GST- BACK Drop >

 To serve as a back drop :

 EXTRACTS from the landmark Judgment of the SC  ..

@
In L&T SC case @
https://indiankanoon.org/doc/38073485/

3. The Law Commission of India in its 61st Report elaborately examined the law laid down in Gannon Dunkerley’s case and suggested that the relevant entry contained in the 7th Schedule to List II to the Constitution of India - Entry 54 - could either be amended; or a fresh entry in the State List could be added; or Article 366 which is a definition clause could be amended so as to widen the definition of “sale”, and include therein indivisible composite works contracts. Having regard to the said recommendation of the Law Commission, the Constitution (46th Amendment) Act was passed in 1983 by which Parliament accepted the 3rd alternative of the Law Commission, and amended Article 366 by adding sub-clause (29A). We are concerned with sub-clause (b) of Article 366 (29A) which reads as follows:-

366 (29A) “tax on the sale or purchase of goods” includes-

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

and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made;

4. The Constitutional amendment so passed was the subject matter of a challenge in Builders' Assn. of India v. Union of India, (1989) 2 SCC 645 *. This challenge was ultimately repelled and this Court stated:-

“… After the 46th Amendment, it has become possible for the States to levy sales tax on the value of goods involved in a works contract in the same way in which the sales tax was leviable on the price of the goods and materials supplied in a building contract which had been entered into in two distinct and separate parts as stated above.” (at para 36)

5. This is the historical setting within which the present controversy arises.

6. Service tax was introduced by the Finance Act, 1994 and various services were set out in Section 65 thereof as being amenable to tax. The legislative competence of such tax is to be found in Article 248 read with Entry 97 of List I of the 7th Schedule to the Constitution of India. All the present cases are cases which arise before the 2007 amendment was made, which introduced the concept of “works contract” as being a separate subject matter of taxation. Various amendments were made in the sections of the Finance Act by which “works contracts” which were indivisible and composite were split so that only the labour and service element of such contracts would be taxed under the heading “Service Tax”.

 * https://indiankanoon.org/doc/732612/

CROSS refer-

https://indiankanoon.org/doc/155272316/ (A)

READ paras 1 and 2 of above; and Xtract from para 2 (inset):

"Be that as it may, apart from the disputes in hand, the point which we have to examine is whether the ratio of the judgment of the Division Bench in the case of Raheja Development Corporation (supra) as enunciated in Para 20, is correct. If the Development Agreement is not a works contract could the Department rely upon the second contract, which is the Tripartite Agreement and interpret it to be a works contract, as defined under the 1957 Act. The Department has relied upon only the judgment of this Court in Raheja Development Corporation(supra) case because para 20 does assist the Department. However, we are of the view that if the ratio of Raheja Development case is to be accepted then there would be no difference between works contract and a contract for sale of chattel as a chattel. Lastly, could it be said that petitioner - Company was the contractor for prospective flat purchaser. Under the definition of the term "works contract" as quoted above the contractor must have undertaken the work of construction for and on behalf of the contractor (sic.) for cash, deferred or any other valuable consideration. According to the Department, Development Agreement is not works contract but the Tripartite Agreement is works contract which, prima facie, appears to be fallacious. There is no allegation that the Tripartite Agreement is sham or bogus."


"DEEMED WORKS CONTRACT" - HIstory of related Consitutional Amendments > (B)

< within -  Deemed Sale - Legal Services India

Xtract -  
Thus, the 46th Constitutional Amendment widened the horizon of the term ‘sale’ which was conventionally understood as transfer of complete property in goods for valuable consideration. Now sales tax is levied on both sale as envisaged in the Sale of Goods Act, 1930 as well as that envisaged in Article 366 (29A) of the Constitution of India and the provisions as incorporated in Central Sales Tax Act and State VAT Acts. Now transactions in the nature of sale are also liable to sales tax like compulsory transfer, goods involved in works contract, right to use goods, transfer among members of unincorporated association, supply of food articles and hire purchase. This leads to confusion as to whether certain transactions are liable to both Sales as well as Service Tax and leads to escalation of prices.

Now we await the implementation of Goods and Services Tax, which is a comprehensive tax levy on manufacture, sale and consumption of goods and services at a national level which aims to remove all doubts and multiple layers of taxation existing currently. This will benefit individuals as prices are likely to come down.
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