M/S Nagarjuna Construction Company ... vs State Of Karnataka on 30 June, 2010

[Cites 17, Cited by 2]

Karnataka High Court

M/S Nagarjuna Construction Company ... vs State Of Karnataka on 30 June, 2010

Equivalent citations: 2010 (4) AIR KAR R 425

Bench: Anand Byrareddy

 

, Mei'-

IN THE IIIOII COURT OF KARNATAKA AT' BANGALORE
DATED THIS TIIE 3o'"'*I3AY OE IUNE 20III 
BEFORE   % % A'
TIIE HON'BL.E MR. IIISTICE A?~§"}\ND"B'_:§:fV  & "

WRIT PETITION NOS. 2993229933/_2o09 'I.T~I<sT)'  I
C/W WRIT PETITION No.=39II./2010"   
WRIT PETITION'«N'O.I 452/2'01_(}»  ' A
WRIT PETITION NOj[§_(){}l.2009 ANQ 
WRIT PETIT ["O.N Nos, 3"§'9_1.8"-'E-3.28/2()()9 A
WRIT PE'TI'}"'IGN  62}f2O §§V
WRIT'PETITQNNO.;56E§3--694['£U10
WRIT P-ETI'i;FION_fNO, 'II5E95;7O5/20 I 0
_\_?SV/'_RlIII11I3'E.T_l_1:!_Q;I' No; }_._S707¥'I"} 8/2010
I  I      I
%%%% M 'yW'R7I»T PF,Tl'T'i--{J'N_N().1§ 1676/2010
; 'W.R'i"_F:'PETIT~EQI\_1§'~EO.29O46--048/2()()9

WP. 1\:Io;299§2--:?§v3f2.f}()9ITEIRST)

.1" .._ M/_' Nzigaaj uIfI'ai".C()nstI'uction
C_._OITIpa_I1y Lirjﬁited,
NO.3(}'-I, Béitavia Chz1IIIbers,
 NO.8._I_<§u1n_a1I-ai Krupa Road,
., " Ku_.I1IaI9a Park East.
"  'B.aﬁ.ga10re--56() 00}
 Represented by its

I   ..._..:SeraéOI' Vim: P1'I:sideII£.

§



1-»:

Sri. C. Premachzmder Redd)/,
S/0 Sri. C. \/uradha Reddy.
Aged about 48 years.
R/0 No. 301, Batavia Chambers,
N0. 8, Ku mara1<:'upa Road,
Kumu1'apa1'k East,
Bzmgz1I()1'e--56() 001 .

E\J

. Sri. A.G.Ruvi

S/0 Sri. AP. Gamgadhuriah

Aged about 40 years, T.

R/0 N0301. Butzwizl Cha.mbefs',"--~

No.8, Kum21rakrupa Road, 

Kumarapark East,   _   
Bunga1_01'e--56() 001. v   _ V  ..  PETITIONERS

(By Sm M.R. N;1_:1<, se1;.ie<2f%Adpvgﬁgfeate"e&'§5r7.?y_£3_ Krishnamurthy,
Advocate) ..     .  '  '

I. Smte ofuK';:ef11;1tza.ké1-L'v  
Rep:"ese:iIe(l by its A S
P:'i;1'ici;);1l Sec'-retVzii'y
l_T§Le';:>z1gjie111e.;at (.)f"I*i'11a:--12ce,

A ' .e\_»/i<,ilaai11A;1 S()u.dha,

 B;i;1.g;1;;;'rc;'550-- 00: .
2." ..It_SE"nt CL>1:§1jniissi<_)sae1' of
C1'mn11_aei"c.i,:t'l T:1xes(Ad:n11.)
,  . . } *1
VA? Lv;:v:s:(.)n .1, 7" H001',

,  = I/'_j1'K BuEIdi11g,Gandhi Nagar,
3 *  x ga101'e~5(j0 009,



(By Shri
Pleztdeiﬁ)

so far  ;3€Iiti0H€I'S are cciinceincd an'dfe:c.,' "

WP 394/20 E0

'~..>J

The Deputy Commissioner of
COm1'1'§€l'Ci&li T21xes(Audit)« E 3,
VAT Division i, 7"" Floor,
VTK Building,

Gandhinagar,

B;i11gai0i'e--560 009.

 

...  'V 4

KM. Shivuyogiswamy. '._VHighi  5CGLi19i-.. v'G()'V'V'i:'if7I_1ITi!;}i"l{

These Writ Petitions is filed.._L1inv(ici*V..Anicles.226_.i1r1d 227 of
the Coiistitution of 111dia;__'prz1yi_i1g _tVO" ..._(£¢C'1.a.1'e the provisions of
Section 4C that auth()1"izeS"ievy"Qf}:T%1x"0,ii.works contract under
item 23 of the schedule  'J0.id'i1i1d:i"unenforceable in

BETwE,EN'&i   - f{'.%% A

1.

M/s. .iLii1]p£1l]a CK)i1:§.i'l'LlCf'i1.)i§'F;< 
Private Liimiitcci, i ._ ' _ " 
Registered Ofi'i'ce.':"N().i' 389/},
I V_i""i.'+f)():l'__? .J1'.l_§ig6S C0i.«r1i1\.v,

 ,I{.T N:ig:1i';'«._._

A =Bi2I'i1g:':i(§i'e§56(i"032.

1" ._ Ri;_p.i-e'$e.i1_i.cci by"its Director
Siji. J. \_/eii"u.g0pal K.l'iShi'a2liT1 Raju,

S/'(S S1'i--,J 'S"athyaiiarziyz111a Raju,
Aged .i;i_b~out 41 years,

i A' 12:44.) No. E390, 8m Cross,

 "1..€)'55Me1ii1, Jucliciai Layout".
"§G.K.V.K. Post.
<B:1:'1g;1i01'e--56(} 065.



2. Sri. .3. Srinivusz-1 Raju
S/0 Sri. J Sa{yhz1narayan Raju.
Aged ab0u142 years,
R/0 No. 981/13. f4mMz=1i11,
Judicial} Laymlt,
G.K.V.K. P0.~.;L   5 ._ 
Bangal0re--560 065.  p,e5~T1Te£e0NE}<es  %

(By Shri. M.R. Naik, Senior Adv()cz1te"'fc3--;*.Y.S'. K1:1':S'§V":1'r4i'Z1VVVlVI'.[ivI'[f1'}{, "

Adx/0cu{e)
AN D:

1. State of Karnataka
Represented by its
Principal Secretary,
Department of Finance,
Vidhana Soudhja.'  H

B :1 n gvéi  '  ' ' e 

P

The Com ndiss i(>ne's-..:()~i* V ., " " 2 
C()zn1nerE:eé«::1}ATaxes. 7 " "
VTvI{--B_L:ildir;g.' * 
C}z1fa.dh_§:'3;sga11-, A A ..... .. e

%  e . Biii1g;ai'£.('):'e_¥:C«()_() 009.

L;-3?-' ' .

. _T?I1e. AsS¥'5;.{'z111i§VV'Cbmmi ss inner of

C §)i11n1e:fC'ie:§i 'Taxes

(Awn-1-5 2  DVOW5,

B21113;-!_}_('i':'e.  RESPONDENTS

'('33s'--..Si11'i. KM. SE1évz1y()gisw;1:'ny. High C0u:'1 Govemmem ..4"57Pe1é uaer) 5 This Writ Petition is filed under Articles 226 and 227 of the C011st.§tu£i(m of lnclia, pmyizlg (0 call for 1'ec0rds l'xf'(5tr3 the 1'esp011dents and declare. the provisions of Sccti(>I1v~.4'C_'~Iha{ authorizes levy of Tax on works contraczt under ite«:nf_2.3._*tlj Ville schedule Vl illegal, void and unenf01'L:ea1ble a111dc:u't¢., WP 452/2010 BETWEEN:

l. M/S. Shri. Aruna C011struction$\.V7 Private Limited _ N0. 323, Sri. Range: Nijlaya, 11 Floor, 1 Cross, III l\/lziin,-. '-

RT. Nagar, " .

Bz1ng:1l()re--56().(}32. _ A _ _ _ R6PFese11ted?l3)/ S1-i._i. A _ S/0.1 .Sz1tl1y.ari3:';'§yané*.'R.;xj'ul_' .. V Aged Lib()l_l'I"4l'8v yeéys, _ _ R/0 lalo. 1%/1);. _ l .ludicialu1;ay0L1t.,V "

(3.K.V.K'.=,Pl()§3.l._ l Bz;:'lg21Al(>:*e§l56(.) (J55.

«.-

_ Silt),.ll.'=.A.lj.llli1,_l{'&ijL1 H ._ "A_g«ea;'i' ' ;2lj~a)_Lz1' '8""yea1's, 'R/lo Nu. l:1,74, 10"' 'B' C1'(_>ss, Town Public School.

A Ycllahﬁnka §\lewT0wn_._ A 'lB.:.1A11gz1l(.>1fe~56()064. PETITIONERS V" (By Sh1'i.. l\/LR Naik, Senior Advocate for Y.S. K1'ishnamurtlay, . " "'¢5§Cl\?(')C£lEC) % This Writ Petition is fiied under Ariieles 226 and 227 of the Constitution of India. praying to call for the records fi'_(__)m the respondents and dec1:L1'e the p1fovisions of Section that authorizes levy of tax on works contract item 23 to the"'2;e_he'ciL;1e V}, as illegal, void and unenforceable so far as to _t§1e"p'etitjioh_e1'~s concemed and etc., WP 378()O/2()()9and WP 3791.8»928/:'20()9_"..§' BETWEEN: V E V' M/s. Mfar Constructions Private :1-4-':-m.i"ted"-~.._ No.8 & SA, AVS C()113p(5E-EEC}, 1 ~ 80 Feet Road, K()m:'na11ga11éI, Bz=mga1ore--56() (')34. _ ' RepresenEed by,it:3«.._V 1.

Chief Execu:i,ve.,Offic.e1',.

Sri. BK. Dhizlr,    "

S/o  _  _

Agedabsmn57Vyeus5S~;/.%e'      e  PETITEONER

(By Shri.G;S_§i1"z111é§;1.1_1gAA.S'e':ﬁ.(j)1" Advocaze for K.S. R'.1nna1bz1d1'a11, Advoeatte) - V' 'E. 'Ttee (?a5'1~.m;e:j~'c'i 211 Tax officer. Aad;;s22e;;-sovo--2, H Floor, LIC Boi1'ding, Sampige Road, Mz11}e.::'hw:1ram,

2 » ' B-.2mga1o1~e~--56() 003.

The State of Karnat21§<a Represented by the % Principal Sec:'et;11'y to Cioverninent, Finance Department, Vidhana Soutlha, Banga1!ore~56() 00].. ... 4' (By Shri. K.1\/E. Shivayogiwamy, HighCourt.Got/e1'n1nent PEe.:f1de'1~.) ?5=$$>i==I< ; _ '. -

These Writ Petitions is fi1'ed"--:1_ncie.i' iAI'iti(']6Si'?.i?i.i6 ';:.ntiH "2377 of"-'_* the Constitution of India, praying tooiuztsh the.re'4'aSSe§§vinen1 order and demand notice dated 19.1 I.2009;'vi_d'e.._AnneXure¢D_fpassed by the respondent no. 1, for t'§i__e"peri(jid 2()O5.g{).7'~-1.evyi:ig Tax at !.2.5% on the value of Iron & Steei 'Ltsed',i_11':ti}1e e2{_ea:tit~i(i)I1 of Civil Works as without Jurisdictiyon a1:ide_te'_,»._ vi ' ., WP 62/20085 ~ i BETWEEN; * - ' T M/S UE Dex/e.iop1nent' :E:I.'1'(iiii!'--Pii"i'V'£i[€ Limited

60. Weliin§gton_Roaci,._ A S RiChlT'.;(i)I'l(J_TO\«VI1I.' _ V' 'i '~ ..Ba1ii;gt1'}:)1'§:_:56.() 025:" ..... .. * (VB}:oMI'( _Y:.ii's1_i<.t:t)1ig Ciiee, 46 years) PETETIONER (B3/'-._Shi*'i«iiffg.Siﬁfttiigaii, Senior Advocate for Shri TN. KﬁshtlVElE'I]L1.I'EFEjf')i , iiC~O£'3:'1l"ﬂ€l"CiE}i Tax Officet' (lnteE1igence)--XV. i;S<_)uth Zone, VTK El, 6"" Floor, " V80 Feet Road, @ 9 Viveknzlgzn' Post, K()1'£il'T}'di1g£ll&1, Bz1ng2ti()1"e--56{) 047.

2. State of Kamatuka Represented by the Principal Secretary to G()ve1'nn"1em. ._ Finzmce Department, ' Vicihanz-1 SOLEdh£i, B:1nga1i0:'e--560 003.

(By Shri KM. Shivayogiswamy, High_2CQurt (.j"()._\iel'.E'}l'l}tV'f§I][ Pit:-ader f()r1*<:Sp0i1ciei1tno. 1 and A . ' >1< >%< >'.'_1=i< 3:19 ' This Writ Petition is-'fiiedfu-ideif'-.Arti.cle$'>226 and 227 of the Constitution of ;I"11'd'i1-at-2'praying: :5 'qIii1Sh*~t.h_e§ re-assessment order dated E().E2.2_.()()'7v .4}/iftitiff¢\.li1!1C_}(i£{¢-A 1%;'vying tax at 12.5% on the value of sEee:i.vv@L:si:dginu'the_V--E:§<'icQ1it'i0n. civil works as without jijrisdictiém amid -~ WP 15683-64/2411 V' iiiii 2 iS'e11t'i'1«:iVi'2.».ai' "CV()x1'1.St]"UC[ io it Company N'(:,6'(§(§; 3'3 F}')(§i"}.80 Feet Road, 6"' Bi.Qc'k, }5{.r.)i*:4t.;'na111ga1a, B2ii}gﬂf(*.i'€i'-.360 095.

' Rﬂplfésellivfiii by its ..}_'i*()p1*iat():* ME". 3'. Chundrashekar. PETITIONER Shri. Ajit Ktiniar L. Ralheja, Advocate') 5 10 AND:

1. The Commissioner o'fC(.)mmercial Taxes, Vunijya Therige Karyalaya 1' Main Road.

Gandhinagar, Bangai0re--56() 009.

E\.) The Deputy Commissioner of C0mme1'ciaiTz1xes, "

(Audit--4l), DVO--4. » Vanijaya Therige Kary;1t1aya.. ' Korarnzlngaia, ' V Bzmgalore. ' J " _'LR'EVS'i?ONDENTS (By Shri. KM. i~.I:ig§i'_gi."_IpL1rifGovernment Pieader f()r1'esp()nden_LsV):-.,v 5:" V . ' fi1e(:.1_"'iiﬁder Articles 226 and 227 of the C():1s't_itL1§:(m. ()"f'»'i:1:.dizL,pif;;yi--ng to quash the impugned circuiar dated ()7. i'Z':2f){)9 iespondent no.1, vide. Annexure--A and €EC.. 2 % . ' . 7 " u _ 'WP £55,954?(m:);y(:j 11111 H A:

M./S. S'e11t11u1*{i11 C0nst1'uc:ti0n Company V VV _ N0. (596, 3" F'rO(>r, 80 Feet Road, 13"' B1_c)c§/;, Ko1'anmngaia, % .Bzr::1.g;141()ré'%56(') 095, ' "'£{_Ac:v;)1jLe§:nted by its Proprietor H Mr. J. Chzmdreshekat'. PETITIONi3R; 'x (By Shri. Ajit Kumar L Raheja. Advocate) AND:

1. The Commissioner of Commercial 3 Vanijya Therige Karyalaya, ' I Main Road, Gandhinzigar, Banga10re.--56() 009.

'i\.) The Deputy C():n:11issit§ne,;" 0f* 1.

Contmercizti Taxes A * (AL1dit--4l) DVQ--4, Vanijya Therigai 'K.a1'ya§Iaya}' * K()1'21manga1z%J;

Bangalotfeg; V RESPONDENTS (By Shri§ K.F\/I:uSv5!1_ivz1§Ift§gi$w.;t}ny, Isiigat Court Government Pleader f()1':'eSPQ'r1de--nts'} 4' ' ' " r. 4...» .;. .g.

3. .,;. 4'1 .3 .,' ;"E'h:2_.~_;c W1§!_Pet'iti(.)i'zs it; filed under Articles 226 and 227 of ._t_l1e (j§(f}~:1s3IiLt£:t':__(')n 0t'"in:.1..i;:,vpraying to quash the impugned circular 7 V detted (T}7.'l2.2(.}'{}.9 issued by the respondent no.1 vide Annexure--A

--V WP I S7.{:):7:"V'.7.} 5%:/2010 A " f_'B t«;"rwEE}N:

Senthuran Constructiorl Company .. "N0. 606, 3"; i310(')r, 80 Feet Road, % 6"' .BEc>ck, Komaiizingzllzl, B2.1ng:110:'e--560 095, Represented by its Pr0p1'iet0i', 1 Mr. J. Chandrashekaa'. PETITEON-E'R_.f"--«f._ (By Shri. Ajit Kumar L Raheja, Advocate) AND:

1. The Commissioner ofCL)1i11I1eiie'i*:1.l Taixesi: .

Vanijya Therige Karyalaya, "

I Main Road, Gaiidhiiuigar, Bz1nga1()re--56() 009. ' E0 The Deputy C0mmissiQ.ne.:§'_of COmlT1€1'Ci£1i 1 .

(_Audit--4'1§iD'\?'OV¥Zi{?.. A ..

Veinijya_Theijige:<E§_z1i'y:i_Iay5;; "

K(>:'aVih2inga'm}_v _ Bz1:1g:1l<)1*e; . ' ' RESPONDENTS (By Shri. KQVE:iShixiayogiSwﬁiiiy', High Court Government Pieader for i'e's;p(>ngiesat) " ' ' +¢¢w+ ¢m¢TT V' V ii -W.ajit'*Petiti0:is is filed under Articies 226 and 227 of {he C0':1:siitif_i'1=i0n',0? India, praying to quash the impugned ci.1'cu1ar dziteai (i)7.,i.2._2(3()9 issued by the respondent no.1 vide Annexure--A j and eicz, 13 W? 11676 OF 20i(') BETWEEN:

I. M/s. JMC Projects (India) Limited A-- 104, Shz,-1pa1th--4.

Opposite to Kamalvati dub, V SG Road, Ahmedabad~38O 051.

And with its local office at Gold Towers, N0. 50, 2" F1001f,___"'-.__ --

Residency Road,    ii
B21ngal()i'e~56()()25.
Represented by its
Authorized   _

Assistant Vice Ir'}1e'Si<fei:e;t (F_iﬁ21n¢e)_.

Sri. ChinUuibzibj..1?.é1;*ikh,i V ' ' Aged a1b()u£..5;%-géeglifs, i R/0 i 5» Sn. Nimgn-C Pzz.ifi}'<hf--

S/0 C§']i11i1i}bz1i Paws. "

Aged :r:_b0uti 5}-3_yez1'1"s, V' P;/"("')?.Alf}eiT]'Cdi1bLid'.».. _____ PETITIONERS V' B5,-*A TS'i".1:i'§ ; Senior Ad vocate) Ai'-§U':Vi' _ 'V_I_. Statc:- (5f7._'Kz1i'i1ata1k:1 .. Repre':;*ented by its V' ,Prii_1<;ipa1Sec1'eta21'y, I)e'pai'tme11[ of Fiimiiee.

g Vidhama Soudha.

Bangz11o1'e-56() ()0 E .

av Commercial Tax Oft'i<:ea' (_ENF)-- 10, South Zone, Ba1ngz1l()1'c:.

3. Additional Commercial! of Commercial Taxes (_Enf()rcement) South Zone. -

VTK--'2, 80 Feet Road, K0 raman gala.

Bzlngzllore-56() 047.

Karnataka St';l[i:::; _ H '~ _ -

Bu11§a10:'6-H      RESPONDENTS

(By  High Court Government
P1e.ader?a    '

This Vvm miaam: iI'sv.1f_'i.'ied under Articies 236 and 227 of the C():1s4Ejtu:iLAg):1 of'-» _I ndiu, }Ln"aying to Cali] for 1'€COI'dS from the 3 " _:A*::spQt'3;~d:§§:.1ts; and eté ---------- -« * 8 2009 1% B ET24W..E'i?Z.N':' "

Engineming Private Limited ?.VIV.R.--P.L. Premise:;, Kaiépaiizl, i\/T£anga1i<_):"c--575 (")3().

8 (By S.G.Shinde, aged 57 years.

Deputy General Ma1nage1' Project Accounts). . . .

(By Shri G.Sarang:.1n, Senior _ »fu:'._ Shri. T.N. Keshzwamurthy, Adv()ca1te)ﬁ AND:

1. The Commercial Tax Officer (Enf01"cement--iI'), Maidan Road, Mange-ilore-575 O01.

fx.) The C0 m 1'1'1.i.ssi()'t':6}' of Chinn'5eI'C'iaI'e»Tax.cs., "

G211'1dE1i11aga1§;' Ba1ngz11():"e---'56"0__U09';-_V ' . 4' * ' V

3. The gm-e ofKa:'fIz1:a1<;1'"x,_"'---

Rep1'esenter,1 b'yf1_t:S r V' PrincipalxSeMc;<e.tary to " V ' GC.;ve.:"n.:"nenI','- _ V' " V' F:i_j1'i'i:~1r1__r.:_e<V3 Depa1'tﬁ1'e.v:f1--t--, * ~ey;ah;n»;a Sdzidhz-1, ' V V Pieadelj) "

A VBa11.g:a1gj1'e¥5..6:(3{)01. ... RES PONDENTS (:By»., Sh1'i... Shiva1y<)giswamy, High Court Government « :.I .- -5.

7213'?-F-"5'u~ . , "These Writ Petitions is filed under Articles 226 and 227 of ._ " the Constitution of india, praying to quash :21 wriﬁ ofce1"Ii0ra1'i or ' '"d1'1'ecti()1'1s in the nature of writ of Certi()rari and to read down 3 16 ex.pl'.tnati011 to rule. 3( E) of the Karnutaka Value Added Tax Rules ?,(_){)5, as opp0se.d to the provisions of Section 4(l'} (C) of the Karnataka Value Added Tax Act 2003 & Article 366 (29A)(b) of the CottstEtt1ti(.)n of India in so f'at";=1.s pCEE.tl()E.}t3I' (,'()F1S@1'\~'G(l and etc, These petitions having been heard and on l1.()6.20E0. .l.4.06.20l0 and 23.06.20E(), respeetively,_'anti-e'eming,; on for Pronouneement of Orders this day. the Ctuttrt de'l%Vjje.1iect. foll_0wE_n.g:--

These petitions are hear<i~..gtitd_Vdisphosed--Q1"'*t0gethershaving regard to the fact that tltellgsuesrvilhlmlrtkedlltttje 1'de.nltV1"Cal;"

""" "tTl1e"i:,t)etlt:E:Ai(;t1.e'1"sﬂseekHto'ehallenge the constitutional V£tliditylF'e)fl «Selct«i.(:)rrv.V'j4(_lf)<{.el)'-...tt1--rd Schedule Vl, Item 2.3 of the KL11'l}tlf£1l(EE Vitllte A..dded. Aet,2{)(l3 (he1'einafter lfeferred to as 'l:1l)llrWbrevity) and the 1'-?',xpl21r121ti0r; appended to Kamzttttka Value Added Tax Rules, 2005 (here-i11ztl.'ter'rete1'1'ed to as ' the KVAT Rules' for brevity) . The petétionets are engaged in undertaking turnkey ' "'p'1'()jeets and other works contrttcts for third-pt11't.ies. The é petitioners are assessed to tax under the Act, more pttrticulmly under Section 39(.l) of the Act. The orders of assessn:rents.._1nt:;de in respect of each of the petitioners were sought toljevrev"i.seLlii(;n the ground that the turnover ot'fered:'t'o'r"tax -a_.,rtite._ot' 4% on turnover of iron and steel, involved in the exeetrtiicpn of contracts, was not permissible foirﬂhe 1'eaiso_ni"that ifthe 'works contract of civil works ' is8.distinct:iEn.tryiin. the Schedule and therefore, tax is attracted :tu1'--r'1'ov'e~i:' ;€1.T.i"[i'l€ rate of 12.5% l3rovided_. .

ltgis poi nitetito.tittl1t1t.._p1=i,o1' to l.4.2()06, there was no separate provision under w'hicl'1_it.:t;f{*--e.(5t1l.<l be levied on works contracts. Tl1e1:e..{:was~lioweverna levy of tax on transfer of property involved in_tl'1eVexectitiorivof worlrs contracts under Section 3 of the KVAT with Schedule Ill. It is only from 1.4.2006, that iqthe Legivsieture has introduced the impugned provisions enabling i"--the_i'eive11ue to levy tax on works contracts. 3 18

4. Heard Shri G.Sz:i'2111gz111. Senior Advocate, Shri Madhusudhzm R. Naik, Senior Atfvocate. alppeaiing for the c0un:~'.e1 for petitionem. and Shri Ajit Kumar Raheja.

5. It is contended that the power of the Statesiitruv ivtiliie . added tax on saies and purchases ofhgoods..4is't_to~i'b-e__i1"0u1id"oiiiy under Entig/-54 of List~H under,e'S_ehedt1if::_ VII t0dV.tiii';.r3 of India.

In the case of State Qf'M(1'a.'i9d.v _'..~*.._iiiCm-z.}1'«i{=r'z [hm/<erle__\_' and C(2:':z;_2ctIjy, 9 t_hie...¢Supi'ei4riie Court of Endia heid that a buiiding CQr1t'i1;1ct'v.v_iii%;§'h is'-.._eé':'ti'1'e. and indivisi'0ie- did not invoive any sale of g()t>da_ and thei'ef0;'e it was not within the. competence X

t)i'vt11e i<~:g§;iAi§;i:;1ti1«:f_e to impose a tax on the suppiy of materials used in. §LE.Ci¢i1 iaii'ci_m_it'1'V:_,'1'<iit treating it as a sale. It was observed by the j Supi'enj:ei"C()i:1"t as foilows:

"A.rmrf2c:-' c.1':_'/.'f2'c,'u.lI_v in the way of c;tc(:e;)1'1Trzg I/we (.*m:.Ien.Iim-7 oft/16 (zppceiianf as to Splittirzg up at /)i.;ila.':'r2g c*r.mImcit is that ' ,*_it'o;')@r1_t' in r1rai'er'i(z!ts' met! 3 EKJ it is as a consequence of the above amendment that~_tapg on sale or purchase of goods, took within its ambit a wj'oi'k.s contracts. The constitutional validity of the 46th i}'t.._inefi_d.;tient -of V' the Constitution, whereby Clause 29A~w'as--inse~_fted.in'iA:tiicv1.e'¢.366. V was chalienged in the ease of Builder:§:A.s'.';oc.~~i2zriot: (;_~f_Inc{it:.i"teei>;%é;ts Uf"l!'()I-I oyflnciia 73 STC 370, wt1'ei'e--i_n it held' Court that the object of a new definitiott of t'E1e:w'oi'dif;'sa1e' is to G enlarge the scope of 'tax o.1if.;a1ei_ on pst1I'c_t':»z1s'e.oof goods wherever it occurs in the Constitution so ._ti1&iti_it:ET1£'é'_y, iI':t:_'it1(;'€ within its scope the ti'ansfe1f,_ de1i'V*-e:'-y__o:'s st1pi5iy_ of goods that may take piaee under any of the?'ti't1its2tctEt)£1s i'€f'€-l'£'i(i(i to in sub--clauses (21) to (D of Clause' 29A. So_iconst:'i.ied, the expression ' tax on the sale or i"pt11"chase--f"t)§'""-goodsii'"""t'é1 Entry--54 of the State List, the1'efoa'e.. A'i_ricv1.ude.sv.:ia~..ta;<fon}~the tmnsfer of property in goods (whether go<:;L__1s or i_ns~o_m'e other form) involved in the execution of 3 works igcontrac.t: aiso. it was held that the power of the State to levy tax on ,.f»The'tijansfer of property in goods involved in the execution of 3 23 contract fzilling within the ambit of Article 366 (29A_)('b) is ieviable on the goods invoh/ed in the execution of :1 works contract. and ' the vzliuti of the goods ' which are irtvtuiveifiri the execution of works contract would constitute t11e;"'1t'ie.:ts;.uji'e ;_.tt;ar imposition of the tax.

In order to determine the V'L1iii1_v6 o-t7_tjhei--rrg,t5ods iwitisicliqiie involved in the execution of 21 co'n.ri'ect ftir ithjU«E1ui'pt)sei o.f:* levying the tax referred to__ in Aitic_1.ei366(?,9A)i(b),. it iS_i}iI)€FET1'ESSibi€ to take the vaiue of the v»tio:'}<ost ct>_ittr;ict it1:sV:i_the'»»basis and the value of the gt)(.ids.iiiV'io1veed«. iH'«f,!1iV€3-__6i'~'._("3L'_"3.iti()11 of the works contract can be arrived at, by deriuctiizgexpeitses incurred by the contractor for pi"()\fiC1il1g"~iab()3.l.i"'E3.i}d other services from the value of the works 'cotit;tz1et-.._v iWiti1e'v1'ixing_: the rate of tax, it is petinissibie to fix :1 un«;~t;-inn rzttef_ of tax. for the various goods involved in the 'v._€X.€CLEti*")I1i';.()1C at works contract, while rate may be different from tateﬁite of tax fixed in respect of sales or pL1l"Ch3.S€ of those goods .e 2.1 sepztmte article.

53 This position in law was reiterated in Builclers A.s'.s'0c*z'czIi'0n of lIid1'a v€r_sus State QfKcm1atczka 88 STC 248. From 3 reading of the provisions~o.fythe A'ctl_§__gi_t ll clear that Section 3 is the main ' lehai'.-giiig secti--o,n contemplates the levy of tax ()iilyl"oifi"'-i',sale. ' lie' fate tax on every such sale in :'eSpect is pi7e"sci'ibed under Section 4 of the KVAT Act." HlltVVis.vlcoiite--hded[thut unlike under the Karnatzika (hei*e'inel'tei"-ret'eri'ed to ' the KST Act' foi'=,_ l)IT_C'.'il}lf5l/'is,"r._li1<E:.1;t3.,'l.l'E1._" no 'rwrz~o[:>.s'Iari2*e' clause which overrides lllC4_ET1L1ii1lCh2ti'giﬂgl"'S6C{i()E} and therefore, the provisions a of {M91-¢_g¢nt A¢'t'wg;1"'1i;i:/e to be strictly construed. l.i:3".7.i_:(l}*1."' {()l":i.74.~.2U()6, there was no separate provision under which lE1__f('{)n_l'VV()k'l(S contracts was levied. The levy of tax, on tiarzsfer t',)*t' property, involved in the execution of works contracts, . vvasltieiiig levied under Section 3, read with the Eli Schedule to the lml<l'.l'V,A'i' Act. It is only with effect from l_.4.2()()6, the State 5 Ix.) LII t-we-»~«---~ , . . . . ﬁe-++~ has introduced the new provisions by inseitmg (C) to /\ {:2 '"

Section 4Aof the KVAT Act, thereby seeking to levy tt.'.-'}<;__CS on works contract while specifying the rate of tax unde_1f'thec_Six-th Schedule. It is hence contended that in the ttbse.n_cer.of V section to levy tax for a class of dealers the :ptitfp(t$€'--._()i Schedule under the Act reinainstit:on~t'unctional; t.i1'i"thz,tt_, the of dealers like the petitioners can_n_ot-.b_e--svingled. toifimpose the levy.

"It is nexti}1eontentled"" tliat.V_i'Att.i:.':.l~e 286(3)(_a) of the Constittition ofindia3"fautho»:tises Paiiliiament to declare some goods as being"of"speci.al' -iVi'epo~tta"nr:e and to impose restrictions and conditioits in l'€»g_ai1"'(ll() the power of the states to levy a tax on ,sttt:l1ig0_t)t.ils_tti'1{l the rates thereof. Section ?.(c) of the CST Act, defines ii'i(ie7_c_tai'et',l'goods as those declared under Section 14 of the Q said lA.ct";,asi' goods of special importance ' in intet--state trade 01' »if;:on*i'me1'ce. Section l4 of the said Act enumerates such goods. iron anti steel are iisted therein as goods of special importance and are 5 hence declared goods. The pz=trli'.1ment can therefore restrict the powers of the State government to tax such goods. Section 15 expressly provides for the restriction on the power ('_)£'_"t'he«i.St2ites._toA tax such goods. _ In the light of the above'ipi*ovisio1i.s,' the _}Valt2e Added Tax Act, 2003, has specified" 'decV1.;1r'ed.igoods ;ivt:§Ser.ial No. 30 ofthe Third Schedule A ' g;o_od;i'3 s'1?>e:c::'iti7eel...iit:Section E4 of the (,Cent1'aE Act 74 of Ar1d_a':;Vpi'o.y.idAed.iiiu*:1d'e«r~"Sectior1 4(l')(a)(ii) of the KVAT Act, the ggoods I-_.isfted'1rn thevThird Schedule are taxable at. the rate :'()t's.é_$m'7Z/2 is"t'l.1._e1*ei_'t)1'e clear that the restriction imposed by the A"Pztriia.r11e'1it}_».under Article 286(3) is applicable to the whole det'ih'itio'h«V oi: 'sale' defined under Article 3o6{_29A) of the ~iifCor1siAitution, which includes works contracts also. 3 It is seen that the State can levy tax "on the sale or purchase of goods" by virtue of the power vested in Article 246 E'n~t:fy:S4iof' List--ll. The expression "tax on the sale or pu1'chasejo--f been defined to include the term 'f*W'()ri~:.s c~iont.:";tcts°4'. V-V3/hiE.e simultaneously the Constitution iprnposesairestriction in resp_ec.t of the system of levy, rates and ()thei"=inc»idence"of oinithe sale or V epuichase of goods.

It is conte,n.ded:. attached to the ii'i'.fde--en1ed to be at sale" as oti._tiheiiiConstituti()n. The Supreme Court lEliiiiS.'VVLV':Eli'('i()'fd {lam-um [Jam/<w*lc'_t' and C()n-zpczrz}.-' (ll4c1(1fa..x') oplpirrziite-(1,Vi(']'95él}9 353, which has been followed in se'v=e;9ai §L3A'l}f:'~.(43A(}L_1CI1t judgments, has expounded on the natural 1':-spun ol"itl_te idhéflllltloll of the expression "tax on the sale or j pu1fchias.e.'i"t)Vt' got)ds" not to be construed in its popular sense, but Cfinp its-..Alegal sense. The expression 'includes' as employed in Clause 29A of Article 366 ztssuines importance; since it is directed é not only in respect of such things as signified according.; to their natural import, but includes such transfer as shall be deevn1_ed_ to be 2: sale of goods. under it legal fiction.

Section 2( l5} of the KVAT Act~'ai1d--.Secti(')it.iZi{'l)tth).i,ot' the i KST Act, define goods as meaning all li<;i__r:(i1*sV of inoveable. property_ other than, newspaper, actionable"t's.cilaiins, stocl<::¢;.andt.»shares and securities. but including sonieother form) involved in the exe.cuti()iivAoJ°_:a:--wtiii.ilts:c('ii1tiiactj:i..'-7 This would lead to a position.' igoods from the form, at the stage_.()fpurc:l'1iiis;e:'_ some other form, at the stztge ol'~,tra-n'sfe1'iito"-'i.ht:._c'o--ntrac'te'e. cannot be treated as being a different (.)ne«-..'li"o.an ithei<')1*iigi_ii21l one for the purpose of levy of tax «fin i"=:spe¢§tVt)t'..ra deeiine»J....s:1le of goods involved in the execution of a i__w"cif_l{sa.cio!1ti'ac't.__i "In other words, steel for instance, which is used in the exc.cut;i--on of works contract for purposes of construction Tesults i:1."the same being: incorporated into imrnovy§'able property, 5 'in 'respect of which the State cannot assume power to levy tax in ii '''respect of such immovfable property. The interpretation of the '' 3 30 Article 3()6(29A) of the Constitution which would incittde works contracts also. It is hence emphasized that having reg;trdi'<t(_)'~VtVhe scheme under the erstwhiie Ka1'ntttttl<a Sates Tax Act, theT"ltivy;"t';~t"

tax based on the contettts of the Schedittlie' U{1d€1"i_Ihe_. VAL;-E not acceptable in idw. The levy_ of 1'ate_t otitaxii turnover of iron and steel wottid 'i*t1Vti"tc()unte;'._to'*Section 7 of the KVAT Act which speeit'ic§;i'}~y prrjvities .:t_s,fio~li1*ows :~/A "7(i_) Nt)twithst.t-md_i:1g 'zt_11y._t11itigVco~tit3i'i1ed in the Sale of Gg)'c)'d'sT:._r%'ct, ;é__93€} {:{Iei1«tr:d'ti-i}1t«::,t___3fit>t' 1930). for the purposejo'I'""t'hi'§ Ac1{_...__;111:!_s'u_b'}t%ctto sL1b~»sccEion (2). the .*;E}.it3ii(')i'w'f._.;jv€,)()(;i.':,iiI,ﬁilttiibﬁ deemeti to have taken place at thci"_tin_1e of '«e't'1=:.t1iis.§ertt--._o{. title or pt)sse;~;sion or it1c()1'p't}.tjzii.ion of the goods in the course of execution of _gtmytowo1'ksi'co1it1i'zact 'whether or not there is receipt of §Td$1'iii1"t(3lii[A'~"

"'...__Frorﬁ'_~-:.:i_ reatiiiig of the above, it is ctear that the sale of ~V good§ s.h£tl«l_ be deemed to have taken piace at the time of transfer 4' ..ft'~ti t'it'Ee, oz' possession or incorporation of the goods in the course ()ffexect1tit)11 of any works contifact. In other wortis, the sale é 31 .

occtiis at the time of i!}C(")l"p(')l"£':{i0l] of the goods in the cotirse of execution of the work. it is hence coiitendeti that steel materiality 2tequii"es the chztmcteristics of construction work such as footiiigs, slabs. betims etc., only when they are made part and ptii?t:fe««!._(;'fVthe immovable property namely. the building, and '..A&4ii1€It._t)'1'i:(ii€ frteyv. become immovttbie property. ti1€yv~'C€21*Z-£6 E6) The' question of £1 deemed sale of the said',gOt)ds 0!'iG£h€tTWiSit3,i.Wt5Liid not arise. Steel is used iii such c"e,iiis'tt'uctit)ra*- in same it"().rm and is not converted into 'ttti.y 0_thei9 ~fI)i'tii"..whei'ehAy "it loses its eharactet'ist.ic of being steeV!.,_V"

It'-_is 'tiitis c(>i{i"t~ee4zided»t_httt the respondents seeking to take 21 View that the._vpetiti0-i_ie.i'7_s t«t..1i5ii over assessed to it-EX was erroneotis iii'aﬁnd-i:,.jii'}£1t_.,,ti'tt°5._ tui"iit5Ve=i*---::»ffei"ed for tax at the rate of 4% on the _tt;im_Ot«et'~r;)«f'isteel i.:}vt)1ved in the execution of works c()I1tmct is not pet:}jtissi.hie'i'ti*g;»i*i. the reason that the Entry under the Schedule 'A '"namely?,-\zf0i'ks C()I}U'E1Ct of civil W01'i\'S finds 21 sepainite and distinct _ i Serial No.23 under the head "all other works ctmtrztcts not ~»vspecit'ied in any of the ctttegmics specified under the Vi 2 Schedule" and therefore. attrzicts tax on the said turnover at the rate of 12.5%, hats proceeded to issue proposition ii('itices't2;1nd has sought to revise i1SS€SSl't'tCi'1[S. Though several t1SS€§$."§lT}€.ifI{S_'i3§AY€N been made for different periods in thepttst ttiidiiitzixes, h'a.ve_be_en"

paid on the basis that such turnover isn't;-ixe_d at 4i'3{<fthe £li1i.ifI'Qi'ViiiiCS seek. to revise the assessinents wiii_ii'e~»..g;eeking.to t'e2=id_ (3tit"'of» Joi1tex't» i

-- 21 decision of 2.1 Division Bench' of'~th"is_ eourt"i~n ti' Sales Tax Revision Petition in Lczrsei-7 and"Tou_!2fo,i_'Li}it:_iteci vs. State of K(.lf'l'Z£2I'(l/((1, (2£)()(//::';i:(),r:.'i'KI.4l:.:fl" wvhi"ch'». 'Ll decision which proceeded to ._deielii;ne to i.nite1jfei*'ei~i'inithie impugned order on the footing i..ha1t- the fvi1'E'{j'i-I.'i'g'.;:.7>(5f-,§hC- Tribtinal being findings of fact. and not iii\t(iE_\ii'i'ig_ any iC:jtiIE:4iS[i(.)EV1'tt}eii' law and the respondents see.kii_ig to di'tiwﬁstistetiaiiice ~froni the said decision seem to ignore given the i"tis'ti\i"iRiti;iii$ of*~Secti(in 4 of the present Act. which plainiy does not "'ti..p1:il_y deciared goods. to which Sections Hi and E5 of ti1ei"CIei1t_r'a'l Tax Act, 1956 would apply. A iarge number of "*aitttitoi'itie:§ are 1"Ci.i.€d upon in support of the contentions. S

6. The leamed Government Advocate on the othe:_j hand seeks to sustain the action of the respondents. it is contentiiedthat the subject matter is squarely covered by a decision of '[hil§:iC()ll]:;[!f{iii'l.1"l B. V.Si.ibba Raddy vs. DE.'])1.tf}' Commimioner 7'a.t~es, /2008]]! VST 715 and further that the_.deCi:$'i.oh'--i.ii1.URvC l C0n.s'Iru(.'Ii()It Limite(1 vs. [)e?pLtI'),~' C()tii.iiti.§S'»'012.er of.Cr}mmiéi9('ic1if. T'aXes,[2()()8_] I 1 VST 896, was not apgiloicableii URC Cr)mtmcIi(m. Liltlifqad, has s'oti«ght {(i)ii'¢iV_li\i'llIlV§.#7_li'lL$,iill in B.V.Subba Reddir, supra, and has_A.t>bsei'ved._thati-Zthevtéassessing authority had accepted that the'..t-;s'teeL_l'-- beei1*--..u.sed in the construction 'of the'iiE:~:.:4ildivii'g_ Mtliout being converted into any other form. ii*-Bvecvatisc of factual l:'incli_ng by the assessing iiV.Ullthcliiitlys;'l:_h.l§':._C0Ul'l{"hl.i'dr'h€1d that it was a case where the goods "w_efe as being declared goods and therefore, did not lay down _t"h,el_tiw as sought to be contended by the petitioners that evéai if iron and steel are sold in some other form, when i .th'e_y are incorporated in the wo1'ks contrz.-icts, that the tax could not

--«i_.:"b'e"lexs'ied in terms; of the VI Schedule. It is thus contended that g 34 whether there was it transfe.s' of dechired goods as declared goods in the execution of a works contract would depend on the.'i'atcts of each case to be determined by the assessing at1thority...~~~--. f ' "

In the instant cases, the tlssessiiingauthor_ity"'having; held that the steel used in the execution of'the"works'i'con'traetiihasyinot been transferred in the form of dect'i»ai'e<J gooids, b'uti.hasr;ciianged its form when it is t1't1ns't'eij_re.<i and Vthei*et7oii'e., are not any longer declared goods are fit1dii1.gs..ot7.fact.., i3£eVnice.;_--.t*iiei'e is no error in the i'ea1soning.ado;3ted the ass.es'singi'o'fi'icer. It is contended that the sanie its_Vn()tii'§Vi/iit1l:1'tiiie of thesettied iegai position as laid down bythe' Supiienie'Co*tirt"iii*i several cases that are cited at the bar. ' i i' T.it-i.siicotii.tended that Section 3 of the KVAT Act provides for ieVy__ of-~tz_1itj'..-- on the sale of goods in question of different £;t)stniiio*d.--i'ties. The language of Eintr}/«~54 of the Constitution of 'Inti§*a having been incorporated M» the 'tax on sale or purchase of "'gt)()ds' is to provide the State legislature the competence to ievy E tax, whenever there is a purchase or sale. In View of the legal fiction created consequent to the amendment to Article 36_6__of the Constitution, a sale would include the transfer of p':ft5pef'to§t-.oiI1 goods "whether in the same form or in some other"fo1'Inj,'etinirolvfzd in the execution of works contract. Conseqtlently. it i.si_.'contended'«, there is a charge on the sale o'i",_got)dS._under se¢agm'3 'lof°'tl1etwc KVAT Act and the rate has beenVdlfi'xed.Vunder*SVection';4 (l)(c) of the KVAT Act read with is contended that the tax is not levied on 21 sale of goods. A comparison .Vsc_h.._e_;n'"aeV '~-t)f:_'the» KST Act is wholly tmwarr2i'ntedi_11» cL)'ntcndin the levy is on a class of dealers. Relittnce is pl-:_1ce.d t>n"tl1e decision of Ganmm. I)mrker1_\,r & lV'v_AC7m}:;j3r:zg;'., 88 S7"C."'2-()4; to contend that the legislature has the _power-- _t:(:..'Vpres.<;_:"ibe a uni'form rate of tax for each category of wt)';-ks; contract, hence the rate of tax leviable even on the H i_m;:t)1*p()1?ation of iron and steel in the works contract @126 was l"j.u§ti'lliab§e .

% 36 Reliance is piziced on decisions of this court in Larsczn. & Toul)ro 12. Store ofKarn.a.Iz2ka, 20()6(6I) Kc.zr.L.J 452, cz1rc2"c'§:."ifc4cfc% of Kcu'2mmka 'U, Ammtha Er1gir2.ecr'z'rzg Works, STRP 30_§§f"2i()f}@_:'(i5&t§_tféef

26. .1 0.2006 which have been rendered VtfoVi1owin,g"t'he.. B. V. S:-tlaba I€eci'd_v's case supra .

It is thus sought to be c()ntetn.detiﬂtI1z1t." i1:1i\}'itr-ig regard to the consistent View taken byVth_is* court wii.'(')~?3'E.1f'1'd'S[€€3 or any goods if involved in the €Xf3Cuti()D_-"Of.Woﬂfg".oC(iri.t1"EiC{:¢.C)if civil works, the said goods would to tag: iji:1de1fwSe1'ia1 no.2?) of the V1 Scheduleiitoiitiheiiﬁct only ;

it is Fu"17't11t3vJ' cio~r1te:ided~~'i'that the petitioners are provided with .._t1:i.d atEteri"1t:--t--E«xv'e remedy under the K\/AT Act and s_t}1'e;%e"tore';..§he"ipetit.i<)ns would have t.o be dismissed on that ground alone.

_ By way of xfeply', it is contended that the assertion that the steei used in the execution of works contracts has been 2 37 tramsferred after converting the same into some other form is an imsorrect statement. There is no such finding by the assessing authority in the present cases. In the light of the contention that the petitioners are not entitled to plaice"i'e«l.i_ane'e:_.ori _ the decision of this court in URC C ()fl3'TVifAL5{V¢'bIIi()f'2, supra.:i'_s ,eii't'.()i:eo2.is." = s. The petitioner in WP 29()46tt4s/2ee79 ii;1t'.1_$"titli$§'0iiiti:iti€_ﬁ(Liii§:t1 additional ground, in that, it is st_ate.d thatthe .p_et'itvio'i1_ei*-..who was' engaged in the execution of Via-------:t.ont19a::t for"t.h.e s'i1pp'ly and installation and commissioningofihaniufatttured "bullet tanks"

which a,»;9e l2ttei"~:*§n instaiile-d"at the site of the coiitt-"acting party. had used mild steel' spla-tes sheets as raw materials in the t1i.t11iufaCtt:,i'e of they saitl prodttcts. This raw material was sought to he'«bi'(;u;:lit .to*--._tax @ l2.5"/ce on the El1"1"t()i1E1IS declared by the petiti;one'*'to_wa'_:'jdsi the Value of the same. Apart from this, Certain im)bi1i;:(ationi advances received under the terms of the contract ~ ftowai*ds pi"eii.minary work and procurement of the material was s()}ught to be brought to tax @125 932: apart froin penalty, on the 3 38 footing, that there. was an trnderstatenierit of the tax liability. it is contended that during the relevant period, when the pet..it'io1iei's received the advances. the only activity carried_;tj'ut.fw;is»Tthe purchase of the raw material aforesaid and prepztration (5'f.:sectio_ns«i.

of the plates and sheets at the site. ;'Th€_:"I'L:lE tif_t'2i>i"tin' t'l--~.._e 'raw material, which are declared gotjds;"bei1igil% andi'the'»st-rme liavitigi' been paid - and even though" "raw rhatveriaii was not incorporated in the works co:_1ti'ac~t. no-.ti=a.ii's--fe.r of the property had taken place --"'~th'e ad=_van__ces w.erei.ja.ppaife11tly being treated as the co1isidei'ation_ ii1ieeei'i'ed'"'r7oVi'. lil'r€5...tI'Eli3Sil€1' of property in the said raw material.' to levy?'-»ta>t=and penalty as aforesaid. _;i'i"l'.<e petit'i:)r_iei's stibinit that levy of tax @ l?,.5% on the .:.1i*r:t.)tt1atsirepresenting advances received towards preliminary w--ori<:'.'i1iv(3l.vetlgiri the execution of works contract is illegal and oppoisedltohdtlie provisions of charging Section 4(l)(c) of the Act that provides for levy of tax only on the amounts re..prese11ting transfer of property in goods involved in the 3 39 execution of works CO11[i'dC[. Fm'ther, the levy of tax on the Vdli,1C of declared goods i..e.. M.S.Sections prepared at the work _§;ite @ l2.5% as against 4% declared in the returns filed in I00 is clearly opposed to the provisions of Artic'i'ej286{33&1}:of the Constitution of indie read withoitheiiiP:'£)visi¢;3a.?iiof'Section 4(l)(c) of the KVAT Act as wellesé Secit1a)1i$w.l4 "of Act, 1956 governing the levy on 'diecleired goods' and therefore the levy is withcaot j_uri_sdi;ction_.'»._The petitioners further submit that the levy is uri.c;onst;ituti-t)r:;ili totally opposed [0 316 biﬂdillg'd€tZiSilti!1$ 'OffFhﬁ-APEXfCf)u1'it"iin the case of Gannon Z):-trzker*!ie--_,\' am; V(.7lr)'r3iig)x:;iz'I"t>, VS'-tale' of Rc.:ja.s'rhcm., 88 3 TC 204 and BL-til(1i(?I'.S' A.Yii§t3--r;t(.I'f!'Qt':-Qf".lI'lLIl:'ihtli t..=,s'. Union of IITCII-C21 ( 73 STC 3 70 at 'VV."«A$94V-Vi.-TS':{/")z,\'-,Wig'e1'€-i1]V"Vi'tV' ----- -has been held that the restrictions and tc(3'i;diit'it\h's;..aceiitgiiiyed in Section '15 of the Central Sales Tax Act, l956,__oii the pfovvea' of the States to levy tax on the sale of declared Vi"gr.)otfls ttppily equally and fully to transfer of property in goods _i i'n_voi*vied in the execution of works contracts, even as they apply to it ordinziry satles, and therefore, if there is transfer of property in Z 40 declared goods, for example steel products, in the process of execution of works contract. the State can levy tax only a1t's'fi% and only at one stage. The petitioner further submits that penalty under Section 7'2(2.) of the Act or1"the:ff()o~t:in<g V. the petitioner 'under--stated the tax liah-.ility"ti.ti the_r"ettjrns Ifi--l.edi1.'r;y more than 5% and also the levy o_f°'i»nteres't uE'ld€1'1Sv€Ct_l(5'Il35(3) of the KVAT Act is also illeygail and tirr..:oi~1stitutional beitig highly arbitrary and confiscatory in ;:_tata1*ef' arise to if co ns ide1*?2"it.7:t_) Ii' w:a1i~e , z1:)Whetlter thei"Sta--te"floverttmeiit has the competence to lex'y»»'-ifctx on the "t-i?:1n_st'er of property in goods. involved in the 'ex.eCu.tyionl'(?nf-.W().1fks contract, (when the goods in question are "deeliared for the purposes of the Central Sales Tax Act Q1956 )atn;o1'e than one stage '?

it Whether the Explanation to Rule 3(1) of the KVAT it ...RUles - which pro\='ides that any advances paid to a <:ont.raetot as 3 4! part of the C0nSid€!'t1ti()E} for goods involved in the execution of the works contract could be ineiuded in the totai tLttnover __in the month in which the execution of the works commences-~i--§fVe'*.aen before the goods are incorporated in the works'? In answering the above questio.ns,1'_ithe: set~t1e'd_'};oi;i.ifi'oﬁ'3of iaw iiasofai" as the iHIE5i'}3i"€i21{i()!1V(¥.1fiit'h§3 s<:o'pe__ of.uArtie"1e"36G('29A')'V V of the Constitution of Ia1di.a.;1nd i't$"'imij'aeit"~:).n the ip1'ovi:§i()ns of the CST Act, laid down by theiéi1:iex7i'eou:t~__cz1ses of Builclers A.s'.s'm~iczIi0r2. of ];1(z'i't;_:.i-*. U}'2i()!_I lr2cii(t§_"--7,3___STC 370 and Gannon 1')L,,,,I',(,,~jv{i_\_- i__4=kg~.'x[€'cgjti';t:/tczr':,' 88 STC 204, is to be kept in View. In theiliattei" been laid down thus :

1zVl'ziiié"e}iti.c'Iiiz.g (1 law in~2,1_)o,s'ing at {cm on .5'(.zfe _()igi_)ii.i:if&f*i'rti.§s'c'.ofgoods under Entry-54 of I/1.9 State List, " = i-.§;i.ti.';:;;~izi;::i;-iii;--t-/am (b) rgf'C[ai.:,s'e (2%) Q;-'Arm.-ze 366 rifftlic)'vCoI'zis'liIutir)it of '1!-tdfcz, it is not picar'i'rt:'.s'.s't'l§/6for the '..'s'v.-ﬁe Lceg:'.s'laIu.re to nmke (1 lczw :7:-npowlfr-lg tax on Slit.'/'1 cz clecmzecl .s'¢.'.lc wi'2ic.'/? c:'0rz.s'IiI'ttfe.s' (1 mile in the c*r)m-'Se of 1';-Ila):-'-static' {male or c'r.m-1m,m'c'c* zmder Sc*c.'f:'0:'z 3 of the Ckeizlraf Scz.le.s' Tm: Acre' or sczfe in the ('0m".s'e off fI?'?.{)(})"I i "3 or e.x'porI m-:(1erSe('tion 5 ofthe C emml Sales Tax Act. 50 also it is not possible for the State Legislature toll, impose a tax on goods declared to be of l' importance in inter-state trade or commerce'liirtdeci Section 1'4 of the Central Sales__..Tax' Ac;".e§tc'elﬁt.ii1'~ accordance with the restrictions ulcoitditi-oilsf.-,_ contained in Section 15 the Ceiztral Tax Act." (e.mphasis .mppZieti } Tlius, the levy of respect of declared goods, is and restrictions c(mtz-lined in ilfﬁlle "i"--.helfi1'st condition is that the tax p£iyéib'le...l:,11defftie1e s21l"es"'t£ix law in respect of any sale or purclmse of decl;1i'e'§i*1~side the State shall not exceed 4% of {l1eA.:;-ale or "pI.;1'chaSe 'pm-"e and such tax shall not be levied at l1i'a2.1Vte"thz1°n:' otlustage. The apex Court has laid down in Bm'l(Ze.rs A.s,s"o;-iat'i'oi5i:is czise'"sup1'a, thus 2 .. h' The re.s'Iric.'tio1-'1s and cm-'z.dit'ior:..s' con.I'.:zinecl in Se'c,=.¥io:I I5 (if the Ceiztml Sales Tax Act, 1956 on the r,.'J()»;4=c't' of the States to [ea--1}.' tax on the sale of c1ec'!ar'ed ;3o(Jcls tsp/)1)' ('(j£-t(.iH_§-' tznd'/£411); to transfer of propertjt in goods Lmder works contracts, even as tire}-= app];-' to 3 43 omit';--z(.:r'_\' soles. Therefore if there is a transfer of property in deciared goods --for example steel pr()d1¢cts¥ in the process of execmfion of works contract , the can levy tax only at 4 percent and i"

stage "( emphasis supplied).

As can be seen. Section 4 oftheK;1_1'natakav_i\/alue 'Ai(idcd--,V Tax. 2003 is the charging Secti()nfe,1_d»it p1'()\if:~:ies'ea:s foiltiws : "4. Liability to tax anti i':=_1Eesit-hci1'e'()i'__«i (1) Every dﬁi-liiC_E.' whc:>'iiis"(ir.ii;-: 19'c:.;i:ui_redi.1e_i§:~: registered as speicii'icg: in ":1 Sections 224.i:1::1di'2i4;'sha1l be liable to pay 'if.f;iX;.;_ on 'Vl:1.;l'..§ ._{e'X.};iblie"tomes/chi', (at) in __i':-:spe.ic1Vcnfiigryodsiincnti0i;c.d in -- (.1) u 'aE'=il1c rate of one per re;-21,

(ii) iiTE.1i1'd S§hC.(/jAL!_EicC.l."{i:{i thclrate of four per cent, and V]:(')L1.£"E'h""Stv,'Vi']'g('i"..IIC. at the rate of twenty per' com.

A {i)_v)"i'i:i} i'cis§)ccI of other goods, at the E':-Ht"? 01' {twelve V T' oi1;cV:i.i~uii.'§ per cent' i'.__ﬁ(c)Virliieesgaeet of transfer of property in goods i i(«:_wii1cther as gooés or in some other form) Viﬂiinvtﬂvetl in the execution of Works contract specified in coiumn (2) of the Sixth Seheduie, subject to Sections 14 and 15 of the Centrai Saics Tax Act, 1956 (Centrai Act. 74 of 1956), at 3 44 the rates specified in the corresponding entries in eoiumn (3) of the said Schedule."

An analysis of the Section more pe1'ticuEarEy.,..jCIttuiS*e(Cf)& would indicate that 2: dealer registered under the V' to tax and that such tax is Ieviabie on the ta1x.afbEe--cc t1it7,t1()ve'i= 'i*e_1at.i.n;g to t1'L1HSf€t'()fpt'0p6t"[)/ in goods, Whether ztsgoods ot"i}r1sovme}othe:{:> form. invoived in the e>_<ect1ti()n___'_of_works iCt')|TlVtraCt§; that are specified in the Sixth Schei(iuie--to'--tl1eAet'--:iit:'i'at the rates specified therein. The levy i:s:Vst.;bjeet'VVtoV'the p'i'o.\}*is_i()hs«»of' Section 14 and 15 of the CST c.:tS:'eEz1tii':u*tgv't()"a1cc.1a1:'ed"geoiis. Tl1i7.ugii1_ tax.att='I'2.5i%_:'i'5;.,,;i'p.pEtcabIe under Serial 210.23 of the Sixth ScI1ed"ecE4_eio 'th'e.Aet »';ic1i"i.=espect of composite works contracts Ellvtﬂvjlilg transfe':v.of Vp:'o|:ierty in goods, an exception is provided in :Sectto_1ja4-.(i.l'*}('c) of the KVAT Act itself, that in respect of v.;_:'(';otJs f'i~n_\.2olved in the execution of works contracts, the rate: t__)if'itat>;_sheiV_EAihe as provided in Section E4 of CST Act @ 4%. [This ié $o'I:)ecause- the provisions of Section 4{1)(c) is necessarily ivto"he..i'eael" with the Sixth Schedtile to the Act and the entries in g 45 that Schedule. are subject to the provisions of Section l4 and 15 of the CST Act. Thus, as 1'ega1'ds iron and steel prottuets. iiseG."-in the execution of works contracts. the levy oi" tax shall .onl3[ on the value thereof.

It is also to be seen that Section 7'loi;t'h'e KVAT .L{X'et_i'e2Icls as:

foiiows :

"7. Tin'teoi's;1Ee of goods (1) Notwithstanding anything cotitatitied itt'ihelSale}ot' Goods Act. 1930 Ai_(2Cetttratlli tloitilthe to subsection (2).

:.zileVt5iillgt>:_)lls tieemed to have taken place at .the _tiiite._Aold"tt*:t1'i'1sl'ei Viol' tttte or possession or . _ii1eoi'i5ot';itionhot" Ativtellgotids in the Course. oi' execution

g)__EHttity \V()'l'l\'b'£'.(.'l.l]ll'L1Ci whether or not there is receipt I" {)'it}f[ll'1Ct't£I it i~'*lt':i'i'*xVil_LEe.Al<.llVv'that where :1 dealer issues L1 tax invoice it} t'e.:+;)eejt.- of such sale within fourteen days from the ~~dat_e oi' the sale, the sale shall be deemed to have tzii<e.ii place at the time the invoice is issued. iii'): Where, bel'ot'e the time E_}.ppllCt1l)it'.' in s11l)wseetion(l'}, the denier. seiling the goods issues it tax invoice in 46 respect of such sale or receives payment in respect of"

such sale, the sale shall, to the extent that ter1tpt)r"2V1ryl..F"

injunction is covered by the invoice Oi" pztyztieiﬁtjtaeih' V cleeined to have taken at the time the issued or the payment is 1'CCCiV€_.(,l».~»~ ._ M (3) The Commissioner may on applAi§:atioti dealer exempt such dealer sub_jeet---- to'sueh co5ndiltv'i'oi'1s "

as he may specify, from 'th:e"v.tiine l section (i)."' This provision creates'a-legsIf';-fiiv;til():1l:le2,slLo the point of time the sale. of goodsis porptrlses of this Act. It or when iii} i'nVovice"is'is¢3d=;__ = l or when the owjiieii'ship of goods is ti'ttnsfe1*red ,or when possession tl1e_L;(')o.ds is given,-~ -------- ~::"Wl1€l] the goods are incorporated into the l p_ro';3ei'~t 3r off Jllhtill"C,Qli:l'lI'E1C[BC. 3"'-Theli'efoI'e, steel and steel products used as raw material by the petitioiters are lnC()i'p()i'E1t€d into their civil works or other * lf:w(;:rks contracts in the Si1E11e£I'lT1 except that the same may be 47 fashioned to suit the requirement. before the same :i'1e1'_ge into the works which is thereafter identified immovable property. At the time of iiiccarporatiosi , steel and steel products do notepiose their nature or form and therefore cannot be subjec_t§ec1'to_' as the said goods are already subjected to tax .;1s"'d--eicV1aii'eVd'-gozgdsy under the CST Act.

The reliance sought to be_yp~L;1ced'():i ;hei'dec«Vi_$i'o:3. of this.' court in the case of B. 1/.Subl)ar-'i'i'etfc!yi"~supra,S'by. the Revenue, which has been followed in 1:;.1te:9d.eici'Sionis-5f;,1,1Sc.cannot be pressed into service --iiii"o';_.otheisarne' rendered in the backdrop of there being, no dispute that irosiu---i.1d'steel that had been purchased by the petitioi1'ei<.thereinmid had been used in the construction ()fa bridge .s=.md., h'c1dvil'1Q{"i)i€C!'1 used in the same form. Secondly , the said d*e»c.is;-i_onwéie. Wiiil reference to the provisions of the KST Act, which not contain any provision akin to Section 7 of the

5.' Act.

2 48 In so far as the dispute regarding the levy of tax @ i 2.5% in respect of advance amounts received by the petitioner in WP 29046-29048/20()9 is concerned, it is seen that the vpethioner therein was paid the said advances to enabie it__§'_to"c..é_1rr_y':.3ti't_ preiiminary work and procurement ofbniateriaisr.:'_'v!,ti"'was not"

engaged in any activity of manufacttrre :i_"nid"isaiie_ (if.'ainy..igoE)d.s. The contract it appears was V21-.._co.mp(3site__ works "c_o'rrtra'ct for"

designing, procurement ryf...11'1ate.:i"i:;ti:i:i_:'constr-uctioii; erection and commissioning of moulded LPG s'toi'ziig¢...$iy~ste.rhs_, at the site of the contractee. Ti1e'°;1etiti()rr.et'gis~*:sa'id"to-- received the said advancesv-,dLiring the oniy activity carried out under the contract was vp1'V()c-:_:i'e.niie:rtii' of the steei materiai and preparation ~of thie_'isan3e by cL:tting--~--:}:id roiiing into sections to be incorporated i__nt'o_ct_Iie. :I't'_.is not in dispute that the rate of tax in respect of iron and steeij..~i§e.,m.iid steei sections being 4% , the said rate was :d:'{cia1'e.d'anid paid. it is also not in dispute that the said material _ie._h:1_d"not been incorporated into the works. Hence the ievy ' 'apparently was with reference to the Expianation appended to 3 4*) Rule 3(l)(a) to (g) of the KVAT Rules. The same reads as follows :

Determination of turnover A (l) The l()lEt'l:."

turnover of :1 dealer, for the purposes of shall he the aggregate ol'-- ' (at) the total amount p£1l(>'lV(:)I' pzt}r":i'tile----ll):j»,tbthe dealer as the consideration for p_urcl.ias;.e the goods in respect of which l'l'd..Xl'"}.5,j levial)_le, sub-section(2)ol" Section*3_il''~~._pb . Al _ V (lo) the total amount pziidp_g)_rl:p:iy:ibule totli«e_dAe;'tle5r as the etasisicierzitijozi 7_lori- supply or distribution of any ..'goods--'«..vWliei?e_'I-such sale, "sui_liLpEyllllgfltii§tt=i,.l§'utiori._lhasl"taken place inside the l' dealer himself or through " l (C) the tt1rtz.t_lahioLt':1t paid or payable to the dealer as ll et)t1sidlelrati(>ii for transfer of property in goods as goods or in some other form) involved ll "l~l:f:1': th1ellexeeuti<:)ti of works contract including any ltiiiiotirit paid as advance to the dealer as a part of V 1' such C-()ElSl(l€!'£1ll()E1L x __ t.{d) the total amount paid or payable to the dealer as the consideration for transfer of the right to use any @ 50 goods for any pttrpose (whether or not for specified period);

(e) the total amount. payable. to the dealer 213 the__ cc)iisi<1ci'u1'ion in resgaeet of goods deiivered on hi_re»._ purchase or any system of payment by iiistai:.n~et1'ts;.:. c- (F) the aggregate of the sake. prices reeei'&<ie:d .a_m.d"

receivable by the dealer in respect goods in the course ofV'-iiii1€;t"«s.ti3te'rentrztde commerce and CXp(')l"[V(iEJ.[" the territory 0!: .1v.r;.tEi..:1viVztr1d attic. tn the course of i'i"tv:;oo:"t into the 'tei_:i>it(ii*yvuot'i India; and i i it 1 '-13

(g) the value of 211} woods t1{ar:st'e';9ij'crji't)r despatched outside the Stz1te....t>1,her.w'ise way" of sale.

it 'Arty paid as advance to 21 "deaiier has : vot'"'~c£j'lt;sideration for transfer of prope1*€yiii goo_dis7 as goods or in some other ..§:<forirra) §i1voi't-r._et:lV in the execution of 21 works contract siiiillii '*includettHii11 his tot:-ii turnover in the month in iiei$ie.cvt1;tio11 of such works contract commences.] ,3' as

-4-...» -"u._- -'-o The 'iixpidiizttioii' above was inserted by 21 n(')tificat.ion ('1'i".:[€'(Ei.-'2'?"5"2()()(7t which reqtai1'e.s' L1 registered deaiet to include the 2 advance amounts received as part of t()L.-ti turnover in the month in which the execution of works contr:.1ct commences and thereon. even though there is no transfer of prt)pett.y"i.i1v aiijye-igot)_ds involved . The Explanation cenaiiilyiihins'c.r)_u'nter«to'the vtenior of the ch:.1rging Section 4(I)(e) andiuns c'o_unt.er to tih'eid'cfinit--ionof, 'taxable turnover", 'totaE turnovei'i'*:,t:ii<i the Act. It is also in direct ctﬁnflicit 366(i9A)(b)tur the Constitutionoflndia. V i it i i creates a legal fiction for the purposes of the Act as advance is :.t1<.in to bringing to tax an z1gi'ee.nient. to sell' goods . even before the property in the to the"E3--u--yei'. This is plainly contrary to the very i'*.:1e'i'inition"=ot' under the Act itself. Therefore. to the said e--xten.t, tlie.-;tb()<jve said provisions are unconstitutional. 6

21)

b) Hence, the following {.)i'd€l'2- The writ petitions are allowed.

it is declared that Section 4(l)(c) read with Serial the VI Schedule to the KVAT Act does not enable tile 1'esTpoh*de"r:tsl'v. to levy tax at the rate of i2.5% ii":''i'es--pect:l_4of_.dec»l'nredgootls ' Lised in the saline form, in the exectptisilh of works 'coi--1lti*'acts,hh which fall under Section 14 ol"'z.he"Centi~a'l~ 1956:' Consequently, pr()ceediiit.gs ir_«i'itie_1te*d .()1fii'C~I;)I1CludE)'d in respect of the petitioners seei<ii1g__to levy t;;1x,--'"a.sl'qi1Vesl'ti()ned above, are l16l'Cl3=y qtiasheldt to thattl exte:-at'. ' "iixpl21nt1t~i.ol117' to R';_ille'«.._l?i(zi) to (g) of the KVAT Rules is lo SAelctiei1--~3.(l)(c) of the KVAT Act amd Article the Constittition of India and is hence, iu,nconstitiitional and invalid.

Consequently, the levy of tax 6':

and penalty on 2;:dvune.es received by the petitioner in WP 29046- 29()48/2{')()9 at Annexure-A thereof is hereby quashed. nv ;' "

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