner therein and had been used in the construction of the bridge etc., had not been used in the same form of iron and steel, in the sense that, before being put into the construction of the bridge, perhaps it had undergone some intermediate change where after it ceased to remain as iron and steel and therefore the petitioner was not entitled to the benefit of the rate of tax as is available to a declared goods under Schedule-IV of the Act.
18. This becomes very clear in paragraph-14 of the decision which reads as under:
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 has purchased iron and steel and has utilised the same for the purpose of construction of the bridge. Iron and steel purchased by him are used not in the same form as iron and steel but are used for the purpose of construction of a bridge. Therefore, 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
19. In the present case, it is the definite contention of the petitioner and as canvassed by Sri. Keshavamurthy, learned Counsel for the petitioner that the iron and steel has been used in the construction of the building and not by converting it to any other form, much less, to a form where after it ceases to be iron and steel. In fact, this position was not disputed and on the other hand, the assessing authority had also accepted this factual position which is reflected in the assessment order also but only proceeded to hold that, ...XXX since the tax is being levied under Section 5-B of the Act, the request of the assessee concern to levy tax on Iron and Steel under Section 5(4) of the Act cannot be accepted. Hence, the objections in this regard are unacceptable.
Which clearly indicates that the assessing officer had understood that the tax being levied under Section 5-B, the provisions of Section 5(4) of the Act has no relevance and therefore had rejected the contention of the petitioner.
20. The view taken by the assessing officer is clearly in the teeth of the very provisions of Section 5B of the Act which are governed and are made subject to the provisions of Section 5(4) of the Act even as indicated in the very Section 5B of the Act and therefore the petitioner-assessee was very much entitled to claim the benefit of the rate of tax as it occurs in Schedule-IV to the Act in respect of the iron and steel which it had utilised in the construction of the building which was the works contract executed by the petitioner and in respect of which tax was being levied.
21. In view of this clear legal position, the assessment order dated 27-9-2002 [copy at Annexure-A] is definitely not sustainable which is accordingly set aside.
22. However, the matter is remanded to the assessing authority for re-determination of the tax liability on the position of law as clarified in this order and by applying the rate of tax as is mentioned in item-2 of Schedule-IV in respect of the value of the iron and steel involved in the execution of the works contract.
23. Tax if any already paid by the petitioner-assessee may be retained by the respondent pending such determination and to be adjusted against such final determination.
24. Writ Petition allowed. Rule made absolute