1. The matter arises under the Kerala General Sales Tax Act, 1963 (for short 'the Act'). Revision-petitioner is the same in all these cases. The assessment years concerned are 1984-85, 1985-86 and 1986-87. The revision-petitioner, a works contractor, had entered into a contract with Hindustan Organic Chemicals Ltd., Ambalamugal for the design, manufacture, supply, erection, commissioning and handing over of fire protection system. In the assessment for the aforesaid three years the assessee contended that since it has transferred materials in the execution of works contract not in the form of goods but only in some other form, the transfer of such materials cannot be subjected to tax under the Act for the three assessment years in question. The assessee also contended that it is entitled to the benefit of compounding provided under Section 7 of the Act. The assessing authority rejected both the contentions and brought the materials transferred in the execution of the works contract to tax under the Act. The benefit of compounding available under Section 7 of the Act was also denied. Being aggrieved by the said assessment orders the revision-petitioner filed appeals before the Deputy Commissioner (Appeals), Commercial Taxes, Ernakulam. All the three appeals were heard together and a common order dated August 31, 2000, (annexure A2) was passed. The first appellate authority did not accept the contention of the assessee that it is entitled to exemption on the turnover of materials transferred in the execution of works contract. However, the first appellate authority directed the assessing authority to modify the assessment orders allowing both the compounded rate of tax under Section 7(7A) and 1 per cent reduction from the compounded rate of tax as per Section 7(7AA). This order of the first appellate authority was confirmed by the Tribunal in further appeals filed by the revision petitioner. Now the direction regarding the benefit of compounding provided under Section 7(7A) and the reduction of 1 per cent under Section 7(7AA) has become final.
2. The only dispute which survives for consideration in these revisions relates to the exigibility to tax on the turnover of materials transferred in the execution of the works contract not in the form of goods as such but in some other form.
3. Smt. K. Latha, learned counsel appearing for the revision-petitioner submits that though the Constitution 46th amendment to Article 366 by insertion of Clause (29A) thereto empowers the State Legislatures to enact a law which levy tax on the transfer of goods in the execution of works contract in some other form also, the State Legislature had chosen to levy tax on the transfer of materials involved in the execution of works contract not in the form of goods as such but in some other form only by the amendment to the relevant provisions of the Act made with effect from July 1, 1987. Counsel pointed out that amendments to the definitions of 'goods', 'sale' and 'turnover' specifically mentioning about the transfer of goods in 'some other form' was made effective from July 1, 1987 only. Counsel also submits that but for the provisions of Section 5(1)(iv) which specifically provides for levy of tax on the transfer of goods in 'some other form' the respondents have no authority to levy tax on the transfer of goods involved in the execution of works contract in some other form. Counsel also pointed out that the corresponding amendments to the relevant rules were also made effective from July 1, 1987 only.
4. Learned Government Pleader appearing for the respondent on the other hand submits that by virtue of the definition of 'dealer' in Section 2(viii) which specifically refers in Sub-clause (f)(2) to transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract right from April 1, 1984, even the transfer of materials in the execution of works contract in some other form was liable .to be assessed under the Act. The Government Pleader further submits that the fact that a provision similar to Rule 4(1)(iv) is not available in the Act during the relevant assessment years will not be a ground for not assessing to tax the turnover of transfer of materials in the execution of works contract in some other form. The Government Pleader also pointed out that the definition of sale in Section 2(xxi) [explanation 3(A)] before the amendment made in 1987 itself was sufficient to assess the turnover of transfer of materials involved in the execution of works contract in some other form.
5. The Government Pleader also brought to our notice the provisions of Section 5C of the Act brought into force with retrospective from April 1, 1984 regarding the deductions available in arriving at the taxable turnover of a dealer in respect of the transfer of property in execution of the works contract.
6. As already stated, the contention of the counsel for the petitioner is that since the transfer of the materials involved in the execution of the works contract is not in the form of goods but in some other forum, the same cannot be assessed to tax under the Act in the absence of provisions in the Act specifically enabling the assessment on the turnover of materials transferred in the execution of works contract in some other form. In order to appreciate the correctness of the contention raised by the assessee it is necessary to refer to the relevant provisions of the Act as also the provisions of the Constitution of India as it stood during the assessment years 1984-85, 1985-86 and 1986-87. By the Constitution 46th amendment Clause (29A) containing Sub-clauses (a) to (f) was inserted in Article 366 of the Constitution. As per Sub-clause (b) of Clause (29A) the scope of entry 54 of List II of the Seventh Schedule to the Constitution 'tax on the sale or purchase of goods' was enlarged, inter alia, to include 'a tax on the transfer of the property in goods (whether as goods or in some other form) involved in the execution of a works contract'. Thus by virtue of Clause (29A) of Article 366 the inhibition contained in assessing the transfer of property in goods involved in the execution of a works contract was removed. It is pursuant to this Constitutional provision the provisions of the Kerala General Sales Tax Act were amended with effect from April 1, 1984. Section 2(viii) defines 'dealer'. Clause (f)(2) thereof includes transfer of the property in goods (whether as goods or in some other form) involved in the execution of a works contract. Section 2(xii) which defined 'goods' means all kinds of movable property (other than newspapers, actionable claims, electricity, stocks and shares and securities) and includes livestock, all materials, commodities and articles (including those to be used in the construction, fitting out, improvement or repair of immovable property or used in the fitting out, improvement or repair of movable property). Section 2(xxi) defines 'sale', Explanation (3A) thereof says a transfer of property in goods involved in the execution of a works contract shall be deemed to be a sale. Section 2(xxvii) defines 'turnover'. Explanation (lA)(i) provides that the turnover in respect of works contract shall be the aggregate amount received or receivable by the dealer for carrying out such contract less such portion representing labour charges as may be prescribed. Section 2(xxix-a) defines 'works contract' to mean any agreement for carrying out for cash or for deferred payment or other valuable consideration, the construction, fitting out, improvement or repair of any building, road, bridge or other immovable property or the fitting out, improvement or repair of any movable property. Section 5, which is the charging provision, states that every dealer (other than a casual trader or agent of a non-resident dealer) whose total turnover for a year is not less than one lakh rupees and every casual trader or agent of a non-resident dealer, whatever be his total turnover for the year, shall pay tax on his taxable turnover for that year in the case of goods specified in the First or Second Schedule, at the rates and only at the points specified against such goods in the said Schedules and in the case of goods not specified in the First or Second Schedule and not coming under Clause (iii) at the rate of five per cent at all points of sale.
7. From a reading of the provisions of Section 5 along with the definitions of 'dealer', 'goods', 'sale' and 'turnover' it is clear that in a case where the turnover of goods transferred in the execution of works contract if it exceeded Rs. 1 lakh, is exigible to tax under Section 5. If the materials which are transferred in the execution of the works contract fall under First or the Second Schedule the rate of tax of such goods is as provided in the said Schedules and in a case where the goods does not fall under either the First Schedule or the Second Schedule and not coming under Clause (iii) it is liable to tax at the rate of 5 per cent at all points of sale. Here it must be noted that though the expression 'in some other form' has been specified in the definition of 'dealer' in Section 2(viii)(f)(2) there is no reference to the said expression in the definitions of 'goods', 'sale' or 'turnover' during the relevant assessment years. According to us since the inhibition in making assessment on the materials transferred in the execution of works contract has been removed by the constitutional amendment made to Article 366 by inserting Clause (29A) and since necessary amendments have been made to the provisions of the Act enabling assessment of the turnover of goods transferred in the execution of works contract even though the statute did not specifically say (whether in the form of goods or in some other form) the contention of the petitioner that no assessment can be made in respect of the transfer of the materials involved in the execution of works contract not in the form of goods, but in some other form, cannot be accepted. The only limitation for assessing the turnover of materials which have been transferred in execution of the works contract is subject to the various disciplines provided under the Constitution, the Central Sales Tax Act and under the Kerala General Sales Tax Act as held by the Supreme Court in Builders Association of India v. Union of India [1989] 73 STC 370. In the instant case admittedly the petitioner has no case that the materials which have been used in the execution of the works contract is in any way exempted under the Constitution or that it has already suffered tax in the State. The legal issue raised in this case, according to us, is covered by the decisions of the Supreme Court in Builders Association case [19891 73 STC 370, Gannon Dunkerley & Co. v. State of Rajasthan [1993] 88 STC 204 and the Builders Association case [1993] 88 STC 248.
8. It must be noted that Section 5 of the Act was amended by incorporating Clause (iv)(a) and (b) only to facilitate the fixation of rate of tax specifically. But for the said requirement it may not be required to specify in the Act or in the Rules about the transfer of goods as goods or in some other form. What is sought to be assessed is only the goods which are transferred in the execution of the works contract whether it is in the form of goods or in some other form, which otherwise would have escaped the taxation. It must also be noted that the provisions of Clause (29A) of Article 366 itself gives the description whether in the form of goods or in some other form within brackets. Even without the bracketed portion the intention of the Parliament in incorporating Clause (29A)(b) in Article 366 is to levy tax on the transfer of goods involved in the execution of works contract. We are of the view that there is no merit in the contention of the petitioner that the assessment of the materials transferred in the execution of works contract in the instant case is without authority of law. We are in full agreement with the assessing authority and the two appellate authorities that the turnover of materials transferred in the execution of works contract is liable to be assessed under the Act subject to the disciplines provided under the Constitution, the Central Sales Tax Act and under the Kerala General Sales Tax Act. In the instant case there is no such inhibition. In the circumstances, there is no merit in these revision petitions. They are accordingly dismissed.