advocatemmmohan

My photo

ADVOCATEMMMOHAN -  Practicing both IN CIVIL, CRIMINAL AND FAMILY LAWS,Etc.,

WELCOME TO LEGAL WORLD

WELCOME TO MY LEGAL WORLD - FOR KNOWLEDGE IN LAW & FOR LEGAL OPINIONS - SHARE THIS

Friday, September 9, 2016

Karnataka Sales Tax Act,= (i) Is the assessee liable to turnover tax under Section 6-B of the Karnataka Sales Tax Act, 1957 on the payment made to the sub-contractor in spite of the fact that the sub-contractor had declared the turnover and paid taxes? (ii) Since the payment made to the sub-contractor does not amount to turnover within Section 2(i)(v) of the Karnataka Sales Tax Act, 1957, can such payment be part of total turnover as per Section 2(1)(u-2) of the Karnataka Sales Tax Act, 1957? = since the transfer of property involved in such execution had already been taxed, the appellant cannot be taxed again under Section 6-B of the Karnataka Act there being only one taxable event for the purpose of Article 366(29A)(b) of the Constitution of India.= the assessee had assigned parts of the construction work to sub- contractors who were registered dealers. These sub-contractors had purchased goods and chattels like bricks, cement and steel and, where necessary, supply and erect equipments such as lifts, hoists, etc. The materials were brought to the site and they remain the property of the sub- contractor. The site was occupied by the sub-contractor and the materials were erected by the sub-contractor. In this backdrop, after taking note of some provisions of the Andhra Pradesh Act, the Court explained the legal position in the following manner: “16. By virtue of Article 366(29-A)(b) of the Constitution, once the work is assigned by the contractor (L&T), the only transfer of property in goods is by the sub-contractor(s) who is a registered dealer in this case and who claims to have paid taxes under the Act on the goods involved in the execution of the works. Once the work is assigned by L&T to its sub- contractor(s), L&T ceases to execute the works contract in the sense contemplated by Article 366(29-A)(b) because property passes by accretion and there is no property in goods with the contractor which is capable of a retransfer, whether as goods or in some other form. 17. The question which is raised before us is whether the turnover of the sub-contractors (whose names are also given in the original writ petition) is to be added to the turnover of L&T. In other words, the question which we are required to answer is whether the goods employed by the sub- contractors occur in the form of a single deemed sale or multiple deemed sales. In our view, the principle of law in this regard is clarified by this Court in Builders' Assn. of India as under: (SCC p. 673, para 36) “36 … Ordinarily unless there is a contract to the contrary in the case of a works contract, the property in the goods used in the construction of a building passes to the owner of the land on which the building is constructed, when the goods or materials used are incorporated in the building.” (emphasis supplied by us) 18. As stated above, according to the Department, there are two deemed sales, one from the main contractor to the contractee and the other from sub-contractor(s) to the main contractor, in the event of the contractee not having any privity of contract with the sub-contractor(s). 19. If one keeps in mind the above quoted observation of this Court in Builders' Assn. of India the position becomes clear, namely, that even if there is no privity of contract between the contractee and the sub- contractor, that would not do away with the principle of transfer of property by the sub-contractor by employing the same on the property belonging to the contractee. This reasoning is based on the principle of accretion of property in goods. It is subject to the contract to the contrary. Thus, in our view, in such a case, the work executed by a sub- contractor, results in a single transaction and not as multiple transactions. This reasoning is also borne out by Section 4(7) which refers to the value of goods at the time of incorporation in the works executed. In our view, if the argument of the Department is to be accepted, it would result in plurality of deemed sales which would be contrary to Article 366(29-A)(b) of the Constitution as held by the impugned judgment of the High Court. Moreover, it may result in double taxation which may make the said 2005 Act vulnerable to challenge as violative of Articles 14, 19(1)(g) and 265 of the Constitution of India as held by the High Court in its impugned judgment.” This raison d'etre shall apply, in full force, while answering the question even in the context of the Karn5ataka Act. We, therefore, hold that the value of the work entrusted to the sub- contractors or payments made to them shall not be taken into consideration while computing total turnover for the purposes of Section 6-B of the Karnataka Act. As a consequence, the two appeals which are filed by the assessee are allowed and the appeal preferred by the Revenue is dismissed. In the facts and circumstances of the case, there shall be no order as to costs.


                                                                  REPORTABLE

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO. 2956 OF 2007


|LARSEN & TOUBRO LIMITED                    |.....APPELLANT(S)            |
|VERSUS                                     |                             |
|ADDITIONAL DEPUTY COMMISSIONER             |                             |
|OF COMMERCIAL TAXES & ANR.                 |.....RESPONDENT(S)           |

                                   W I T H
                        CIVIL APPEAL NO. 2318 OF 2013

                                    A N D

                        CIVIL APPEAL NO. 7241 OF 2016


                               J U D G M E N T

A.K. SIKRI, J.
                 Same parties are entangled in  these  three  appeals  which
arise  out  of  the  provisions  of  the  Karnataka  Sales  Tax  Act,   1957
(hereinafter  referred  to  as  the  'Karnataka  Act').   Two  appeals   are
preferred by the assessee, viz. Larsen & Toubro  Ltd.,  and  one  appeal  is
filed by the Revenue, i.e. the Sales Tax Department of Karnataka.

The assessee is doing the business of engineers and contractors and in  this
process it, inter  alia,  executes  projects  under  contracts  with  public
sector undertakings, local bodies  as  well  as  the  Union  and  the  State
Governments, besides private sector.  The assessee is registered  under  the
Karnataka Act and files its returns for payment  of  sales  tax  thereunder.
The contracts which are secured by the assessee are the works contracts  and
a part thereof is generally assigned to sub-contractors.   For  example,  in
Civil Appeal No. 2956 of 2007,  the  assessee  had  secured  a  contract  to
construct an indoor stadium  styled  'Sree  Kanteerava  Indoor  Stadium'  in
Bengaluru and the assessee assigned the work of finding their own  materials
and laying foam concrete to M/s. Lloyd  Insulation  (India  Limited).   This
sub-contractor was registered with the  Deputy  Commissioner  of  Commercial
Taxes, Assessment-IX  City  Division,  Bengaluru,  and  accordingly  it  had
submitted returns and paid taxes for the execution  of  the  works  contract
and was duly assessed under Sections 5-B and 6-B of the  Karnataka  Act.   A
certificate dated April 10, 1998 to that effect had been marked  before  the
authorities.
      Likewise, returns are filed by the assessee as well on regular  basis.
In the course of the  assessment,  the  assessee  submitted  that  the  sub-
contractors were the parties who executed the works contract and  since  the
transfer of property involved in such execution had already been taxed,  the
appellant cannot be taxed again under  Section  6-B  of  the  Karnataka  Act
there being only one taxable event for the purpose  of  Article  366(29A)(b)
of the Constitution of India.  In nutshell, it was  the  submission  of  the
assessee that value of the work entrusted to the  sub-contractor  could  not
be taken into account while computing total turnover  of  the  assessee  for
the purpose of taxation under the Karnataka Act.   This  submission  of  the
assessee was, however, negatived by the Assessing Officer  as  well  as  the
Karnataka Appellate Tribunal.  In the revision filed  under  Section  23  of
the Karnataka Act, the appellant raised the following questions:
(i) Is the assessee  liable  to  turnover  tax  under  Section  6-B  of  the
Karnataka Sales Tax Act, 1957 on the payment made to the  sub-contractor  in
spite of the fact that the sub-contractor  had  declared  the  turnover  and
paid taxes?
(ii)  Since the payment made  to  the  sub-contractor  does  not  amount  to
turnover within Section 2(i)(v) of the Karnataka Sales Tax  Act,  1957,  can
such payment be part of total turnover  as  per  Section  2(1)(u-2)  of  the
Karnataka Sales Tax Act, 1957?

            The High Court  decided  the  aforesaid  questions  against  the
assessee and thereby affirmed the  view  taken  by  the  Appellate  Tribunal
which resulted in dismissing the revision  petition  of  the  assessee  vide
judgment dated February 03, 2006.  This judgment is the  subject  matter  of
challenge  in  Civil  Appeal  No.  2956  of  2007,  which  pertains  to  the
Assessment Year 1997-1998.

Likewise, for the Assessment  Year  2002-2003  (Civil  Appeal  No.  2318  of
2013), the assessee has been meted out the same treatment whereby  the  work
awarded to the sub-contractors, who are  the  registered  dealers  and  have
paid sales tax in respect of the works undertaken by them,  has  been  added
in the total turnover of the assessee  for  the  purposes  of  levying  tax.
However,  here  the  matter  is  remanded  to  the  Assessing  Officer   for
ascertaining the liability of the assessee under  Section  5-B  as  well  as
Section 6-B of the Karnataka  Act  in  respect  of  total  turnover  of  the
assessee.

On the other hand, outcome of the proceedings in respect of  the  Assessment
Year 1999-2000 (Civil Appeal No. 7241 of 2016)  has  taken  a  U-turn.   For
this Assessment Year, though the Assessing Officer as well as the  Appellate
Tribunal had included the cost of work awarded to the  sub-contractors,  the
High Court has held that value of the work awarded  to  the  sub-contractors
cannot be included for computing the total  turnover  of  the  assessee  and
has, thus, allowed the revision petition preferred by the assessee.  Against
that order, the Revenue is in appeal.

The aforesaid brief resume of the three appeals  makes  it  clear  that  the
question of law involved in all these three cases is the  same,  though  the
two sets of judgments of the High Court are contrary to each other.

It may be pointed out at this juncture itself that in the case of this  very
assessee same question of law had arisen, albeit in the  context  of  Andhra
Pradesh Value Added Tax Act, 2005 (hereinafter referred to  as  the  'Andhra
Pradesh Act').  This Court has decided the issue in its  judgment  known  as
State of Andhra Pradesh  &  Ors.  v.  Larsen  &  Toubro  Limited  &  Ors.[1]
(hereinafter referred to as 'Andhra Pradesh  judgment').   The  question  of
law is answered  in  favour  of  the  assessee.   Taking  aid  of  the  said
judgment, the assessee  has  argued  that  the  instant  appeals  should  be
decided in its favour.  On the other hand, plea of the Revenue is that  that
view taken by the High Court, which is in favour  of  the  Revenue,  is  the
correct view and should be maintained having regard  to  the  provisions  of
the Karnataka Act.  The endeavour of the Revenue is to demonstrate that  the
provisions of the Andhra Pradesh Act are materially different than  that  of
the Karnataka Act and, therefore, the judgment in the  Andhra  Pradesh  case
need not be followed.
            Before adverting to the aforesaid judgment  of  this  Court,  it
would be advisable to take note of the various provisions of  the  Karnataka
Act.

For  our  purposes,  definitions  of  'sale',  'taxable  turnover',   'total
turnover' and 'turnover' are material, which are reproduced below:
“2(i)(t)  “Sale” with all its grammatical variation and cognate  expressions
means every transfer of the property in  goods  (other  than  by  way  of  a
mortgage, hypothecation, charge or plede) by one person to  another  in  the
course of trade or business for  cash  or  for  deferred  payment  or  other
valuable consideration, and includes, –

(i)  a transfer otherwise than in pursuance of a  contract  of  property  in
any goods for cash, deferred payment or other valuable consideration;

(ii)  a transfer of property in goods (whether as goods  or  in  some  other
form) involved in the execution of a works contract;

                          xx          xx         xx

2(i)(u-1)  “Taxable turnover” means the turnover on which a dealer shall  be
liable to pay tax as determined after making such deductions from his  total
turnover and in such manner as may be prescribed, but shall not include  the
turnover of purchase or sale in the course of inter-State trade or  commerce
or in the course of export of the goods out of the territory of India or  in
the course of import of the gods into the territory of India;

(u-2)  “Total turnover” means the aggregate  turnover  in  all  goods  of  a
dealer at all places of business in the State, whether or not the  whole  or
any portion of such turnover is liable to tax,  including  the  turnover  of
purchase or sale in the course of inter-State trade or commerce  or  in  the
course of export of the goods out of  the  territory  of  India  or  in  the
course of import of the goods into the territory of India;

(v)  “Turnover” means the aggregate amount for which  goods  are  bought  or
sold, or supplied or distributed or delivered or otherwise  disposed  of  in
any of the ways referred to in clause (t) by a dealer,  either  directly  or
through another, on his own account or on account  of  others,  whether  for
cash or for deferred payment or other valuable consideration.”

Since we are dealing with the sales tax under the Karnataka  Act,  obviously
the said tax is on 'sale'.  'Sale' is defined as transfer  of  the  property
in goods by one person to another in the course of  trade  or  business  for
consideration and it, inter alia, includes a transfer of property  in  goods
(whether as goods or in some other form) involved  in  the  execution  of  a
works contract.  Thus, even in respect of works contract whenever  there  is
a transfer of property in goods, that is deemed as 'sale'.
An essential element to constitute a transaction as 'sale' is  the  transfer
of property in goods.  Aggregate amount for which the goods  are  bought  or
sold, or supplied or distributed or delivered or otherwise disposed  of,  in
any of the ways referred to under Section 2(t), by a dealer  is  treated  as
'turnover' within the meaning of Section 2(v) of the Karnataka  Act.   There
are two variants of this turnover known as  'taxable  turnover'  and  'total
turnover', the definitions whereof  are  already  reproduced  above.  'Total
turnover' is defined as aggregate turnover in all goods of a dealer  at  all
places of business in the State.  However,  from  this  aggregate  turnover,
certain deductions are permissible under the  provisions  of  the  Karnataka
Act and when those deductions are allowed from the total  turnover,  we  get
'taxable turnover' on which a dealer is liable to pay tax.

Section 5-B of the Karnataka Act is  the  charging  section  in  respect  of
execution of the works contract and it reads 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.”

There is a levy of turnover tax as well, which is provided under Section  6-
B of the Karnataka Act.  At the relevant time, this  provision  was  in  the
following form:
“6-B  Levy of Turnover Tax. – (1) Every registered dealer and  every  dealer
who is liable to get himself registered under sub-section  (1)  and  (2)  of
Section 10 whose total turnover in a year is not  less  than  the  turnovers
specified in the said sub-sections, whether or not the whole or any  portion
of such turnover is liable to tax under any other provisions  of  this  Act,
shall be liable to pay tax. –

(i)  at the rate of one and half per cent of  the  total  turnover,  if  the
total turnover is not more than one thousand lakh rupees in a year; or

(ii)  at the rate of three per cent of the  total  turnover,  if  the  total
turnover is more than one thousand lakh rupees in a year;

Provided that the rate of tax payable for any year shall be at one and  half
per cent on the turnovers up to one thousand lakh rupees and  at  three  per
cent on the turnovers exceeding one thousand  lakh  rupees,  if,  the  total
turnover in the year immediately preceding that year was not more  than  one
thousand lakh rupees.”

On a plain reading of Sections 5-B and 6-B of the Karnataka Act, it  can  be
seen that Section 5-B deals with levy of tax  on  transfer  of  property  in
goods involved in the execution of the  works  contract.   It  is,  thus,  a
special provision made for imposing sales tax on works contract and  tax  is
payable  on  'taxable  turnover  of  transfer   of   property   in   goods'.
Additionally, in those cases where total turnover of a registered dealer  in
an year is not less than the turnover specified in sub-sections (1) and  (2)
of Section 10, such a dealer is liable to pay tax at the rate  specified  in
Section 6-B of the Karnataka Act.

The question for determination is: for  calculating  the  turnover  for  the
purpose of payment of turnover tax under Section 6-B of the  Karnataka  Act,
whether  payments  made  to  sub-contractor  are  to   be   included   while
calculating the total turnover?

Mr.   N.   Venkatraman,   learned   senior   counsel   appearing   for   the
appellant/assessee, made a fervent plea  for  not  including  such  payments
made to the sub-contractor, as component of total turnover, because  of  the
reason that the sales tax is payable on the transfer  of  property  and  the
'turnover' also meant aggregate amount for which goods are bought  or  sold,
etc.   Therefore,  transfer  of  property  in  goods   was   the   necessary
concomitant in ascertaining the sale and, thus, in the  process  calculating
the turnover/total turnover.  It was submitted that there  was  no  sale  of
goods involved in the execution of a works contract  as  in  such  contracts
the property does not pass  as  movables.   Tracing  the  history  of  works
contract, the learned senior counsel submitted  that  in  the  case  of  The
State of Madras  v.  Gannon  Dunkerley  &  Co.  (Madras)  Limited[2],  while
speaking of a building contract, this Court held that the property in  goods
involved in the execution of a works contract does not pass as movables  but
on the theory of accretion on the principle quicquid  plantatur  solo,  solo
cedit, i.e. whatever is attached to the  soil,  becomes  part  of  it.   The
Constitution (Forth-Sixth Amendment)  Act,  1982  inserted  Article  366(29-
A)(b) to neutralise the judgment in Gannon  Dunkerley  &  Co.  only  to  the
extent that an indivisble contract was deemed to be divisible  and  did  not
undo the principle.  He argued that this Court, interpreting Article 366(29-
A)(b) in Builders' Association of India & Ors. v. Union of India &  Ors.[3],
reiterated that in a works contract property in goods passes out as  movable
but on the theory of accretion.  It was further submitted that the  property
passes by accession just once which, by a fiction, is taxed as a sale.   The
Article also identifies the transferor and transferee effecting  the  deemed
sale and deemed purchase.  The taxable person is  the  contractor  executing
the works contract so that the main contractor,  who  assigns  the  work  to
another person to  execute  the  work,  cannot  be  a  transferor,  nor  any
property in goods  vest  in  the  main  contractor,  when  the  contract  is
executed by a sub-contractor.

Proceeding further,  by taking the aforesaid line of argument,  the  learned
senior counsel submitted that if  the  point  of  view  of  the  Revenue  is
accepted, it would amount to double  taxation  inasmuch  as  sub-contractors
were also registered dealers who had paid sales tax under the Karnataka  Act
and by including the payments made to them in  the  total  turnover  of  the
assessee, tax was sought to be levied on the same  amount  all  over  again.
On the aforesaid premise,  the  learned  senior  counsel  for  the  assessee
submitted that precisely this argument in law  has  been  accepted  by  this
Court in the  Andhra  Pradesh  judgment.   He  referred  to  the  discussion
contained in the said judgment in extenso.

Mr. K.N. Bhat,  learned  senior  counsel  appearing  for  the  Revenue,  per
contra, heavily relied upon the reasoning given by the  High  Court  in  the
judgment which has taken the view in favour of the  Revenue.   He  submitted
that one had to keep  in  mind  the  distinction  between  Section  5-B  and
Section 6-B of the Karnataka Act by pointing out that when it comes to  levy
of turnover tax, it speaks of 'total turnover', whereas  tax  payable  under
Section 5-B is on the 'taxable turnover'.  He submitted that  since  we  are
concerned with the levy of tax under  Section  6-B  of  the  Karnataka  Act,
total turnover becomes relevant  and,  therefore,  the  value  of  the  work
entrusted  to  the  sub-contractors  is  includible  at  the  hands  of  the
assessee.  He further submitted that the High Court was  right  in  pointing
out that sales tax is leviable at a single point, whereas  turnover  tax  is
leviable at a multi-point, both at the hands of the main contractor and sub-
contractor and, therefore, the question of double taxation does not arise.

After bestowing our due consideration  to  the  respective  submissions,  we
find that the position taken by the assessee has to prevail,  which  appears
to be meritorious.  This result follows even from the bare  perusal  of  the
Karnataka Act and Rules.  For this purpose, it becomes  important  to  refer
to clause (c) of sub-Rule (1) of Rule 6 of the Karnataka  Sales  Tax  Rules,
1957.  Rule 6 deals with determination of total  and  taxable  turnover  and
clause (c) reads as under:
“6.  Determination of total and taxable turnover. – (1) The  total  turnover
of a dealer, for the purposes of the Act, shall be the aggregate of. –

                          xx          xx         xx

(c)  the total amount paid or payable to the  dealer  as  the  consideration
for transfer of property in goods (whether as goods or in some  other  form)
involved in the execution of works contract; and includes  any  amount  paid
as advance to the dealer as a part of such consideration.

                         xx          xx         xx”

What is significant is that total amount paid or payable to the dealer as  a
consideration for 'transfer of property in  goods',  which  is  involved  in
execution of the works contract, is  to  be  treated  as  'total  turnover'.
This Rule, thus, specifically restricts the total  turnover  in  respect  of
those  goods,  alone,  where  the  property  has  been  transferred.   Thus,
transfer of property in goods, becomes necessary event and unless  there  is
a transfer of property, the amount paid is not to be included in  the  total
turnover.  The amount paid to the sub-contractor  is  not  for  transfer  of
property in goods.  When matter is examined from this angle, the ratio  laid
down by this Court in the Andhra Pradesh judgment clearly  applies  inasmuch
as in that case also the Court noticed  that  Section  4(7)  of  the  Andhra
Pradesh Act indicated that the taxable event is the 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 Court held that the value of the goods which constitute  the
measure for the levy of tax is the  value  of  goods  at  the  time  of  the
incorporation of the goods in the works.  The Court further found that  same
was the position contained in Rule 17(1)(a)  of  the  Andhra  Pradesh  Value
Added Tax Rules, 2005.

It is not in dispute that the facts and the issue involved  were  identical,
i.e. the assessee had assigned  parts  of  the  construction  work  to  sub-
contractors  who  were  registered  dealers.   These   sub-contractors   had
purchased goods and chattels  like  bricks,  cement  and  steel  and,  where
necessary, supply and erect equipments such  as  lifts,  hoists,  etc.   The
materials were brought to the site and they remain the property of the  sub-
contractor. The site was occupied by the sub-contractor  and  the  materials
were erected by the sub-contractor.  In this backdrop, after taking note  of
some provisions of the Andhra Pradesh Act, the  Court  explained  the  legal
position in the following manner:
“16.  By virtue of Article 366(29-A)(b) of the Constitution, once  the  work
is assigned by the contractor (L&T), the only transfer of property in  goods
is by the sub-contractor(s) who is a registered dealer in this case and  who
claims to have paid taxes under  the  Act  on  the  goods  involved  in  the
execution of the works. Once the  work  is  assigned  by  L&T  to  its  sub-
contractor(s), L&T ceases  to  execute  the  works  contract  in  the  sense
contemplated by Article 366(29-A)(b) because property  passes  by  accretion
and there is no property in goods with the contractor which is capable of  a
retransfer, whether as goods or in some other form.

17. The question which is raised before us is whether the  turnover  of  the
sub-contractors (whose names are also given in the original  writ  petition)
is to be added to the turnover of L&T. In other words,  the  question  which
we are required to  answer  is  whether  the  goods  employed  by  the  sub-
contractors occur in the form of a single deemed  sale  or  multiple  deemed
sales. In our view, the principle of law in  this  regard  is  clarified  by
this Court in Builders' Assn. of India  as under: (SCC p. 673, para 36)

“36 … Ordinarily unless there is a contract to the contrary in the  case  of
a works contract, the property in the goods used in the  construction  of  a
building passes  to  the  owner  of  the  land  on  which  the  building  is
constructed, when the goods  or  materials  used  are  incorporated  in  the
building.”

                                                   (emphasis supplied by us)

18.  As stated above, according to the  Department,  there  are  two  deemed
sales, one from the main contractor to the contractee  and  the  other  from
sub-contractor(s) to the main contractor, in the  event  of  the  contractee
not having any privity of contract with the sub-contractor(s).

19.  If one keeps in mind the  above quoted  observation  of  this  Court  in
Builders' Assn. of India the position becomes clear, namely,  that  even  if
there is no  privity  of  contract  between  the  contractee  and  the  sub-
contractor, that would not  do  away  with  the  principle  of  transfer  of
property by the  sub-contractor  by  employing  the  same  on  the  property
belonging to the contractee. This reasoning is based  on  the  principle  of
accretion of property in goods.  It  is  subject  to  the  contract  to  the
contrary. Thus, in our view, in such a case, the work  executed  by  a  sub-
contractor,  results  in  a  single  transaction   and   not   as   multiple
transactions. This reasoning is also borne out by Section 4(7) which  refers
to the value of goods at the time of incorporation in  the  works  executed.
In our view, if the argument of the Department is to be accepted,  it  would
result in plurality of deemed sales  which  would  be  contrary  to  Article
366(29-A)(b) of the Constitution as held by the  impugned  judgment  of  the
High Court. Moreover, it may result in double taxation which  may  make  the
said 2005 Act vulnerable to challenge as violative of Articles 14,  19(1)(g)
and 265 of the Constitution of India as  held  by  the  High  Court  in  its
impugned judgment.”


            This raison d'etre shall apply, in full force,  while  answering
the question even in the context of the Karn5ataka Act.

We, therefore, hold that the  value  of  the  work  entrusted  to  the  sub-
contractors or payments made to them shall not be taken  into  consideration
while computing total turnover for  the  purposes  of  Section  6-B  of  the
Karnataka Act.  As a consequence, the two appeals which  are  filed  by  the
assessee are allowed and the appeal preferred by the Revenue  is  dismissed.
In the facts and circumstances of the case, there shall be no  order  as  to
costs.

                             .............................................J.
                                                                (A.K. SIKRI)



                             .............................................J.
                                                     (ROHINTON FALI NARIMAN)


NEW DELHI;
SEPTEMBER 05, 2016.

-----------------------
[1]   (2008) 9 SCC 191
[2]   AIR 1958 SC 560
[3]   (1989) 2 SCC 645

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.