October 2013 - The Gujarat Sales Tax Bar Association

659

The G.S.T.B. Association 4th Floor, “C” Block, Multi Storyed Building, Lal Darwaja, Ahmedabad.

Phone : 25506305 Fax : 25501731 Email : gstbar@yahoo.com

EDITORS : N. N. PATEL - P. K. SONI

Volume : 52 Part - 7

: Thought of the Month :

October - 2013

Happiness is not a state to arrive at, but a manner of traveling.

CONTENTS

1. lÉÅmÉÒ »oÉÉ{ÉàoÉÒ

2. President’s Desk

Shri N. N. Patel-Shri P. K. Soni 661

Shri Devkaran L. Vaghasia 663

3. Threshold Exemption of Rs. 10 Shri Kuntal Parikh

Lakh vis-à-vis Reverse Charge

Mechanism under Service Tax

4. Penalties prescribed u/s 78 of Shri Divyesh C. Mehta the service tax Act.

5. Service Tax on Educational

Services Over All View

CA Manoj B. Shah

665

674

680

6.

Important changes/announcements Shri Nirav P. Shah pertaining to the Service Tax law

7. ÊWÅqNÉÒ - +àH HàÊ±ÉeÉà»HÉà~É

8. Introspection

Shri Sunil Sagar

Shri Nirav P. Shah

686

690

693

696 9. H±É©É-80{ÉÉ SÉÖHÉqÉ ÷ÚÅH»ÉÉù Shri Kulin B. Shah

Shri Nigam K. Shah

10.

11. yËk÷íkkuLke yxkheyuÚke swËe swËe yËk÷íkkuLkk yøkíÞLkk [qfkËk

12. Gist of Judgments - June,13

13. Gist of The Judgments

Shri Ramesh Nakar

Shri J. S. Amin

Shri Madhukar J. Amin

Shri Lalit M. Leuva

Shri G.D. Jain

14. Tribunal Judgments

15. ¡ÉüÉÉànÉùÒ

Shri N. N. Patel-Shri Ashok J. Patel

Shri Amit C. Shah

16. Important High Court Judgement

Shri Sameer Siddhpuria

17. Notifications

18. X¾àù ~ÉÊù~ÉmÉ

19. Association News

705

715

719

738

740

742

743

784

811

813

October - 2013 SALES TAX JOURNAL - 52

660

Both optimists and pessimists contribute to our society. The optimist invents the airplane and the pessimist the parachute.

7. Price of single copy of Sales Tax Journal for each month is Rs. 125/-

Annual Subscription is Rs. 1200/-

Total pages of this issue is from 657 to 816 including title.

SALES TAX JOURNAL - 52 October - 2013

lÉÅmÉÒ »oÉÉ{ÉàoÉÒ 661

lÉÅmÉÒ »oÉÉ{ÉàoÉÒ.....



Fate of dealers and Status of Cases

Recently it is known that in number of cases State Government has preferred appeals before the Hon’ble Gujarat High Court. The Hon’ble High Court has taken note that the appeals are filed late due to the administrative procedures of department. However, in many cases the delay has been condone and in some of the cases the delay application has been rejected.

The issue on which appeals are preferred may be on legal issues. However, on preferring appeal by the departments, whatever may be the stake but dealers have to appoint advocate for contending the appeal before Gujarat High Court. It is open secret that what is the cost to be borne by the dealer in engaging Advocate for arguing matter before the High court.

In such a situation it is expected that the Government should scrutinize the orders of the tribunal and then considering stake involve in the matter and also considering recurring effect of the judgment of the tribunal the government should decide to file tax appeal before the high court .It is also expected that the department should publish information regarding filing of tax appeal and the details of pending tax appeal for the information of the trade and industries of the state to know the status of the cases pending before the Hon’ble High Court. Whether stay of proceedings has been granted by the Hon’ble High Court? Presently on number of issues the first appeals are not decided by the appellate authority on receiving intimation from higher authority that state Government has preferred appeal before High Court. In spite of fact that the L.D.O is consumable and the set off is admissible to the dealer in view of decision of Gujarat high court, the number of cases are kept pending on the issue of L.D.O. The issue of reduction of tax credit at the rate of 4% is decided in the case of Reliance Ind. Ltd, and the issue of B/f and C/f of tax credit is decided in the case of M/s.cosmos international by the

Hon’ble Tribunal. The specific guidelines should be issued to the public at large to know the correct status of their cases of similar matters.


662 lÉÅmÉÒ »oÉÉ{ÉàoÉÒ

It is known that on the issue of form C obtained combined of two quarters

State Government has been kind enough to issue instruction to the appellate authority to follow decision of M/s Sainest Tubes Ltd & finalize the appeals and appeals are being disposed off by the appellate authority. In suitable case either stay should be obtained from the high court or instruction should be issued to the departmental authorities with respect to the decision of the Hon’ble Tribunal. At the most as done in past at the time of disposal of appeals on issue of setoff u/r 42 – (

Prabhat Solvent’s case) undertaking was taken from the dealers & appeals were disposed off.

It is expected that dept should think from all angle about gravity of case, stake involved in the matter and the consequential effect on mass of dealers etc. For the state government it is very easy to put a note and give papers to high court but government pleader for preferring appeal before High court but it is a clear cut cost burden on state government when appeals are preferred in numbers of cases without touching internal substance of case. Recently it is known that in almost all cases even when time limit for filling appeal is barred by limitation even then appeals are preferred with delay condonation application & courts are positive on admission of such delayed filling of appeal because of their presentation of grounds of administrative consent procedure. Looking to all such issues what will be the fate of dealer’s and surety of justice and what would be the status of cases.

We hope that the government will consider the legal issue as well as the recurring effect of the judgment of Hon’ble Tribunal while filling tax appeal before the Hon’ble Gujarat High court.

Jai Hind ……….. Jai Gujarat…………..

Wish all the readers Shubh Dipawali & Happy New Year.


President’s Desk 663

President’ s Desk



SHRI DEVKARAN L. VAGHASIA v aghasiaandco@yahoo.com

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Threshold Exemption of Rs. 10 Lakh vis-à-vis

Reverse Charge Mechanism under Service Tax

665

Threshold Exemption of Rs. 10 Lakh vis-à-vis

Reverse Charge Mechanism under Service Tax



Kuntal Parikh, Advocate-kuntal_parikh23@yahoo.co.uk

I do believe that there is lot of confusion in the trade regarding applicability of provisions of threshold exemption scheme under the Service Tax Law, where the burden of payment of service tax is shifted upon the service recipients. Hence, I would like to share my viewsin the situations which generally may arise in the trade as well as in the professions in respect of provisions of threshold exemption and reverse charge mechanism scheme under the service tax regime.

Case - 1

An individual advocate has provided legal service to its client M/s XYZ Pvt. Ltd. and charged

Rs. 2,00,000/- for providing such service. Service recipient company is a manufacturing unit and also providing Annual Maintenance Contract (AMC) serviceto its customers under its own brand name.Aggregate value of provision of AMC servicehas not exceeded rupees 10 lakh either in thepreceding year, 2012-13or in the current year, 2013-14.

(a) Whether service recipient, M/s XYZ Pvt. Ltd. is liable to pay service tax on value of input service obtained from an individual advocate ?

Yes, M/s XYZ Pvt. Ltd. is liable to pay service tax on value of input service.

Section 68(2) of the Finance Act, 1994 empowers the Central Government to notify taxable services and persons who shall be liable to pay tax on such notified taxable services in such manner as may be prescribed.

By virtue of section 68(2), the Central Government has issued a Notification

No. 30/2012-ST, dated 20.06.2012, and thereby notified that in case of provision of legal services by an advocate, a service recipient would be liable to pay service tax.

Therefore, M/s XYZ Pvt. Ltd. is liable to pay service tax because it has obtained legal service from an advocate who is notified under Notification 30/2012-ST. A scheme notified under the said notification is known as reverse charge mechanism.

(For ready reference, I have reproduced a rele vant portion of the Notification no. 30/2012-ST, dated 20.06.2012 at the end of this article .)

(b) W hether an advocate is liable to pay any service tax ?

No, an advocate is not liable to pay service tax in respect of provision of legal service.

In notification no. 30/2012-ST, dated 20.06.2012, the extent to which service


666


Reverse Charge Mechanism under Service Tax provider and service recipient are liable to pay service tax on notified taxable services is specified. Accordingly, in case of provision of legal service by an advocate,

100% service tax is payable by a service recipient and an advocate is not liable to pay any tax on “Legal Services” as a service provider. Therefore, in the present case an advocate who has provided only legal services is not liable to pay any tax and 100% tax is to be paid M/s XYZ Pvt. Ltd as service recipient.

(c) Whether an advocate is requried to take registration of service tax ?

No, an advocate providing legal service to M/s XYZ Pvt. Ltd. is not required to take registration of service tax. However, the persons liable to pay the Service Tax are required to obtain Service Tax Registration.

So far as reverse charge mechanism is concerned, only that person (service provider and/or service receiver) is required to take registration who is made liable to pay service tax, wholly or partly, under notification no. 30/2012-ST, dated

20.06.2012. In the case on hand, an individual advocate is not made liable to pay any service tax for providing legal service under the said notification and therefore, he is not required to take registration.

(d) Can service recipient, M/s XYZ Pvt. Ltd. Claim Exemption (threshold exemption of

R s. 10 lakh) in respect of availment of legal service from an advocate ?

No, service recipient, M/s XYZ Pvt. Ltd. cannot claim the said Exemption in respect of availment of legal service from an advocate.

The said exemption is granted by the Central Government by issuing notification no. 33/2012-ST, dated 20-06-2012. This exemption is available only to the Service providers and not to the recipient of services. By the said notification taxable services are exempted from the whole of the service tax leviable thereon under section 66B of the Finance Act, provided aggregate value of taxable services do not exceed rupees ten lakh in any financial year. Therefore, service provider whose aggregate value of taxable service does not exceed Rs. 10 lakh, can claim this exemption under the said notification, but the said exemption notification is not applicable to service recipients who are made liable to pay service tax under reverse charge mechanism, irrespective of their turnover. Therefore, M/s XYZ Pvt. Ltd. is not entitled to claim this exemption even though its aggregate value of taxable service received remain below threshold limit because it has received legal service from an advocate who is notified under the reverse charge mechanism scheme.

(For ready reference, I have reproduced the Notification no.

33/2012-ST, dated

20.06.2012 at the end of this article .)

(e) Can M/s XYZ Pvt. Ltd. claim Threshold Exemption in respect of provision of AMC service to its client ?

Yes, M/s XYZ Pvt. Ltd. is entitled to claim this exemption unless aggregate value




667 of taxable service does not exceed rupees ten lakh in respect of provision of AMC service in the preceding financial year.

M/s XYZ Pvt. Ltd. is entitled to claim exemption in respect of provision of AMC service because AMC service is not notified by the Central Government under

Notification No. 30/2012-ST (notification of reverse charge mechanism). In my view,

Notification No. 33/2012-ST (Threshold exemption notification) puts an embargo only on such value of taxable services in respect of which service tax would be paid by such person and in such manner as specified under section 68(2) of the

Finance Act read with Service Tax Rules. Thus, AMC service is not specified under

Notification No. 30/2012-ST issued by virtue of section 68(2) of the Finance Act read with rule 2(1)(d) of the Service Tax Rules, 1994; and therefore, restriction contained in Notification No. 33/2012-ST is not applicable to M/s XYZ Pvt. Ltd. for claiming threshold exemption in respect of provision of AMC service.

Thus, in nutshell I opine that M/s XYZ Pvt. Ltd. has to pay service tax against the invoice of Rs. 2,00,000/- issued by an advocate for providing legal service, but it can claim SSI exemption for providing AMC service to its clients because its aggregate value of AMC service has not exceeded ten lakh rupees in the preceding financial year and providing service under its own brand name.

(f) Whether M/s XYZ Pvt. Ltd. can claim cenvat credit of service tax paid on input legal service obtained from an advocate ?

Yes, M/s XYZ Pvt. Ltd can claim cenvat credit of service tax paid on input legal service even though an advocate is not registered under service tax. It can claim cenvat credit on the basis of challans establishing payment of service tax towards input legal service.

Case - 2

In 2013-14, an individual, P has provided services by way of Supply of Manpower to two

Companies, Q and R. P has charged sum of Rs. 4 lakh from Q and Rs. 2 lakh from R for providing said service. In the preceding year 2012-13, the aggregate value of taxable services provided by P was Rs. 8 lakh. As perpartial reverse charge mechanism (Notification no. 30/2012-ST), service provider, P is liable to pay 25% of service taxand remaining 75% of service tax is to be paid by the service recipients, Q and R as per their respective invoices.

(a) In the above facts, Whether P can claim SSI exemption of service tax in the current year 2013-14 ?

Yes, service provider, P can claim SSI exemption of service tax. Under partial reverse charge mechanism, liabilities of service providers and service recipients are different and independent of each other. Further, aggregate value of taxable services provided by P has not exceeded Rs. 10 lakh in preceding financial year, i.e., 2012-13 and in the current year 2013-14 also. Hence, P is eligible to claim threshold exemption.


668



(b) If P has provided taxable services worth of Rs.12 lakh in the year 2012-13 instead of Rs. 8 lakh, can he claim SSI exemption in the current year 2013-14 ?

No, P cannot claim SSI exemption because aggregate value of taxable service provided by him has exceeded Rs. 10 lakh in the preceding financial year, 2012-13.

Thus, SSI exemption is linked with the turnover of preceding year. However, if in the year 2013-14 turnover remains below Rs. 10 lakh, then again in the year 2014-15 service provider, P will be entitled to claim SSI exemption.

(c) For determining the threshold limit ofRs.10 lakh for the service provider, P,whether entire amount of Rs. 6 lakh or only 25% of Rs. 6 lakh (4 lakh + 2 lakh) is to be taken into consideration ?

In my view, for determining threshold limit of Rs. 10 lakh, entire value of taxable service is to be taken into consideration.

In the present case, P has provided total taxable service of Rs. 4 lakh and Rs. 2 lakh to Q and R respectively in the year 2013-14. As per the SSI exemption notification, taxable services are exempted unless aggregate value not exceeding 10 lakh rupees in any financial year from the whole of the service tax leviable thereon under section

66B of the Finance Act . Further, in the said notification a term ‘aggregate value’ is defined as under:

“aggregate value means the sum total of value of taxable services charged in the first consecutive invoices issued during a financial year but does not include value charged in invoices issued towards such services which are exempt from whole of service tax leviablethreon under section 66B of the said Finance Act under any other notification .”

From the analysis of the definition of term ‘aggregate value’, in my view, it includes entire value for taxable services charged in the first consecutive invoices issued during a financial year. Accordingly, in the present case, P has issued two consecutive invoices for providing taxable service to Q and R during the financial year

2013-14, and he has charged total sum of Rs. 6 lakh. In other words, the total value of taxable services charged in the first consecutive invoices would be Rs. 6 lakh and this amount would be treated as aggregate value in the present case.

From the second part of the definition, apparently it appears that aggregate value would be 25% of the Rs. 6 lakh for determining threshold limit of Rs. 10 lakh because as per the exclusion part of definition, aggregate value does not include the value charged in invoices issued towards taxable services which are exempt from whole of the service tax leviable thereon. Accordingly, in the present case, service provided by P is exempted to the extent of 75% of total value of taxable service and therefore, only 25% of Rs. 6 lakh is to be taken into consideration as aggregate value for determining threshold limit. But according to me, this view would not be sustainable because the definition of aggregate value in its second part excludes only




669 that value which is charged against taxable service which is exempted from whole of service tax leviable thereon. In the present case, value charged against supply of manpower service is exempted partially but it is not exempted from the ‘ whole of the service tax ’ and therefore, value charged by P cannot be treated as ‘exempt from whole of the service tax’.

Thus, in my view, threshold limit of Rs. 10 lakh need not be determined by calculating 25% of Rs. 6 lakh but entire value of taxable service, i.e. Rs. 6 lakh to be taken into account.

(d) Whether Q is entitled to claim SSI exemption of service tax ?

No, service recipient, Q cannot claim SSI exemption. As discussed in case-1, service recipient cannot claim SSI exemption under notification no. 33/2012-ST if he has received taxable service which is notified under reverse charge mechanism scheme as prescribed under notification no. 30/2012-ST. ‘Supply of manpower’ service is notified under reverse charge mechanism scheme and therefore, Q cannot claim SSI exemption. Similarly, even R cannot claim SSI exemption in respect of availment of manpower supply service.

(For ready reference, I have reproduced relevant portion of the Notification no.

30/2012-ST, dated 20.06.2012 at the end of this article.)

___________________

Notification No. 30/2012-S.T., dated 20-6-2012

Services for which tax is payable or partially payable by persons receiving the service

— Service tax payable by Reverse Charge System in relation to insurance business, GTA, sponsorship, Arbitral Tribunal, legal services by Advocates, support services provided by Govt. or local authorities (except specified services), renting of motor vehicles on abated value, renting of motor vehicles on unabated value (partially also payable by service provider), manpower supply (partially also payable by service provider), work contract (partially also payable by service provider), service provide from non-taxable territory but received in taxable territory (partially also payable by service provider)

In exercise of the powers conferred by sub-section (2) of section 68 of the Finance

Act, 1994 (32 of 1994), and in supersession of (i) notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 15/2012-Service Tax, dated the

17th March, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, Subsection (i), vide number G.S.R 213(E), dated the 17th March, 2012, and (ii) notification of the Government of India in the Ministry of Finance (Department of Revenue), No.

36/2004-Service Tax, dated the 31st December, 2004, published in the Gazette of India,

Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 849(E), dated the

31st December, 2004, except as respects things done or omitted to be done before such supersession, the Cent ral Government hereby notifies the following taxable service s and


670


Reverse Charge Mechanism under Service Tax the extent of service tax payable thereon by the person liable to pay service tax for the purposes of the said sub -section, namely :—

I. The taxable services,—

(A) (i) provided or agreed to be provided by an insurance agent to any person carrying on the insurance business;

(ii) provided or agreed to be provided by a goods transport agency in respect of transportation of goods by road, where the person liable to pay freight is,—

(a) any factory registered under or governed by the Factories Act, 1948

(63 of 1948);

(b) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India;

(c) any co-operative society established by or under any law;

(d) any dealer of excisable goods, who is registered under the Central

Excise Act, 1944 (1 of 1944) or the rules made thereunder;

(e) any body corporate established, by or under any law; or

(f) any partnership firm whether registered or not under any law including association of persons;

(iii) provided or agreed to be provided by way of sponsorship to anybody corporate or partnership firm located in the taxable territory;

(iv) provided or agreed to be provided by ,-

(A) an arbitral tribunal, or

(B) an individual advocate or a firm of advocates by way of support services , or

(C) Government or local authority by way of support services excluding,-

(1) renting of immovable property, and

(2) services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act, 1994, to any business entity located in the taxable territory;

(v) provided or agreed to be provided by way of renting of a motor vehicle designed to carry passengers to any person who is not in the similar line of business or supply of manpower f or any purpose or se rvice portionin exec ution of works contr act by anyindividual , Hindu Undivided Fa mily




671 orpartnership firm, whether registered or not, including association of per sons, located in the taxable territory t o a business entity registered as body c orporate, located in the taxable territory ;

(B) provided or agreed to be provided by any person which is located in a nontaxable territory and received by any person located in the taxable territory;

(II) The extent of service tax payable thereon by the person who provides the service and the person who receives the service for the taxable services specified in (I) shall be as specified in the following Table, namely :-

TABLE

Sr.

No.

Description of Service Percentage of

Service Tax Payable by the Person

Providing Service

Nil

Percentage of

Service Tax Payable by the Person receiving Service

100% 5.

in respect of services provided or agreed to be provided by individual advocate or a firm of advocates by way of legal services

8.

in respect of services provided or agreed to be provided by way of supply of manpower for any purpose

25% 75%

Explanation-I. - The person who pays or is liable to pay freight for the transportation of goods by road in goods carriage, located in the taxable territory shall be treated as the person who receives the service for the purpose of this notification.

Explanation-II. - In works contract services, where both service provider and service recipient is the persons liable to pay tax, the service recipient has the option of choosing the valuation method as per choice, independent of valuation method adopted by the provider of service.

2. This notification shall come i nto force on the 1st day of July, 2012.

Notification No. 33/2012-S.T., dated 20-6-2012

Exemption to small scale service providers when value of Taxable services in the preceding financial year had not exceeded ten lakh rupees

In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act,

1994 (32 of 1994) (hereinafter referred to as the said Finance Act), and in supersession of the Government of India in the Ministry of Finance (Department of Revenue) notification

No. 6/2005-Service Tax, dated the 1st March, 2005, published in the Gazette of India,


672



Extraordinary, Part II, Section 3, Sub-section (i), vide G.S.R. number 140(E), dated the

1st March, 2005, except as respects things done or omitted to be done before such supersession, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts taxable services of aggregate value not exceeding ten lakh rupees in any financial year from the whole of the service tax leviable thereon under secti on 66B of the said Finance Act :

Provided that nothing con tained in this notification shall apply to,-

(i) taxable services provided by a person under a brand name or trade name, whether registered or not, of another person; or

(ii) such value of taxable services in respect of which service tax shall be paid by such person and in suc h manner as specified under sub-section (2) of section 68 of the said

Finance Ac t read with Service Tax Rules, 1994.

2. The exemption contained in this notification shall apply subject to the following conditions, namely :-

(i) the provider of taxable service has the option not to avail the exemption contained in this notification and pay service tax on the taxable services provided by him and such option, once exercised in a financial year, shall not be withdrawn during the remaining part of such financial year;

(ii) the provider of taxable service shall not avail the CENVAT credit of service tax paid on any input services, under rule 3 or rule 13 of the CENVAT Credit Rules,

2004 (herein after referred to as the said rules), used for providing the said taxable service, for which exemption from payment of service tax under this notification is availed of;

(iii) the provider of taxable service shall not avail the CENVAT credit under rule 3 of the said rules, on capital goods received, during the period in which the service provider avails exemption from payment of service tax under this notification;

(iv) the provider of taxable service shall avail the CENVAT credit only on such inputs or input services received, on or after the date on which the service provider starts paying service tax, and used for the provision of taxable services for which service tax is payable;

(v) the provider of taxable service who starts availing exemption under this notification shall be required to pay an amount equivalent to the CENVAT credit taken by him, if any, in respect of such inputs lying in stock or in process on the date on which the provider of taxable service starts availing exemption under this notification;

(vi) the balance of CENVAT credit lying unutilised in the account of the taxable service provider after deducting the amount referred to in sub-paragraph (v),




673 if any, shall not be utilised in terms of provision under sub-rule (4) of rule 3 of the said rules and shall lapse on the day such service provider starts availing the exemption under this notification;

(vii) where a taxable service provider provides one or more taxable services from one or more premises, the exemption under this notification shall apply to the aggregate value of all such taxable services and from all such premises and not separately for each premises or each services; and

(viii) the aggregate value of taxable services rendered by a provider of taxable service from one or more premises, does not exceed ten lakh rupees in the preceding financial year.

3. For the purposes of determining aggregate value not exceeding ten lakh rupees, to avail exemption under this notification, in relation to taxable service provided by a goods transport agency, the payment received towards the gross amount charged by such goods transport agency under section 67 of the said Finance Act for which the person liable for paying service tax is as specified under sub-section (2) of section

68 of the said Finance Act read with Service Tax Rules, 1994, shall not be taken into account.

Explanation. For the purposes of this notification,-

(A) “brand name” or “trade name” means a brand name or a trade name, whether registered or not, that is to say, a name or a mark, such as symbol, monogram, logo, label, signature, or invented word or writing which is used in relation to such specified services for the purpose of indicating, or so as to indicate a connection in the course of trade between such specified services and some person using such name or mark with or without any indication of the identity of that person;

(B) “aggregate value” means the sum total of value of taxable services charged in the first consecutive invoi ces issued during a financial year but d oes not include value charged in invoice s issued towards such services which are exempt from whole o f service tax leviable thereon under sec tion 66B of the said Finance Act under a ny other notificatio n.”

4. This notification shall come into force on the 1st day of July, 2012.

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674 Penalties prescribed u/s 78 of the service tax Act.

Penalties prescribed u/s 78 of the service tax Act.

 Divyesh C. Mehta - divyesh_cm@yahoo.co.in

Friends, service tax itself is a wider subject but all together now the business of service tax has become so huge that there is no competitor of it what so ever.

In a lighter mood service tax is being established in India with a wider perspective with its rules being spread over. Today I would like to discuss or deliver article on penalties being levied in the service tax Act. Mainly the penalties that are levied u/s

78 of the Act. Penalty itself is a subject which if heard creates huge impact on the ears of every Assessee as well as consultant. While going through any orders the main headline to be watched is the section of penalty. Whether how much penalty is being levied and if huge then how ?????

Section 78:-

The section 78 of the finance act, 1994 has a huge and wider and elaborative meaning and also has an everlasting effect and fear on the mind sets of an

Assessee as well as on the consultant. The Assessee because he has the burden while of the consultant as the same passes on the burden of him by his valuable client.

There has been issues relating to section 78 which is for penalty being levied due to non levy / non payment / short payment of service tax on account of:-

(i) Fraud or

(ii) Collusion or

(iii) Will full mis statement or

(iv) Suppression of facts or

(v) Contravention of any of the provisions of this chapter or the rules made there under with an intent to evade payment of service tax.

If the case falls in any one of the above category, penalty equal to the service tax amount will be imposed.

Now let us study the exact meanings of the phrase (i) to (v) being written above

(i) Fraud :- A knowing mis representation of the truth or concealment of a material fact to induce another to act to his or her detirement. In webster’s third international Dictionary, fraud in equity has been defined as an act of commission or omission to act or concealment by which one person obtains


Penalties prescribed u/s 78 of the service tax Act.

675 advantage over another or which equity or public policy forbids as being prejudicial to another.

(ii) Collusion :- An agreement to defraud another or to do or obtain something that is being forbidden by law.

(iii) Wilful mis-statement :- Voluntary and intentional act of making a false or misleading assertion about something usually with an intent to deceive.

(iv) Suppression of facts :- To put a stop to, put down, or prohibit; to prevent

(something) from being seen, heard, known or discussed.

(v) Intent to evade :- It is a state of mind accompanying an act especially forbidden. Tax evasion is defined as the willful attempt to defeat or circumvent the tax law in order to illegally reduce one’s tax liability. Thus, there should be a state of mind to evade.

Above all i.e. (i) to (v) clearly states and clarifies the set of mind i.e. the act has given five categories under which an assessee to be taken to, in order to levy him penalty. Whether there was a deliberate attempt to conceal something or not can be confirmed only from the circumstantial evidence as no direct evidence is possible as to the state of mind.

Now the whole background above reveals the enforcement of penalty but there can be many circumstances under which penalty cannot be levied, out of which, some instances or circumstances I would like to discuss as under:-

(1) Confusion of law :- Dictionary defines confusion as lack of clearness or directness. Thus, a situation may arise where non-payment/ short-payment of tax could be on the ground that legal position was not clear during the relevant time.

This could be on account of conflicting judgments or ambiguous words used in law.

In such circumstances, it can be concluded that assessee had a bona fide belief of a legal position and no intention to evade the tax. Thus, penalty under section 78 cannot be levied. This conclusion is also supported by following case-laws:

(a) RSWM Ltd. V. CCE[2013] 30 taxmann.com 240 (New Delhi – CESTAT)

(b) Sharp Metal Industries v. CST[2012] 23 taxmann.com 317/36 STT

368 (New Delhi – CESTAR)

(c) Gemini Veterans Security & Vigilance v. CST[2012] 23 taxmann.com

150/36 STT 46 (Kol. – CESTAT)

(d) Bajaj Travels Ltd. V. CST[2011] 15 taxmann.com 12/33 STT 346

(Delhi)

(2) Disclosure in records – Take a case, where assessee had raised invoices and disclosed receipts in bank statement as well as audited accounts. Even though service tax was applicable on the same, he did not pay the same. Subsequently, he paid the service tax with interest. Question now is of penalty under section 78.

Can it be imposed? Can non-disclosure of said receipts in ST-3 returns constitute



suppression? As defined above, suppression means to put a stop to, put down, or prohibit, to prevent (something) from being seen, heard, known, or discussed. By disclosing the said receipts in audited accounts, assessee had not endeavoured to prevent it from being known. Simply non-disclosure in ST-3 returns does not justify levy of penalty under section 78. Said view has been accepted by Kolkata

Bench of the CESTAT in case of Manpasand Manpower (p.) Ltd.v. CST[2013]

35 taxmann.com 78.

A contrary view was expressed by the Delhi Bench of the

CESTAT in case of Ideal Security v. CCE [2011] 13 taxmamm.com 120/35 STT

26.

Contrary view expressed, however, was based on the fact that assessee could not come out with clean hands to explain the difference between ST-3 return and audited accounts. Subsequently, the Delhi Bench of the CESTAT in case of DCM

Textilev. CCE[2012] 19 taxmann.com 204/35 STT 88 held that penalty could not be imposed where information was recorded in Balance Sheet. Thus, in cases where assessee has recorded facts in audited accounts, penalty under section

78 cannot be imposed. This view will remain valid despite proviso 78 stating that where true and complete details of transactions are available in the specified records, penalty will reduce to fifty per cent. this is because reasoning given by

Tribunal in not levying penalty is that disclosure in audited accounts will not result in suppression. Where no suppression is proved penalty cannot be levied under section 78.

(3) Findings during department audit – Department may find out a few short-comings during the course of audit. Some short-comings may be on legal issues and some may be apparent mistakes committed by the assessee.

Assessee may pay the tax immediately on realizing the apparent mistake. This occurs normally in cases where there is some arithmetical mistake or oversight on the part of assessee. Does this situation justify levy of penalty under section

78? The Kolkatta CESTAT in case of Landis + Gyr Ltd. V. CCE [2013] 32 taxmann.com 268 held that every audit objection does not result in an immediate invocation of penalty under section 78. Suppression or material mis-statement with an intent to evade tax must be established before invoking section 78. Situation where assessee immediately on realizing the mistake pays the tax with interest construes a reasonable justification for not levying penalty u/s 78. This view has been approved by the Hon’ble Bombay HC in case of CCE v. Ceat Ltd. [2012] 26 taxmann.com 283/37 STT 430.

In cases where assessee is entitled to CENVAT credit, e.g

., Chennai Bench of CESTAT in case of India Trimmings (P.) Ltd.

[2013] 29 taxmann.com 425 has taken a view that as assessee was not going to get any extra benefit, penalty could not be imposed under section 78.

Thus, Penalty under section 78 pre-supposes guilty mind/mens rea. Unless that is proved, no penalty can be levied under section 78 of the Finance Act, 1994.

One important judgment is highlighted below:-



677

[2013] 40 STT 448/36 taxmann.com 13 (Madras)

HIGH COURT OF MADRAS

Commissioner of Central Excise, Salem v.

Crocodile India (P.) Ltd.*

MRS. CHITRA VENKATARAMAN AND K.B.K. VASUKI, JJ.

C.M.A. NO. 636 OF 2008

JUNE 7, 2013

I. Section 78 of the Finance Act, 1994 – Penalty – For suppressing, etc. of value of taxable services – As held in Union of India v. Rajasthan Spg. &

Wvg. Mills [2009] 20 STT 481 (SC) application of section 78 of Finance Act,

1994 (similar to section 11 AC of Central Excise Act, 1944) would depend upon existence or otherwise of conditions expressly stated in side section and once said section is applicable, concerned authority would have no discretion in quantifying amount and penalty must be imposed equal to tax/ duty determined – In every case of non-payment or short payment of tax/ duty, penal provisions cannot be automatically invoked; conduct and bona fides of assessee in each case have to be looked at before imposing any penalty [Para 6] [In favour of assessee]

II. Rule 15, read with 14, of the Cenvat Credit Rules, 2004 and rule 13 of the CENVAT Credit Rules, 2002 – CENVAT Credit – Confiscation and penalty

– assessee had taken excess credit, which was reversed subsequently after detection by Revenue but prior to issuance of show-cause notice –

Department issued show-cause notice seeking to levy interest and penalty under CENVAT Credit Rules, 2004 – Tribunal upheld imposition of interest but set aside penalties – Assessee argued that notice failed to point out how penal provisions were attracted and, therefore, penalties could not be charged – HELD : Except for mere reference to proposal to levy penalty under

CENVAT Credit Rules, 2004, there was no discussion as regards various requirements necessary for levy of penalty – Show-cause notice was bereft of any details which are required to be considered for levy of penalty under rule 15 of CENVAT Credit Rules, 2004 – In absence of any specific ground alleged, Tribunal order setting aside penalty was upheld [Paras 2,7 & 8] [In favour of assessee]

CASE REVIEW : Union of India v. Rajasthan Apg. & Weg. Mills [2009] 20 STT

481 (SC) (para 8) applied.

CASES REFERRED TO : Union of India v. Rajasthan Spg. & Weg. Mills [2009]

20 STT 841 (SC) (para 5) and Union of India v. Dharamandra Textile Processors

[2008] 17 STT 262 (SC) (para 6).

*In favour of assessee.



K. Ravi Ananthapadmanabhan for the Appellant. K.s. Venkatagiri for the

Respondent.

JUDGMENT

1. This Civil Miscellaneous Appeal is filed at the instance of the Revenue as against the order of the Customs, Excise & Service Tax Appellate Tribunal, So uth

Zonal Bench at Chennai. The above appeal was admitted on the following substantial questions of law:-

“(1) Whether the Tribunal is correct in setting aside the penalty imposed under rule

13 of CENVAT Credit Rules, 2002 when the assessee made an offence by retaining this wrongful CENVAT credit for a period of six months which resulted in unwarranted financial accommodation in contravention of the CENVAT Credit Rules, 2002 and are liable for penal action as per rule 13(1) ibid?

(2) Whether the Tribunal is correct in setting aside the penalty imposed, when the question of ‘imposition of penalty equivalent to the amount of duty evaded under section 11AC of the Central Excise Act, whether maximum or not and of discretion to impose lesser amounts’ itself is pending in appeal before the Supreme Court in a series of appeals by the department?”

2. It is seen from the facts herein that the assessee is a manufacture of readymade garments falling under Chapter sub-heading 62.01 of the Central Excise

Tariff Act, 1985. After communicating with the jurisdictional Superintendent and after considering the reply, the Revenue held that credit taken to a sum of Rs. 15,07,414/-, was in excess of the admissible credit. However, subsequently, the assessee reversed the wrongful credit taken and paid the duty thereon. Evidently, this was before the issuance of show-cause notice. Thus, though the original notice issued on 16-4-2004 proposed levy of interest under section 11AB of the Central Excise Act, 1944 and penalty under rule 13(1) of the CENVAT Credit Rules, 2002, on the above facts, the

Assistant Commissioner dropped the proposal on the levy of interest on penalty. On appeal by the Revenue, by virtue of the powers under section 35E-(2) of Central Excise

Act, 1944, the Commissioner reversed the order of the Assistant Commissioner. He proposed the imposition of penalty under rule 13(1) of the CENVAT Credit Rules, 2002 and interest under rule 12 of CENVAT Credit Rules, 2002. The assessee objected to this that the notice failed to point out how the penal provisions were attracted in the case, more so in the context of payment of the duty even before the issue of the notice in terms of section 11A(2B) of Central Excise Act, 1944. A cursory reading of the notice shows that except for mere reference to the proposal to levy penalty under section

13(1) of CENVAT Credit Rules, 2002, there is no discussion as regards the various requirements which are necessary for the purpose of levy of penalty under section

11AB of Central Excise Act, 1944.

3. A reading of the order of the Commissioner shows that he confirmed the levy of penalty observing that the reversal of the credit made by the assessee after detection of the case clearly established the intention to cause wrongful gain warranting imposition of penalty. Thus even if any credit was reversed before the issuance of show-cause notice, it being made after the detection, penalty was leviable under section 11AB of

Central Excise Act, 1944. Thus, ultimately the Commissioner confirmed his proposal



679 to levy penalty of Rs. 1,50,000/- under rule 13 of the CENVAT Credit Rules, 2002 and confirmed the levy of interest at Rs. 1,24,150/-.

4. Aggrieved by this, the assessee went on appeal before the Customs, Excise & service Tax Appellate Tribunal. Considering the merits of the case, the Tribunal found that the assessee reversed the credit on 23-10-2003 after getting intimation from the department as to the admissibility of the claim. In terms of rule 12 of Cenvat Credit

Rules, 2002, the assessee was rightly asked to pay the interest. However, it was also an admitted fact that the assessee did not utilize the credit and reversed immediately on receipt of the intimation about the error. In the circumstances, in the absence of any other material to show the intent to cause wrongful gain as required under section 11A of the Central Excise Act, the levy of penalty was cancelled by the Tribunal. Aggrieved by this, the present appeal by the Revenue.

5. Learned standing counsel appearing for the revenue placed reliance on the decision reported in Union of India v. Rajasthan Spg. & Weg. Mills [2009] 20STT 481

(SC) and submitted that but for the detection by the Revenue, the assessee would not have reversed the entry. In the circumstances, going by section 11AB of the Central

Excise Act, on the facts the levy of penalty is liable to be imposed.

6. We do not agree with the submission of learned standing counsel for the Revenue.

The decision of the Apex Court Reported in Rajasthan Spg. & Weg. Mills (supra) referred to the decision of the Apex Court Reported in Union of India v. Dharamendra Textile

Processors [2008] 17 STT 262 wherein, the Apex Court pointed out that the application of section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable, the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of section 11A. in so holding, the Apex Court held that in every case of non-payment or short payment of duty, penal provisions cannot be automatically invoked, in other words, the conduct of the assessee in each of the case, before imposing penalty, has to be looked at on the bona fides of the assessee as regards his claim which otherwise would not be sustained in law.

7. As far as present case is concerned, it is no doubt true that the assessee originally made the claim for CENVAT credit. As rightly submitted by the learned counsel for the assessee, the same was availed on the basis what had been stated so by the department. However, subsequently, on receipt of intimation from the department in

October, 2003, the assessee reversed the credit immediately thereon and paid the duty.

In the background of the said facts, we may look into the show-cause notice issued by the adjudicating authority as well as by the Commissioner. On a reading of the show cause notice, we can safely hold that it is bereft of any details which are required to be considered for the purpose of levy of penalty under rule 13(1) of the CENVAT Credit

Rules 2002. In the absence of any specific ground alleged, we do not find any justifiable ground to disturb the order of the Tribunal.

8. Applying the law declared by the Apex Court in the decision reported in

Rajasthan Spg. & Weg. Mills (supra) we reject the appeal filed by the Revenue, thereby confirming the order of the Tribunal. The Civil Miscellaneous Appeal is dismissed. No costs.


680

Service Tax on Educational Services

Over All View

SERVICE TAX ON EDUCATIONAL

SERVICES - OVER ALL VIEW

 CA MANOJ B. SHAH - manoj@rspatelca.com

1. Introduction

Education Sector has been given tax benefit all over the globe. In the post Negative

List era, it was imperative to appropriately exempt educational and related services

. Clause (l) of new section 66D of the Finance Act 1994 , exempt the education services from preschool to higher secondary, education as part of curriculum for obtaining a qualification recognized by law and education as a part of an approved vocational education course from levy of service tax .

Further, services ancillary to education have been exempted by Serial No. 9 of

Mega Exemption 25/2012 dated 20.6.2012 .

2. Statutory provision granting exemption w.e.f 1.7.2012, the exemption has been provided to following services in relation to education services.

Educational Services

Clause (l) of Section 66D of the Finance Act 1994 , exempt following education services

“ Service by way of – i) Pre-school education and education up to higher secondary school or equivalent ii) Education as part of curriculum for obtaining a qualification recognized by any law for the time being in force.

iii) Education as part of an approved vocational education course.”

Services ancillary to education

Serial No. 9 of Mega Exemption notification , the following services ancillary to education would be exempt

“services provided to or by an educational institution in respect of education exempted from service tax , by way of – a) b)

Auxiliary educational services ; or

Renting of immovable property



Over All View

3. Scope of Exemption to Educational Services

681

→ School Education o Education level should be Pre-school education and higher secondary school both inclusive.

→ Education beyond school o It should be part of curriculum for obtaining a qualification recognized by any law for the time being in force.

o Curriculum should be for obtaining qualification o Qualification should be recognized by law

→ Vocational education o Education should be part of an approved vocational education course.

What is “education”

Education has not been defined either in the Act or in the Mega Exemption notification. As per Law Lexicon :

“ education is the bringing up: the process and of developing and training the power and capabilities of human being. In its broadest sense , the word comprehend not merely the instruction received at school or college but the whole course of training moral, intellectual and physical ; is not limited to the ordinary instruction of the child in the pursuit literature. It is comprehend a proper attention to the moral and religious sentiment of the child. And it is sometimes uses as the process of training and developing the knowledge , skill, mind and character of students by formal schooling “

Level of education at school

Pre-school – Preschool is also referred to as “Preprimary education”. Preprimary education is not the fundamental right in India.

Primary Education : there are two sub levels 1. Lower primary 2. Upper primary .

Lower primary is from level I to V and upper primary is from level VI to VIII.

Secondary Education : level IX and X.

Higher Secondary : level XI and XII.

What is Curriculum

Curriculum is referred to set of courses , and their contents, offered at an educational institution. I may referred to a defined and prescribed curse of studies, which student must fulfill in order to pass a certain level of education and degree or diploma.


682


Over All View

Which Qualification are recognised by law ?

One of the activity exempt under clause (l) of Section 65D in the negative list is the education as prescribed curriculum for obtaining a qualification recognized by law for the time being in force.

In this regards the following clarification are given by the department in Circular no.

107/01/2009 dated 28.01.2009.

o So far universities are concerned , all Universities of which are creature of

State or Union Act. As well as deemed universities, will fall under the category of institution “recognized by law for the time being in force”.

o Other institution which are given affiliates status by Universities Grant

Commission[UGC] under power vested in that commission as well as autonomous college promoted under the national policy on education are all to be treated as institutes which issue diploma or certificate recognized by law for the time being in force.

o As regards issuance of degree, section 22(1) of the said Act, provides for right of conferring or granting degrees only by a ‘university’ (as defined above) or a

‘deemed university’ o In addition, for recognition of professional courses, promotion of professional institutions and providing grants to various programmes, a number of

‘professional councils (Such as All India Council for Technical Education-

AICTE, Medical Council of India-MCI, Indian Council for Agricultural Research-

ICAR, Bar Council of India-BCI) have been created through independent

Union Acts. Since, inter alia these councils are entrusted with ensuring norms and standards of the courses, physical and instructional facilities, undertaking assessment etc., they have also been provided with powers to make subordinate legislations (i.e. through notifications, circulars, rules) that the institutions or the establishments within their ambit must abide. In case of default, the councils have the power to derecognize an institution or establishment or a particular course being conducted by them, even if they are recognized as a university, a deemed university or an affiliated college. If an institution or establishment is derecognized, then such institution or establishment cannot be called to be an institute or establishment which issues any certificate or diploma or degree or any educational qualification recognized by the law for the time being in force. With the result, the courses conducted would fall under the ambit of ‘commercial training or coaching centers’ and would be charged to tax. It may however, be noted that for exercising such power, there should be a valid rule / notification / circular, prescribing the minimum requirements or standards as also the consequences of default.

o A related issue is, that since the concept of recognition of an educational



Over All View

683 qualification in India has been dynamic in nature (i.e. the degree/ diploma/ certificate an institute or establishment may be recognized by the law at one time and not recognized at other, due to change in legal provisions) the taxability of the courses conducted would depend on the legal status of such institute or establishment at the point of time when such service is provided

(i.e. course is conducted). It cannot be said that once recognized an institute or establishment would remain so even in future or was so in the past.

o Many a time private institutes conduct courses and issue diplomas or certificates in collaboration with certain foreign institutes universities. In many cases private enterprises conduct campus interviews of the students of such institutes and offer them jobs. Such certificates / diplomas may be accepted for higher education abroad. However, such a certificate / diploma cannot be called as the one ‘recognized by the law for the time being in force’ unless such a diploma/ certificate has been specifically recognized by the statutory authorities such as UGC, AICTE. Consequently, such institutes would not fall under the exempted category and would be subjected to tax.

What is Vocational education

Vocational training has not been defined in the Act,

The term is defined in Section 2(k) of the West Bengal State Council of Vocational education and training Act,2005 as follows:

“Vocational education and training means a systematic course of instruction and training in the field of engineering , technology, agriculture, dairy and poultry , paramedical, social science, applied acts and crafts or such other subject as the state Government in consultation with the council, may by notification , declare.”

Section 2 (l) of the of the West Bengal State Council of Vocational Education and

Training Act,2005 also defines “Vocational Institutes” as follows:

“ Vocational Institute means an educational institutions in which instruction is provided for course of Study in the field of engineering , technology, agriculture, dairy and poultry , paramedical, social science, applied acts and crafts or such other subject leading to any pre or post vocational certificate , and include such other instruction as the state Government in consultation with the council, may by notification , declare as vocational institution.”

Thus the vocational education consist of practical courses through one gains skill and experience directly linked to career in future. It helps student to be skilled and in turn, offer better employment opportunities.

Vocational education imparts skill to enable the trainee to seek employment or undertake self employment directly after the completion of such training or coaching.


684


Over All View

Approved Vocational Education Course-

Section 65B(11) of the Act provides for definition of “approved vocational educational curses”. As per the provision of the section , approved vocational training educational courses will include the following courses.

o A course run by an industrial training institute or an industrial training centre affiliated to National Council for Vocational Training, offering courses in designated trades as notified under the Apprentice Act, 1961.

o A Modular employable skill course, approved by the NCVT, run by person registered with the Directorate General of Employment and Training , Ministry of Labour and Employment , Government of India.

o A course run by institute affiliated to National Skill Development Corporation set up by the Government of India.

Bundled Services o Service provided by Boarding School : if the school provides services of education with other services like provision of dwelling unit for residence and food and fees charges for providing these services are inseparable then these services will be treated “ bundled services” and the taxability shall be determined in terms of principal laid down in Section 66F of the Act.

o Extra- Curricular activities, the incidental auxiliary courses provided by way of hobby classes or extra curricular activities in furtherance of overall well being will be considered as naturally bundled course in the ordinary course of business.

Scope of exemption to services ancillary to education

S.N. 9 of Mega exemption notification exempts two services from the levy of service tax after amendment by way of Notification No. 3/2013-ST dated 1 st March, 2013.

After amendment it reads as under :-

“Services provided to an educational institution in respect of education exempted from service tax, by way of,-

(a) auxiliary educational services; or

(b) Renting of immovable property

Service should be provided in respect of education exempted from service tax.

What is Education institution

It has not been defined in the Act or Mega exemption notification .

Auxiliary education services

This is defined in the Mega exemption notification as follows:

“ Auxiliary education service” means any services relating to imparting any skill, knowledge, education, or development of course contents or any other knowledge- enhancement activity , whether for the student or the faculty or any services which



Over All View

685 educational institutes ordinarily carries out themselves but may obtain a outsource services from any other person, including services relating to admission to such institution ,conduct of examination, catering for student under the mid day meal scheme sponsored by Government , or transportation of student , faculty or staff of such institution.

Thus the essential ingredient of auxiliary educational services are as follows; o Service should relate to imparting of skill, knowledge or education for the student or the faculty, or o Development of course contents, or o Any other knowledge – enhancement activity for student or faculty , or o Services which education institute normally carry out them selves but may obtain as outsource services from any other person , including following services;

- Admission to such institution

- Conduct of examination

- Catering for the student under mid day meal scheme sponsored by Govt.

- Transportation of student, faculty or staff o such institution

Imparting Skill , Knowledge Or Education

Skill ; skill is learned capacity to carry out predetermined results often with the minimum outlay of time.

Knowledge ; knowledge means awareness or understanding of fact or circumstances a state of mind in which person has no doubt about existence of a fact

Education ; Education is already discussed in the previous para.

Enhancement of knowledge ; service that result in improving the knowledge of either the student or staff of an educational institute will be eligible for exemption subject to fulfillment of other conditions.

Renting of immovable property

Services pertaining to renting of immovable property to an educational institute in respect of education is exempt from levy of service tax.

From the reading of the amended notification, it seems that any service provided by an educational institutes in respect of ‘auxiliary education service’ and ‘renting of immovable property ‘ service will be taxable. Unless the auxiliary education services provided by educational institutions to students are exempted, providing exemption to services provided by outsiders to educational institutions would be of no use and is totally irrational as such attempt will make the students to bear the burden and simultaneously relieve the educational institutions from paying service tax on input services procured. It would altogether defeat the entire objective of exempting auxiliary service i.e. not to indirectly transfer the tax burden to students.

All this might be due to drafting anomaly though it is not out of legislative intention.


686

Important changes/announcements pertaining to the Service Tax law

Important changes/ announcements pertaining to the Service Tax law



Nirav Pankaj Shah - nirav@npsassociates.in

Service Tax department arrests 2 buil ders, first ever arr est in Gujarat

Officers of the commissionerate of the Central Excise Ahmedabad III on 18 th

October arrested two partners of Shukan Builders - Purushottam Patel and Jitendra

Patel - for tax evasion of Rs 1.62 crore. Last week, the commissionerate had said it would not take any “coercive action” against the builders. Both the builders were arrested under clause (b) of section 89 (1) of Finance Act 1994 and were sent to judicial custody.

This is the first case in the city of builders being arrested for tax evasion.

Purushottam and Jitendra Patel run Shukan Silver Corporation, a subsidiary of Shukan Builders, located in Shukan Mall in Gandhinagar. The company run had collected Rs 54.93 crore (Rs 24.31 crore in cash and Rs 28.37 crore in cheques) from selling over 200 flats and shops but had not maintained book of accounts.

The company was yet to collect Rs 2.24 crore from customers.

The department of service tax raided 26 premises of Shukan Builders in the first week of October and found tax evasion of Rs 15 crore. Eventually, the owner of

Shukan Builders had paid Rs 4 crore in service tax. The Central Excise team found irregularities involving Rs 24 crore, the amount collected in cash not reflecting in the books.

Shukan Silver Corporation has residential schemes in Koba, Sola, and

Ghatlodia among other places. The builders had collected money from customers for maintenance, stamp duty, GUDA fees among other heads, but had not deposited service tax.

(Times of India 19-10-2013)

Cl arification regardin g Restaurant Services

Circular No.173/8/2013 – ST

F.No.334/3/2013-TRU

Government of India

Ministry of Finance

Department of Revenue

Central Board of Excise & Customs

Tax Research Unit

North Block



687

New Delhi, 7 th October, 2013

Madam/Sir,

Subject: Restaurant Serv ice- clarification regarding

As part of the Budget exercise 2013, the exemption for services provided by specified restaurants extended vide serial number 19 of Notification 25/2012-

ST was modified vide para 1 (iii) of Notification 3/2013-ST. This has become operational on the 1 st of April, 2013.

2. In this context, representations have been received. On the doubts and questions raised therein clarifications are as follows:

1.

Doubts

In a complex where air conditioned as well as non-air conditioned restaurants are operational but food is sourced from the common kitchen, will service tax arise in the non-air conditioned restaurant?

2.

In a hotel, if services are provided by a specified restaurant in other areas e.g. swimming pool or an open area attached to the restaurant, will service tax arise?

3.

Whether service tax is leviable on goods sold on MRP basis across the counter as part of the

Bill/invoice.

Clarifications

Services provided in relation to serving of food or beverages by a restaurant, eating joint or mess, having the facility of air conditioning or central air heating in any part of the establishment, at any time during the year (hereinafter referred as ‘specified restaurant’) attracts service tax. In a complex, if there is more than one restaurant, which are clearly demarcated and separately named but food is sourced from a common kitchen, only the service provided in the specified restaurant is liable to service tax and service provided in a non airconditioned or non centrally air- heated restaurant will not be liable to service tax. In such cases, service provided in the non air-conditioned / non-centrally air-heated restaurant will be treated as exempted service and credit entitlement will be as per the Cenvat Credit Rules.

Yes. Services provided by specified restaurant in other areas of the hotel are liable to service tax.

If goods are sold on MRP basis (fixed under the Legal Metrology Act) they have to be excluded from total amount for the determination of value of service portion.


688


3. Trade Notice/Public Notice may be issued to the field formations and taxpayers. Please acknowledge receipt of this Circular. Hindi version follows.

Yours sincerely,

(S. Jayaprahasam)

Technical Officer, TRU

Tel: 011-2309 2037

CONDONATION OF DELAY

HIGH COURT OF KARNATAKA

Chikkabasavaraju v. State of Karnataka*

WRIT PETITION NOS. 2174 OF 2013 (T-RES), 2175 OF 2013 (T-KST)

AND 14216 & 14426 OF 2013

MARCH 26, 2013

Section 85 of the Finance Act, 1994 and Section 22 of the Karnataka Sales

Tax Act, 1957 - Commissioner (Appeals) - Condonation of delay - There was delay in filing appeal beyond permissible period of condonation by Commissioner

(Appeals) - Assessee’s appeal was rejected as time-barred stating that delay was not condonable - HELD : Act is a special statute prescribing a period of limitation for filing an appeal before Commissioner (Appeals) and provides maximum period of condonation whereafter authorities/Tribunal/courts have no jurisdiction -

Legislature having clearly declared its intention in scheme of Act, it is duty of courts to give effect to same, more so since Act is a taxing statute - In view of specific provisions specify maximum period of condonation, there is complete exclusion of application of section 5 of Limitation Act, 1963 - Hence, dismissal of appeal as time-barred was upheld [Paras 5 to 8] [In favour of revenue]

RENT-A-CAB SERVICES

CESTAT, NEW DELHI BENCH

Ajai Kumar Agnihotri v. Commissioner of Central Excise, Kanpur*

FINAL ORDER NOS. 56363 - 56364 OF 2013

APPEAL NOS. ST/ 326 & 327 OF 2006

MAY 2, 2013

I. Section 65(91) of the Finance Act, 1994 - Rent-a-cab services - Period from

October 2000 to April 2003 - Assessee was providing its motor cabs/maxi cabs to its client on hire on monthly basis subject to specified usage in kilometers on 24 hourly basis - An additional amount was payable by client if usage exceeded ceiling limit and separate charges for night halt were also set out - In addition, charges for vehicles required on call basis (apart from monthly rate basis) were also agreed

- Assessee was obliged to bear all expenses towards fuel, salary of drivers and maintenance of vehicles - Department sought levy of service tax under rent-a-cab



689 services - Assessee argued that its activity amounted to ‘hiring’ of vehicles where service provider bears entire costs and not rent-a-cab services where costs are borne by service receiver - HELD : If a person plies a motor cab or maxi cab, such service becomes a taxable service under ‘Rent-a-cab services’ - There is no substantive definition of word ‘rent’ - Words ‘renting’ or ‘hiring’ are synonymous and consequently, transaction at issue was liable to service tax [Paras 8 to 19] [In favour of revenue]

II. Section 80, read with sections 76, 77 and 78, of the Finance Act, 1994 -

Penalty - Not to be imposed in certain cases - Assessee argued that it was not liable to any penalty, as it had bona fide belief that there is no liability to service tax; more so, in view of divergent views of Tribunal - HELD : Ignorance of law is not an excuse - An Act of appropriate legislature is operative from moment of its vitality and is not contingent upon its specific knowledge by an individual nor does a plea of ignorance of a legislative provision eclipse its efficacy qua that person - A mere untenable assumption regarding relevant provisions of an enactment cannot constitute bona fide belief - Judgments of Tribunal in favour of assessee were pronounced subsequent to period in respect of which assessee was assessed and assessee cannot be said to have a premonition of future judgments to arrange his affairs accordingly - Contention that assessee was operating in remote area was devoid of any force, as ignorance of law cannot be considered a reasonable cause under section 80 for failure to remit legislatively mandated tax - Accordingly, penalties were upheld [Paras 20 to 23] [In favour of revenue]

SHORT-PAID SERVICE TAX ON ACCOUNT OF

INADVERTENT EXCESS UTILIZATION OF CREDIT

CESTAT, AHMEDABAD BENCH

Central Warehousing Corporation v. Commi. of Service Tax, Ahmedabad*

ORDER NO. A/10380/WZB/AHD/2013

APPEAL NO. ST/640 OF 2011

MARCH 8, 2013

Section 80, read with sections 76 and 78, of the Finance Act, 1994 and rules

3 and 6 of the Cenvat Credit Rules, 2004 - Penalty - Not to be imposed in certain cases - Assessee had utilized Cenvat credit in excess of that permissible but had adjusted same in next month - On scrutiny, Department raised demand for excess utilization along with interest and penalties - HELD : Assessee had enough balance available and excess utilisation was an inadvertent error, which was made good by debiting Cenvat credit available with them in very next month - Though said error happened twice, there was no intention to evade service tax as assessee was regularly filing returns - Hence, demands were set aside as having already been paid, interest for delayed payment was ordered to be calculated and paid and penalties imposed were set aside under section 80 [Paras 6 to 8] [Partly in favour of assessee]


690 ÊWÅqNÉÒ - +àH HàÊ±ÉeÉà»HÉà~É

ÊWÅqNÉÒ - +àH HàÊ±ÉeÉà»HÉà~É

{kt fe {{íkk fe økkuË çkur{Mkk÷ íkku ni ne,

ÃkÃÃkk fk ÃÞkh¼hk Mkþõík ftÄk ¼e f{ Lknª

rþÞk¤kLke nqtVk¤e Mkðkh. y{ËkðkËLkk Ãkrh{÷ økkzoLk{kt çkktfzk Ãkh ºký ð]Øku ðeíku÷k Mk{ÞLkku ykLktË yLku ðíko{kLkLkk ð÷kuÃkkíkLku ðkøkku¤e hÌkk Au.

y{q÷¾hkÞ rLkð]¥k Mkhfkhe yrÄfkhe Au. yufLkku yuf Ëefhku y{urhfk{kt MÚkkÞe ÚkÞku Au, fnu Au “{khk

ËefhkLku nwt yuLke {k sux÷ku s Ônk÷ku Awt Ãký y{urhfkÚke yuLkku fkì÷ ykðu íÞkhu {khe MkkÚku “fu{ Aku ? ÃkÃÃkk

íkrçkÞík ò¤ðòu” yux÷wt s fnu Au ßÞkhu yuLke {k MkkÚku f÷kfku ðkík fhu Au. yk Mkk÷wt Mk{òíkwt LkÚke.” rËLkfhhkÞ yuf rLkð]¥k ðuÃkkhe Au. “y{w÷¾ Þkh, íkkhe ðkíke Mkk[e Au {khku Ëefhku {khe çkÚko zu Ãkh y[qf ¼ux ykÃku Au Ãký yuLke {B{eLke çkÚko zu Ãkh yuLku ð¤øke Ãkzu Au. {khe yk ykLktË¼he Ãkezk Ãký íkkhk suðe Au.”

ºkeò Au rLkð]¥k «kuVuMkh hkð÷ Mkknuçk. “yhu ËkuMíkku {khe Ëþk Ãký ík{khk suðe s Au. {khe Ëefhe

ÃkhýeLku {wtçkE{kt ÂMÚkh ÚkE Au. {rnLkk{kt ËMkÚke ÃktËh ðkh Mkktsu 7.00 ðkøku yuLkku y[qf fku÷ ykðu,

“ÃkÃÃkk çke.Ãke.Lke Ëðk ÷eÄeLku ? ¼q÷íkk Lkrn” Ëefhku {khe MkkÚku s hnu Au. çkÄe heíku þkýku Au Ãký yuýu fÞkhuÞ {Lku ËðkLke ÞkË LkÚke fhkðe.” yk ºkýuÞLke ðuËLkk, ð÷kuÃkkík, rðxtçkýk, ÔÞøkúíkk yu{Lke yuf÷kLke LkÚke. Mk{økú rÃkíkkykuLke Au.

ÞwøkkuÚke ‘{kLke {{íkkLke økkuË’ Mkk{u ‘rÃkíkkLkku Mkþõík ¾¼ku’ nkhíkku ykÔÞku Au yLku SíkðkLkk fkuE yutÄký yíÞkhu íkku ðhíkkíkkt LkÚke. yhu ! fÞkhuÞ Lkrn ðhíkkÞ. ºký rÃkíkkykuLke «u{Lke y÷øk y÷øk yr¼ÔÞrfík

òuEyu. yLkwÃk{ ¾uh. rnLËe rMkLku{k søkíkLkwt yuf ÷kzfwt Lkk{. yLkwÃk{ ËMk{k Äkuhý{kt VuE÷ ÚkkÞ Au,

íÞkhu yuLkk rÃkíkk yuLku yuf yk÷eþkLk nkuxu÷{kt ÷E sELku fnu Au “÷ux yMk Mku÷eçkúuEx Þkìh Vu÷ÕÞkuh” yk rLk»V¤íkkLkwt rÃkíkkyu ykÃku÷wt Mku÷eçkúuþLk yLkwÃk{ ¾uh {kxu ‘{kuxeðuþLk’ çkLke òÞ Au yLku yLkwÃk{ MkV¤íkkLkkt

Wåík{ rþ¾hku nktMk÷ fhu Au.

ÞwðkLk yr{íkk¼ hkºku 12.00 ðkøku yuf þqxª{ktÚke ½uh ykðu Au. rÃkíkk nrhðtþhkÞ çkå[Lk yuLke

«íkeûkk fhíkk òøkíkk nkuÞ Au. “ykðe økÞku yr{ík, sÞk yuLku s{kze ÷u” yuf MktðuËLkþe÷ rÃkíkkLkk

ÓËÞ{ktÚke yk {kíkk çkku÷e hne Au Lku ?

rÃkíkk-ÃkwºkLkku MktçktÄ ySçkkuøkheçk Au. ÄLkw»Þ Ãkh [Zkðu÷k çkkýLke su{ yu íkLkkðÃkqýo Au, Ãký yux÷ku s MLkunk¤ Au. Ãkkt[Mkku ð»ko Ãknu÷k þuõMkrÃkÞh fne [qfÞk Au,” rÃkíkk ßÞkhu ÃkwºkLku fkuE ¼ux ykÃku Au íÞkhu

çkÒku nMku Au, Ãký Ãkwºk ßÞkhu rÃkíkkLku ¼ux ykÃku íÞkhu çkÒkuLke ykt¾ku{kt yktMkw nkuÞ Au.”


ÊWÅqNÉÒ - +àH HàÊ±ÉeÉà»HÉà~É 691

MktíkkLk ÃkkuíkkLkk rÃkíkk ÃkkMku þkLke yÃkuûkk hk¾u Au ? {Lkkurð¿kkLkLkku ¼e»{rÃkíkk{n Mkªø{z £kuEz fnu Au.

“{Lku {khk çkk¤Ãký{kt rÃkíkkLkk «kuxuõþLkLke sYrhÞkík sux÷e çkeò fþkLke LkÚke ÷køke.” çkk¤f nt{uþkt rÃkíkk ÃkkMku, «kuuxuõþLkLke yÃkuûkk hk¾u Au.

çkk¤f {kLke økkuË{kt MkqE òÞ Ãký fqËðkLkwt íkku yuLku ÃkÃÃkkLkk ¾¼k WÃkh s øk{u. yktøk¤e ÃkfzeLku

[÷kðíkku fu nðk{kt WAk¤íkku rÃkíkk MktíkkLk{kt yuf øksçkLkku rðïkMk ÃkuËk fhu Au. “rÃkíkk {Lku fÞkhuÞ Lke[u

Ãkzðk Lknª Ëu.” {kíkk ÓËÞðk[f yLku ¼kððk[f þçË Au {kíkkLkwt yuf MÚkkLk Au. rÃkíkkLkwt çkeswt MÚkkLk Au. rÃkíkk {Lkðk[f yLku {kLkðk[f þçË Au. MktíkkLk {kxu rÃkíkk yuf ÷e÷wtA{ hnuíkwt, þe¤e AktÞze ykÃkíkwt,

Úkkfe sðkÞ íÞkhu rðMkk{ku ykÃkíkwt ½xkËkh ð]ûk Au. ‘rÃkík] Ëuðku ¼ð’ yu fÚkkLkf SðLkLkwt MkLkkíkLk MkíÞ Au. y÷çk¥k, ‘sLkf’ çkLkðwt yu çkkÞku÷kuSf÷ «kuMkuMk Au ßÞkhu ‘rÃkíkk’ çkLkðwt yu Mkk{krsf, {Lkkuði¿kkrLkf, sðkçkËkhe¼he «r¢Þk Au. y{q÷¾hkÞ çkkuÕÞk, “yÕÞk hkð÷ íkwt íkku «kuVuMkh Au yLku yu Ãký rV÷kuMkkuVeLkku.

{kLkðeÞ MktçktÄkuLkk yk Lk Wfu÷e þfkÞ yuðk íkkýkðkýkLke ðkík {ktzeLku fh yux÷u Úkkuze þkíkk ð¤u.”

«kuVuMkh hkð÷ “ík{u çkÒku {khk çk[ÃkýLkk ËkuMíkku Au. yuf Mkhfkhe yrÄfkhe çkLÞku, çkeòu ðuÃkkhe.

ík{u çkÒku Ãký {khe ‘{kMíkhøkehe’ yLku rV÷MkqVeLke yðkhLkðkh Xufze Wzkðku Aku Ãký yksLke Ãkezk ykÃkýk

ºkýuLke Au, yhu ËwrLkÞk¼hLkk rÃkíkkykuLke Au. Úkkuzk Xkðfk ÚkEyu yLku yk økt¼eh rð»kÞLke Úkkuzef Mkk[wf÷e

ðkíkku {{¤kðeyu.

“ËkuMíkku, nðu ºkeò rÃkíkkLke ðkík. s{oLke{kt çkLku÷e yuf Mkk[e ½xLkk. yuf rÃkíkk yuLkk økuhus{kt fkhLke

MkkVMkqVe fhe hÌkku Au. yux÷k{kt [kh ð»koLkku yuLkku Ãkwºk ykðu Au yLku ÷ku¾tzLkk yuf xwfzkÚke fkhLkk fk[Lkk

çkkhýk WÃkh Úkkuzk ½Mkhfk fhu Au. rÃkíkk økwMMku ÚkE òÞ Au yLku çkk¤fLkk nkÚk{ktÚke ÷ku¾tzLkku xwfzku AeLkðe

÷E yuLke yktøk¤eykuLku f[ze Lkk¾u Au. LkkLkfzku çkk¤f ðuËLkkÚke r[ífkhe QXu Au çkkÃk íkku Auðxu çkkÃk s Au

Lku !!! Ãku÷k çkk¤fLku nkuMÃkex÷{kt ÷E òÞ Au. çkk¤fLke yktøk¤eykuLkwt ykuÃkhuþLk fhkÞ Au. rLkËkuo»k çkk¤f yuLkk rÃkíkkLku ÃkqAu Au. “zuze {khe yktøk¤eyku fÞkhu Mkkhe ÚkE sþu ?” Ãku÷ku Ãkk{h zuze ÄúqMkfu Lku ÄúqMkfu hze Ãkzu

Au. økwMMku ÚkELku økuhus{kt òÞ Au yLku su fk[Lkk çkkhýk WÃkh yuLkk Ãkwºku ½Mkhfk fhu÷k íkuLku íkkuzðk òÞ Au.

íÞkt yu yuf á~Þ òuELku yðkf ÚkE òÞ Au. yu hze Ãkzu Au yuLkku økwMMkku, yntfkh ¼M{ ÚkE òÞ Au. fk[Lkk

çkkhýk WÃkh çkk¤fu ÷ÏÞwt níkwt “Daddy I love you” yLku yu rÃkíkk ÃkMíkkðkLkk yk½kíkÚke ykí{níÞk fhe ÷u Au. «kuVuMkh yLku yu{Lkk ºkýu r{ºkkuLke ykt¾ku Ãký ykÿo çkLke hnu Au. hkð÷ Mkknuçk ykøk¤ [÷kðu Au.

“ykÃkýk {kLkðeÞ MktçktÄkuLke ‘ÃkkfeOøk Ã÷uMk’ fkuELkk {Lk{kt hne LkÚke. MktçktÄkuLke Ãkezk {kLkrMkf çke{kheLkwt fkhý Au yux÷wt íkku ykÃkýu Mk{Syu Aeyu Ãký ‘MktçktÄkuLkk MkÚkðkhk’ yk çke{kheLkwt {khý Au yux÷wt Mk{síkk

LkÚke. þk {kxu ykÃkýk ºkýuLke ykÃkýk suðk fhkuzku rÃkíkkykuLke ®sËøke Ãkt¾eyku rðLkk MkqLkk ¼Ufkh {k¤k{kt

‘yuBÃxe LkuMx-rMkLzÙku{’Lkwt ze«uþLk Au. {k¤ku íkku Au, Ãký Ãkt¾eyku fÞkt Au ? MktíkkLkkuLku yu{Lkku Mkk[ku rÃkíkk

{¤u yu Mknu÷e ðkík LkÚke.

MktíkkLkLku {kxu {kíkk su{ Lkðku sL{ ÷E sL{u Au íku{ rÃkíkkLkku Lkðku sL{ LkÚke Úkíkku. çkk¤f rÃkíkk{kt rðfkMk Ãkk{u Au. çkk¤f rÃkíkk MkkÚku íkkËkíBÞ “identification” MkkÄu Au. ÃkkuíkkLkk rÃkíkk suðwt Úkðwt yu «íÞuf

çkk¤fLkwt Ïðkçk nkuÞ Au.


692 ÊWÅqNÉÒ - +àH HàÊ±ÉeÉà»HÉà~É

¾÷eMk rsçkúkLkLkk {ík «{kýu ík{khkt çkk¤fku íku ík{khkt çkk¤fku LkÚke íku ík{khe îkhk ykðu Au, Ãký

ík{khk{ktÚke LkÚke ykðíkk. yux÷u ík{khe {kr÷feLkk fu ík{khk {{íðLkkt fu yrÄfkhLkk rð»kÞ LkÚke. fwËhík

Ãkkuíku ÃkkuíkkLku yLkuf heíku ÔÞõík fhðk {køku Au, yLku íkuLku ÃkkuíkkLku ÔÞõík fhðkLkwt MkkÄLk ík{u rÃkíkkyku Aku.

ík{khkt çkk¤fku ík{khe Mkkuz{kt hnu Au. Aíkkt íku ík{khk LkÚke. ík{u yu{Lku ík{khku «u{ ¼÷u ykÃkku. Ãký

ík{khe fÕÃkLkkyku Lkrn. fkhý ík{khk çkk¤fkuLku yu{Lke ÃkkuíkkLke ykøkðe fÕÃkLkkyku Ãký nkuE þfu Au. yu

MkíÞ ík{khu Mðefkhðwt hÌkwt. ík{u ík{khk çkk¤fku suðk Úkðk ¼÷u «ÞíLk fhòu Ãký íku{Lku ík{khk suðk fhðk

VktVk {khþku Lkrn. çkk¤fkuYÃke MkSð çkkýku AkuzðkLkkt ík{u ÄLkw»Þku Aku. yLktíkLkk {køko Ãkh hnu÷wt fkuE ÷ûÞ

íkkfe ÄLkwÄoh (fwËhík) ík{Lku Lk{kðu Au, suÚke yuLkkt (fwËhíkLkkt), çkkýku ÍzÃkÚke yLku Ëqh òÞ. yu ÄLkwÄoh

(fwËhík) Lkk nkÚk{kt ík{khwt Lk{ðwt yu s ykLktË{Þ yLku fÕÞkýfkhe Au. fkhý, su{ QzeLku sLkkÁt çkký

(ík{khk çkk¤fku) yuLku r«Þ Au, íku{ ÂMÚkh hnuLkkhwt ÄLkw»Þ (rÃkíkkyku) Ãký yuLku ðnk÷wt Au. y{w÷¾ yLku rËLkfh, ykÃkýu ykÃkýk çkk¤fkuLku yLknË «u{ fheyu Ãký yu çkk¤fku Ãký ykÃkýLku yux÷ku «u{ fhu yuðe yÃkuûkk yu íkku þhíke {k{÷ku ÚkÞku.

ykÃkýu nðu Úkkuzk zexuåz ÚkE {]íÞwLke ykLktËÃkqðof «íkeûkk fheyu. {kíkkLke økkuË Mkk{u ykÃkýu fËe SíÞk

LkÚke, SíkðkLkk LkÚke Ãký yu økkuË ykÃkýe íkku ðnk÷e ÃkíLkeLkku íkku Au Lku ?

ytík{kt ÚkeÞkuzkuh nuMkçkøkoLkwt yk rðÄkLk fhe {kÁt ðõíkÔÞ Ãkqýo fheþ. “çkk¤fkuLke ‘{kíkk’ Lku yLknË

«u{ fhðku yus çkk¤fku {kxu rÃkíkkLkwt ©u»X yÃkoý Au.” ykÃkýe yÃkuûkkykuLke rLkhÚkof ÞkËkuLke ytÄkhe fkuxze{ktÚke shk ykÃkýu çknkh zkurfÞwt fheyu íkku ¾çkh

Ãkzu fu Ëhðksu ®sËøke nS Ãký Ëeðku ÷ELku Q¼e Au.

[k÷ku, ËkuMíkku yu ËeðkLke ßÞkuík{kt økhfkð ÚkE sEyu.

{kíkk yLku rÃkíkk çkÒkuLku ÃkkuíkkLkkt MktíkkLkku {kxu yMke{ MLkun nkuÞ Au. nk, çkÒkuLke «u{Lke yr¼ÔÞÂõík y÷øk y÷øk nkuE þfu Au. {kíkkLkku «u{ yktMkwLkk MðYÃk{kt ðne þfu Au, rÃkíkkLkku «u{ ykt¾{kt ¼eLkkþ ÷kðu

Au yLku ¼eLkkþ yktMkw çkLkíkkt yxfe òÞ yu Mk{Þ økk¤kLke Ãkezk yMkÌk nkuÞ Au.

suLku ¾k÷eÃkku ÷køku Au Ãk¤¼h

íkuyku øk{íkwt fþwtf yze ÷u Au su ¼ÞkLkf heíku yxq÷k Au

íku íkku xku¤k{kt Ãký hne ÷u Au

[k÷ku ËkuMíkku, fþwtf øk{íkwt þkuÄe ÷Eyu yLku yuLku MÃkþo fhe ÷Eyu.


Introspection 693

INTROSPECTION



Nirav Pankaj Shah - nirav@npsassociates.in

Swami Vivekananda is an inspiration to many. I hope his following speech would help you introspect. Of the Swami’s address before the

Parliament of Religions, it may be said that when he began to speak it was of “the religious ideas of the Hindus”, but when he ended, Hinduism had been created.

RESPONSE TO WELCOME

At the World’s Parliament of Religions, Chicago

11th September, 1893

Sisters and Brothers of America,

It fills my heart with joy unspeakable to rise in response to the warm and cordial welcome which you have given us. I thank you in the name of the most ancient order of monks in the world; I thank you in the name of the mother of religions; and I thank you in the name of millions and millions of Hindu people of all classes and sects.

My thanks, also, to some of the speakers on this platform who, referring to the delegates from the Orient, have told you that these men from far-off nations may well claim the honour of bearing to different lands the idea of toleration. I am proud to belong to a religion which has taught the world both tolerance and universal acceptance. We believe not only in universal toleration, but we accept all religions as true. I am proud to belong to a nation which has sheltered the persecuted and the refugees of all religions and all nations of the earth. I am proud to tell you that we have gathered in our bosom the purest remnant of the

Israelites, who came to Southern India and took refuge with us in the very year in which their holy temple was shattered to pieces by Roman tyranny. I am proud to belong to the religion which has sheltered and is still fostering the remnant of the grand Zoroastrian nation. I will quote to you, brethren, a few lines from a hymn which I remember to have repeated from my earliest boyhood, which is every day repeated by millions of human beings: “ As the different streams having their sources in different places all mingle their water in the sea, so, O Lord, the different paths which men take through different tendencies, various though they appear, crooked or straight, all lead to Thee .”


694 Introspection

The present convention, which is one of the most august assemblies ever held, is in itself a vindication, a declaration to the world of the wonderful doctrine preached in the Gita: “ Whosoever comes to Me, through whatsoever form, I reach him; all men are struggling through paths which in the end lead to me .” Sectarianism, bigotry, and its horrible descendant, fanaticism, have long possessed this beautiful earth. They have filled the earth with violence, drenched it often and often with human blood, destroyed civilisation and sent whole nations to despair.

Had it not been for these horrible demons, human society would be far more advanced than it is now. But their time is come; and I fervently hope that the bell that tolled this morning in honour of this convention may be the death-knell of all fanaticism, of all persecutions with the sword or with the pen, and of all uncharitable feelings between persons wending their way to the same goal.

WHY WE DISAGREE


I will tell you a little story. You have heard the eloquent speaker who has just finished say, “Let us cease from abusing each other,” and he was very sorry that there should be always so much variance.

But I think I should tell you a story which would illustrate the cause of this variance. A frog lived in a well. It had lived there for a long time.

It was born there and brought up there, and yet was a little, small frog.

Of course the evolutionists were not there then to tell us whether the frog lost its eyes or not, but, for our story’s sake, we must take it for granted that it had its eyes, and that it every day cleansed the water of all the worms and bacilli that lived in it with an energy that would do credit to our modern bacteriologists. In this way it went on and became a little sleek and fat. Well, one day another frog that lived in the sea came and fell into the well.

“Where are you from?”

“I am from the sea.”

“The sea! How big is that? Is it as big as my well?” and he took a leap from one side of the well to the other.

“My friend,” said the frog of the sea, “how do you compare the sea with your little well?”

Then the frog took another leap and asked, “Is your sea so big?”

“What nonsense you speak, to compare the sea with your well!”


Introspection 695

“Well, then,” said the frog of the well, “nothing can be bigger than my well; there can be nothing bigger than this; this fellow is a liar, so turn him out.”

That has been the difficulty all the while.

I am a Hindu. I am sitting in my own little well and thinking that the whole world is my little well. The Christian sits in his little well and thinks the whole world is his well. The Mohammedan sits in his little well and thinks that is the whole world. I have to thank you of America for the great attempt you are making to break down the barriers of this little world of ours, and hope that, in the future, the Lord will help you to accomplish your purpose.

RELIGION NOT THE CRYING NEED OF INDIA


Christians must always be ready for good criticism, and I hardly think that you will mind if I make a little criticism. You Christians, who are so fond of sending out missionaries to save the soul of the heathen — why do you not try to save their bodies from starvation? In India, during the terrible famines, thousands died from hunger, yet you Christians did nothing. You erect churches all through India, but the crying evil in the

East is not religion — they have religion enough — but it is bread that the suffering millions of burning India cry out for with parched throats.

They ask us for bread, but we give them stones. It is an insult to a starving people to offer them religion; it is an insult to a starving man to teach him metaphysics. In India a priest that preached for money would lose caste and be spat upon by the people. I came here to seek aid for my impoverished people, and I fully realised how difficult it was to get help for heathens from Christians in a Christian land.

(from the Book ‘Complete works of Swami Vivekananda)

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 Nyu jnre=n 4eknolo@ µara koroZn ip/veN=nna isivl vkR Ae ibiL6&g kN4^k=nno -ag g8ato hova9I klmÝÉÌAe he5Xna jahernama k/m&ak Š @AecAenÝÉÈÎ, ta. ÉÉÝÉÈÝÊÈÈÎnI no&0ÝË•Ê– no la - mXe.

Arjdare ‘Nyu jnre=n 4eknolo@ µara korozn ip/veN=n’ na isivl vkRs koN4âk4 prna wCck verano dr ke4lo rhe tevo p/¿n wpiS9t krI in8Ry m&agel 2e. teAone messR jy[aI Aerome4Iks p/a.lI. Ý A&kle¿vr trf9I vkR Ao6Rr mXel 2e. jem&a tem8e g/ahkna kemIkl PlaN4 pr A9R vkR ibiL6&g, A9R vkR ro6, koNk/I4 Ý mesenrI Ane Nyu jnre=n 4eknolo@ ²ara koroZn ip/veN=nn&a isivl vkRna kamo krI Aapvan&a 2e. teAoAe Nyu jnre=n 4eknolo@ µara korozn ip/veN=nna isivl vkRs koN4âk4 prna verana dr A&ge in8Ry m&agel 2e. je isivl vkR krva ma4e ;poksI Ane polIyure9In m4IrIyl sIlIka vgere vapre 2e. Aa kam9I teAo kemIkl PlaN4na ibiL6&g Ane tmam

PlaN4 m=InrI kemIkl Ae4ek9I bcave ma4enI 2e. jema srfesne meNyuAlI A9va imkenIklI saf krvam&a Aave 2e. Tyarbad tena pr ;poksInu& È.Ë 9I É.Í AemAem su0Inu& leyr c6avvam&a Aave

2e. temj ;poksI A9va sIlIkonu É AemAem 9I Í AemAem je4lu& PlaS4r c6avvam&a Aave 2e. temj ;poksI A9va polIyure9Innu& È.Ë 9I É.Í AemAem je4la Aek A9va be leyr c6avvam&a

Aave 2e. Aa smg/ kamgIrI kemIkl PlaN4na A9R vkR, ibiL6&g vkR, ro6 vkR, koNk/I4 Ane mesenrI vkR bad krvam&a Aave 2e.

Aa koroZn ip/veN=nnu& isivl vkR Ae kemIkl PlaN4na ibiL6&g Ane PlaN4 m=InrI kemIkl

µara `va; n jay tenI same rx8 ma4e Aam te ibiL6&g kN4^k=n sa9e s&kXayelu& 2e. te9I te isivl vkRs koN4âk4 2e. Ane te9I wCck verano dr È.Î 4ka lage tem rjuAat 2e. ArjdarnI rjuAat

)yane let&a j8ay 2e ke, vkR Ao6Rrm&a A9R vkR ibiL6&g, A9R vkR ro6, koNk/I4 Ane mesenrI temj Nyu jnre=n 4eknolo@ µara koroZn ip/veN=nna isivl vkRno wLle` 2e. Aa tmam kamo k/mb)0 rIte krvan&a 2e Ane te tmam Aek j vkR Ao6Rrno -ag 2e.v0um&a Aa vkRs koN4âk4 isivl vkR, keimkl

PlaN4na ibiL6&g Ane PlaN4 Ane m=InrI pr krvam&a Aave 2e.

gu.mU.v.ve.A, ÊÈÈËnI klmÝÉÌ Ae he5Xna wCck verana dr in0Rairt krta jahernama k/m&akŠ

@AecAen Ý ÉÈÎ, ta.ÉÉÝÉÈÝÈÎ nI no&0ÝË•Ê– na =Bdo )yane leta tema ibiL6&g kNS4^k=n smaivQ4 2e. pr&tu tema9I bakat raèl babto isvayna kamo ke je ibiL6&g kNS4^k=nne lgta hoy teno smave= Aa no&0m&a 9ay. Aa9I Nyu jnre=n 4eknolo@ µara koroZn ip/veN=nna isivl vkR


H±É©É-80{ÉÉ SÉÖHÉqÉ ÷ÚÅH»ÉÉù 697

Ae ibiL6&g kN4^k=nno -ag g8ay Ane klmÝÉÌAe he5Xna jahernama k/m&ak Š @AecAenÝÉÈÎ, ta. ÉÉÝÉÈÝÊÈÈÎnI no&0ÝË•Ê– m&a smaivQ4 9ay.

Arjdar Š messR 0I DI. Aar. :iNDya, cukado Š s&.k.•ka.– / ve4 / klmÝÐÈ / ÊÈÉËÝDIÝÉËÑ / ja.ËÊË / ËÊÍ ta.Ê / ÈÐ / ÊÈÉË

 iviv0 Ao:l kulsRno smave= vpra=ne Aa0are je te no&0m&a 9ay.

Ao;l kulrna wTpadk Ane ivk/eta Arjdare nIcenI cIjvStuAo prna verana dr A&ge in8Ry m&agel 2e.

k/m. bIl n&br tarI` cIjvStunu& nam

É.

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Ê.

ÈÌÉÈ ÌÝÍÝÊÈÉÊ Ao:l kulr •Aekskeve4r ma4e–

Ë.

ÉÑÊÉ ÊÐÝÐÝÊÈÉÊ Ao:l kulr •loDr ma4e–

Ì.

ÉÈÌË ÊÊÝÎÝÊÈÉÊ Ao:l kulr •Dozr ma4e–

Í.

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Î.

ÉÉÑÏ ÌÝÏÝÊÈÉÊ Ao:l kulr •fLyuD kplI&g ma4e–

•Ae– Aer Ao:l kulr

•bI– Ao:l kul fLyuD kplI&g

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ÈÈÏÐ ÉÈÝÌÝÊÈÉÊ Ao:l kulr •pavr pek ma4e–

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Ñ.

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Aa cIjo Ao:l kulr Ae hI4 AeksceNjr 2e jeno wpyog malna wTpadnm&a vpratI m=InrI,

A9RmuvI&g m=InrI, kNS4^k=n m=InrI, ètI ivqyk m=InrI ivgerem&a 9ay 2e. Aa Ao:l kulrno m=InrIna 3sarane rokva ma4e vprat&a Ao:lne W&ca p/ma8m&a grm 9tu& rokva Ane tenI 5&Dk yoGy tapmane jaXvva ma4e iviv0 p/karnI m=InrIm&a vpray 2e, jenI ivgt nIce mujb 2e.

•É– Ao:l kulr •koNk/I4 mIxr m=In Ane bekho loDr ma4e– Š

KNS4^k=n sa:4 pr vpr&ata koNk/I4 mIxr m=In Ae ismeN4, retI, kpcInuu& mIåcr tEyar kre

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•Ê– Ao:l kulr •Aekskeve4r ma4e– Š

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µara Aek S9Xe9I bIja S9Xe cale 2e, tem&a rbr 4ayr VhIl hota n9I, tena ma4e Aar.4I.Ao. r@S4ê=n j£rI hotu& n9I.



Aa cIj vkRs koN4âk4m&a vpratI m=InrI ho: Aa kulr Aa m=InrIno pa4R g8ay.

•Ë– Ane •Ì– Ao:l kulr •loDr ma4e– t9a •Dozr ma4e– Š

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•Í– Ao:l kulr •so:l koMpek4r ma4e– Š

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•Î– Ao:l kulr •fLyuD kplI&g ma4e– Š

AayRn AeND S4Il :NDS4ÎZm&a mo4&a ptraAone ha;DôlIk m=InrI µara kapvam&a Aave

2e. kolsanI à8m&a ha:DôlIk m=In µara kolsanI herfer 9ay 2e. ha:DôlIk m=Inm&a fLyuD kplI&gnI sa9e Aa Ao:l kulrno wpyog 9ay 2e. ha;DôlIk m=InrI malna wTpadnm&a vpratI m=InrI ho: Aa Ao:l kulr m=InrI pa4R g8ay.

•Ï– Ao:l kulr •pavr pek ma4e– Š

S4Ilna vas8o, lo`&Dna tagara ivgere bnavtI :NDS4Îm&a Ha:DôlIk m=nrIno wpyog

9ay 2e. Aa Ha:DôlIk m=Inm&a p/e=r9I Ao:l sPlay krva ma4e pavr pek vpray 2e Aa pavr pek sa9e Ao:l kukr joDvam&a Aave 2e. je9I Ao:l 5&Du rhe. Ha:DôlIk m=InrI malna wTpadnm&a vpratI m=InrI ho: Aa Ao:l kulr m=InrI pa4R g8ay.

•Ð– Ao:l kulr •Spe+yl :NDS4Îyl :kvIpmeN4s ma4e– Š malna wTpadnm&a vpratI iviv0 m=InrI jevI ke iflI&g :kvIpmeN4, DIzl jnre4r se4,

Aer koMp/esr, koNk/I4 :kvIpmeN4 ivgerem&a Aa Ao:l kulrno wpyog 9ay 2e. AavI m=InrIm&a Aa

Ao:l kulr lagto ho: m=InrI pa4R g8ay.

•Ñ– Ao:l kulr •:NDS4Îyl koMp/esr ma4e– Š malna wTpadn drMyan hvana dba8ne j£rIyat mujbna mapm&a jaXvI ra`va ma4e koMp/esrno wpyog 9ay 2e. Aa koMp/esrm&a Ao:l kulr vpray 2e. Aam koMp/esr malna wTpadnm&a vpratI m=InrI ho: Aa Ao:l kulr m=InrI pa4R g8ay.

Aam, wkt tmam cIjo malna wTpadnm&a vpratI m=InrI Ane vkRs koN4âk4m&a vpratI m=InrIna pa4R ho: teno smave= AnusUicÝÊnI no&0ÝÍÐ Ae malna wTpadnm&a vpratI ma=InrI


H±É©É-80{ÉÉ SÉÖHÉqÉ ÷ÚÅH»ÉÉù 699 na pa4Rsm&a Ane klmÝÍ•Ê– he5Xna jahernama k/m&akŠ @AecAenÝËÍ, ta.ËÉÝËÝÊÈÈÎnI no&0ÝËÍ vkRs koN4âk4m&a vpratI m=InrIna pa4Rm&a 9ay tem rjuAat krI 2e.

sm9Rnm&a gujrat ha;ko4Rna cukada mess$ :ND4Îyl m=InrI meNyufekcrI&g p/a.lI, •ÉÎ

Aes.4I.sI.ËÐÈ– jema& 4ex4a;l mIlm&a vprata HMyumIDIfayrne m=InrI g8el 2e. t9a mess$

A&ibka vuD vk$s •ÌËÝAes.4I.sIÝËËÐ– jem&a Sk/In ip/N4I&g 4ebl sa9e fI4 krel S4Il pa;pne m=InrI g8el 2e te cukada 4a&kel 2e.

ArjdarnI rjuAat, p/oDk4 p/ofa;l fo4og/afs, sm9$nm&a 4a&kel cukada temj p/[nnI ivgto

)yane leta Aa Ao;l kuls$ n&a iviv0 wpyogne )yane leta& nIce mujb tar8 )yane levam&a Aavel

2e.

• koNk/I4 mIxr m=In A{aena mess$ sEnI hevI :NDS4Îz ;NDIya lImI4eDna kesm&a klmÝÐÈ he5X cukada k/m&ak Š ÊÈÉÉÝDIÝÉÈÑ, ta.ËÈÝÈÏÝÊÈÉÉm&a 5raVya mujb vk$s koN4a^k4m&a vpratI m=InrI 2e. te9I tem&a vprata Ao;l kulr vk$s koN4a^k4m&a vpratI m=InrIno -ag g8ay.

• bekho loDr Ane so;l koMpek4r Ae Aar.4I.Ao r@S4ê=n pa{a 2e. temj A{aen&a mess$ y&{aman Ao4omek p/a.lI.na kes m&a klmÝÐÈ he5Xna cukada k/ma&k Š ÊÈÈÐÝDIÝÉÐÎ, ta.ÉÎÝÉÉÝÊÈÈÑma& 5raVya mujb teno smave= AnusUicÝÊnI no&0ÝÐÏma& 9to ho; te vk$s koN4a^k4m&a vpratI m=InrI n9I. te9I tem&a vprata Ao;l kulr teno pa4$ g8ay nhI.

• Aekskeve4r, loDr, Dozr Ae tena fo4og/afs jota& lo&`DnI ce;n pr caltI m=InrI 2e.

Aa m=InrI Aar.4I.Ao. r@S4ê=n pa{a n9I k/awlr ;kvIpme4^s 2e. klmÝÐÈ he5Xna mess$

Ae.bI.@ ;Nfalo@S4Ik lImI4eDna kesma& cukada k/ma&k Š ÊÈÉÈÝDIÝÐÑ, ta.ÊÉ.Î.ÊÈÉÈma&

5raVya mujb k/awlr ce;n Ae vkRs koN4âk4m&a vpratI m=InrI 2e te )yane leta& lo`&DnI ce;n pr calta& Aekskeve4r, loDr Ane Dozr Ae vk$s koN4âk4m&a vpratI m=InrI ho; tema& vprata

&Ao;l kulr tena& pa4$ g8ay.

• rbr 4ayr pr calta& loDrAe Aar.4I.Ao r@S4ê=nne pa{a ho; te vahn 2e Ane te vk$s koN4âk4ma& vpratI m=InrI n9I te9I tem&a vprata Ao;l kulr m=InrI pa4$ g8ay nhI.

• Aayn$ AeND S4Il :NDS4Îm&a ptra& kapva, vas8 Ane tgar&a bnavtI ;NDS4Îm&a vpratI ha;Do^lIk m=InrI ANy w0ogoma& vprata iflI&g ;kvIpmeN4^s, koNK/Î4 ;kvIpmeN4^s DI.@. se4, AerkoMp/esr ivgere malna wTpadnma& vpratI m=InrI 2e. Aa9I tevI m=InrIm&a vprata

Ao;lkulr Ae malna wTpadnma& vpratI m=InrIna pa4R g8ay.

Aa9I nIce mujb 5ravvam&a Aave 2e.

Sr.

No.

Product Reference To be taxed under

1 (a) Oil Cooler for Concrete mixture Schedule II Entry- 58A

(b) Oil Cooler for Backhoe loader Schedule II Entry-87



2 Oil Cooler for Excavator

(c) Wheel Loader

4 Oil Cooler for Dozer

U/s.5(2) Noti. No.GHN-35 Dt.31/3/06

Entry-35

3 Oil Cooler for loader

(a) Loader equipments

(b) Loader Machine

U/s.5(2) Noti. No.GHN-35 Dt.31/3/06

Entry-35

U/s.5(2) Noti. No.GHN-35 Dt.31/3/06

Entry-35

Schedule II Entry-87

U/s.5(2) Noti. No.GHN-35 Dt.31/3/06

Entry-35

Schedule II Entry-87 5 Oil Cooler for Soil Compactor

6

7

8

(b) Oil Cooler for fluid couplings

Oil Cooler for Power Pack

Oil Cooler for Special Industrial

Schedule II Entry- 58A



Equipments

9 Oil Cooler for Industrial compressor Schedule II Entry- 58A

Arjdar Š messR S4aNDDR reiDye4sR p/a.lI., cukado Š s&.k.•ka.– / ve4 / klmÝÐÈ / ÊÈÉËÝDIÝÎÎÝÏÌ / ja.ËÊÏ / ËËÈ ta.Ê / ÈÐ / ÊÈÉË

‘konRfleks’ Ae ‘mmraÝkurmura’ trIke klm ÝÍ•Ê– nIcena jaherna ma k/m&ak nI no&0ÝÉÑ m&a smaivQ4 2e.

àÀ pda9oRna wTpadk Arjdare bIl n&. ËÊÌ ta.ÊÉÝÉÊÝÊÈÉÊ9I veca8 krel “ Corn

Flakes ” prna verana dr A&ge in8Ry m&agel 2e.

konR fleksna wTpadnm&a roÝm4IrIyl trIk e mka; Ý ÑÊ.ÊÊ % , mI5u& ÝÉ.ÏÌ % , `&aD Ý

É.ÎÌ % Ane maL4 Ý Ì.ËÈ % vpray 2e. sO p/9m mka:na da8a pr9I patXu& pD Ane mI&j ka7I levam&a Aave 2e. tem&a `&aD, maL4 Ane soL4 -eXvI vraX9I bafvam&a Aave 2e. te9I mka;na da8&a poca 9ay 2e. poca 9yela da8ane rolr m=Inm&a p/es krI cp4a ptrI jeva bnavay 2e. Ane tene roS4 krvam&a Aave 2e. Tyarbad vecvam&a Aave 2e. Aa cIjno wpyog dU0 sa9e im[a8 krI àva ma4e krvam&a Aave 2e. Aa cIj mka:na pO&Aa 2e. te9I teno smave= klmÝÍ•Ê– he5Xna jahernama k/m&ak Š @AecAen ÝËÍ, ta.ËÉÝËÝÊÈÈÎnI no&0 ÝÉÑ ‘mmra Ane pO&Aa’ m&a 9ay tem 5ravva rjuAat 2e.

sm9Rnm&a teAoAe messR Aec. Ka&itlal AeND k&a.no klmÝÐÈ he5Xno cukado k/m&ak Š

ÊÈÉÉÝDIÝÉÈÈ, ta.ËÝÉÊÝÊÈÉÉ 4&akel 2e. rjuAat, p/oDk4 p/oses, nmuna, sm9Rnm&a 4&akel cukado p/[nnI ivgto )yane leta ArjdarnI cIj mka:na pO&Aa 2e. Corn Flakes m&a ÑÊ % je4lI mka: 2e, je mh]am p/ma8m&a 2e.


H±É©É-80{ÉÉ SÉÖHÉqÉ ÷ÚÅH»ÉÉù 701 messR Aec.k&aitlal AeND k&au. na kesm&a mka:ne pa8Im&a plaXta nrm bne 2e. Jyare p/Stut kesm&a maL4 sa9e plaXel 2e Ane nrm bnavel 2e. Aam, wTpadnnI p/oses b&ne kesom&a sman 2e

Ane wTpaidt vStu p8 sman ho: kvDR me4r trIke ArjdarnI cIj ‘ Corn Flakes ’ no smave= klmÝÍ•Ê– he5Xna jahernama k/m&ak Š @AecAenÝËÍ, ta.ËÉÝËÝÊÈÈÎ nI no&0ÝÉÑ “ Mamara and pauva ” m&a 9ay tem 5ravvam&a Aave 2e.

Arjdar Š messR =&ait fuDs •:iNDya– p/a.lI.

 cukado Š s&.k.•ka.– / ve4 / klmÝÐÈ / ÊÈÉËÝDIÝÍÎ / ja.ËÉË / ËËÌ ta.Ê / ÈÐ / ÊÈÉË iviv0 Ao:l sILsno smave= m=InrIna -ag trIke AnusUicÝÊnI no&0ÝÍÐAe m&a 9ay.

Ao:l sILsna punŠveca8ktRa Arjdare iviv0 Ao:l sILsna veca8o krel 2e. tena prna verana dr A&ge in8Ry m&agel 2e.

K/m n&. bIl n& tarI`

3

4

1

2

5

55

55

55

9

9

23-4-13

23-4-13

23-4-13

2-4-13

2-4-13 ivgt

Nok oil seals 115X145 X 14 TCN

Nok oil seals 180X210 X16 TB

Nok oil seals 60X82 X12 TCV

CHO Oil Seals 65 X85 X10 OTHO

CHO Oil Seals 80 X100 X10 OTHO iviv0 pkarna Ao:l sILs, vI sILs, ha:DôlIk sILs, ver SlIVz, sIl kI4, Ao rI&g kI4 tmam Ao:l sILs :NDS4Îyl m=InrIna Ao:l sILs 2e. jenI bnav4m&a kaS4, k/om S4Il, kabRn, sIramIk 4&gS4n kabRa:D, sIlIkon kabRa:Dno wpyog 9ay 2e.

Ao:l sILsno wpyog wtpadnm&a vpratI m=InrIm&a vahn 9ta iviv0 p/vahIna lIkejne rokva ma4e 9ay 2e. pe4ôkemIkl, fam$a, kemIkl, ma:nI&g, vo4r 4Î4meN4 PlaN4, fuD :NDS4Îz, rIfa:nrI jeva wÀogom&a vprata bo:lr, fID p&p, SlrI p&p, hevI Dyu4I pa:p la:n, pMpI&g koMp/esr, :NDS4Îyl BleNDr t9a :NDS4Îyl mIxr jevI m=InrIna pa4Rs g8ay Ane teno smave=

AnusUicÝÊnI no&0ÝÍÐ Ae m&a 9ay tem 5ravva rjuAat 2e.

sm9Rnm&a Arjdare klmÝÐÈ he5Xna messR lIk p/uf AeN@nIyrI&gna cukada k/m&ak Š

ÊÈÉÈÝDIÝËÊÊ, ta.ÊÑÝÉÉÝÊÈÉÈno Aa0ar 4&akel 2e.

rjuAat, p/[nnI ivgto )yane leta Ae iviv0 p/karna Ao:l sILs je wTpadn krtI m=InrIm&a vhn 9ta iviv0 p/vahIAona lIkej A4kavva ma4e vparay 2e. kvDR me4r trIke p/[n he5Xna cIjono smave= AnusUicÝÊnI no&0ÝÍÐAe m&a 9ay tem 5ravvam&a AaVyu&.

no&0 Š sman p/karna Ao:l =Il A&ge ANy cukado me. messR mosn :NSD4Îz s&.k.•ka.– / ve4 / klmÝÐÈ / ÊÈÉËÝDIÝÉÎÊÝÉÎÎ / ja.ËËÑ / ËÌÊ ta.Ê / ÈÐ / ÊÈÉË p8 jo: levo.

Arjdar Š messR sIlI&g 4eknolo@s,. cukado Š s&.k.•ka.– / ve4 / klmÝÐÈ / ÊÈÉËÝDIÝÉÎÊÝÉÎÎ / ja.ËËÍ / ËËÐ ta.Ê / ÈÐ / ÊÈÉË



 s&caln, me:4enNs, rIper iv. Svy& krI, potana Aopre4r µara s&cailt DI.@. se4 -aDe

Aapvano Vyvhar Ae mal vaprvana hkknI tbidlI nIce veca8no Vyvhar n9I.

Arjdar messR låmI AeN@nIyrI&g vkRs, surt DI.@. se4 -aDe Aapvano ibznes kre 2e. teAoAe DI.@ se4 hayrI&g job sivRs Aapel 2e. tena pr klmÝÊ•ÊË–•DI– mujb veranI jvabdarI

A&ge in8Ry m&agel 2e. temnu& 4nRAovr inyt myRada krta v0el n ho: no&08I n&br lI0el n9I. teAo potanI mailkIna A9va ANynI mailkIna DI.@. se4 meXvI g/ahkne lei`t krar krI cokks j£rIyat mujbna smy ma4e vaprva Aape 2e Ane tena ma4e cokks rkm Avej trIke meXve 2e. Aa rIte -aDe

AapvanI p/v<i]am&a g/ahkne DI.@. se4 prno ko;p8 jatno mailkI hkk ke Svt&{a rIte vpra= krvano hkk Aapta n9I. s&pu8R s&caln Arjdarna inQ8&at kmRcarI µara krvam&a Aave 2e, jemno pgar p8 Arjdar cUkve 2e. Aam, DI.@. se4no :fek4Iv k&4ôl s&pU8Rp8e Arjdar potanI pase j raè 2e. bgDe to teno rIperI&g `cR Arjdar -ogve 2e Ane j£rI j8ay Ty&a nvu& DI.@. se4 p8 pu£ paDvanI jvabdarI temnI rhe 2e.

Aa tmam babto jot&a p/Stut Vyvharnm&a meXvel Avej Ae ve4 kaydanI klmÝÊ•ÊË–•DI– mujbna 4âNsfr Aof ra:4 4u yuz ANvye veca8no Vyvhar g8ay nhI& tem 5ravva rjuAat 2e.

sm9Rnm&a

•É– messR AeSsar p/ojek4s lImI4eD, ÊÈÈÌ Ý @Aes4IbIÝÉËÍ

•Ê– £pera 4âNspo4R, ÊÈÈÑÝ@Aes4IbIÝÍÈÌ Ane

•Ë– 4ola4 :lek4ôinks, ÊÈÉÈÝ@Aes4IbIÝÉÍÐ cukadaAo 4&akel 2e.

sm9Rnm&a 4&akel cukada temj p/[nnI ivgtono A_yas krvam&a Aavel 2e. :Nvo:sm&a

“ Diesel generators set utilization and operating charges ” =Bdo tenj g/ahk sa9ena vkR

AoDRrnI =rtono A_yas krta j8ay 2e ke DI.@. se4 Aopre4 krva ma4e Arjdarna Aopre4rnI

Ane suprva:zr moklvam&a Aave jeno pgar Arjdar cUkve 2e, rIperI&g Ane me:N4enNsnI jvabdarI ArjdarnI rhe 2e. krarnI 4MsR AeND kiND=nm&a wLle` kyRa mujb DI.@. se4 :fek4Iv kN4ôl Arjdar pase rhe 2e. jyare s&caln Arjdarna S4af µara 9tu& ho: :fek4Iv kN4ôl temnI pase j rhe 2e. te Aa0are Aa Vyvhar 4âNsfr Aof ra:4 4u yuzno g8ay nhI& tevu& namdar 4ÎByunlna cukadam&a 5ravvam&a Aavel 2e.

p/Stut kesm&a p8 g/ahkna S9Xe pUra paDvam&a Aavel DI.@. se4na Aopre=n ma4e Arjdarna

Aopre4r Ane suprva:zr Aapvam&a Aave 2e, rIperI&g Ane me:N4enNsnI jvabdarI ArjdarnI j rhetI ho: :fek4Iv kN4ôl teAo 0rave 2e. te9I Aa Vyvhar klmÝÊ•ÊË–•DI–nI jogva: mujbno

4âNsfr Aof ra:4 4u yuzno g8ay nhI& Ane Aavo Vyvhar veca8no Vyvhar n ho: tena pr veranI jvabdarI Aave nhI& tem in8Ry Aapvam&a Aavel 2e.

Arjdar Š messR låmI AeN@nIyrI&g vkRs, cukado Š s&.k.•ka.– / ve4 / klmÝÐÈ / ÊÈÉËÝDIÝÉÌÉ / ja.ËÌÌ / ËÌÏ ta.Ï / ÈÐ / ÊÈÉË


H±É©É-80{ÉÉ SÉÖHÉqÉ ÷ÚÅH»ÉÉù 703

 AefLyuAN4 4Î4meN4 drMyan veS4 vo4rne 4Î4meN4 krva drMyan meXvel bayo masno smave=

AnusUicÝÉnI no&0ÝÊÌm&a 9ay. veS4 vo4rnu& =ui)0kr8 Ae veca8 n9I, Ane Aa9I te p/ik/ya drMyan vpr atI cIjonI ITC mXvapa{a n9I.

Arjdare •É– temnI meMbr k&pnI pase9I meXvel :NDS4Îyl veS4 vo4r pr AefLyuAN4

4Î4meN4 p/oses ma4e meXvel Avejno Vyvhar, lebr vkR ho:, vero -rvano 9ay ke kem?

•Ê– wkt 4Î4meN4 drMyan teAoAe veS4 vo4rm&a9I Bio-Mass •bay p/oDk4 trIke– meXvI teno veca8 krel 2e tena pr vero lag eke kem, Ane kya dre?

•Ë– Aa p/oses drMyan, tem&a vaprva ma4e kemIkl, AeLyum Ane Bio-wish nI krel `rIdI pr

4ex k/eiD4 mXe k ekem?

Arjdar Common Effluent Treatment Plant (CEPT) clave 2e Ane Aa PlaN4nI

Aaspas Aavel iviv0 kemIkl Ane ANy :NDS4Îzne meMbr trIke temnI j£rIyat A&ge 4Î4meN4 pUrI paDe 2e.

teAo meMbr k&pnInu& veS4 vo4r Collect kre 2e Ane tena pr 4eS4I&g krI yoGy j8ay to tena pr j£rI p/oses krI tem&a9I A=ui)0Ao dUr kre 2e Ane Tyarbad rheta pa8Ine VECL (Vodafone

Effluent Channel Limited) nI cenlm&a 5alve 2e. Aa smg/ p/ik/yaAo nIce mujb kre 2e.

meMbr µara moklvam&a Aavel veS4 vo4rne :kvala:ze=n 4eNkm&a BloAsR vDe sarI rIte

3mroXvam&a Aave 2e. Tyarbad tem&a Hydrated Lime Ane Alum •cUno Ane f4kDI– wmervam&a

Aave 2e Ane pa8I A0R 3n Sv£p 0ar8 kre 2e. Tyarbad Aava pa8Ine Clariflocculator Tank m&a moklay 2e Jy&a tem&a Bio-wish wmervam&a Aave 2e. Bio-wish Ae bayo 4eknolo@kl p/oDk4

2e, te Super Catalyst 2e. te micro-organisms no g/o9 Ùb zDp9I v0are 2e Ane micro organisms wish

Ae veS4 pa8Im&a rhelI A=ui)0Aone à; jay 2e Ane pa8I =u)0 9ay 2e. BioveS4 vo4rm&a wmeray 2e, tem&a Bio-mass wTpNn 9ay 2e. Aa bayomasne Mixed Liquor

Suspended Solied (MLSS)

Channel khe 2e. Bio-wish wmerva9I =u)0 9yel pa8I Tyarbad VECL m&a 5alvI devay 2e, je A&ge Aa k&pnI Arjdar k&pnI pase9I cajR vsul kre 2e.

wkt smg/ p/ik/ya drMyan Aa veS4 vo4rm&a9I De-Watered dried sludge p/aPt 9ay 2e.

Aane Bio-mass A9va MLSS khe 2e. Aa cIj Ae veS4 vo4rne =u)0 krva ma4e j vpray 2e. meMbr k&pnIAon&a veS4 vo4rne =u)0 kyRa bad rhel Aa v8vprayel bayomasne HDPE Bags m&a -rI

Aa bayomasna veca8 kre 2e. jeno meMbr Aa k&pnIAo pa8Ina =ui)0kr8 ma4e wpyog kre 2e.

veca8 krel bayomas Ae Aekva4Ik p/oDk4 ho: tena pr vero n lage tevI p8 rjuAat kre 2e.

Aquatic nI Vya~ya “ Pertaining to water, Growing in water ” jot&a Aa cIj bio- mass Ae aquatic product g8ay tem 5ravva rjuAat 2e.

v0um&a, meMbr k&pnIAo pase9I meXvel pa8Ine =u)0 krvanI p/ik/ya Ae Purely labour work ho:, tena ma4e vsulvam&a Aavel cajRno Vyvhar Ae veca8 n9I, tem 5ravva rjuAat 2e.


704 H±É©É-80{ÉÉ SÉÖHÉqÉ ÷ÚÅH»ÉÉù rjuAat, p/oDk4 p/oses temj p/[nnI ivgto )yane leta j8ay 2e ke, Arjdar µara meMbr k&pnI pase9I veS4 vo4r meXvI tene =u)0 krI ANy k&pnInI cenlm&a 5alvI devanI p/ik/yam&a

Arjdarn&a ko; malnu& veca8 9tu& n9I. te9I Aa Vyvhar malna veca8no Vyvhar n ga8ay. te9I ten&a pr vero Aakarvano 9ay nih.

Effluent treatment drMyan veS4 vo4rm&a9I meXvel bio-mass Ae aquatic product 2e kar8ke te pa8Im&a ivkas pame 2e. Aa9I teno smave= AnusUicÝÉnI no&0ÝÊÌ m&a 9ay.

veca8 krel bio-mass Ae AnusUicÝÉ mujb veramaf mal ho:, bio-mass wTpadnm&a vprayel cIjonI `rIdI prnI 4ex k/iD4 klmÝÉÉ•Í–•Aec–nI jogva: )yane let&a mXvapa{a 9ay nih.

Aam,

•A– Arjdar µara meMbr k&pnI pase9I veS4vo4r meXvI tene =u)0 krI ANy k&pnInI cenlm&a 5alvI devanI p/ik/yam&a Arjdarn&a ko: malnu& veca8 9tu& n hova9I Aavo Vyvhar malna veca8no Vyvhar g8ay nih Ane vero Aakarvano 9ay nih.

•b– Effluent treatment drMyan veS4 vo4rm&a9I meXvel bio-mass Ae aquatic product

2e. te9I teno smave= AnusUicÝÉnI no&0ÝÊÌ Fish, sea food and other aquatic products m&a 9ay.

•k– Arjdare veca8 krel bio-mass Ae AnusUicÝÉ mujb veramaf mal ho:, klmÝÉÉ•Í–• h – nI jogva; )yane let&a Bio-mass wTpadnm&a vprayel cIjonI `rIdI prnI 4ex k/eiD4 mXvapa{a

9ay nih.

Arjdar Š messR AeNvayro :Nf/aS4^kcr k&pnI lImI4eD, cukado Š s&.k.•ka.– / ve4 / klmÝÐÈ / ÊÈÉÊÝDIÝÊÑÐÝËÈÈ / ja.ËÍÉ / ËÍÌ ta.ÉÊ / ÈÐ / ÊÈÉË

÷àKÉ ~ÉÎ¥±ÉHà¶É{»É - +©ÉqÉ´ÉÉq

lÉù£oÉÒ

{ÉÒSÉà{ÉÉ ~ÉÖ»lÉHÉà ¥ÉÉù +à»ÉÉà»ÉÒ+à¶É{É{ÉÒ ±ÉÉ«ÉúÉàùÒ{Éà ©É³à±É Uà.

(1) R. P. Shah’s The Gujarat Value Added Tax Act, 2003

With Synopsis Amended upto 1-4-2013

Revised by Lalit M. Leuva

11th Ed. 2013

Rs. 450/-

(2) R. P. Shah’s The Gujarat Value Added Tax Rules, 2006

With Synopsis Amended upto 1-4-2013

Revised by Lalit M. Leuva

7th Ed 2013

Rs. 450/-

(3) R. P. Shah’s Central Sales Tax Laws in Gujarat

With Synopsis

Revised by Hasmukh H. Soni

8th Ed 2013

Rs. 350/-


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 ¸ÉÒ ù©Éà¶É +Éù. {ÉÉHù rrnakar@gmail.com

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swËe swËe yËk÷íkkuLkk yøkíÞLkk [qfkËk 715

swËe swËe yËk÷íkkuLkk yøkíÞLkk [qfkËk

 su. yuMk.y{eLk-{Äwfh su.y{eLk-yuzðkufux aminconsultancy@hotmail.com

nkEfkuxoMk - Mkw«e{ fkuxo

(1) çkúkt[ xÙkLMkVh : Vku{o - yuV ykfkhýe{kt Lkk hsq ÚkE þfíkkt.......

fuLÿeÞ fkÞËkLke ykfkhýe{kt Vku{o-yuV hsq Lkk ÚkE þfíkkt Yk.72,61,879.70Lkkt yktíkh hkßÞ

ðu[kýku økýeLku Mke Vku{oMkLkk y¼kðu 12.50 xfk ÷u¾u ðuhku ykfkhu÷ níkku. ykfkhýe yrÄfkheLkku ykËuþ

«Úk{ yÃke÷ íku{s xÙeçÞwLk÷ Míkhu Lkk{tsqh Úkíkkt ðuÃkkheyu Ãktòçk yLku nrhÞkýk nkEfkuxo Mk{ûk xuûk yÃke÷

VkE÷ fhe níke yLku Lke[u {wsçkLkku fkÞËkLkku «&™ hsq fhu÷ níkku.

“Whether the appellant can produces form-F at any stage for seeking the benefit of branch transfers outside State under the Central Sales Tax Act, 1956 ?”

ðuÃkkheyu ykfkhýe Ãkqýo ÚkE økÞk ÃkAe sYhe Vku{o-yuV Yk.72,61,876.70Lkk {u¤ðe ÷eÄu÷ níkkt.

Lkk{Ëkh fkuxuo ÃkkuíkkLkku {uMkMko ËeÃkf huzeÞkuÍ «k.÷e{exuz rðYî ÞwrLkÞLk xuhuxhe ykuV [tzeøkZ (2009)

23 ðeyuMkxe 42 (ðux yÃke÷ Lkt.56 yku 2008, íkk.18-3-2009) íku{s {uMkMko «uMxku÷kEx ykuV

ELzeÞk ÷e{exuz rðYî nrhÞkýk hkßÞ (1988) 70 yuMkxeMke 198, Ãktòçk yLku nrhÞkýk nkEfkuxoLku yLkwMkheLku çkkfe Vku{oMk Mðefkhðk {kxu ykfkhýe yrÄfkheLku fuMk he{kLz fÞkuo.

yuøkúe{kMk fur{fÕMk ÷e{exuz rðYî nrhÞkýk hkßÞ yLku çkeò

64 ðeyuMkxe 134 - íkk.12-2-2013 Ãktòçk yLku nrhÞkýk nkEfkuxo

(2) ÔÞks : heðeÍLk ykËuþ

ÔÞks fÞktÚke fÞkt MkwÄeLkwt ÷R þfkÞ....

su rfMMkk{kt yufs [es ðMíkw Ãkh ðu[kýðuhku yLku ¾heËðuhku yu{ çktLku «fkhLkk xuûk ÷køku Au íkuðk rfMMkk{kt ¼q÷Úke ¾heËðuhku ¼hðkLkku hne økÞku nkuÞ yLku ykfkhýe{kt Ãký ¾heËðuhku ÷økkzðkLkku hne

økÞku nkuÞ yLku heðeÍLk ykËuþÚke yk ¾heËðuhkLkwt {ktøkýwt WÃkÂMÚkík fhðk{kt ykÔÞwt nkuÞ íkku íkuðk rfMMkk{kt ykfkhýe Ãkqýo ÚkÞkLke íkkhe¾Úke ÔÞks ÷økkze þfkÞ Lkrn,Ãkhtíkw heðeÍLk ykËuþLke íkkhe¾ fu su rËðMku

ðÄkhkLkk ðuhkLkwt {ktøkýwt WÃkÂMÚkík ÚkÞwt nkuÞ íku íkkhe¾Úke s ÔÞks Ãký ðMkq÷ðkLkwt ÚkkÞ. ykfkhýeLke íkkhe¾ yLku heðeÍLkLke íkkhe¾ ðå[uLkk Mk{Þøkk¤kLkwt ÔÞks ÷økkze þfkÞ Lknª.

Lkk{Ëkh fkuxuo {kLkLkeÞ Mkw«e{ fkuxoLkku {uMkMko su. fu. rMkLÚkuxef ÷e{exuz (1994) 94 yuMkxeMke 422

(Mkw«e{ fkuxo) Lkku ykþhku ÷eÄku Au.

“In J. K. Synthetic Ltd. case the Supreme Court has held that the assessee is not liable to pay interest on the additional sales tax on the date original return was


716 swËe swËe yËk÷íkkuLkk yøkíÞLkk [qfkËk filed, but interest has to be paid only for the period subsequent to determination of the sales tax under the final assessment while overruling the judgment of the

Supreme Court in Associated Cement Co. Ltd. case (1981) 48 STC 466 (SC).

Since the liability to pay interest has attained finality with the order of the revisional authority on July 7, 1993, the interest would be payable not from the date of assessment order but from the date of the such imposition.

fuøk Vk{o «k. ÷e{exuz rðYî nrhÞkýk hkßÞ yLku çkeò

64 ðeyuMkxe 144 - íkk.8-4-2013 Ãktòçk yLku nrhÞkýk nkEfkuxo

(3) yuLxÙe : yuÕÞwr{LkeÞ{ økúuLÞwyÕMk (yuÕÞwr{LkeÞ{ Ãkkðzh)

The residuary entry would not be applicable when a specific rate of tax has been prescribed on a particular commodity.

Lkk{Ëkh {æÞ«Ëuþ nkEfkuxuo XhkÔÞwt fu yuÕÞwr{LkeÞ{ yLku yuÕÞwr{LkeÞ{ økúuLÞwyÕMk(yuÕÞwr{LkeÞ{

Ãkkðzh) çktLku yuf s ðMíkw økýkÞ yLku yuÕÞwr{LkeÞ{ økúuLÞwyÕMk WÃkh Ãký yuÕÞwr{LkeÞ{ {kxu su ðuhkLkku

Ëh Lk¬e ÚkÞku nkuÞ íku s Ëhu ðuhku ÷køku. yk {kxu huMkezâwyhe yuLxÙeLkku ykþhku ÷E þfkÞ Lkrn.

yuLxÙe-36 yk «{kýu níke.

Ferrous and nonferrous metals and alloys, non ferrous metals such as aluminium, copper, zink and metal scrap... 4 %.

ðÄw{kt Lkk{Ëkh fkuxuo XhkÔÞwt fu sÞkhu fkuE ðMíkwLkk yÚko½xLkLkku «&™ Mktf¤kÞu÷ nkuÞ íÞkhu ykuÕxhLkux hu{uze ytøkuLkk rMkîktíkLkku ykøkún hk¾ðku çkhkçkh LkÚke.

Existence of alternative remedy not bar where question of interpretation of expression involved.

yk [qfkËk {kxu {kLkLkeÞ Mkw«e{ fkuxoLkk {uMkMko {kuËe ELzMxÙeÍ ÷e{exuz rðYî ykuheMMkk hkßÞ (2005)

141 yuMkxeMke 155 (Mkw«e{ fkuxo) yLku Lkk{Ëkh {æÞ «Ëuþ nkEfkuxoLkk {uMkMko yuMk. fw{kh rðYî yuzeþLk÷ fr{þLkh ykuV MkuÕMk xuûk (2007) 6 ðeyuMkxe 412 WÃkh ykÄkh hk¾u÷ Au.

S. fu. {kE¢ku {ux÷ «k. ÷e{exuz rðYî {æÞ «Ëuþ hkßÞ yLku çkeò

64 ðeyuMkxe 147 - íkk.15-5-2013 {æÞ «Ëuþ nkEfkuxo

(4) heVtz WÃkh ÔÞks : yuLxÙe xuûkLkk {ktøkýk Mkk{u ðu[kýðuhkLkwt heVtz yuzsMx Lkk fhe þfkÞ.

yktÄú «Ëuþ yuõx {wsçk fkuE Ãký heVtz ykuzoh ÚkÞkLkk A {kMk Ãkqhk Úkíkkt MkwÄe{kt heVtz ¾hu¾h Lkk

[qfðkÞ íkku ykðwt heVtz ÔÞks Mkrník ykÃkðkLke òuøkðkE níke.

¾kíkkyu yuLxÙe xuûkLke çkkfe hf{ Mkk{u yk heVtz yuzsMx fÞwO níkwt. su Lkk{Ëkh fkuxuo {kLÞ Lk hk¾e

ÃkwhuÃkwÁt heVtz ÔÞks Mkrník [qfððk ykËuþ fÞkuo.

xÙkLMk{eþLk fkuÃkkuohuþLk ykuV yktÄú «Ëuþ ÷e{exuz rðYî fku{þeoÞ÷ xuûk ykuVeMkh,¾ihkíkçkkz Mkfo÷, niËhkçkkË yLku çkeò

64 ðeyuMkxe 155 - íkk.6-2-2013 - yktÄú «Ëuþ nkEfkuxo


swËe swËe yËk÷íkkuLkk yøkíÞLkk [qfkËk 717

(5) Mkeðe÷ yLku E÷ufxÙef÷ fkuLxÙkõxMko

Mkeðe÷ yLku E÷ufxÙef÷ fkuLxÙkõxMkoLkk fuMk{kt Wå[f ðuhkLke òuøkðkE ÷køkw Ãkkze þfkÞ. Wå[f ðuhkLkk

Ëh{kt ðÄkhku fhíkku MkwÄkhku hkßÞ Mkhfkh øk{u íÞkhu fkÞËk{kt MkwÄkhku fheLku fu ònuhLkk{ktÚke fhe þfu.

MkwÄkhkLkku y{÷ MkwÄkhku ÚkÞkLke íkkhe¾Úke s y{÷e çkLke þfu. ykðku MkwÄkhku y{÷e çkLÞku nkuÞ íku yøkkWÚke fhe hk¾u÷ yhSykuLke íkkhe¾Úke ykðku MkwÄkhku y{÷e çkLke Lkk þfu. ÃkAeLkk ð»ko{kt Ãký fk{Lkku fkuLxÙuõx

Ãkqýo Lkk ÚkÞku nkuÞ íkku fkuLxÙkõxh Wå[f ðuhkLke òuøkðkE [k÷w hk¾ðk {kxu hsqykík fhe þfu yÚkðk Wå[f

ðuhkLke òuøkðkEÚke rðYî fkÞËk {wsçk su{ Mkk{kLÞ ðuÃkkheyu ðuhku ¼hðkÃkkºk Úkíkku nkuÞ íku heíku Mkk{kLÞ

ðuÃkkhe íkhefu ðuhku ¼hðkLke sðkçkËkhe yËk fhe þfu yLku íku {wsçk íku{Lke rLkÞr{ík ykfkhýe ÚkE þfu.

Lkk{Ëkh y÷knkçkkË nkuRfkuxpu ík{k{ ÃkexeþLkku hË çkkík÷ fhe.

rçkÕzMko yuMkkuMkeyuþLk ykuV ELzeÞk yLku çkeò rðYî W¥kh «Ëuþ hkßÞ yLku çkeò

64 ðeyuMkxe 160 - íkk.6-8-2012 y÷knkçkkË nkEfkuxo

(6) MkŠðMk xuûk : õ÷çk yLku íkuLkk Mk¼kMkËku ðå[u MkuðkykuLke ykÃk÷u

MkŠðMk xuûk : fÕkçk yLku íkuLkk Mk¼kMkËku ðå[u MkuðkykuLke ykÃk÷u Úkíke nkuÞ íkku õ÷çk MkŠðMk xuûk ¼hðk

{kxu sðkçkËkh LkÚke.

Lkk{Ëkh nkEfkuxoLkk su ykËuþ Mkk{u {kLkLkeÞ Mkw«e{ fkuxo Mk{ûk MÃkuMÞ÷ ÷eð ÃkexeþLk rLkýoÞ {kxu

Ãkzíkh nkuÞ íÞkt MkwÄe nkEfkuxoLkku [qfkËku y{÷e hnu Au yLku MktçktrÄík Ãkûkfkhku íkuLkku y{÷ fhðk sðkçkËkh Au.

Held that Section-65(25 a) and (105) (zzze) and Section-66 of the Finance

Act, 1994 as amended by the Finance Act, 2005 to the extent that the provisions support to levy service tax in respect of services provided by the petitioner club to its members, were ultra vires.

MÃkkuxoMk õ÷çk ykuV økwshkík ÷e{exuz rðYî ÞwrLkx ykuV ELzeÞk yLku çkeò

64 ðeyuMkxe 191 - íkk.25-3-2013 økwshkík nkEfkuxo

(7) ELkÃkwx xuûk ¢uzex

{k÷ ðu[Lkkhu xuûk ELkðkuEMkeMk{kt Mk¤tøk yLkw¢{ Lktçkh Lkkt¾u÷ Lk nkuðkLkk fkhýu {k÷ ¾heËLkkh

ðuÃkkheLku yLÞÚkk {¤ðkÃkkºk Úkíke ELkÃkwx xuûk ¢uzex Lkk{tsqh fhðk{kt ykðe níke. yk çkkçkíkLke íkÃkkMk fhLkkh yrÄfkheyu yu çkkçkíkLke íkÃkkMk fhe Lk níke yux÷u fu yu çkkçkíku íku{Lkku heÃkkuxo þktík níkku fu {k÷

ðu[Lkkhu ¼hðkÃkkºk Úkíkku ÃkqhuÃkqhku ðuhku Mkhfkh{kt s{k fhkÔÞku níkku fu fu{.

¾hu¾h su íkÃkkMk fhðkLke níke íku ykx÷e s níke. Ãkhtíkw yk{ Lkrn fhíkkt yLku Þtºkðík - ðuÃkkheLke xuûk ¢uzex {k÷ ðu[Lkkhu xuûk ELðkuEMkeMk WÃkh MkeheÞ÷ Lktçkh LkÚke LkktÏÞk íku fkhýMkh- xuûk ¢uzex Lkk{tsqh fhíkku ykËuþ {kLkLkeÞ ðuMx çkUøkk÷ xuûkuþLk xÙeçÞwLk÷u hË fÞkuo.

hkurnLke Vuhþ «k. ÷e{exuz rðYî MkuÕMk xuûk ykuVeMkh, çkezkuLk MxÙex [kso yuLk çkeò

64 ðeyuMkxe 203 - íkk.12-4-2012 ðuMx çkUøkk÷ xuûkuþLk xÙeçÞwLk÷

(8) yuLxÙe : ykxeoVeþeÞ÷ ^÷kðh ÃkuxÕMk

Artificial flower petals ykxeoVeþeÞ÷ ^÷kðh ÃkuxÕMkLku VuçkúeõMk fu xuûk xkEÕMkLke ðMíkw økýeLku


718 swËe swËe yËk÷íkkuLkk yøkíÞLkk [qfkËk

íkuLkku Mk{kðuþ ‘õ÷kuÚkªøk yuMkuMkhe’ íkhefu ÚkkÞ íku{ Xhkðu÷ Au.

yu{. yu{. Wãkuøk rðYî yuzeþLk÷ fr{þLkh ykuV fku{þepÞ÷xu ûkeMk ÍkuLk-1, økktÄeLkøkh, çkUøk÷kuh

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(9) LkkfkuoxeõMk fr{þLkh©e ‘ðuÃkkhe’ økýkÞ...

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Opium grown by cultivators on behalf of the Central Government on the basis of licence granted by the Narcotic Department as raw material for manufacture of drug is a taxable item liable to trade tax.

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64 ðeyuMkxe 227 - íkk.10-4-2013 {ÿkMk nkEfkuxo


Gist of Judgments Reported in September, 2013 719

gist of IMPORTANT judgments reported in SEPTEMBER, 2013



Lalit M. Leuva - Lalit.Leuva@ril.com

SUPREME COURT JUDGMENTS

1. LARSEN & TOUBRO LTD. V. STATE OF KARNATAKA [dtd. 26.09.2013] Civil

Appeal No. 8672 of 2013) (Arising out of SLP(C) No.17741 of 2007)

The Division Bench judgement of Supreme Court in K. Raheja came to be approved

FACTS OF THE CASE

The correctness of the decision of the Supreme Court in case of Raheja

Developers Corporation v. State of Karnataka (2005) 5 SCC 162 was doubted by the Division Bench in Larsen & Toubro Ltd. v. State of Karnataka [2008] 017 VST

0460 (SC) and the matter was referred to the Larger Bench. The Hon’ble Larger

Bench by its decision dtd.26.09.2013 affirmed the view taken by the Division Bench in Raheja Development.

FACTS OF RAHEJA DEVELOPMENT

The brief facts in Raheja Development were as under:

I. Raheja Development carried on the business of real estate development and allied contracts;

II. Raheja Development entered into development agreements with the owners of land;

III. Raheja Development entered into agreements of sale with intended purchasers. The agreements provided that on completion of the construction, the residential apartments or the commercial complexes would be handed over to the purchasers who would get an undivided interest in the land also;

IV. The owners of the land would then transfer the ownership directly to the society formed under the Karnataka Ownership Flat (Regulation of the

Promotion of Construction, Sale, Management and Transfer) Act, 1972

(KOFA).

THE DEFINITION OF “WORKS CONTRACT” FOR CONSIDERATION BEFORE THE

DIVISION BENCH


720 Gist of Judgments Reported in September, 2013

“works contract” includes any agreement for carrying out for cash, deferred payment or other valuable consideration, the building, construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, modification, repair or commissioning of any moveable or immovable property”.

DECISION OF THE DIVISION BENCH OF SUPREME COURT IN RAHEJA

DEVELOPMENT

On consideration of the arguments that were put forth by the parties, the

Division Bench of the Supreme Court in Raheja Development held as under:

(i) The definition of the term “works contract” in the Act is an inclusive definition.

(ii) It is a wide definition which includes “any agreement” for carrying out building or construction activity for cash, deferred payment or other valuable consideration.

(iii) The definition of works contract does not make a distinction based on who carries on the construction activity. Even an owner of the property may be said to be carrying on a works contract if he enters into an agreement to construct for cash, deferred payment or other valuable consideration.

(iv) The developers had undertaken to build for the prospective purchaser.

(v) Such construction/development was to be on payment of a price in various installments set out in the agreement.

(vi) The developers were not the owners. They claimed lien on the property.

They had right to terminate the agreement and dispose of the unit if a breach was committed by the purchaser. A clause like this does not mean that the agreement ceases to be “works contract”. So long as there is no termination, the construction is for and on behalf of the purchaser and it remains a “works contract”.

(vii) If there is a termination and a particular unit is not resold but retained by the developer, there would be no works contract to that extent.

(viii) If the agreement is entered into after the flat or unit is already constructed then there would be no works contract. But, so long as the agreement is entered into before the construction is complete it would be works contract.

REASONS FOR DOUBTING CORRECTNESS OF RAHEJA DEVELOPMENT

The correctness of the view taken in Raheja Development has been doubted by the Division Bench in L& T case principally for the following reasons:

(a) The developer had undertaken the contract to develop the property of the owner. It is not alleged by the department that there is monetary consideration involved in the development agreement. 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;



(b) If the ratio in Raheja Development is to be accepted then there would be no difference between works contract and a contract for sale of chattel as a chattel and

(c) From th e definition of work s contract, the contractor must have undertaken the work of construction for and on behalf of the fl at purchaser for cash, deferred or any other valuable consideration but could it be said that developer was contractor f or the prospective fl at purchaser.

THE ISSUE BEFORE THE LARGER BENCH

In light of the facts and the definition of “works contract”, the question before the Supreme Court was whether the view taken by the Division Bench in Raheja

Development with reference to definition of “works contract” in KST Act is legally unjustified?

DECISION OF THE LARGER BENCH

The Hon’ble Larger Bench held that when the agreement between the promoter/developer and the flat purchaser is to construct a flat and eventually sell the flat with the fraction of land, it is obvious that such transaction involves the activity of construction inasmuch as it is only when the flat is constructed then it can be conveyed. There is no reason why such activity of construction is not covered by the term “works contract”. After all, the term “works contract” is nothing but a contract in which one of the parties is obliged to undertake or to execute works. Such activity of construction has all the characteristics or elements of works contract. The ultimate transaction between the parties may be sale of flat but it cannot be said that the characteristics of works contract are not involved in that transaction. When the transaction involves the activity of construction, the factors such as, the flat purchaser has no control over the type and standard of the material to be used in the construction of building or he does not get any right to monitor or supervise the construction activity or he has no say in the designing or lay-out of the building are not of much significance and in any case these factors do not detract the contract being works contract insofar as construction part is concerned.

For sustaining the levy of tax on the goods deemed to have been sold in execution of a works contract, three conditions must be fulfilled: (i) there must be a works contract, (ii) the goods should have been involved in the execution of a works contract, and (iii) the property in those goods must be transferred to a third party either as goods or in some other form. In a building contract or any contract to do construction, the above three things are fully met. In a contract to build a flat there will necessarily be a sale of goods element. Works contracts also include building contracts and therefore without any fear of contradiction it can be stated that building contracts are species of the works contract.

Ordinarily in the case of a works contract the property in the goods used


722 Gist of Judgments Reported in September, 2013 in the construction of the building passes to the owner of the land on which the building is constructed when the goods and materials used are incorporated in the building. But there may be contract to the contrary or a statute may provide otherwise. Therefore, it cannot be said to be an absolute proposition in law that the ownership of the goods must pass by way of accretion or exertion to the owner of the immovable property to which they are affixed or upon which the building is built.

The Hon’ble Larger Bench further held that a contract may involve both a contract of work and labour and a contract of sale of goods. The distinction between contract for sale of goods and contract for work (or service) has almost diminished in the matters of composite contract involving both (a contract of work/labour and a contract for sale for the purposes of Article 366 (29-A)(b). Now by legal fiction under

Article 366(29-A)(b), it is permissible to make such contract divisible by separating the transfer of property in goods as goods or in some other form from the contract of work and labour. A transfer of property in goods under clause 29(A)(b) of Article

366 is deemed to be a sale of goods involved in the execution of a works contract by the person making the transfer and the purchase of those goods by the person to whom such transfer is made. For this reason, the traditional decisions which hold that the substance of the contract must be seen have lost their significance.

What was viewed traditionally has to be now understood in light of the philosophy of Article 366(29-A).

The Hon’ble Larger Bench accordingly justified the view taken by the Division

Bench in Raheja Development .

PRINCIPLES ENUNCIATED BY THE LARGER BENCH

The Hon’ble Larger Bench summarized the legal position, as follows:

(i) For sustaining the levy of tax on the goods deemed to have been sold in execution of a works contract, three conditions must be fulfilled: (one) there must be a works contract, (two) the goods should have been involved in the execution of a works contract and (three) the property in those goods must be transferred to a third party either as goods or in some other form.

(ii) For the purposes of Article 366(29-A)(b), in a building contract or any contract to do construction, if the developer has received or is entitled to receive valuable consideration, the above three things are fully met. It is so because in the performance of a contract for construction of building, the goods (chattels) like cement, concrete, steel, bricks etc. are intended to be incorporated in the structure and even though they lost their identity as goods but this factor does not prevent them from being goods.

(iii) Where a contract comprises of both a works contract and a transfer of immovable property, such contract does not denude it of its character as works contract. The term “works contract” in Article 366 (29-A)(b) takes within its fold all


Gist of Judgments Reported in September, 2013 723 genre of works contract and is not restricted to one specie of contract to provide for labour and services alone. Nothing in Article 366(29-A)(b) limits the term “works contract”.

(iv) Building contracts are species of the works contract.

(v) A contract may involve both a contract of work and labour and a contract for sale. In such composite contract, the distinction between contract for sale of goods and contract for work (or service) is virtually diminished.

(vi) The dominant nature test has no application and the traditional decisions which have held that the substance of the contract must be seen have lost their significance where transactions are of the nature contemplated in Article 366(29-

A). Even if the dominant intention of the contract is not to transfer the property in goods and rather it is rendering of service or the ultimate transaction is transfer of immovable property, then also it is open to the States to levy sales tax on the materials used in such contract if such contract otherwise has elements of works contract. The enforceability test is also not determinative.

(vii) A transfer of property in goods under clause 29-A(b) of Article 366 is deemed to be a sale of the goods involved in the execution of a works contract by the person making the transfer and the purchase of those goods by the person to whom such transfer is made.

(viii) Even in a single and indivisible works contract, by virtue of the legal fiction introduced by Article 366(29-A)(b), there is a deemed sale of goods which are involved in the execution of the works contract. Such a deemed sale has all the incidents of the sale of goods involved in the execution of a works contract where the contract is divisible into one for the sale of goods and the other for supply of labour and services. In other words, the single and indivisible contract, now by

Forty-sixth Amendment has been brought on par with a contract containing two separate agreements and States have now power to levy sales tax on the value of the material in the execution of works contract.

(ix) The expression “tax on the sale or purchase of goods” in Entry 54 in List

II of Seventh Schedule when read with the definition clause 29-A of Article 366 includes a tax on the transfer of property in goods whether as goods or in the form other than goods involved in the execution of works contract.

(x) Article 366(29-A)(b) serves to bring transactions where essential ingredients of ‘sale’ defined in the Sale of Goods Act, 1930 are absent within the ambit of sale or purchase for the purposes of levy of sales tax. In other words, transfer of movable property in a works contract is deemed to be sale even though it may not be sale within the meaning of the Sale of Goods Act.

(xi) Taxing the sale of goods element in a works contract under Article 366(29-



A)(b) read with Entry 54 List II is permissible even after incorporation of goods provided tax is directed to the value of goods and does not purport to tax the transfer of immovable property. The value of the goods which can constitute the measure for the levy of the tax has to be the value of the goods at the time of incorporation of the goods in works even though property passes as between the developer and the flat purchaser after incorporation of goods.

CLARIFICATIONS MADE BY THE LARGER BENCH

The Hon’ble Larger Bench clarified that activity of construction undertaken by the developer would be works contract only from the stage the developer enters into a contract with the flat purchaser. The value addition made to the goods transferred after the agreement is entered into with the flat purchaser can only be made chargeable to tax by the State Government.

The Hon’ble Larger Bench further clarified that the value of the goods which can constitute the measure of the levy of the tax has to be the value of the goods at the time of incorporation of goods in the works even though property in goods passes later. Taxing the sale of goods element in a works contract is permissible even after incorporation of goods provided tax is directed to the value of goods at the time of incorporation and does not purport to tax the transfer of immovable property.

HIGH COURT JUDGMENTS

1. BSCPL INFRASTRUCTURE LIMITED V. STATE OF GUJARAT AND OTHERS

[2013] 63 VST 001 (Guj )

Lump-sum payment permission cannot be cancelled without giving a dealer proper opportunity of hearing. Mere issuance of notice is not sufficient. Bank attachment removed. (Gujarat Value Added Tax Act, 2003)

Facts of the case

The assessee is a dealer registered under the Vat Act. The assessee is engaged in the business of executing works contracts of construction of roads.

The assessee had entered into works contract of Rs. 600-00 crores with High Way

Authority of India for construction of four lane road from Godhara to MP border section of NH 59 from KM 129.300 to KM 219.900.

The assessee had applied to the assessing authority for composition of tax under section 14A of the VAT Act, which was granted under an order dated

17.03.2011. The assessee utilizes various raw materials, such as, cement, steel, sand, grit, etc. in execution of the said works contract. The assessee has leased out certain mines from where it procures blacktrap and the same is converted into grit. The grit is then used in construction of roads and in particular in the execution of the contract in question.



Between 6.3.2013 and 8.3.2013, the assessing authority conducted an inquiry at the assessee’s business premises. On such inquiry, the assessing authority came to a conclusion that use of the grit by the assessee from its own mines is not tax paid and therefore, the assessee has breached the conditions of permission for composition of tax. On such basis, the assessing authority served a notice to the assessee on 08.03.213 to show cause as to why such permission should not be cancelled.

The assessee was granted time up to 12.03.2013 to remain present with original records. Along with such notice itself, the assessing authority supplied tentative calculation of the tax liability of the assessee in case the permission for composition of tax was cancelled. Such liability along with interest would come to

Rs.11.83 crores (rounded off) by way of duty and Rs.2.37 crores (rounded off) by way of interest.

On 12.03.2013, the assessee applied to the assessing authority and prayed for time. It was pointed out before the assessing authority that the time allowed was only for four days. The notice was received on 09.03.2013 in the afternoon and 10 th March was a holiday being Mahashivaratri and also happened to be a Sunday. Books of accounts of the assessee were lying in Hyderabad. The assessee, therefore, prayed for two weeks extension. In addition to such request for adjournment, the assessee also raised certain legal contentions to show why the permission for composition of tax should not be cancelled.

Ignoring such request for extension of time and the legal contentions of the assessee, the assessing authority passed a brief order dated 12.03.2013 and cancelled the permission from the inception. Simultaneously, the assessing authority passed several orders all dated 12.03.2013 and attached various bank accounts of the assessee for the possible tax liability of Rs.11.83 crores (rounded off) with interest and penalty. Being aggrieved, the assessee filed present writ petition before the Gujarat High Court

Decision of the Gujarat High Court

The Hon’ble Gujarat High Court held that the assessing authority showed undue hurry in passing the final order of cancellation of permission for composition of tax. On 08.03.2013, show cause notice was issued which was served on the assessee on 09.03.2013. 10 th March happened to be Sunday. The assessee, therefore, had only one clear day for responding to the notice and producing the material called for. There was no earthly reason why the assessing authority could not have waited for a reasonable period to permit the assessee to put the full facts on record.

The Hon’ble High Court held that the question, whether in the background of the facts noted above, the assessee can be stated to have breached the conditions


726 Gist of Judgments Reported in September, 2013 of permission for such composition of tax is an important question. It required full examination and proper consideration. Such an important question which would result into a possible tax demand of more than Rs.11 crores from the assessee cannot be considered in such a hasty manner.

The Hon’ble High Court held that under any circumstances, the assessing authority breached the principle of natural justice. Mere issuance of show cause notice is not sufficient for complying with the basic requirement of hearing. A reasonable opportunity to put forth its defence was part of the assessee’s right.

No reason whatsoever has been brought to our notice why the entire exercise was required to be completed in four days.

In view of above, the Hon’ble Gujarat High Court set aside the order dtd.

12.03.2013 cancelling the permission for composition of tax. Since the orders of bank attachment were based on this order itself, the same, as a consequential step, were also quashed.

The Hon’ble High Court further held that they are conscious that under the

VAT Act, the competent authority has wide powers for passing appropriate order for safeguarding the interest of the Revenue pending the assessment proceedings.

In the present case, the sole reason for attachment of bank accounts was the order of cancellation of permission for composition of tax and the possible duty demand pursuant to such cancellation. When the base order itself is set aside, they have no hesitation in setting aside the consequential orders of attachment. Nothing has been pointed out to believe that the assessee would not discharge its duty liability so fastened. As noted, the assessee is in the process of executing road construction work valued approximately at Rs.600 crores. In absence of any such facts permitting the assessing authority to attach the bank accounts even before taking a final decision on the cancellation of permission for composition of tax, at this stage, at least does not arise.

In the result, the Hon’ble Gujarat High Court disposed of with following further directions:

(i) The assessee would have time up to 15.04.2013 to file further reply and necessary details pursuant to notice dated 08.03.2013, which has not been interfered with though prayed for by the assessee.

(ii) The assessing authority shall thereafter take final decision in connection with the said notice after granting personal hearing to the assessee’s representative.

(iii) The question of any attachment in terms of section 45 of the VAT Act is left to be judged by the competent authority in future at any stage if such situation arises satisfying the requirement of the said section.



2. STATE OF HARYANA V. GLAXO INDIA LIMITED AND ANOTHER [2013] 63 VST

035 (P & H )

Feed supplement such as proteins, salts and minerals, vitamins, antibiotics and coccidiostate are covered under entry “poultry feed”. (Haryana General Sales

Tax Act, 1973)


The assessee is a dealer registered under the Act. The assessee in the year

1996-97 sold proteins, salts and minerals, vitamins, antibiotics and coccidiostate.

The assessee claimed exemption from tax on such sales on the ground that the impugned goods are covered under entry “poultry feed”. The assessing authority accepted the classification made by the assessee and passed the assessment order accordingly.

The above assessment order came to be revised by the revisional authority on the grounds that the impugned goods are the constituent of poultry feed and therefore, cannot be covered under entry of “poultry feed”. According to the revisional authority, poultry feed is a mixture of such ingredient and only mixture can be covered under this entry and therefore, any individual ingredient cannot be covered under the entry “poultry feed”.

The assessee carried the matter before the Tribunal in revision. The Tribunal accepted the submissions of the assessee and set aside the revision order and restored the assessment order. Being aggrieved, the revenue filed present appeal before Punjab and Haryana High Court.

Decision of the Punjab & Haryana High Court

Referring to various judgments, the Hon’ble High Court held that in the present case the assessee has been given benefit of exemption on the ground that the sale of feed supplements such as proteins, salts and minerals, vitamins, antibiotics and coccidiostate would also constitute “poultry feed”. The very fact that each of the feed supplement can individually be given to the cattle, shall not exclude such feed from the exemption clause as object of giving exemption to the “poultry feed” under the Act is to promote sale of “poultry feed/supplements”.

In view of above, the Hon’ble High Court held that there is no substantial question of law is involved in the matter. The appeal filed by the State came to be dismissed accordingly.

3. PRATIK MAHENDRA GANDHI V V. STATE OF GUJARAT AND ANOTHER [2013]

63 VST 178 (Guj )

Bank attachment and stock attachment during pendency of the assessment is a drastic step. Orders set aside in facts with a condition to maintain stock of goods as directed by the Court. (Gujarat Value Added Tax Act, 2003)




The assessee is a dealer registered under the Vat Act. The place of the business was inspected by the officers of the department. The said authority found that the assessee has claimed tax credit for the purchases made from the dealers whose registration certificates were cancelled. The assessing authority, therefore, initiated proceedings for denial of such tax credit and collection of tax from the assessee.

During the pendency of such assessment, the assessing authority passed orders dtd. 06.02.2013 under section 45 of the Vat Act for provisional attachment on the goods lying in stock and also on the bank account of the assessee. Being aggrieved, the assessee filed present writ petition before the Gujarat High Court.

Submissions of the assessee before the Gujarat High Court

The learned counsel for the assessee submitted before the Gujarat High

Court that the powers under section 45 of the VAT Act are drastic. The exercise thereof should be confined to the rare and exceptional cases. In the present case, there is no material to suggest that there is any outstanding duty remained against the assessee.

The learned counsel for the assessee further submitted that the assessee has been dealing in brass scrap and other similar items, since several years. At the time of spot visit of the assessee's business premises by the officials of the department also, the physical stock tallied with the stock register of the assessee.

He, therefore, submitted that the assessee is not liable to pay any additional tax.

The learned counsel for the assessee further submitted that for denial of tax credit, the assessing authority is relying on cancellation of registration of some of the dealers from whom the assessee has purchased such goods. He submitted that all purchases were made prior to the cancellation of registration and therefore, such denial of tax credit is completely unjustified.

Submissions of the revenue before the Gujarat High Court

The learned counsel for the revenue submitted before the Gujarat High Court that the purchases made by the assessee were not genuine. The investigation revealed that in some cases where dealers from whom such purchases were said to have been made were bogus. In some cases, the transportation and weighing location did not match with the actual purchase and movement of goods.


The Hon’ble Gujarat High Court held that since the assessments are pending, they would not like to make any conclusive statement in respect of rival contentions. Further, they cannot ignore the fact that an order of practical


Gist of Judgments Reported in September, 2013 729 assessment under Section 45 of the Act, pending attachment before the judgment is a drastic measure. According to the Court, a workable formula can be provided under which, the assessee may restart the business subject to further investigation and assessment.

The Hon’ble High Court considered following factors:

(i) That the assessee's bank account has balance of Rs.3986.48, which is of no gre at significance to t he department.

(ii) Currently, the assessee's stock worth Rs. 72,56,480-00 is under attachment.

(iii) It is not pointed out by the assessing authority that there was any discrepancy in the physical stock and stock reflected in register, at the time of spot visit.

(iv) It is the case of the assessee that with respect to the dealers whose registrations were canceled the purchase was made by the assessee prior to the date of cancellation.

In view of above, the Hon’ble Gujarat High Court held that the provisional attachment is required to be lifted subject to assessee maintaining certain minimum stock. This would on one hand, enable the assessee to restart the business and on other hand, safeguard the interest of the department pending assessment.

In ultimate analysis, the Hon’ble Gujarat High Court held that the order of attachment is ordered to be lifted on the conditions that the assessee would maintain minimum stock of the value of Rs.35 lakhs, till the assessments are competed. An undertaking to this effect shall be filed befo re the Court latest by 10.05.2013. Only upon filing of such undertaking this order will come into force.

4. JAI CHEMICAL INDUSTRIES V. STATE OF ASSAM AND OTHERS [2013] 63 VST

202 (Gauhati

Mere change of opinion at belated stage cannot be ground to deny sales tax incentives (Assam Value Added Tax Act, 2005)


The assessee is a dealer registered under the Vat Act. The assessee was engaged in the business of manufacturing soap stone powder from soap stone.

The assessee made an application to the Industries department for grant of sales tax incentives declared by the State Government. The Industries department asked the opinion of the Vat department whether the assessee was a manufacture and entitled to the sales tax incentives.

The authority in the Vat department replied to the Industries department that the activity carried out by the assessee was manufacturing activity and therefore,


730 Gist of Judgments Reported in September, 2013 the assessee was entitled to sales tax incentives as manufacturer of soap stone powder. The Industries department, thereafter, issued eligibility certificate to the assessee which was renewed time to time as provided under the scheme.

In the meantime, in another case, the assessing authority asked for a clarification from the Commissioner whether the activity of preparing soap stone powder from soap stone can be considered as manufacture or it was only resale of goods. The Commissioner clarified that the impugned process is not manufacture but is resale of the goods. Merely converting soap stone into powder form does not change the commodity. On the basis of this clarification, the assessing authority refused to renew the eligibility certificate issued to this assessee. Being aggrieved, the assessee filed present writ petition before the Gauhati High Court.

Submissions of the assessee before the Gauhati High Court

The learned counsel appearing for the assessee submitted before the Gauhati

High Court that the department cannot deny for renewal of eligibility at a later stage without valid reasons. The assessee has acted upon the certificate issued by the department and now the benefit of exemption cannot be withdrawn merely on change in opinion.

The counsel of the assessee also made submissions that the process of manufacturing soap stone powder from soap stone is a manufacturing activity and therefore, the assessee is entitled to the sales tax exemption.

Decision of the Gauhati High Court

The Hon’ble Gauhati High Court posed following questions:

(i) Whether once the department held that the process carried out by the assessee is manufacture, the renewal thereof could be denied on mere change of opinion at a belated stage?

(ii) Whether the earlier view taken by the department was a possible view?

After referring to the judicial authorities on the issue, the Hon’ble High Court held that once the department has i ssued certificate co nsidering the process as manufacturing process, the renewal of such certificate cannot be denied merely on the change of opinion that the said process is not manufacture. Such renewal can only be denied in cases of fraud, misrepresentation or suppression on the part of assessee.

The Hon’ble High Court also held that the earlier view granting eligibility cer tificate was a possi ble view and therefore, the renewal cannot be denied.

5. MEET TRADERS V. STATE OF GUJARAT [2013] 63 VST 246 (Guj)

Stop delivery order for the goods kept in godown held illegal. (Gujarat Value

Added Tax Act, 2003)




The assessee is engaged in the business of trading in various commodities like jeera etc. The goods belonging to the assessee were stored in a warehouse.

The assessing authority issued stop delivery order to the owner of the warehouse on the ground that the assessee has claimed tax credit for the purchases of the goods whose seller’s registration number was cancelled. The assessing authority issued such stop delivery order in order to recover the so called excess claim of the tax credit made by the assessee. As a result of such stop delivery order the assessee was prevented to get possession of the impugned goods. Being aggrieved, the assessee filed present writ petition before the Gujarat High Court.


The Hon’ble Gujarat High Court perused that the assessing authority has issued the order under section 67(2) of the Act. The Hon’ble Court held that under the provisions of the said section, the Commissioner can stop the vehicle or the vessel carrying the goods and enter and search the vehicle, vessel or place in cases where the clauses (a) and (b) apply and inspect the goods and records relating to such goods and elicit such information from the carrier, bailee or any person as is relevant.

The Hon’ble High Court held that clauses (a) and (b) of sub-section (6) of section 67 of the VAT Act pertain to cases where a carrier or bailee or any person to whom goods were delivered for transport has kept the said goods in any vehicles, vessel or place and the Commissioner has reason to believe that tax on such goods is or is likely to be evaded. In such cases, the Commissioner may stop the vehicle or vessel, enter and search the vehicle, vessel or the place and inspect the goods and records.

The Hon’ble Court held that in the present case, neither clause (a) nor clause

(b ) is satisfied. Firs tly, the goods are not kept in any vessel, vehicle or place by a carrier or bailee or any person to whom the goods were delivered for transport.

Further, the Commissioner cannot be stated to have reason to believe that the tax on such goods is or is likely to be evaded.

The Hon’ble High Court further held that even if the stand of the assessing authority that the assessee was not entitled to take tax credit on the purchases made from M/s Surya Vinayak Industries Ltd. was valid, we fail to see how the authority can hold a belief that the goods which are detained, are such on which the petitioner was likely to evade tax payment. Even if both these conditions were satisfied, the pow er with the Commissioner was only to enter the vehicle, vessel or the place, and inspect the goods and records relating to the goods in question and elicit such information as was relevant. In the present case, the assessing authority has acted well beyond such powers. Plainly, the power under section 67(b) of the


732 Gist of Judgments Reported in September, 2013 said Act was simply not available with the assessing authority for passing “stop delivery” order.

The Hon’ble High Court also referred to provisions of section 45 of the VAT

Act which pertains to provisional attachment. The Hon’ble Court held that it is not the case of the assessing authority that in the present case, such powers have been exercised. Even otherwise, section 45 empowers the appropriate authority during pendency of any proceedings of assessment or re-assessment of turnover escaping assessment, to attach provisionally any property belonging to the dealer, if the Commissioner was of the opinion that for the purpose of protecting the interest of the revenue, it was necessary to do so. In the present case, the assessing authority has not invoked such powers.

In view of above, the Hon’ble High Court held that the “stop delivery” of the goods of the assessee is illegal and hereby quashed. The assessing authority shall not prevent the assessee from movement of the goods.

6. ASIAN GANITO INDIA LTD V. STATE OF GUJARAT AND OTHERS [2013] 63 VST

262 (Guj)

Writ is admissible even though legal remedy of appeal is admissible. (Gujarat

Value Added Tax Act, 2003)


The assessee is a dealer under the Act. The assessing authority had by a provisional assessment order raised huge demand against the assessee. Nearly half of the amount due as per the provisional assessment order was recovered by the assessing authority. The assessee’s second appeal against the impugned provisional assessment order and an application for waiver of pre-deposit was pending before the Tribunal.

During the pendency of the second appeal and an application for waiver of pre-deposit, the assessing authority resorted to coercive recovery actions. Being aggrieved, the assessee filed a writ petition before the Gujara5 High Court.


It was contended by the learned counsel of the assessee that nearly 50% dues have been recovered. The matter is pending in appeal before the tribunal and therefore, the action of recovery is high handed and therefore, the assessing authority may be directed not to take any further action for recovery of dues pending the second appeal.


The revenue contended before the Gujarat High Court that the matter is pending at second appeal stage and therefore, this writ should not be admitted since the assessee has legal remedy available.




The Hon’ble Gujarat High Court observed that the assessing authority was proceeding with the coercive recovery even when the Appellate Authority was ceased of assessee’s appeal and application for waiver of pre-deposit. Even without waiting for a reasonable period, such recovery was being made in hothaste. In that view of the matter, the assessee was within his right to approach this

Court and seek

Interim protection. Availability of alternative remedy or actual filing of such appeal therefore would not convince us to reject the petition only on such ground.

The Hon’ble High Court accordingly admitted the writ and disposed with appropriate direction to the assessing authority.

7. M. MOHAMMED HAJI V. STATE OF KERALA [2013] 63 VST 317 (Ker)

Tax credit is not admissible for the purchases not recorded in the books of accounts even though the purchase has suffered tax. (Kerala Value Added Tax

Act, 2003)


The assessee is a dealer under the Kerala Vat Act. In the assessment for the year 2007-08 it was found that the assessee has suppressed purchases of cement.

The assessing authority added gross profit on such purchases and determined sales of such cement and assessed tax, interest and penalty on such estimated sales.

The assessee, in the first appeal, submitted that the purchases were tax paid purchases from the State PSU and therefore, the tax credit in respect of tax paid on such purchases should be allowed. The first appellate authority accepted the submissions of the assessee and passed the order accordingly.

The department challenged the order of the first appellate authority before the

Tribunal wherein; the Tribunal set aside the order of the first appellate authority and restored the order of the assessing authority. Being aggrieved, the assessee filed present revision application before the Kerala High Court.

Decision of the Kerala High Court

The Hon’ble Kerala High Court held that the provisions of maintenance of records for the purposes of determining the quantum of tax credits are not mere procedural provisions. A dealer who has failed to account purchases in his books of accounts and has suppressed such purchases; is not entitled for tax credit, even though such suppressed purchases have suffered tax.

The Hon’ble Kerala High Court held that principle of strict interpretation would be applicable in case of interpretation of provisions for tax credit. No dealer has right to claim tax credit independent of the provisions of tax credit.



The Hon’ble Court held that the scheme of the Act requires that input tax credit has to be claimed along with returns, supported by tax invoice. The quantification of such tax credit has to be made on the basis of the books of accounts. Therefore, where the purchases are not accounted in the books of accounts and the claim has not been made in returns, tax credit would not be admissible irrespective of fact that such purchases have suffered tax.

In view of above, the Hon’ble Kerala High Court confirmed the order of the

Tribunal and dismissed the revision application filed by the State.

8. GE CAPITAL TRANSPORTATION FINANCIAL SERVICES LTD. V. STATE OF

HARYANA AND OTHERS [2013] 63 VST 329 (P&H )

In case of transfer of right to use goods, the total rental amount is not taxable in the month in which the possession is given. The rental received or receivable in a month is taxable in that tax period. (Haryana Value Added Tax Act, 2003)


The assessee is a dealer under the Haryana Vat Act. The assessee entered into an agreement for rental of vehicles for a specified period. The assessing authority held that the amount to be paid for the entire term of lease is to be included in the turnover of the month in which the possession of the vehicles was given.

The assessing authority passed the assessment order accordingly. The said order came to be confirmed in first appeal and also in second appeal before the Tribunal.

Being aggrieved, the assessee filed present appeal before Hon’ble Punjab and

Haryana High Court.

Decision of the Punjab and Haryana High Court

The Hon’ble High Court perused the agreement and the concerned provisions of the Act. The Hon’ble High Court held that the right to use the vehicle is dependent upon monthly payments of rental and therefore, the rental received or receivable for a month would be sale price for that month. Therefore, the entire rental value cannot be made taxable in one month in which the possession of vehicle is given.

In view of above, the Hon’ble High Court set aside the orders of the lower authorities and allowed the appeal filed by the assessee.

9. TOYOTA CONSTRUCTION P LTD. UNION OF INDIA AND OTHERS [2013] 63 VST

341 (Guj )

Request for early hearing is not bar for seeking adjournment. (Finance Act-32 of 1994)


The assessee is engaged in the activity of works contract of constructions of buildings and structures. In case of the assessee, the audit officer took the


Gist of Judgments Reported in September, 2013 735 view that the assesse has not included value of free issue material in the taxable turnover and not paid tax on such amount. The assessee was, therefore, issued a notice to show cause as to why the tax should not be levied as proposed in the said notice. The assessee replied to the said notice but the Commissioner rejected the submissions of the assessee and passed the order raising demand against the assessee.

The assessee filed appeal before the Tribunal with the stay application.

Looking to urgency of the matter, the assessee requested for early hearing of the matter which came to be accepted and a date of hearing came to be fixed by the Tribunal. Now on the date of hearing, it was not possible for the assessee to appear before the Tribunal and therefore, he made an application for adjournment of the matter. The said request came to be rejected by the Tribunal holding that the request for adjournment was made on “very very flimsy” grounds. The Tribunal accordingly passed an order for part payment of Rs. 1 crore as pre-condition of hearing the appeal. Being aggrieved, the assessee filed present writ petition before the Gujarat High Court.


The Hon’ble Gujarat High Court observed that the request for adjournment was made on the ground that the director of the company had to rush to his native place in connection with the serious illness of close relative. The said reason was termed by the Tribunal as “very very flimsy”.

The Hon’ble Gujarat High Court held that there was no opportunity of hearing given to the assessee by the Tribunal. It is true that the assessee had prayed for early hearing of the stay application and in view of the said application a date of hearing was fixed. However, due to unavoidable circumstances, which have been mentioned in the application for adjournment, the opportunity of hearing could not have been denied to the assessee by terming the ground of the adjournment as flimsy. There is nothing to indicate that the assessee was either indulging in dilatory tactics or was on a forum shopping. A request for early hearing cannot bar the assessee to request for adjournment on genuinely arisen contingencies.

In view of above, the Hon’ble High Court set aside the order of the Tribunal and remanded the matter back to the Tribunal with a direction to give reasonable opportunity of hearing to the assessee and to pass the order thereafter.

10. SUNIL KUMAR AGRAWAL V. JOINT COMMISSIONER OF SALES TAX,

CHOWRINGHEE CIRCLE AND OTHERS [2013] 63 VST 464 (WBTT)

Revision is not permissible on the ground not mentioned in notice for revision

(West Bengal Value Added Tax Act, 2003)


The assessee is a dealer registered under the Act. The assessee made sales


736 Gist of Judgments Reported in September, 2013 in the course of exports. Since the sales were export sales, the assessee was not liable to pay tax on such sales. The assessee, thus, was entitled to refund of tax paid on purchases of such goods. The assessment order came to be passed accordingly.

Thereafter, the revisional authority issued a notice to the assessee for revision of the impugned assessment order on the ground that the purchases on which the assessee has claimed tax credit are the purchases made in the course of import and therefore, the assessee is not liable to tax credit (refund) in respect of such purchases.

The assessee for genuine reasons could not remain present before the revisional authority on the date fixed for hearing. He made a request to grant more time for submissions in the matter. The revisional authority rejected the request of the assessee and passed ex-party revision order on the different ground that the dealers from whom the assessee has made purchases were not in existence.

Being aggrieved, the assessee filed present revision before the WBTT.

Decision of the WBTT

The Hon’ble Court held that the revision order has been passed on a new point which was not there in notice of revision. The Hon’ble Court followed the decision of Andhra Pradesh High Court in case of State of Andhra Pradesh v. Loharu

Steel Industries [1995] 96 STC 369 (AP); wherein the Hon’ble Court held that exercise of powers of revision by the revision officer could only be on the grounds mentioned in revision notice, otherwise, the very purpose of offering reasonable opportunity by issuing a show cause notice would be negated.

In view of above, the Hon’ble WBTT set aside the revision order and allowed the revision application filed by the assessee.

11. SHREE RAMDEV ICE CREAM V. STATE OF GUJARAT [2013] 63 VST 495 (Guj)

The process held as manufacturing of ice cream. Claim of resale of goods rejected (Gujarat Sales Tax Act, 1969)


The assessee is a dealer registered under the Act. The assessee purchased raw materials as sweetened milk, soft drink concentrate, chocolate powder, vanilla powder, food additives, flavor etc. The assessee mixed all the ingredients and kept such materials under certain low temperature. The said condensed materials were then sold under name ‘softy’. According to the assessee, there was sale of sweetened milk only whereas, the assessing authorities held that the sales were of ice cream. The assessment order also came to be confirmed in the second appeal before the Tribunal. Being aggrieved, the assessee filed present Tax Appeal before the Gujarat High Court.




It was submitted before the Gujarat High Court that the process carried out by the assessee is not ‘manufacture’. The assessee was only reselling sweetened milk by adding certain materials therein. By addition of such materials and cooling such material no new product comes into existence. Therefore, the assessee is not liable to pay any tax on the re-sales of the goods.


It was submitted before the Gujarat High Court that the process carried out by the assessee is ‘manufacture’ wherein, ice cream is manufactured. What the assessee has sold is the ice cream under name of softy. Therefore, the assessee is liable to pay tax on sales of softy manufactured by him.


The Hon’ble Gujarat High Court held that the process carried out by the assessee was not mere a process of cooling and condensing pre-mixed sweetened milk mixture. The process is a manufacturing process of ice cream. Therefore, the assessee is liable to pay tax on sales of ice cream sold under name ‘softy’.

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738 Gist of the Judgements

Gist of the

Judgements

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SHRI G. D. JAIN pradip1963@ymail.com

ASPICK ENGINEERING (P.) LTD.

Vs.

STATE OF TAMIL NADU

[IN THE MADRAS HIGH COURT]

[2013] 62 VST 216(Mad)

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STATE OF KARNATAKA

Vs.

KRISHNA STONE TECH PVT. LTD.

[IN THE KARNATAKA HIGH COURT]

[2013] 63 VST 14(Karn)

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740 Tribunal Judgements

Tribunal

Judgements



Shri N.N.Patel-Shri Ashok J.Patel nnpatelassociates@yahoo.co.in

(32) MCB is covered under entry 78(i) of schedule II of the VAT Act. The assessment order passed by holding MCB is covered under entry 87 of schedule II is set aside.

The Ld. Assessing Officer while passing assessment order for the year 2006-

07 has held that the item MCB is covered under entry 87 of schedule II of the VAT Act. He passed assessment order in which he levied tax @ 12.5 % on sale of MCB. The Ld. Appellate Authority affirmed the view of levying tax

@ 12.5 % on sale of MCB. The appellant contended before Hon’ble Tribunal that MCB is switch gear as covered under entry 78(i) of schedule II of the VAT

Act. Appellant referred entry 41 of electrical goods, entry 113 and entry 60 of transformer, switch gear and switch boards and spare parts and accessories thereof of the earlier Act. Appellant relied on Tribunal judgments in the case of

M/s. Jayprakash & Co. dt. 15/10/86, M/s. Bharat Linder Pvt. Ltd. dt. 14/10/87,

M/s. Kusumit Electro Works dt. 18/10/99 and determination order passed u/s

62 in the case of M/s. Siemens India Ltd. dt. 21/03/85, M/s. The general Electric

Co. of India dt. 22/03/85, M/s. L & T Ltd. dt. 23/12/85 and in the case of M/s. Ex

Protectce dt. 10/02/89. Appellant also relied on report of BIS, Government of

India in which the meaning of switch gear was pointed out as the switch gear is used in association with electric power system or grid, refer to the combination of electrical equipment. Switch gear is used both to de-energize equipment to allow work to be done and to clear faults downstream. The appellant also relied on report of the electro technical and allied manufacturers association.

As regard classification of residuary entry the appellant contended that when there is a specific entry should not be resorted. In this regard appellant relied on judgment of Hon’ble Supreme Court in the case of M/s. Mauri Yeast India

Pvt. Ltd. 14 VST 259. The Hon’ble Tribunal referred entry 78(i) and entry 87 of schedule II of the VAT Act and also referred various reports and judgments relied on by the appellant. Hon’ble Tribunal held that the item MCB is switch gear as covered under entry 78(i) of the VAT Act.

M/s. Schneider Electric India Pvt. Ltd. S. A. No. 1000 & 1001 of 2010 decided on 09/05/12. Reported at 2012 GSTB Page 711.


Tribunal Judgements 741

(33) The item interlocking paving blocks and curb stones in different shape and size are bricks as covered under entry 10(i) of schedule II of the VAT

Act.

An application for determination of rate of tax payable on sale of interlocking paving blocks and curb stones in different shape and size was made u/s 80 of the VAT Act. The Ld. Determining Authority held that the bricks are available in rectangular shape and they are used for the construction of wall. The disputed item paving blocks are used for flooring of roads and hence they are not bricks.

He determined that the item paying blocks are covered under residuary entry

87 of schedule II of the VAT Act. The appellant contended before Hon’ble

Tribunal that Paver blocks are used to provide concrete pavements of roads, footpaths, court yards and buildings, petrol pumps etc. The paver blocks are used to solve the problem of good water permeability and water holding properties. The appellant produced process of fitting paver blocks and curb stones. The appellant relied on determination order of Hon’ble Commissioner of Sales Tax, Maharashtra passed in the case of M/s. S. K. Industries and judgment of Hon’ble Karnataka High Court in the case of M/s. H. H. Cement

Products and judgment of Hon’ble Allahabad High Court in the case of M/s.

Adarsh Nirman Sanstha. As regard classification of disputed item in the residuary entry 87, the appellant contended that when there is a specific entry, the residuary entry should not be resorted. The Hon’ble Tribunal referred manufacturing process of paver block and also referred various judgments relied on by the appellant and held that the disputed item interlocking paving blocks and curb stones in different shape and size are covered under entry

10(1) of schedule II of the VAT Act. As regard classification of item in residuary entry, the Hon’ble Tribunal referred judgment of Hon’ble Supreme Court in the case of M/s. Bradma of India Ltd. 140 STC 17, M/s. Mauri Yeast India Pvt. Ltd.

14 VST 259, M/s. Champadany Industries Ltd. (2009) 9 SCC 466, M/s. HPL

Chemicals Ltd. (2006) 5 SCC 208 and M/s. Jalani Enterprise, 4 STC 386.

M/s. Vyara Tiles Pvt. Ltd. Appeal No. 20 of 2009 decided on 15/06/12.

Reported at 2012 GSTB 739.


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IMPORTANT SUPREME COURT JUDGEMENT 743

IMPORTANT SUPREME COURT JUDGEMENT

Hon’ble SC Judgment in the case of M/s L & T Ltd. & another

There was a confusion regarding payment of tax by the building contractor, even after SC Judgment in the case of M/s K Raheja

Development Corporation Ltd., because in the matter of M/s

Larsen & Toubro Ltd. it was held that the judgment in the case of M/s K Raheja Development Corporation Ltd. requires reconsideration and hence the said matter in the case of M/s

L & T Ltd. was referred to the larger bench of the Hon’ble SC court. The Hon’ble SC court vide judgment dated 25/09/2013 approved the ratio laid down in the case of M/s

K Raheja Development Corporation Ltd. (supra) and held that the activity of constructing flat for the prospective buyer on the land own by the land owner is a works contract and the deemed sale of goods used in the construction of building are liable to tax. This judgment has far reaching effect on the developer of the land and to the contractor who are engaged in the building construction activity. The whole judgment is printed here under for the benefit of the readers.

Editors

October - 2013

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 8672 OF 2013

(Arising out of SLP(C) No.17741 of 2007)

M/s. Larsen & Toubro Limited & Anr. …… Appellants

Versus

State of Karnataka & Anr. ……Respondents

WITH

CIVIL APPEAL NOS. 8673-8684 OF 2013

(Arising out of SLP(C) Nos. 30581-30592 of 2009)

WITH

CIVIL APPEAL NO. 8685 OF 2013


WITH

SALES TAX JOURNAL - 52

744 IMPORTANT SUPREME COURT JUDGEMENT



WITH



WITH



WITH



WITH



WITH



WITH



WITH



WITH



WITH



WITH



AND





JUDGMENT

R.M. LODHA, J.

Leave granted in all these special leave petitions.

2. Does the two-Judge Bench decision of this Court in Raheja Development[1] lay down the correct legal position? It is to consider this question that in Larsen and

Toubro[2] a two-Judge Bench of this Court has referred the matter for consideration by the larger Bench. In the referral order dated 19.8.2008, the two-Judge Bench after noticing the relevant provisions of the Karnataka Sales Tax Act, 1957 and the distinction between a contract of sale and a works contract made the reference to the larger Bench by observing as follows :

“We have prima facie some difficulty in accepting the proposition laid down in Para 20 quoted above. Firstly, in our view, prima facie, M/s Larsen & Toubro

- petitioner herein, being a developer had undertaken the contract to develop the property of Dinesh Ranka. Secondly, the Show Cause Notice proceeds only on the basis that Tripartite Agreement is the works contract. Thirdly, in the Show Cause Notice there is no allegation made by the Department that there is monetary consideration involved in the first contract which is the

Development Agreement.

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.

For the aforestated reasons, we direct the Office to place this matter before the Hon'ble Chief Justice for appropriate directions in this regard, as


746 IMPORTANT SUPREME COURT JUDGEMENT we are of the view that the judgment of Division Bench in the case of Raheja

Development (supra) needs re-consideration by the larger Bench.”

3. Of the 26 appeals under consideration before us, 14 are from Karnataka and 12 from Maharashtra. Insofar as Karnataka appeals are concerned, it is appropriate that we take the facts from the leading case being Larsen and Toubro2.

The ECC division of Larsen and Toubro (for short, “L&T”) is engaged in property development along with the owners of vacant sites. On 19.10.1995, L&T entered into a development agreement with Dinesh Ranka, owner of the land bearing survey numbers 90/1, 91, 92 (Part), 94, 95 and 96/1 (Part) together measuring 34 acres all situated at Kothanur Village, Begur Hobli, Bangalore South Taluk, Bangalore, for construction of a multi-storeyed apartment complex. The owner was to contribute his land and L&T was to construct the apartment complex. After development, 25% of the total space was to belong to the owner and 75% to L&T. A power of attorney was executed by the owner of the land in favour of L&T to enable it to negotiate and book orders from the prospective purchasers for allotment of built up area.

Accordingly, L&T entered into agreements of sale with intended purchasers. The agreements provided that on completion of the construction, the apartments would be handed over to the purchasers who will get an undivided interest in the land also. Sale deeds, thus, were executed in favour of the intended purchasers by L&T and the owner.

4. On 12.07.2005, the business premises of L&T were inspected by the Deputy

Commissioner of Commercial Taxes (Intelligence-1) South Zone, Koramangala,

Bangalore (hereinafter referred to as the ‘Deputy Commissioner’) and a detailed statement of the Finance Manager was recorded.

5. On 21.12.2005, the Deputy Commissioner called upon L&T to furnish the details of development project. L&T furnished details on 24.07.2005 and

26.09.2005.

6. On 04.10.2005, the Deputy Commissioner served a show cause notice on L&T stating that it was liable to tax as per the decision of this Court in Raheja

Development1. L&T responded to the show cause notice and submitted preliminary objections on 10.10.2005. By a further communication dated 10.11.2005, L&T objected to the assessment of tax for development of projects by it. The L&T inter alia submitted that the development agreement was not a works contract per se on account of the reasons: (a) the agreement was to develop and market flats to customers; (b) the intent and purpose of the agreement was to develop property by the petitioners on the one hand and the land owner on the other; (c) the construction and development of the said land involved no monetary consideration; and (d) the only consideration was that upon the completion of the entire project, L&T would be entitled to 75 per cent of the same.

7. Again on 04.01.2006, the business premises of L&T were inspected and


IMPORTANT SUPREME COURT JUDGEMENT 747 certain documents like agreement copies and other documents relating to the transactions of the sale of flats were seized for the purposes of further investigation and verification.

8. On 02.02.2006, the Deputy Commissioner served upon L&T a further notice proposing to tax the sale of materials used in the construction of flats on the ground that it was entitled to 75 per cent of the share of the projects. L&T filed detailed objections to this notice as well.

9. On 03.07.2006, the Deputy Commissioner issued provisional assessment orders under Section 28(6) of the Karnataka Sales Tax Act, 1957 (for short, ‘KST

Act’) for the years 2000-01 to 2004-05. Along with the provisional orders, the

Deputy Commissioner also issued demand notices raising a total demand of Rs.

3,99,28,636/-.

10. Initially, L&T preferred a writ petition before this Court challenging the above demands but that writ petition was withdrawn and a writ petition under

Article 226 of the Constitution of India was filed before the Karnataka High Court.

11. The Single Judge of the Karnataka High Court noted that the controversy raised by the L&T was covered by the decision of this Court in Raheja Development1 and, accordingly, dismissed the writ petition on 10.07.2007 by observing as follows:

“From the aforesaid observations of the Apex Court it is very much clear that as the petitioner No. 1 had entered into an agreement to carry out construction activity on behalf of someone else for cash or for deferred payment or for any other valuable construction, it would be carrying out works contract and therefore would become liable to pay turnover tax on the transfer involved in such work contracts. It is also not in dispute in this matter that the agreement of sale is entered into between the first petitioner and the buyers of the flat even prior to completion of the construction of the building. Under such circumstances, as has been held by the Apex Court in the RAHEJA

DEVELOPMENT CORPORATION’s Case, the petitioners are liable to pay the turnover tax on the transfer of goods involved in such ‘works contract’. In view of the dictum laid down by the recent judgment cited supra, this Court does not find any merit in this writ petition.”

12. L&T preferred an intra-court appeal. The Division Bench of that Court concurred with the Single Judge and dismissed the writ appeal by expressing its opinion as follows:

“In our view, so far as the definition of ‘work contract’ in almost similar situation as in the present case has been well considered by the Hon’ble

Supreme Court in the case of K. RAHEJA DEVELOPMENT CORPORATION

(supra). The question as to whether that judgment as per Article 141 of the

Constitution of India is the law of the land binding on all the Courts in the



Country. Prima facie, we find that the facts and circumstances in that case are almost similar to the present case and as such, the ratio laid down in the

RAHEJA’s Case and relied upon by the learned Single Judge is, in our view, just and proper. So far as the other pronouncements are concerned, if the appellant feels that it is necessary to get the pronouncement in RAHEJA’s

Case reviewed, it is open for him to approach the Apex Court and this Court cannot substitute its own findings on the questions since the same has already been decided by the Apex Court in RAHEJA’s case.”

13. Insofar as appeals from Maharashtra are concerned, they arise from the judgment of the Bombay High Court. The Bombay High Court was concerned with the group of matters wherein challenge was laid to the constitutional validity of

Section 2(24) of the Maharashtra Value Added Tax Act, 2002 (for short, “MVAT

Act”) as amended initially by Maharashtra Act XXXII of 2006 and thereafter by

Maharashtra Act XXV of 2007 and Rule 58(1A) of the Maharashtra Value Added

Tax Rules, 2005 (for short, “MVAT Rules”).

14. The Division Bench of the Bombay High Court on examination of rival contentions has, inter alia, held; (a) works contract have numerous variations and it is not possible to accept the contention either as a matter of principle or as a matter of interpretation that a contract for works in the course of which title is transferred to the flat purchaser would cease to be works contract; (b) the provisions of MOFA recognise an interest of the purchaser of the apartment, not only in respect of the apartment which forms the subject matter of the purchase, but also an undivided interest, described as a percentage in the common areas and facilities; (c) the amendment to Section 2(24) clarifies the legislative intent that a transfer of property in goods involved in the execution of works contract including an agreement for building and construction of immovable property would fall within the description of a sale of goods within the meaning of that provision and it brings within the ambit of that expression “transactions of that nature” which are referable to Article

366 (29-A)(b); (d) by amended definition of the expression “sale” in clause (b)(ii) of the explanation to Section 2(24), the transactions which involve works contract have been covered; (e) the amendment in Section 2(24) does not transgress the boundary set out in Article 366(29-A); (f) Rule 58(1A) of the MVAT Rules provides that in the case of construction contracts where the immovable property, land or as the case may be, interest therein is to be conveyed and the property involved in the execution of the construction contract is also transferred, it is the latter component which is brought to tax; the value of the goods at the time of transfer is to be calculated after making the deductions which are specified under sub-rule (1); and

(g) Rule 58(1A) provides for a measure for the tax by excluding the cost of the land.

15. The Division Bench of the Bombay High Court, thus, found no merit in the challenge to the constitutional validity of Section 2(24) of the MVAT Act and



Rule 58(1A) of the MVAT Rules. The trade circulars and the notifications were also found to be legal and consequently writ petitions were dismissed.

16. We have heard learned senior counsel and counsel for the appellants and learned senior counsel for Karnataka and learned Advocate- General and learned senior counsel for Maharashtra at quite some length.

17. Mr. Rohinton F. Nariman, learned senior counsel for L&T led the arguments on behalf of the appellants. His submission is that Raheja Development1 does not lay down correct law. He submits that insertion of clause 29-A (b) in Article

366 following the 61st Law Commission Report is intended to separate the goods component from the labour and services component of a composite works contract.

The amendment does not in any manner undo Gannon Dunkerley-I[3] insofar as that decision defines what a works contract is. In this regard, learned senior counsel extensively referred to the decisions of this Court in Builders’ Association[4] and Bharat Sanchar[5]. It is argued by him that in Raheja Development1 it was incorrectly assumed that the definition of works contract was wide although the definition of works contract in KST Act and Madras General Sales Tax Act which was under consideration in Gannon Dunkerley-I3 was identical.

18. Alternatively, it is argued by Mr. Rohinton F. Nariman that if it is accepted that the definition of ‘works contract’ in KST Act is wide which takes within its fold the contracts that are not commonly understood as works contract then this would be outside Entry 54 List II of the Seventh Schedule of the Constitution for the reason that “works contract” as understood in Gannon Dunkerley-I3 has not in any manner been upset by the constitutional amendment and would have to mean

“works contract” as commonly understood.

19. Criticizing the conclusions drawn in paragraph 20 of the judgment in Raheja

Development1, it is argued by Mr. Rohinton F. Nariman that these conclusions are incorrect for, (a) the well known tests to determine as to whether a particular contract is a “works contract” or “contract of sale” have not been adverted to; (b) the contract is not read as a whole. Its substance and the main object has not been looked at and one phrase is torn out of context without adverting to any other part of the contract and based on this reasoning the contract is said to be a works contract; (c) though it is noticed that construction/development is to be on payment of a price in various installments but does not draw any conclusion from it; (d) it is noticed that developer has a lien on the property but incorrectly states that the lien is because they are not owners. The lien is obviously so that if monies are not recovered from the prospective flat purchasers, the lien can be exercised, showing thereby that the contract is a contract of an agreement to sell immovable property; (e) after noticing that developer can terminate the agreement if any one installment is not paid and can forfeit 10% of the amount that has been paid and can ultimately resell the flat, it is held that the presence of such a clause does not


750 IMPORTANT SUPREME COURT JUDGEMENT mean that the agreement ceases to be a “works contract” without appreciating that such a clause would have no place in a works contract and can only be consistent with the contract for the sale of immovable property inasmuch as termination can take place if the entire consideration for the immovable property is not paid; (f) it is stated that if there is termination but there is no re-sale, there would be no works contract only to that extent which is again wholly incorrect because post termination what happens to a particular flat is of no relevance inasmuch as the prospective flat purchaser goes out of the picture; and (g) the distinction between a flat being constructed and a flat under construction is a distinction without a difference for the reason that the judgment notices that if the agreement is entered into after the flat is already constructed, there would be no ‘sale’ and no ‘works contract’. This is obviously for the reason that the flat has already been developed by the developer using his material and his plan and is sold as such to a purchaser.

20. Mr. Rohinton F. Nariman extensively referred to the decisions of this Court in B.C. Kame[6] and Hindustan Shipyard[7]. With reference to paragraphs 7 to

16, 22 and 24 to 26 in Hindustan Shipyard7, it is submitted that in a somewhat similar fact situation, this Court came to conclusion that construction of various ships for and on behalf of the customer would amount to a ‘sale’ and not to a ‘works contract’.

21. Based on the various clauses of the tripartite agreement, it is argued that the main object of the agreement read as a whole and the substance of the agreement is to sell and convey fraction of the land together with a fully constructed flat only when all installments have been fully paid. The work undertaken is for the joint development of the project as a whole, i.e., work is undertaken by the developer for himself and for the owner. The construction is not carried out for and on behalf of the purchaser, but it is carried out entirely by the owner/developer in order to exploit or get the best price for the land and the structure built thereon from various flat purchasers. The flat is to be sold as a flat and not an aggregate of its component parts. No work is carried out for the purchaser who gets title to the property only after all work is complete. Learned senior counsel argued that the ultimate test would be: if a suit for specific performance is filed by the flat purchaser against the owner/developer, such suit would invariably be for the conveyance of title and not for the construction of a building. Conversely a suit by an owner/ developer against the flat purchaser would be for payment of consideration of a flat/fractional interest in the land. Such suit would never be for payment of work done at the behest of the flat purchaser and payment of consideration therefor. It is, thus, submitted that the judgment in Raheja Development1 does not lay down good law and deserves to be overruled.

22. Mr. K.V. Vishwanathan, learned senior counsel for Maharashtra Chamber of Housing Industries elaborately argued based on the following contentions. First,


IMPORTANT SUPREME COURT JUDGEMENT 751 that to attract Article 366(29-A)(b) there has to be a “works contract” and in the process of executing the works contract if certain transfer of property occurs, such transfer would be deemed to be sale. If there is no works contract, the question of applying Article 366(29-A)(b) would not arise. A distinction is drawn between

“works” and “works contract”. It is contended that an agreement for sale is an agreement to transfer immovable property as an indivisible whole which will result in the execution of a conveyance. There is no element of works contract involved.

Even if for the purpose of complying with the obligations of an agreement for sale, a vendor carries out some works, it is not on account of any works contract. Even if there are some “works” involved, there is no “works contract” between the promoter and purchaser.

23. Secondly, that the applicability of Article 366(29-A) read with Entry 54 of

List II will arise only in matters which are otherwise not covered under the ambit of sale and cannot apply to an agreement for sale of immovable property resulting in a conveyance. He pressed into service (i) test of enforceability (ii) common parlance test (view of the reasonable man) (iii) test of substance of the contract and (iv) assignment test. Insofar as common parlance test and test of substance of the contract are concerned, Mr. K.V. Vishwanathan placed reliance upon Bharat

Sanchar5. As regards assignment test, paragraph 36 of the judgment in Builders’

Association4 was referred to by the learned senior counsel.

24. Thirdly, that amended definition under Article 366(29-A) has not conferred on the States a larger freedom than what they had before the amendment in regard to their power to levy sales tax under Entry 54 of the State List. Paragraph 40 of the Builders’ Association4 is relied upon. It is contended that an agreement to sell entered into between the promoter and purchaser continues to remain an agreement to sell and the provisions of MOFA does not change the nature of such agreement. Reference is made to the decision of this Court in Nahalchand

Laloochand[8].

25. And fourthly, that if State’s submissions are accepted, Article 366 (29-A)

(b) has to be read as “a tax on the transfer of property (whether as goods or in some other form) involving works” which will not only distort the amendment but will render the words “in goods” redundant. Article 366 (29-A)(b) does not provide for such an interpretation. The phrase “in some other form” takes its colour from the preceding words namely, “transfer of property in goods” and “whether as goods”.

The said phrase “in some other form” cannot and would not mean the transfer of an indivisible immovable property as a whole. Reliance is placed on the decision of this

Court in Purshottam Premji[9] to differentiate between a sale and works contract. It is contended that the distinguishing factors that have been laid down in Purshottam

Premji9 which were relied on by the Law Commission should be considered as the only tests to differentiate a works contract and a contract for sale.



26. Dr. Abhishek Manu Singhvi, learned senior counsel appearing for Promoters and Builders Association made brief oral submissions which were followed by detailed written submissions. The principal issue, according to him, is, whether the agreement entered into between a promoter/developer and a flat purchaser, pursuant to the provisions of Section 4 read with Rule 5 and Form V of MOFA can be divided into two parts, (i) an agreement between the promoter/developer and the flat purchaser to construct a flat; and (ii) an agreement between the promoter/ developer and the flat purchaser to eventually sell the flat so constructed and whether the first part of the said agreement can be treated as a works contract whereby the flat purchaser is accorded the status of a principal employer and the promoter/developer acts as a mere contractor for him and constructs the flat for and on behalf of the flat purchaser. While conceding that an integral part of the transaction of sale of a flat is the activity of construction of the said flat but the moot question in his view is whether such activity of construction has the characteristics or elements of works contract. Learned senior counsel highlighted the distinguishing features between “works contract” and “contract for sale of goods” and having regard to that it is submitted that the activity of construction undertaken by the promoter/developer cannot be said to be works contract for the reasons, (i) that developer does not construct at the behest of the flat purchaser as on various occasions the flat is constructed without there being any booking for the said flat; (ii) the main intention of the agreement between the promoter/developer and the flat purchaser is the sale of flat and not to appoint the developer as the contractor of the flat purchaser for the purposes of carrying out the construction of the flat for and on behalf of the flat purchaser; (iii) the flat purchaser does not have any role in conceptualizing the project of construction nor does he have any say in the designing and lay-out of the building to be constructed. The flat purchaser does not have any control over the type and standard of the material to be used in the construction of the building. He does not get any right to monitor or supervise the construction activity; (iv) the ownership in the material used in the construction remains with the promoter/developer and the said ownership passes to the flat purchaser only on the eventual conveyance of the flat; (v) the accretion to the goods happens in the hands of the promoter/developer and not when the flat is conveyed to the flat purchaser; and (vi) the construction linked payment schedule is nothing but a method of payment in installments.

27. It is the submission of Dr. Abhishek Manu Singhvi that Article 366(29-A)(b) by a deeming fiction only deems the transfer of property in goods in execution of a works contract as a sale but the said amendment does not contemplate a deemed transfer of goods which actually does not happen at the time of execution of the contract. The provisions of MOFA do not change the character of the transaction entered into between the promoter/developer and the flat purchaser from that of a pure sale of immovable property to a works contract. Even in the absence of a


IMPORTANT SUPREME COURT JUDGEMENT 753 statute like MOFA, the obligations and restrictions prescribed therein would still be present as part of obligations under the Indian Contract Act/Transfer of Property

Act and its penalties for breaching the same would still be applicable under the penal statutes.

28. While referring to Section 2(24) MVAT Act, it is submitted by the learned senior counsel that a plain reading of amended explanation b(ii) to Section 2(24) of that Act will show that the said provision has not brought within its scope transactions which are not in their substance works contract. The amendment brought in explanation b(ii) to Section 2(24) is merely explanatory in nature. Even after the amendment the transaction in which there is transfer of property in goods has to be works contract. The amendment cannot be interpreted to mean that transfer of property in goods in execution of any agreement even if it is not a works contract has now been included in the definition of sale. Such interpretation will render the provision unconstitutional. Learned senior counsel submits that the manner in which the State Government is expanding scope of Section 2(24) on the basis of the decision of this Court in Raheja Development1, it has rendered the said provision unconstitutional. According to Dr. Abhishek Manu Singhvi, Raheja

Development1 therefore needs to be reconsidered and overruled.

29. As regards constitutional validity of the provisions of Rule 58(1) and 58(1A) of MVAT Rules, it is submitted that these Rules and Rule 58(1-A) of the 2005 Rules include an element of profit earned by a promoter/developer on the sale of a flat.

There are no provisions to take the profit element from arriving at the value of goods. As a result income earned by the promoter/developer from the profit on sale of the flat also gets included in the value of goods and eventually the said income gets taxed. Imposition of such tax on the income of the promoter/developer is beyond the legislative competence of the State Government.

30. Without prejudice to the above arguments, it is firstly submitted that assuming that the activity of construction undertaken by the developer is a works contract then the same would be a works contract only from the stage when the developer enters into a contract with the flat purchaser. Only the value addition made to the goods transferred after the agreement is entered into with the flat purchaser can be made chargeable under MVAT Act. VAT cannot be charged on the entire sale price as described in the agreement entered into between developer and flat purchaser as sought to be done under the composition scheme. Secondly, it is submitted that assuming that the agreement entered into between the developer and the flat purchaser has two components, namely, a works contract and sale of proportionate share in the land then the stamp duty on such transaction should be levied under Article 25 (stamp duty for conveyance) only on the component sale of proportionate share in the land and the stamp duty on the value of construction carried out ought to be charged under Article 63 (stamp duty for works contract).



31. Mr. N. Venkatraman, learned senior counsel for Builders Association while highlighting the background in which clause (29-A) came to be inserted in Article

366 and drawing distinction between a conventional sale and a works contract submits that ‘transfer’ is imminent and indispensable requirement in both but in the case of a conventional sale, property in goods gets transferred as intended by the parties while in a works contract, property in goods get transferred through accretion. Few illustrations have been referred to by him and it is submitted that

‘test of accretion’ which is sine qua non for works contract is not satisfied in the agreements under consideration. L&T II[10] is referred which says, “once the work is assigned by L&T to its sub-contractor, 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 re-transfer whether as goods or in some other form”.

32. Learned senior counsel contends that when ultimately the constructed flat is transferred or sold, it becomes a sale of an immovable property at which point of time the question of transfer on accretion does not arise. The transfer of goods has to take place in the course of the construction of a building before becoming an immovable property though the contract may be indivisible contract for construction of a building in the form of an immovable property. Once it becomes an immovable property, Article 366(29-A)(b) cannot be pressed into service to such a transaction.

He submits that an agreement to sell is not a sale in its conventional sense and, therefore, cannot be a deemed sale also.

33. It is submitted by Mr. N. Venkatraman that Section 2(24) of MVAT Act and Rules 58 and 58(1A) of MVAT Rules seek to redefine the taxable event by moving away from theory of accretion to transfer of immovable property by way of conveyance and that renders these provisions unconstitutional.

34. Mr. Vinod Bobde, learned senior counsel appearing on behalf of Promoters and Builders Association, Nasik argues that after insertion of clause 29-A in

Article 366, the works contract which was an indivisible one has by a legal fiction altered into a contract which is divisible into one for sale of goods and the other for supply of labour. Thus, the goods component is exigible to sales tax. However, the amendment has not enlarged the meaning of “works contract” as commonly understood. With reference to Section 2(24) explanation (b)(ii) of the MVAT Act, learned senior counsel submits that this provision aims at taxing the sale of goods involved in the execution of a works contract. In the case of a building contract on land, the contractor must be carrying out the building activity for consideration which obviously means that he should be receiving consideration from the person who has engaged him as contractor. The provision does not cover an owner or developer of land who is constructing a building for the purpose of ultimately selling the flats therein to purchasers. Such owner or developer does not receive any


IMPORTANT SUPREME COURT JUDGEMENT 755 consideration from anyone for carrying out of the building activity; what he receives is simply the sale price of the flats from the purchasers. According to Mr. Vinod

Bobde, the provisions so read would not transgress Article 366 (29-A) but if it is read as was done in Raheja Development1, it would be unconstitutional.

35. It is argued by Mr. Vinod Bobde that an agreement of sale whether simplicitor or in Form V under the MOFA is not a “works contract”. It only settles terms for the sale of property and the sale ultimately takes place in pursuance thereof unless the contract is terminated. The “works” component and “goods” component are totally absent in the agreement. There is no question of taxing sale of goods in an agreement of sale. The buyer does pay the sales tax on the purchase of goods/ material used in construction of the building. Such goods/materials are purchased from the dealers registered under the Act. What the taxing authorities seek to do by treating an agreement for sale of immovable property, namely, flat to be a “works contract” within the meaning of Section 2(24), explanation (b)(ii) is to again tax the goods used in the construction of the building. This cannot be done because the builder is not building as the contractor for the flat purchaser but for himself, and he cannot possibly transfer such goods to himself.

36. Mr. Vinod Bobde submits that the High Court’s view that the element of sale of immovable property can be there in a works contract is clearly erroneous.

The agreement of sale in Form V under the MOFA is not an agreement simpliciter and the aspect that MOFA creates the right and interest in the flat as a measure for protecting prospective flat purchasers is irrelevant. With reference to Entries

25, 5 and 63 of the Bombay Stamp Act, 1958 which provide for stamp duty on conveyance including an agreement for sale of property, agreement or its record or memorandum of agreement and works contract respectively, it is submitted that

State has been levying stamp duty on agreement of sale under Entry 25 and not under Entry 63 and hence the State does not consider an agreement for sale to be a works contract.

37. Mr. Shivaji M. Jadhav learned counsel appearing for one of the appellants has broadly followed the above submissions. He submits that expression “in some other form” in Article 366(29-A)(b) does not mean immovable property but some other form of goods being movable property. According to him, artificial rules or other enactments like MOFA, Bombay Stamp Act would not be relevant at all in ascertaining whether transfer of property in goods has taken place in the execution of works contract. Model agreement Form V in MOFA does not indicate that construction of a flat by the developer/promoter is being carried on for and on behalf of the purchaser of the flat. Rather it supports the view that buyer is interested in what is constructed as a flat and not the building material. MOFA ensures that the theory of accretion is not applicable and the flat purchaser is not left at the mercy of the builder.



38. Learned counsel also submits that if Section 2(24) explanation b(ii) of the

MVAT Act is read in the manner suggested by this Court in Raheja Development1, such provision is rendered unconstitutional. As regards Rule 58(1) and Rule 58 (1-

A), the submission of the learned counsel is that these Rules suffer from various infirmities and are unable to carry out the objectives of MVAT Act.

39. In the counter arguments advanced on behalf of the two States – Karnataka and Maharashtra - Raheja Development1 has been stoutly defended. Mr. K.N.

Bhat, learned senior counsel for Karnataka submits that view taken in Raheja

Development1 is correct and needs no reconsideration – both on merits as well as on the basis of binding precedents on the principles governing reconsideration of an earlier decision. He submits that Article 366(29-A) uses the phraseology employed in Entry 54 of List II that reads, “taxes on sale or purchase of goods ….”

For the purpose of Entry 54 List II, “taxes on the sale or purchase of goods” includes

“tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of works contract”. Transfer of property in goods is the essence of definition of ‘sale’ in Section 4 of the Sale of Goods Act. Article 366(29-

A)(b) can be rephrased as “a tax on the sale of goods involved in the execution of a works contract” and in any case by the deeming fiction incorporated in the above provision, it shall be deemed to be a sale of those goods by the person making the transfer and a purchase by a person to whom such transfer is made. The taxable event is the deemed sale of goods involved in the execution of works contract.

Article 366 (29- A) has been inserted to remedy the situation arising from the decision in the Gannon Dunkerley-I3 where attempt to levy sales tax on the sale of goods involved in the execution of works contract was held to be unconstitutional.

This was on the basis that a works contract could not be dissected into contract for “works and services” and contract for “sale of goods”. Mr. K.N. Bhat submits, relying upon para 41 in Builders’ Association4, that definition of ‘works contract’

KST Act does not go beyond what is contemplated in the Constitution.

40. Mr. K.N. Bhat’s submission is that in order to sustain levy of sales tax on the goods deemed to have been sold in the execution of works contract the following conditions are to be met, (a) there must be works contract, i.e., any contract to do construction, fabrication and the like; (b) the goods deemed to have been sold should have been involved in the execution of a works contract; and (c) the property in those goods must be transferred to a third party either as goods or in some other form. The taxable event is deemed sale. It is irrelevant whether transferee was a party to the works contract. All that is required to be enquired into is as to whether the goods were involved in the execution of the works. By

Forty- sixth Constitutional Amendment, the effect of Gannon Dunkerley-I3 has been neutralized. Now that the works contract which was indivisible according to Gannon Dunkerley-I3 are divisible and the goods involved in the execution of works contract that were then not taxable are now taxable.



41. The whole idea by insertion of clause 29-A(b) in Article 366, Mr. K.N. Bhat submits, is to make the materials used in the building activity liable to sales tax.

Any other interpretation will be contrary to the two decisions of the Constitution

Benches in Builders’ Association4 and Gannon Dunkerley-II[11]. So construed works contract simply means a construction activity. If the building is retained by the builder himself, there is no deemed sale.

42. Mr.K.N. Bhat, however, submits that the statement of law in Raheja

Development1 that when a completed building is sold, there is no works contract and, therefore, no liability to tax, may not be correct statement of law. If the building was intended for sale and is in fact sold, tax is attracted to the deemed sale. Even in such cases, goods used in the construction are deemed to have been sold by the builder (dealer) to the purchaser.

43. It also urged by Mr. K.N. Bhat that in the referral order, the Bench has entertained certain doubts in respect of the decision of this Court in Raheja

Development1 . However, such doubts that a better view was possible is not good enough to reconsider the decision. Relying upon decisions of this Court in Gannon

Dunkerley-II11 and the earlier decision in Keshav Mills[12], he submits that while recommending reconsideration of an earlier decision, the Bench must first come to the conclusion that the earlier decision was clearly wrong for the reasons stated.

According to him, within the settled standards, recommendation to consider Raheja

Development1 does not fall. Moreover, since Raheja Development1 in May, 2005 almost all States have modified their laws in line with Raheja Development1 and the need for change in a settled practice is not made out.

44. Mr. Darius Khambata, learned Advocate General and Mr. Shekhar

Naphade, learned senior counsel advanced arguments on behalf of Maharashtra. It is argued that after insertion of Article 366 (29- A)(b) in the Constitution, the transfer of movable property in a works contract is deemed to be sale even though it is not a sale as per the Sale of Goods Act. The works contract is now divisible. Article

366(29-A)(b) clarifies that the transfer of the goods may be as goods or in some other form. Therefore, the goods may remain as goods or cease to be goods, i.e., they may merge into immovable property. In this regard, extensive reference has been made to Builders’ Association4 and it is submitted that the same submissions made by the States which were rejected by this Court in Builders’ Association4 are now sought to be raised almost on similar lines by the appellants which have been rightly rejected by the High Court.

45. Learned Advocate General and learned senior counsel for Maharashtra submit that the term “works contract” is nothing but a contract in which one of the parties is obliged to undertake or to execute works. The expression “works” is extremely wide and can either mean the act of bestowing labour or that on which the labour is bestowed. In this regard, the two decisions of this Court (i) Dewan



Joynal Abedin[13] and (ii) Kartar Singh[14] have been referred. It is submitted that the term “works” would include the final product and, therefore, a works contract cannot be confined to a contract to provide labour and services but is a contract for undertaking or for bringing into existence some “works”. Nothing in Article 366(29-

A)(b) limits the term “works contract”. Although, works contract usually have only two elements, i.e., labour and services as well as sale of goods but the addition of few other elements does not denude such contract being works contract. It is possible that there could be a works contract coupled with the sale of immovable property. The transaction does not cease to be a works contract merely because it may include other obligations.

46. Learned Advocate General argues that even in the case of a works contract, the ownership of the goods need not pass only by way of accretion or accession to the owner of the immovable property to which they are affixed or upon which the building is built; property can pass under the terms of a contract or by statute. He submits that the tests laid down in judgments prior to Forty-sixth

Constitutional Amendment for determining whether a contract is a works contract or a sale of goods are no longer applicable. There is no question of ascertaining the dominant intention of the contract now since the sale of goods element is a deemed sale under Article 366(29-A)(b) and can be taxed separately. Hindustan

Shipyard7 was distinguished and it was submitted that in Associated Cement[15] a three- Judge Bench of this Court has overruled the decision in Rainbow Colour

Lab[16] and it has been expressly noted that cases such as Hindustan Shipyard7 relate to the situation prior to Forty-sixth Amendment where the court had no jurisdiction to bifurcate a works contract and impose sales tax on the transfer of property in goods involved in the execution of the contract. Reference was also made to a decision of this Court in P.N.C. Construction[17]. According to learned

Advocate General, it has now become possible for the States to levy sales tax on the value of the goods involved in the works contract in the same way in which the sales tax was leviable on the price of the goods supplied in a building contract. This is where the concept of “value addition” comes in. It is on account of Forty- sixth Amendment to the

Constitution that the State Government is empowered to levy sales tax on the contract value which earlier was not possible.

47. Mr. Darius Khambata submits that a composite contract comprising both a works contract and a transfer of immovable property does not denude it of its character as a works contract. According to him, Article 366(29-A)(b) provides for a situation where the goods are transferred in the form of immovable property. He referred to an Australian case, M.R. Hornibrook[18] in this regard which has been approved by this Court in Builders’ Association4.

48. Learned Advocate General has also pressed into service the aspect theory


IMPORTANT SUPREME COURT JUDGEMENT 759 of legislation. His submission is that different aspects of the same transaction can involve more than one taxable event. There is nothing to prevent the taxation of different aspects of the same transaction as separate taxable events. This would not constitute a splitting of an indivisible contract. Reference is made to a decision of this Court in

Federation of Hotel & Restaurant[19]. The submission of the learned

Advocate General is that transfer of immovable property cannot be taxed as a sale of goods but there is no constitutional bar to tax only the sale of goods element and separately tax the transfer of immovable property. Taxing the sale of goods element in a works contract under Article 366 (29-A)(b) read with Entry 54 List II is permissible, provided the tax is directed to the value of the goods and does not purport to tax the transfer of immovable property.

49. Stoutly defending the impugned judgment of the Bombay High Court, learned Advocate General submits that Section 2(24) explanation b(ii) of MVAT

Act has been rightly held to be constitutional as the provisions in the MVAT Act offer diverse options for valuation of the sale of goods element in a works contract.

Each of these options is consistent with the methods approved of by this Court in

Gannon Dunkerley-II11.

50. As regards challenge to the constitutional validity of Rule 58A and Rule

58(1A), it is submitted by learned Advocate General that these provisions are consistent with the principles laid down in Gannon Dunkerley- II11. The measure of tax is not determinative of its essential character or of the competence of the legislature. He sought to dispel the impression that Rule 58(1A) may result in double taxation. Distinguishing the decision of this Court in Larsen & Toubro-II[20], learned Advocate General submits that the observations made in para 19 does not apply to Maharashtra inasmuch as Section 45(4) of the MVAT Act ensures that it is either the builder or the sub-contractor who pays the tax (being treated as one and jointly/severally liable). In any case all claims of alleged double taxation will be determined in the process of assessment of each individual case.

51. Highlighting the MOFA agreement in prescribed Form V, learned Advocate

General argues that the clauses therein indicate that it comprises of a works contract along with the agreement for sale. There is no reason to deny the applicability of

Article 366(29-A) to such a works contract. His argument is that sale of goods element in the works contract contained in a MOFA agreement is taxable under

Section 2(24) explanation b(ii) of the MVAT Act. As long as there is an obligation to construct under the agreement between the promoter and the flat purchaser (in the case of Maharashtra being an agreement under the MOFA) the deemed sale of goods involved in the execution of such a works contract can be taxed even after incorporation of the goods in the works and when the property passes as between the promoter and the flat purchaser. It is submitted that what is at issue before


760 IMPORTANT SUPREME COURT JUDGEMENT this Court is not the determination of when the taxable event takes place but the exigibility to tax of a deemed sale of goods in a composite contract.

52. Prior to Forty-sixth Amendment in the Constitution, levy of sales tax on the sale of goods involved in the execution of the works contract was held to be unconstitutional in Gannon Dunkerley-I3. That was a case where the assessee

(Gannon Dunkerley) was carrying on business as engineers and contractors. Its business consisted mainly of execution of contracts for construction of buildings, bridges, dams, roads and structural contracts of all kinds. During the assessment year under consideration, the return filed by the assessee showed as many as

47 contracts most of which were building contracts which were executed by it.

From the total of the amount which the assessee received in respect of sanitary contracts and other contracts 20 per cent and 30 per cent respectively were deducted for labour and the balance was taken as the turnover of the assessee for the assessment year in question. Sales tax was levied on the said balance treating it as taxable turnover under the Madras General Sales Tax Act, 1939.

Assessee questioned the levy of sales tax on the ground that there was no sale of goods as understood in India and, therefore, no sales tax could be levied on any portion of the amount which was received by the assessee from the persons for whose benefit it had constructed buildings. The Madras High Court concluded that the transactions in question were not contracts for sale of goods as defined under the provisions of the Sale of Goods Act, 1930 which was in force on the date on which the Constitution came into force and, therefore, the assessee was not liable to pay sales tax on the amounts received by it from the persons for whom it had constructed buildings during the year of assessment. It is from this judgment that the matter reached this Court. The Constitution Bench of this Court held that in a building contract where the agreement between the parties was that the contractor should construct the building according to the specifications contained in the agreement and in consideration received payment as provided therein, there was neither a contract to sell the materials used in the construction nor the property passed therein as movables. It was held that in a building contract which was one (entire and indivisible) there was no sale of goods and it was not within the competence of the Provincial State Legislature to impose tax on the supply of the materials used in such a contract treating it as a sale. The Constitution Bench said, “……..when the work to be executed is, as in the present case, a house, the construction imbedded on the land becomes an accretion to it on the principle quicquid plantatur solo, solo cedit, and it vests in the other party not as a result of the contract but as the owner of the land. Vide Hudson on Building Contracts,

7th Edn., p. 386………” It was further stated, “…..that exception does not apply to buildings which are constructed in execution of a works contract, and the law with reference to them is that the title to the same passes to the owner of the land as an accretion thereto. Accordingly, there can be no question of title to the materials passing as movables in favour of the other party to the contract…….”



53. In Gannon Dunkerley-I3, this Court held that in a building contract which was one, entirely indivisible, there was no sale of goods and it was not within the competence of the provincial State legislature to impose tax on the supply of materials used in such a contract treating it as a sale. The above statement was founded on the premise that the works contract was a composite contract which is inseparable and indivisible. Entry 48 of List II of Schedule Seven of the

Government of India Act, 1935 was under consideration before this Court in Gannon

Dunkerley-I3. It is observed that the expression “sale of goods” in that entry has the same meaning as the said expression had in the Sale of Goods Act, 1930. In other words, the essential ingredients of sale of goods are (i) an agreement to sell movables for a price and (ii) property passing therein pursuant to that agreement.

54. The problems connected with powers of States to levy tax, inter alia, on goods involved in execution of works contract following Gannon Dunkerley-I3 was elaborately examined by the Law Commission of India. In its 61st Report,

Chapter 1A, the Law Commission specifically examined the taxability of works contract. The Law Commission noted the essential nature and features of the building contracts and the difference between contract of works and contract for sale. It examined the question whether the power to tax indivisible contracts of works should be conferred on the States. The Law Commission suggested three alternatives (a) amendment in the State List, Entry 54, or (b) adding a fresh entry in the State List, or (c) insertion in Article 366 a wide definition of “sale” so as to include works contract. It preferred the last one, as, in its opinion, this would avoid multiple amendments.

55. Having regard to the above recommendation of the Law Commission, the

Constitution Bill No.52 of 1981 was introduced in the Parliament.*

56. The Parliament then enacted the Constitution (Forty-sixth Amendment)

Act, 1982 which received the assent of the President on 02.02.1983. Accordingly, clause 29-A was inserted in Article 366 of the Constitution which is set out as below.**

57. Following the above amendment in the Constitution, the sales tax legislations in various States were amended and provisions were made for imposition of sales tax in relation to works contract. The constitutional validity of the

Forty-sixth Amendment by which the legislatures of the States were empowered to levy sales tax on certain transactions described in clauses (a) to (f) of clause 29-A of Article 366 of the Constitution as well as the amendments made in the State legislations were challenged in Builders’ Association4. The Constitution Bench of this Court upheld the constitutionality of the Forty-sixth Amendment. The Court observed that the object of the new definition introduced in clause 29-A of Article

366 of the Constitution was to enlarge the scope of the expression “tax of sale or purchase of goods” wherever it occurs in the Constitution so that it may include


762 IMPORTANT SUPREME COURT JUDGEMENT within its scope any transfer, delivery or supply of goods that may take place under any of the transactions referred to in sub-clauses (a) to (f). The Constitution

Bench*** explained that clause 29-A refers to 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. The emphasis is on the transfer of property in goods – whether as goods or in some other form. A transfer of property in goods under sub-clause (b) of clause 29-A is deemed to be a sale of the goods involved in the execution of a works contract by the person making the transfer and a purchase of those goods by a person to whom such transfer was made.

58. Article 286 puts certain restrictions upon the power of the State to enact laws concerning imposition of sales tax. It lays down that no law of a State shall impose or authorise the imposition of a tax on the sale or purchase of goods where such sale or purchase takes place (a) outside the State, or (b) in the course of import of the goods into, or export of the goods out of the territory of India. Subclause (2) of Article 286 enables the Parliament to enact law formulating principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1). As regards inter-state trade and commerce, clause (3) puts two restrictions. It provides that any law of a State shall, insofar as it imposes, or authorises the imposition of (a) a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-state trade or commerce;

(b) a tax on the sale or purchase of goods, being a tax of the nature referred to in sub-clause (b), sub-clause (c) and sub-clause (d) of clause 29-A of Article

366, be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of tax as the Parliament may by law specify. Clause (3) was substituted by Constitution Forty-sixth Amendment Act, 1982 with effect from

02.02.1983.

59. Clause 29-A was inserted in Article 366 by the Forty-sixth Amendment with effect from 02.02.1983. Entry 54 of List II (State List) enables the State to make laws relating to taxes on the sale or purchase of goods other than the newspapers, subject to the provisions of Entry 92-A of List I. Entry 63 of List II enables the States to provide rates of stamp duty in respect of documents other than those specified in provisions of List I with regard to the rates of stamp duty. Entry 92-A of List I deals with taxes on the sale or purchase of goods other than newspapers where such sale or purchase takes place in the course of inter-state trade or commerce. Entry

6 of List III deals with the subjects, “transfer of property other than the agricultural land; registration of deeds and documents”.

60. It is important to ascertain the meaning of sub-clause (b) of clause 29-A of Article 366 of the Constitution. As the very title of Article 366 shows, it is the definition clause. It starts by saying that in the Constitution unless the context otherwise requires the expressions defined in that article shall have the meanings


IMPORTANT SUPREME COURT JUDGEMENT 763 respectively assigned to them in the article. The definition of expression “tax on sale or purchase of the goods” is contained in clause (29-A). If the first part of clause

29-A is read with sub-clause (b) along with latter part of this clause, it reads like this: tax on the sale or purchaser of the goods” includes 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. The definition of “goods” in clause 12 is inclusive. It includes all materials, commodities and articles. The expression, ‘goods’ has a broader meaning than merchandise. Chattels or movables are goods within the meaning of clause 12. Sub-clause (b) refers to transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract. The expression “in some other form” in the bracket is of utmost significance as by this expression the ordinary understanding of the term ‘goods’ has been enlarged by bringing within its fold goods in a form other than goods. Goods in some other form would thus mean goods which have ceased to be chattels or movables or merchandise and become attached or embedded to earth. In other words, goods which have by incorporation become part of immovable property are deemed as goods. The definition of ‘tax on the sale or purchase of goods’ includes a tax on the transfer or property in the goods as goods or which have lost its form as goods and have acquired some other form involved in the execution of a works contract.

61. Viewed thus, a transfer of property in goods under clause 29-A(b) of Article

366 is deemed to be a sale of the goods involved in the execution of a works contract by the person making the transfer and the purchase of those goods by the person to whom such transfer is made.

62. The States have now been conferred with the power to tax indivisible contracts of works. This has been done by enlarging the scope of “tax on sale or purchase of goods” wherever it occurs in the Constitution. Accordingly, the expression “tax on the sale or purchase of goods” in Entry 54 of List II of Seventh

Schedule when read with the definition clause 29-A, includes a tax on the transfer of property in goods whether as goods or in the form other than goods involved in the execution of works contract. The taxable event is deemed sale.

63. Gannon Dunkerley-I3 and few other decisions following Gannon

Dunkerley-I3 wherein the expression “sale” was given restricted meaning by adopting the definition of the word “sale” contained in the Sale of Goods Act has been undone by the Forty-sixth Constitutional Amendment so as to include works contract. The meaning of sub-clause (b) of clause 29-A of Article 366 of the

Constitution also stands settled by the Constitution Bench of this Court in Builders’

Association4. As a result of clause 29-A of Article 366, tax on the sale or purchase


764 IMPORTANT SUPREME COURT JUDGEMENT of goods may include a tax on the transfer in goods as goods or in a form other than goods involved in the execution of the works contract. It is open to the States to divide the works contract into two separate contracts by legal fiction: (i) contract for sale of goods involved in the works contract and (ii) for supply of labour and service. By the Forty-sixth Amendment, States have been empowered to bifurcate the contract and to levy sales tax on the value of the material in the execution of the works contract.

64. Whether contract involved a dominant intention to transfer the property in goods, in our view, is not at all material. It is not necessary to ascertain what is the dominant intention of the contract. Even if the dominant intention of the contract is not to transfer the property in goods and rather it is the rendering of service or the ultimate transaction is transfer of immovable property, then also it is open to the States to levy sales tax on the materials used in such contract if it otherwise has elements of works contract. The view taken by a two-Judge Bench of this

Court in Rainbow Colour Lab16 that the division of the contract after Forty-sixth

Amendment can be made only if the works contract involved a dominant intention to transfer the property in goods and not in contracts where the transfer of property takes place as an incident of contract of service is no longer good law, Rainbow

Colour Lab16 has been expressly overruled by a three-Judge Bench in Associated

Cement15.

65. Although, in Bharat Sanchar5, the Court was concerned with sub- clause

(d) of clause 29-A of Article 366 but while dealing with the question as to whether the nature of transaction by which mobile phone connections are enjoyed is a sale or service or both, the three-Judge Bench did consider the scope of definition in clause 29-A of Article 366. With reference to sub-clause (b) it said: “……. subclause (b) covers cases relating to works contract. This was the particular fact situation which the Court was faced with in Gannon Dunkerley-I3 and which the

Court had held was not a sale. The effect in law of a transfer of property in goods involved in the execution of the works contract was by this amendment deemed to be a sale. To that extent the decision in Gannon Dunkerley-I3 was directly overcome”. It then went on to say that all the sub-clauses of Article 366(29-A) serve to bring transactions where essential ingredients of a ‘sale’ as defined in the

Sale of Goods Act, 1930 are absent, within the ambit of purchase or sale for the purposes of levy of sales tax.

66. It then clarified that Gannon Dunkerley-I3 survived the Forty- sixth

Constitutional Amendment in two respects. First, with regard to the definition of

“sale” for the purposes of the Constitution in general and for the purposes of Entry

54 of List II in particular except to the extent that the clauses in Article 366(29-A) operate and second, the dominant nature test would be confined to a composite transaction not covered by Article 366 (29-A). In other words, in Bharat Sanchar5,


IMPORTANT SUPREME COURT JUDGEMENT 765 this Court reiterated what was stated by this Court in Associated Cement15 that dominant nature test has no application to a composite transaction covered by the clauses of Article 366(29-A). Leaving no ambiguity, it said that after the Forty-sixth

Amendment, the sale element of those contracts which are covered by six subclauses of clause 29-A of Article 366 are separable and may be subjected to sales tax by the States under Entry 54 of List II and there is no question of the dominant nature test applying.

67. In view of the statement of law in Associated Cement15 and Bharat

Sanchar5, the argument advanced on behalf of the appellants that dominant nature test must be applied to find out the true nature of transaction as to whether there is a contract for sale of goods or the contract of service in a composite transaction covered by the clauses of Article 366 (29-A) has no merit and the same is rejected.

68. In Gannon Dunkerley-II11, this Court, inter alia, established the five following propositions : (i) as a result of Forty-sixth Amendment the contract which was single and indivisible has been altered by a legal fiction into a contract which is divisible into one for sale of goods and the other for supply of labour and service and as a result of such contract which was single and indivisible has been brought on par with a contract containing two separate agreements; (ii) if the legal fiction introduced by Article 366 (29-A)(b) is carried to its logical end, it follows that even in a single and indivisible works contract there is a deemed sale of the goods which are involved in the execution of a works contract. Such a deemed sale has all the incidents of the sale of goods involved in the execution of a works contract where the contract is divisible into one for sale of goods and the other for supply of labour and services; (iii) in view of sub-clause (b) of clause 29-A of

Article 366, the State legislatures are competent to impose tax on the transfer of property in goods involved in the execution of works contract. Under Article

286(3)(b), Parliament has been empowered to make a law specifying restrictions and conditions in regard to the system of levy, rates or incidents of such tax. This does not mean that the legislative power of the State cannot be exercised till the enactment of the law under Article 286(3)(b) by the Parliament. It only means that in the event of law having been made by Parliament under Article 286(3)(b), the exercise of the legislative power of the State under Entry 54 in List II to impose tax of the nature referred to in sub-clauses (b), (c) and (d) of clause (29-A) of Article

366 would be subject to restrictions and conditions in regard to the system of levy, rates and other incidents of tax contained in the said law; (iv) while enacting law imposing a tax on sale or purchase of goods under Entry 54 of the State List read with Article 366 (29-A)(b), it is permissible for the State legislature to make a law imposing tax on such a deemed sale which constitutes a sale in the course of the inter-state trade or commerce under Section 3 of the Central Sales Tax Act or outside under Section 4 of the Central Sales Tax Act or sale in the course of import or export under Section 5 of the Central Sales Tax Act; and (v) measure for the


766 IMPORTANT SUPREME COURT JUDGEMENT levy of tax contemplated by Article 366 (29-A)(b) is the value of the goods involved in the execution of a works contract. Though the tax is imposed on the transfer of property in goods involved in the execution of a works contract, the measure for levy of such imposition is the value of the goods involved in the execution of a works contract. Since, 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 value of the goods which can constitute the measure for the levy of the tax has to be the value of the goods at the time of incorporation of the goods in works and not the cost of acquisition of the goods by the contractor.

69. In Gannon Dunkerley-II11, sub-section (3) of Section 5 of the Rajasthan

Sales Tax Act and Rule 29(2)(1) of the Rajasthan Sales Tax Rules were declared as unconstitutional and void. It was so declared because the Court found that

Section 5(3) transgressed the limits of the legislative power conferred on the State legislature under Entry 54 of the State List. However, insofar as legal position after

Forty-sixth Amendment is concerned, Gannon Dunkerley-II11 holds unambiguously that the States have now legislative power to impose tax on transfer of property in goods as goods or in some other form in the execution of works contract.

70. The Forty-sixth Amendment leaves no manner of doubt that the States have power to bifurcate the contract and levy sales tax on the value of the material involved in the execution of the works contract. The States are now empowered to levy sales tax on the material used in such contract. In other words, clause 29-A of

Article 366 empowers the States to levy tax on the deemed sale.

71. Now, if by legal fiction provided in clause (29-A)(b) of Article 366, the works contract becomes separable and divisible, one for the materials and the other for services and for the work done, whatever has been said by this Court in Gannon

Dunkerley-I3 with regard to the definition of works contract in Section 2(i) of the

Madras General Sales Tax Act pales into insignificance insofar as ambit and scope of the term “works contract” within the meaning of Article 366(29-A) is concerned.

To say that insertion of clause (29-A) in Article 366 has not undone Gannon

Dunkerley-I3 in any manner, in our view, is not correct. The narrow meaning given to the term “works contract” in Gannon Dunkerley-I3 now no longer survives.

72. There is no doubt that to attract Article 366(29-A)(b) there has to be a works contract but then what is its meaning. The term “works contract” needs to be understood in a manner that the Parliament had in its view at the time of Forty-sixth

Amendment and which is more appropriate to Article 366(29-A)(b).

73. The ordinary dictionary meaning of the word “work” means a structure or apparatus of some kind; architecture or engineering structure, a building edifice. When it is used in the plural, i.e., as works, it means architectural or engineering operations, a fortified building, a defensive structure, fortification or


IMPORTANT SUPREME COURT JUDGEMENT 767 any of the several parts of such structures. In Webster Comprehensive Dictionary,

International Edition the term “work” is stated to be, ……… (2) that upon which labor is expended; an undertaking task. (3) that which is produced by or as by labor, specifically, an engineering structure;……...... In the same dictionary, the term “works” is stated as a manufacturing establishment including buildings and equipment.

74. In Radha Raman[21], Allahabad High Court stated (although in the context of Section 40 of the Land Acquisition Act, 1894) that the “work” has a very wide meaning. It is really used in two senses of bestowing labour and that upon which labour has been bestowed. When used in plural the word certainly means some outstanding or important result of the labour that has been bestowed and large industrial and scientific establishments are called “works”.

75. Hudson’s ‘Building Engineering Contracts’, Eleventh edition, Volume

1, for the purposes of that book, starts by saying that a building or engineering contract may be defined as an agreement under which a person (called builder or contractor) undertakes for reward to carry out for another (building owner or employer), works of building or civil engineering character. It continues to say that in the typical case, the work will be carried out upon the land of the employer or building owner, though in some special cases obligations to build may arise by contract where this is not so, for example, under building leases and contracts for the sale of land with a house in the course of erection upon it. The above statement by Hudson indicates that in a typical case work (structure, building etc.) will be carried out upon the land of the employer or building owner though in some special cases an obligation to build may arise by contract where this is not so. Hudson gives an example of building leases and contracts for the sale of land with a house in the course of erection upon it.

76. In our opinion, the term ‘works contract’ in Article 366(29- A)(b) is amply wide and cannot be confined to a particular understanding of the term or to a particular form. The term encompasses a wide range and many varieties of contract. The Parliament had such wide meaning of “works contract” in its view at the time of Forty-sixth Amendment. The object of insertion of clause 29-A in Article

366 was to enlarge the scope of the expression “tax of sale or purchase of goods” and overcome Gannon Dunkerley- I3. Seen thus, even if in a contract, besides the obligations of supply of goods and materials and performance of labour and services, some additional obligations are imposed, such contract does not cease to be works contract. The additional obligations in the contract would not alter the nature of contract so long as the contract provides for a contract for works and satisfies the primary description of works contract. Once the characteristics or elements of works contract are satisfied in a contract then irrespective of additional obligations, such contract would be covered by the term ‘works contract’. Nothing


768 IMPORTANT SUPREME COURT JUDGEMENT in Article 366(29-A)(b) limits the term “works contract” to contract for labour and service only. Learned Advocate General for Maharashtra was right in his submission that the term “works contract” cannot be confined to a contract to provide labour and services but is a contract for undertaking or bringing into existence some

“works”. We are also in agreement with the submission of Mr. K.N. Bhat that the term “works contract” in Article 366(29-A)(b) takes within its fold all genre of works contract and is not restricted to one specie of contract to provide for labour and services above. The Parliament had all genre of works contract in view when clause 29-A was inserted in Article 366.

77. The difference between a contract for work (or service) and a contract for sale (of goods) has come up for consideration before this Court on more than one occasion. Before we consider some of the decisions of this Court in this regard, it is of interest to refer to two old decisions of English courts. In Lee[22], it was laid down that if a contract would result in the transaction of property in goods from one party to another then it must be a contract of sale.

78. However, the statement of law in Lee21 did not find favour in Robinson[23] where it was held that if the substance of the contract required skill and labour for the production of the articles then it would not make any difference that there would pass some materials in addition to the skill.

79. In Chandra Bhan Gosain[24], this Court exposited that for finding out whether a contract is one of work done and materials found or one for sale of goods depends on its essence. If not of its essence that a chattel should be produced and transferred as a chattel, then it may be a contract for work done and materials found and not a contract for sale of goods.

80. In Purshottam Premji9, the difference between a contract for work and a contract for sale was explained like this: The primary difference between a contract for work or service and a contract for sale of goods is that in the former there is in the person performing work or rendering service no property in the thing produced as a whole notwithstanding that a part or even the whole of the materials used by him may have been its property. In a case of contract for sale, the thing produced as a whole has individual existence as the sole property of the party who produced it at some time before delivery and the property therein passes only under the contract relating thereto to other party for price. Mere transfer of property in goods used in the performance of the contract is not sufficient; to constitute a sale there must be an agreement express or implied relating to the sale of goods and completion of the agreement by passing of title in the very goods contracted to be sold. Ultimately the true effect of an accretion made pursuant to a contract has to be judged, not by an artificial rule that the accretion may be presumed to have become by virtue of affixing to a chattel of part of that chattel but from the intention of the parties to the contract.



81. The factors highlighted in Purshottam Premji9 which distinguish a contract for work from a contract for sale are relevant but not exhaustive. It is not correct to say that these factors should be considered as the only factors to differentiate a works contract and a contract for sale. In our view, there are not and there cannot be absolute tests to distinguish a sale and works contract.

82. This Court in Associated Hotels[25], stated that the determination as to whether the contract involved in a transaction constitutes a contract of sale or a contract of work or service depends in each case upon its facts and circumstances.

Mere passing of property in article or commodity during the course of the performance of the transaction does not render it a transaction of sale. For even in a contract purely of work or service, it is possible that articles may have to be used by the person executing the work and property in such cases articles or materials where passed to the other party. That would not necessarily convert the contract into one of sale of those materials. It is stated in Associated Hotels25 that in every case the Court will have to find out what is the primary object of the transaction and the intention of the parties while entering upon it. It has been clarified that in some cases it may be that even while entering into a contract of work or even service, parties might enter into separate agreements, one of work and service and the other of sale and purchase of materials to be used in the course of executing the work or performing the service. But, then in such cases the transaction will not be one and indivisible but will fall into the two separate agreements one of work or service and the other of sale.

83. Halsbury’s Laws of England, Third Edition, Vol. 41, para 603, while distinguishing a contract of sale from a contract for work and labour, has highlighted the test thus: whether or not the work and labour bestowed end in anything that can properly become the subject of sale; neither the ownership of materials, nor the value of the skill and labour as compared with the value of the materials, is conclusive, although such matters may be taken into consideration in determining, in the circumstances of a particular case, whether the contract is in substance one for work and labour or one for the sale of a chattel.

84. In B.C. Kame6, the Court following Associated Hotels24 observed that determination of the question whether a contract is a contract for ‘work and labour’ or a contract for ‘sale’ was not free from difficulty, particularly, when the contract is a composite one. Having said that the Court applied the test stated in Halsbury’s

Laws of England.

85. In Hindustan Aeronautics[26], the Court noted the difference between contract for service and contract for sale of goods in these words:

“13. It is well settled that the difference between contract of service and contract for sale of goods, is, that in the former, there is in the person performing work or rendering service no property in the things produced as a


770 IMPORTANT SUPREME COURT JUDGEMENT whole notwithstanding that a part or even the whole of materials used by him had been his property. In the case of a contract for sale, the thing produced as a whole has individual existence as the sole property of the party who produced it some time before delivery and the property therein passed only under the contract relating thereto to the other party for price. It is necessary, therefore, in every case for the courts to find out whether in essence there was any agreement to work for a stipulated consideration…………”

86. The Court went on to say further in Hindustan Aeronautics25 as follows;

“18. It cannot be said as a general proposition that in every case of works contract, there is necessarily implied the sale of the component parts which go to make up the repair. That question would naturally depend upon the facts and circumstances of each case. Mere passing of property in an article or commodity during the course of performance of the transaction in question does not render the transaction to be transaction of sale. Even in a contract purely of works or service, it is possible that articles may have to be used by the person executing the work, and property in such articles or materials may pass to the other party. That would not necessarily convert the contract into one of sale of those materials……”

87. In Kone Elevators[27], the Court again highlighted the tests to distinguish a works contract and a contract for sale of goods. The Court said;

“5. It can be treated as well settled that there is no standard formula by which one can distinguish a “contract for sale” from a “works contract”.

The question is largely one of fact depending upon the terms of the contract including the nature of the obligations to be discharged thereunder and the surrounding circumstances. If the intention is to transfer for a price a chattel in which the transferee had no previous property, then the contract is a contract for sale. Ultimately, the true effect of an accretion made pursuant to a contract has to be judged not by artificial rules but from the intention of the parties to the contract. In a “contract of sale”, the main object is the transfer of property and delivery of possession of the property, whereas the main object in a

“contract for work” is not the transfer of the property but it is one for work and labour. Another test often to be applied is: when and how the property of the dealer in such a transaction passes to the customer: is it by transfer at the time of delivery of the finished article as a chattel or by accession during the procession of work on fusion to the movable property of the customer? If it is the former, it is a “sale”; if it is the latter, it is a “works contract”. Therefore, in judging whether the contract is for a “sale” or for “work and labour”, the essence of the contract or the reality of the transaction as a whole has to be taken into consideration. The predominant object of the contract, the circumstances of the case and the custom of the trade provide a guide in deciding whether


IMPORTANT SUPREME COURT JUDGEMENT 771 transaction is a “sale” or a “works contract”. Essentially, the question is of interpretation of the “contract”. It is settled law that the substance and not the form of the contract is material in determining the nature of transaction.

No definite rule can be formulated to determine the question as to whether a particular given contract is a contract for sale of goods or is a works contract.

Ultimately, the terms of a given contract would be determinative of the nature of the transaction, whether it is a “sale” or a “works contract”. Therefore, this question has to be ascertained on facts of each case, on proper construction of terms and conditions of the contract between the parties.”

88. In Hindustan Shipyard7, this Court stated that it was difficult to lay down an absolute rule to distinguish a contract for sale and a contract for labour. The question under consideration in that case was whether the transactions involved in manufacture and supply of ships by Hindustan Shipyard to its customers are

“sale” as defined in clause (n) of Section 2 of Andhra Pradesh General Sales Tax

Act, 1957 or a works contract as defined in clause (t) of Section 2 of that Act.

While dealing with the above question, the Court in para 6 stated, “the distinction between a contract of sale and works contract is not free from difficulty and has been the subject matter of several judicial decisions. No straitjacket formula can be made available nor can such quick-witted tests be devised as would be infallible. It is all a question of determining the intention of the parties by culling out the same on an overall reading of the several terms and conditions of a contract…….” The

Court did note the observations made in Variety Body Builders[28], that there is no standard formula by which one can distinguish a contract of sale from a contract for work and labour. There may be many common features in both the contracts, some neutral in a particular contract, and yet certain clinching in a given case may fortify conclusion one way or the other.

89. The Court then analysed the recitals and terms and conditions of the contract and also took into consideration para 603 of Halsbury’s Laws of England,

Fourth Edition, Volume 41, Benjamin’s Sale of Goods, Fourth Edition, Para 1.042 and Pollock and Mulla on Sale of Goods [1990, Fifth Edition, Page 53] and summed up the legal position in sub-para 2 and sub-para 3 of para 14 (pgs. 591-592) as under :

“(2) Transfer of property of goods for a price is the linchpin of the definition of sale. Whether a particular contract is one of sale of goods or for work and labour depends upon the main object of the parties found out from an overview of the terms of the contract, the circumstances of the transactions and the custom of the trade. It is the substance of the contract document/s, and not merely the form, which has to be looked into. The court may form an opinion that the contract is one whose main object is transfer of property in a chattel as a chattel to the buyer, though some work may be required to be


772 IMPORTANT SUPREME COURT JUDGEMENT done under the contract as ancillary or incidental to the sale, then it is a sale.

If the primary object of the contract is the carrying out of work by bestowal of labour and services and materials are incidentally used in execution of such work then the contract is one for work and labour.

(3) If the thing to be delivered has any individual existence before the delivery as the sole property of the party who is to deliver it, then it is a sale.

If ‘A’ may transfer property for a price in a thing in which ‘B’ had no previous property then the contract is a contract for sale. On the other hand where the main object of work undertaken by the payee of the price is not the transfer of a chattel qua chattel, the contract is one for work and labour.”

90. The Court in Hindustan Shipyard7 also set out three categories: (a) the contract may be for work to be done, for remuneration and for supply of materials used in the execution of work for a price, (b) contract for work in which the use of the materials is accessory or incidental to the execution of the work and (c) contract for supply of goods where some work is required to be done as incidental to the sale. Having regard to the recitals of the contract, the Court then concluded that the contracts in question involved sale of respective vessels within the meaning of clause (m) of the Andhra Pradesh General Sales Tax Act and were not merely the works contract as defined in clause (t) thereof.

91. In our opinion, the tests laid down in Hindustan Shipyard7 after Forty-sixth

Amendment are not of much help in determining whether a contract is a works contract or sale of goods. In any case, Hindustan Shipyard7 also says that there is no absolute rule for distinguishing a contract for sale (of goods) and a contract for labour (or services).

92. It seems to us (and that is the view taken in some of the decisions) that a contract may involve both a contract of work and labour and a contract of sale of goods. In our opinion, the distinction between contract for sale of goods and contract for work (or service) has almost diminished in the matters of composite contract involving both (a contract of work/labour and a contract for sale for the purposes of Article 366 (29-A)(b). Now by legal fiction under Article 366(29-A)

(b), it is permissible to make such contract divisible by separating the transfer of property in goods as goods or in some other form from the contract of work and labour. A transfer of property in goods under clause 29(A)(b) of Article 366 is deemed to be a sale of goods involved in the execution of a works contract by the person making the transfer and the purchase of those goods by the person to whom such transfer is made. For this reason, the traditional decisions which hold that the substance of the contract must be seen have lost their significance. What was viewed traditionally has to be now understood in light of the philosophy of

Article 366(29-A).

93. The question is: Whether taxing sale of goods in an agreement for sale of


IMPORTANT SUPREME COURT JUDGEMENT 773 flat which is to be constructed by the developer/promoter is permissible under the

Constitution? When the agreement between the promoter/developer and the flat purchaser is to construct a flat and eventually sell the flat with the fraction of land, it is obvious that such transaction involves the activity of construction inasmuch as it is only when the flat is constructed then it can be conveyed. We, therefore, think that there is no reason why such activity of construction is not covered by the term “works contract”. After all, the term “works contract” is nothing but a contract in which one of the parties is obliged to undertake or to execute works. Such activity of construction has all the characteristics or elements of works contract.

The ultimate transaction between the parties may be sale of flat but it cannot be said that the characteristics of works contract are not involved in that transaction.

When the transaction involves the activity of construction, the factors such as, the flat purchaser has no control over the type and standard of the material to be used in the construction of building or he does not get any right to monitor or supervise the construction activity or he has no say in the designing or lay-out of the building, in our view, are not of much significance and in any case these factors do not detract the contract being works contract insofar as construction part is concerned.

94. For sustaining the levy of tax on the goods deemed to have been sold in execution of a works contract, in our opinion, three conditions must be fulfilled:

(i) there must be a works contract, (ii) the goods should have been involved in the execution of a works contract, and (iii) the property in those goods must be transferred to a third party either as goods or in some other form. In a building contract or any contract to do construction, the above three things are fully met.

In a contract to build a flat there will necessarily be a sale of goods element.

Works contracts also include building contracts and therefore without any fear of contradiction it can be stated that building contracts are species of the works contract.

95. Ordinarily in the case of a works contract the property in the goods used in the construction of the building passes to the owner of the land on which the building is constructed when the goods and materials used are incorporated in the building. But there may be contract to the contrary or a statute may provide otherwise. Therefore, it cannot be said to be an absolute proposition in law that the ownership of the goods must pass by way of accretion or exertion to the owner of the immovable property to which they are affixed or upon which the building is built.

96. Value addition as a concept after Forty-sixth Amendment to the Constitution has been accepted by this Court in P.N.C. Construction17. While dealing with this concept, the Court said that value addition was important concept which had arisen after the Forty-sixth Amendment by insertion of sub-clause (b) of clause (29-A) in

Article 366. It has now become possible for the States to levy sales tax on the value of the goods involved in a works contract in the same way in which the sales


774 IMPORTANT SUPREME COURT JUDGEMENT tax was leviable on the price of the goods in a building contract. On account of the

Forty-sixth Amendment in the Constitution the State Governments are empowered to levy sales tax on the contract value which earlier was not possible.

97. Where a contract comprises of both a works contract and a transfer of immovable property, such contract does not denude it of its character as works contract. Article 366(29-A)(b) does contemplate a situation where the goods may not be transferred in the form of goods but may be transferred in some other form which may even be in the form of immovable property. The decision of the

Australian High Court in M.R. Hornibrook18 is worth noticing in this regard. Section

3(4) of the Australian Sales Tax Assessment Act, 1930 was brought in by way of amendment by the Legislature in 1932 which reads, “For the purposes of this Act, a person shall be deemed to have sold goods if, in the performance of any contract under which he has received, or is entitled to receive, valuable consideration, he supplies goods the property in which whether as goods (or in some other form) passes, under the terms of the contract, to some other person”. The question for consideration before the Australian High Court in light of the above provision was whether the contractor was liable to pay sales tax on the transfer of goods involved in a works contract. The majority judgment held as follows:

“In my opinion the commissioner is right in his contention that this provision applies to the present case. The appellant company, in the performance of a contract for building a bridge under which contract it was entitled to receive and doubtless has received valuable consideration, has supplied goods, namely, reinforced concrete piles. Such piles are plainly manufactured articles. They are chattels. They were intended to be incorporated in a structure and were so incorporated. They lost their identity as goods in that structure. But this fact does not prevent the piles from being goods any more than it prevents bricks or stones or nuts and bolts from being goods. The fact that the goods were specially manufactured and designed for a particular purpose cannot be held to deprive them of the character of goods.” (Emphasis supplied)

98. M.R. Hornibrook18 has been followed by this Court in Builders’

Association4. This Court said that sub-clause (b) of clause (29-A) of Article 366 of the Constitution of India had more or less adopted the language used in Section

3(4) of the Australian Act.

99. Learned Advocate General for Maharashtra vehemently argued that there was nothing to prevent the taxation of different aspects of the same transaction as separate taxable events. Pressing into service the aspects theory, he argued that a contract for carrying out works coupled with the sale of immovable property may be taxed by both, the State legislatures and the Parliament within their respective spheres of legislative competence as there is deemed sale of goods involved in works contracts. The works contract aspect can be taxed by the State legislatures


IMPORTANT SUPREME COURT JUDGEMENT 775 under Entry 54 of List II of Seventh Schedule read with Article 366 (29-A)(b) of the

Constitution. The transfer of immovable property can be taxed by the Parliament under Entry 97 of List I. Mr. K.V. Vishwanathan, however, argued that the aspect theory has no application as the State legislatures inherently lack the legislative competence to tax the transfer of an immovable property. According to him, the aspect theory would apply when a tax is sought to be imposed on more than one distinct field of legislation in relation to the same matter provided that there exists in the States/Union legislative competence/legislative power to levy a tax under each distinct head.

100. We have no doubt that the State legislatures lack legislative power to levy tax on the transfer of immovable property under Entry 54 of List II of the

Seventh Schedule. However, the States do have competence to levy sales tax on the sale of goods in an agreement of sale of flat which also has a component of a deemed sale of goods. Aspects theory though does not allow the State legislature to entrench upon the Union List and tax services by including the cost of such service in the value of goods but that does not detract the State to tax the sale of goods element involved in the execution of works contract in a composite contract like contract for construction of building and sale of a flat therein. In para 88 of

Bharat Sanchar5, the Court stated: “the aspects theory does not however allow the

State to entrench upon the Union List and tax services by including the cost of such service in the value of the goods. Even in those composite contracts which are by legal fiction deemed to be divisible under Article 366(29-A), the value of the goods involved in the execution of the whole transaction cannot be assessed to sales tax”. Having said that, the Court also stated that the States were not competent to include the cost of service in the value of the goods sold (i.e. the sim card) nor the Parliament could include the value of the sim card in the cost of services. But the statement in para 92(C) of the Report is clear that it is upto the States to tax the sale of goods element in a composite contract of sale and service. Bharat

Sanchar5 thus supports the view that taxation of different aspects of the same transaction as separate taxable events is permissible.

101. In light of the above discussion, we may summarise the legal position, as follows:

(i) For sustaining the levy of tax on the goods deemed to have been sold in execution of a works contract, three conditions must be fulfilled: (one) there must be a works contract, (two) the goods should have been involved in the execution of a works contract and (three) the property in those goods must be transferred to a third party either as goods or in some other form.

(ii) For the purposes of Article 366(29-A)(b), in a building contract or any contract to do construction, if the developer has received or is entitled to receive valuable consideration, the above three things are fully met. It is so because in


776 IMPORTANT SUPREME COURT JUDGEMENT the performance of a contract for construction of building, the goods (chattels) like cement, concrete, steel, bricks etc. are intended to be incorporated in the structure and even though they lost their identity as goods but this factor does not prevent them from being goods.

(iii) Where a contract comprises of both a works contract and a transfer of immovable property, such contract does not denude it of its character as works contract. The term “works contract” in Article 366 (29- A)(b) takes within its fold all genre of works contract and is not restricted to one specie of contract to provide for labour and services alone. Nothing in Article 366(29-A)(b) limits the term “works contract”. (iv) Building contracts are species of the works contract. (v) A contract may involve both a contract of work and labour and a contract for sale. In such composite contract, the distinction between contract for sale of goods and contract for work (or service) is virtually diminished.

(vi) The dominant nature test has no application and the traditional decisions which have held that the substance of the contract must be seen have lost their significance where transactions are of the nature contemplated in Article 366(29-

A). Even if the dominant intention of the contract is not to transfer the property in goods and rather it is rendering of service or the ultimate transaction is transfer of immovable property, then also it is open to the States to levy sales tax on the materials used in such contract if such contract otherwise has elements of works contract. The enforceability test is also not determinative. (vii) A transfer of property in goods under clause 29-A(b) of Article 366 is deemed to be a sale of the goods involved in the execution of a works contract by the person making the transfer and the purchase of those goods by the person to whom such transfer is made.

(viii) Even in a single and indivisible works contract, by virtue of the legal fiction introduced by Article 366(29-A)(b), there is a deemed sale of goods which are involved in the execution of the works contract. Such a deemed sale has all the incidents of the sale of goods involved in the execution of a works contract where the contract is divisible into one for the sale of goods and the other for supply of labour and services. In other words, the single and indivisible contract, now by

Forty-sixth Amendment has been brought on par with a contract containing two separate agreements and States have now power to levy sales tax on the value of the material in the execution of works contract.

(ix) The expression “tax on the sale or purchase of goods” in Entry 54 in List

II of Seventh Schedule when read with the definition clause 29-A of Article 366 includes a tax on the transfer of property in goods whether as goods or in the form other than goods involved in the execution of works contract.

(x) Article 366(29-A)(b) serves to bring transactions where essential ingredients of ‘sale’ defined in the Sale of Goods Act, 1930 are absent within the ambit of sale or purchase for the purposes of levy of sales tax. In other words, transfer of


IMPORTANT SUPREME COURT JUDGEMENT 777 movable property in a works contract is deemed to be sale even though it may not be sale within the meaning of the Sale of Goods Act.

(xi) Taxing the sale of goods element in a works contract under Article 366(29-

A)(b) read with Entry 54 List II is permissible even after incorporation of goods provided tax is directed to the value of goods and does not purport to tax the transfer of immovable property. The value of the goods which can constitute the measure for the levy of the tax has to be the value of the goods at the time of incorporation of the goods in works even though property passes as between the developer and the flat purchaser after incorporation of goods.

102. The crucial question would now remain: whether the view taken in Raheja

Development1 with reference to definition of “works contract” in KST Act is legally unjustified? The following definition of “works contract” was under consideration before this Court in Raheja Development1: “works contract” includes any agreement for carrying out for cash, deferred payment or other valuable consideration, the building, construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, modification, repair or commissioning of any moveable or immovable property”.

103. The Court also noticed the definition of “dealer” and “taxable turn over ”.

104. The broad facts in Raheja Development1 were these: • Raheja

Development carried on the business of real estate development and allied contracts;

• Raheja Development entered into development agreements with the owners of land;

• Raheja Development entered into agreements of sale with intended purchasers. The agreements provided that on completion of the construction, the residential apartments or the commercial complexes would be handed over to the purchasers who would get an undivided interest in the land also;

• The owners of the land would then transfer the ownership directly to the society formed under the Karnataka Ownership Flat (Regulation of the

Promotion of Construction, Sale, Management and Transfer) Act, 1972

(for short, ‘KOFA’).

105. In light of the above facts and the definition of “works contract”, the question before this Court was whether Raheja Development were liable to pay turnover tax on the value of goods involved in the execution of the works contract.

106. Section 5-B of the KST Act provides for levy of tax on transfer of property in goods (whether as goods or in some other form) involved in the execution of works contract.



107. On consideration of the arguments that were put forth by the parties, the

Court in Raheja Development1 held as under: (i) The definition of the term “works contract” in the Act is an inclusive definition.

(ii) It is a wide definition which includes “any agreement” for carrying out building or construction activity for cash, deferred payment or other valuable consideration.

(iii) The definition of works contract does not make a distinction based on who carries on the construction activity. Even an owner of the property may be said to be carrying on a works contract if he enters into an agreement to construct for cash, deferred payment or other valuable consideration.

(iv) The developers had undertaken to build for the prospective purchaser.

(v) Such construction/development was to be on payment of a price in various installments set out in the agreement.

(vi) The developers were not the owners. They claimed lien on the property.

They had right to terminate the agreement and dispose of the unit if a breach was committed by the purchaser. A clause like this does not mean that the agreement ceases to be “works contract”. So long as there is no termination, the construction is for and on behalf of the purchaser and it remains a “works contract”.

(vii) If there is a termination and a particular unit is not resold but retained by the developer, there would be no works contract to that extent.

(viii) If the agreement is entered into after the flat or unit is already constructed then there would be no works contract. But, so long as the agreement is entered into before the construction is complete it would be works contract.

108. The correctness of the view taken in Raheja Development1 has been doubted in the referral order principally for the reasons: (a) the developer had undertaken the contract to develop the property of the owner. It is not alleged by the department that there is monetary consideration involved in the development agreement. 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; (b) if the ratio in Raheja Development1 is to be accepted then there would be no difference between works contract and a contract for sale of chattel as a chattel and (c) from the definition of works contract, the contractor must have undertaken the work of construction for and on behalf of the flat purchaser for cash, deferred or any other valuable consideration but could it be said that developer was contractor for the prospective flat purchaser.

109. In Raheja Development1, the Court on consideration of the clauses (q) and (r) of the recitals and clauses (1), 5(c) and (vii) of the agreement between the flat purchaser, developer and owner of the land observed that the agreement had an element for carrying out building and construction activity for cash, deferred payment or other valuable consideration. The developer had undertaken to build for the prospective purchaser. Having regard to the various clauses of the recitals and also the clauses of the agreement, the Court was of the view that such agreement


IMPORTANT SUPREME COURT JUDGEMENT 779 was a typical agreement and so long as there was no termination of the contract, the construction is for and on behalf of the purchaser and it remains a “works contract”.

110. The argument on behalf of the developers that the flat purchaser is entitled to transfer of flat and conveyance of fraction of land only when all installments have been fully paid and that shows that the agreement between the developer and the flat purchaser is the sale of flat and not to appoint the developer as the contractor of the flat purchaser for the purposes of carrying out the construction of the flat for and on behalf of the flat purchaser has no merit. The submission overlooks the typical nature of the development agreement which is followed by a tripartite agreement between the owner of the land, the developer and the flat purchaser. Effectively and de facto it is the developer who constructs the building for the flat purchaser.

The developer does so for monetary consideration. The label of payment is not decisive but the factum of the payment is. The construction is done on payment of price as agreed upon between the developer and the flat purchaser. It is not necessary to recapitulate all clauses of the agreement under KOFA or for that matter under MOFA. Raheja Development1 takes note of relevant clauses of the recitals and the agreement under KOFA. We need not repeat them. Similarly, Form V of the Maharashtra Ownership Flat Rules contains recital such as, ‘as a result of the

Development agreement the promoters are entitled and enjoined upon to construct buildings on the said land’. One of the relevant clauses (omitting unnecessary portion) in Form V reads, “the promoter shall construct the said building/s….in accordance with the plans, designs, specifications …..which have been seen and approved by the flat purchaser with the owner, such variations and modifications as the promoter may consider necessary or as may be required by the concerned local authority/the government…..provided that the promoter shall have to obtain prior consent in writing to the flat purchaser in respect of variations or modifications which may adversely affect the flat of the purchaser”. It is, thus, not correct to say that the work is undertaken by the developer for himself and for the owner and the construction is not carried for and on behalf of the purchaser.

111. In the development agreement between the owner of the land and the developer, direct monetary consideration may not be involved but such agreement cannot be seen in isolation to the terms contained therein and following development agreement, the agreement in the nature of the tripartite agreement between the owner of the land, the developer and the flat purchaser whereunder the developer has undertaken to construct for the flat purchaser for monetary consideration. Seen thus, there is nothing wrong if the transaction is treated as a composite contract comprising of both a works contract and a transfer of immovable property and levy sales tax on the value of the material involved in execution of the works contract.

The observation in the referral order that if the ratio in Raheja Development1 is to be accepted then there would be no difference between works contract and a contract for sale of chattel as chattel overlooks the legal position which we have summarized above.

112. The argument that flat is to be sold as a flat and not an aggregate of


780 IMPORTANT SUPREME COURT JUDGEMENT its component parts is already negated by the Constitution Bench in the case of

Builders’ Association4. As a matter of fact, in Builders’ Association4, this argument was advanced on behalf of the States. Repelling the argument, the Constitution

Bench observed that it was difficult to agree with the contention of the States that the properties that are transferred to the owner in the execution of a works contract are not the goods involved in the execution of works contract, but a conglomerate, that is the entire building which is actually constructed.

113. Yet another argument advanced on behalf of the appellants is that in

Raheja Development1, it is noticed that the builder has a lien on the property but incorrectly states that lien is because they are not owners. It is argued that lien is because if the monies are not recovered from the prospective flat purchasers, the lien can be exercised and this would show that the contract is a contract of an agreement to sell immovable property. The argument is insignificant because if the developer has undertaken to build for the prospective purchaser for cash or deferred payment or a valuable consideration pursuant to a contract then to that extent, the contract is works contract and there is deemed sale of material (goods) used in the construction of building and merely because the builder has a right of lien in the event due monies are not paid does not alter the character of contract being works contract.

114. In Article 366(29-A)(b), the term ‘works contract’ covers all genre of works contract and it is not limited to one specie of the contract. In Raheja Development1, the definition of “works contract” in KST Act was under consideration. That definition of “works contract” is inclusive and refers to building contracts and diverse construction activities for monetary consideration viz; for cash, deferred payment or other valuable consideration as works contract. Having regard to the factual position, inter alia, Raheja Development1 entered into development agreements with the owners of the land and it also entered into agreements for sale with the flat purchasers, the consideration being payment in installments and also the clauses of the agreement the Court held that developer had undertaken to build for the flat purchaser and so long as there was no termination of the contract, the construction is for and on behalf of the purchaser and it remains a “works contract”. The legal position summarized by us and the foregoing discussion would justify the view taken by the two Judge Bench in Raheja Development1.

115. It may, however, be clarified that activity of construction undertaken by the developer would be works contract only from the stage the developer enters into a contract with the flat purchaser. The value addition made to the goods transferred after the agreement is entered into with the flat purchaser can only be made chargeable to tax by the State Government.

116. The reasons stated in the referral order for reconsideration of Raheja

Development1 do not make out any good ground for taking a view different from what has been taken by this Court in Raheja Development1. We are in agreement with the submission of Mr. K.N. Bhat that since Raheja Development1 in May, 2005 almost all States have modified their laws in line with Raheja Development1 and


IMPORTANT SUPREME COURT JUDGEMENT 781 there is no justification for change in the position settled after the decision of this

Court in Raheja Development1.

117. The submission of Mr. K.N. Bhat that the view in Raheja Development1 that when a completed building is sold, there is no work contract and, therefore, no liability to tax is not correct statement of law, does not appeal to us. If at the time of construction and until the construction was completed, there was no contract for construction of the building with the flat purchaser, the goods used in the construction cannot be deemed to have been sold by the builder since at that time there is no purchaser. That the building is intended for sale ultimately after construction does not make any difference.

118. We are clearly of the view that Raheja Development1 lays down the correct legal position and we approve the same.

119. There is challenge to the constitutional validity of explanation (b)(ii) to

Section 2(24) which was brought by amendment with effect from 20.06.2006 in

MVAT Act and sub-rule (1A) which was inserted into Rule 58 of the MVAT Rules by a notification dated 01.06.2009.

120. Clause (24)**** of Section 2 defines sale to mean a sale of goods made within the State for cash or deferred payment or other valuable consideration but does not include a mortgage, hypothecation, charge of pledge; and the words “sell”,

“buy” and “purchase”, with all their grammatical variations and cognate expressions.

An explanation is appended to this clause. Clause (b)***** of the explanation to

Section 2(24) defines what would be a sale for the purpose of the clause and brought in its ambit the transactions mentioned therein. Explanation (b)(ii) was amended with effect from 20.06.2006 by inserting the following words after the words “works contract”: “including, an agreement for carrying out for cash, deferred payment or other valuable consideration, the building, construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, modification, repair or commissioning of any movable or immovable property”.

121. There is no doubt in our mind that the amendment in explanation b(ii) to Section 2(24) was brought because of the judgment of this Court in Raheja

Development1. We have already held that Raheja Development1 lays down the correct legal position. Thus, in our view, there is no merit in the challenge to the constitutional validity to the provisions of explanation (b)(ii) to Section 2(24) of MVAT which were amended with effect from 20.06.2006. The Division Bench of the Bombay

High Court took the view that the provision under challenge was not in breach of any constitutional boundaries. This is what it said:

“34. The amended definition of the expression sale in clause b(ii) of the Explanation to Section 2(24) brings within the ambit of that expression transactions of that nature which are referable to Article 366(29A)(b). The transactions which the legislature had in mind involve works contracts. What the state legislatures can tax under the expanded definition contained in clause b of Article 366 (29A) must meet the governing requirements of that clause.



There must be a transfer of property in goods involved in the execution of a works contract. The relevant clause in Section 2(24) is valid because it does not transgress the boundaries set out in Article 366(29A). Indeed, after the 46th

Amendment, State legislation must confine itself to the limits set out even in the expanded concept of what constitutes a sale or purchase of goods in Article

366(29A). State legislation cannot expand the ambit of what constitutes a tax on the sale or purchase of goods beyond the constitutional frontiers. In order that

Section 2(24) remains within constitutional boundaries, in the context of works contracts, it must be read to cover those cases which fall within the expanded definition as elaborated after the 46th Amendment. Whether there is a works contract in a given case is for assessing authorities to determine. As noted earlier, it is not possible to provide a comprehensive or all encompassing list of what contracts constitute works contracts. Section 2(24) properly construed, even after its amendment, reaches out to those cases which fall within the ambit of Article 366(29A). Explanation b(ii) to Section 2(24) in other words covers those transactions where there is a transfer of property in goods, whether as goods or in any other form, involved in the execution of a works contract.

Once those parameters are met, the amended definition in the State legislation in the present case provides a clarification or clarificatory instances. When constitutional norms govern state legislation such as those provided in Article

366(29A) in this case, the legislation must be construed in the context of those norms which it cannot transgress. The law is valid because it does not breach those boundaries. There is no breach of constitutional boundaries.”

122. We are in agreement with the above view and reject challenge to amendment to the provisions of explanation (b)(ii) to Section 2(24) of MVAT Act.

123. Sub-rule (1A)****** was inserted into Rule 58 by a notification dated

01.06.2009. As a matter of fact, Rule 58(1) of the MVAT Rules provides that the value of the goods at the time of the transfer of the property in goods involved in the execution of a works contract may be determined by effecting certain deductions from the value of the entire contract insofar as the amounts relating to deductions pertain to the said works contract. The challenge was laid to Rule 58(1A) of the

MVAT Rules before the Bombay High Court. The Division Bench of the Bombay High

Court found that there was nothing to show that the proviso to the said provision was arbitrary. It held that the Legislature was acting within the field of the legislative powers in devising a measure for the tax by excluding the cost of the land. The

Division Bench recorded the following reasons in repelling the challenge to Rule

58(1A).

“35. The challenge to Rule 58(1A), may now be considered. The Rule has provided that in the case of construction contracts where the immovable property, land or as the case may be, interest therein is to be conveyed and the property involved in the execution of the construction contract is also transferred, it is the latter component which is brought to tax. The value of the goods at the time of transfer is to be calculated after making the deductions


IMPORTANT SUPREME COURT JUDGEMENT 783 which are specified under sub-rule (1). The judgment in the second Gannon

Dunkerley specifies the nature of such deductions which can be made from the entire value of the works contracts. This was permitted to the States as a convenient mode for determining the value of the goods in the execution of the works contract. Similarly, the cost of the land is required to be excluded from the total agreement value. Sub- rule (1A) stipulates that the cost shall be determined in accordance with the guidelines appended to the Annual Statement of Rates prepared under the provisions of the Bombay Stamp (Determination of True

Market Value of Property) Rules, 1995 as applicable on 1 January of the year in which the agreement to sell the property is registered. The Proviso stipulates that deduction towards the cost of land under the sub-rule shall not exceed

70% of the agreement value. The petitioners have not brought on the record any material to indicate that the proviso to sub- rule (1A) of Rule 58 is arbitrary.

Rule 58(1A) provides for the measure of the tax. The measure of the tax, as held by the Supreme Court in its decision in Union of India v. Bombay Tyre

International Ltd. [(1984) 1 SCC 467], must be distinguished from the charge of tax and the incidence of tax. The Legislature was acting within the filed of its legislative powers in devising a measure for the tax by excluding the cost of the land.”

124. The value of the goods which can constitute the measure of the levy of the tax has to be the value of the goods at the time of incorporation of goods in the works even though property in goods passes later. Taxing the sale of goods element in a works contract is permissible even after incorporation of goods provided tax is directed to the value of goods at the time of incorporation and does not purport to tax the transfer of immovable property. The mode of valuation of goods provided in Rule 58(1A) has to be read in the manner that meets this criteria and we read down Rule 58(1-A) accordingly. The Maharashtra Government has to bring clarity in

Rule 58 (1-A) as indicated above. Subject to this, validity of Rule 58(1-A) of MVAT

Rules is sustained.

125. Once we have held that Raheja Development1 lays down the correct law, in our opinion, nothing turns on the circular dated 07.02.2007 and the notification dated 09.07.2010. The circular is a trade circ ular which is clarifi catory in nature on ly. The notification enables the registered dealer to opt for a composition scheme.

The High Court has dealt with the ci rcular and notification. We do not find any error in the view of the High Court in this regard. Moreover, the Advocate General for

Maharashtra clearly stated before us that implementation of Rule 58(1-A) shall not result in double taxation and in any case all claims of alleged double taxation will be determined in the process of assessment of each individual case.

126. After having given answer to the reference, we send the matters back to the Regular Benc h for final disposal .

……………………….J.

(R.M. Lodha)

………….J.

(J. Chelameswar)

………………J.

(Madan B. Lokur)


784 NOTIFICATION

NOTIFICATION

NOTIFICATION

FINANCE DEPARTMENT

Sachivalaya, Gandhinagar.

Dated the 4th October, 2013.

GUJARAT VALUE ADDED TAX ACT, 2003

No. (GHN-21)VAT-2013-SCH-II (45)(21)-TH: In exercise of the powers conferred by entry 45 of SCHEDULE II to the Gujarat Value Added Tax Act, 2003

(Guj. 1 of 2005), the Government of Gujarat hereby amends the Government

Notification, Finance Department, No.(GHN- 21)VAT-2009- SCH-II (45)(1)-TH, dated the 1st August, 2009 as follows, namely:-

In the TABLE appended to the said notification, the entry at serial No. 28, shall be deleted.

By order and in the name of the Governor of Gujarat,

C. J. Mecwan

Deputy Secretary to Government

NOTIFICATION





No. (GHN-22) VAT-2013/SCH-II (28A)(22)-TH: - In exercise of the powers conferred by sub-entry (ii) of entry 28A of Schedule II to the Gujarat Value Added

Tax Act, 2003 (Guj. 1 of 2005), the Government of Gujarat hereby amends the

Government Notification, Finance Department No. (GHN-28)VAT-2008/SCH-

II(28A)(14)-TH, dated the 16th May, 2008, as follows, namely:-

In the said notification, after the words “all types of medical equipment, devices and implants”, the words “excluding the goggles, spectacles of sun-glass and sun-glass which are not correctives” shall be inserted.


C. J. Mecwan



NOTIFICATION 785

NOTIFICATION





No. (GHN-23) VAR-2013(33)-TH: - WHEREAS the Government of Gujarat is satisfied that circumastances exist which render it necessary to take immediate action to make rules and dispense with the previous publication thereof under the proviso to sub-section (4) of section 98 of the Gujarat Value Added Tax Act, 2003

(Guj. 1 of 2005);

NOW, THEREFORE. in exercise of the powers conferred by section 98 of the Gujarat Value Added Tax Act, 2003 (Guj. 1 of 2005), the Government of Gujarat hereby makes the following rules further to amend the Gujarat Value Added Tax

Rules, 2006, namely :-

1. These rules may be called the Gujarat Value Added Tax Rules, 2013.

2. In the Gujarat Value Added Tax Rules, 2006, in rule 28C, in sub-rule (6), after clause (b), the following proviso shall be deemed to have been added with effect from the 17th August, 2006, namely :-

“Provided that the dealer to whom such permission is granted may purchase goods which are not produced in the State due to legal constraints, for the purpose of sales in the same form, subject to following conditions :,

(a) such dealer shall be liable to pay tax under section 7 on the turnover of sales of such goods,

(b) such sales shall not be included in the total turnover of sales for calculating the amount of lump-sum tax,

(c) such dealer shall keep separate accounts for the purchase and sale of such goods.”


C. J. Mecwan


NOTIFICATION

FINANCE DEPARTMENT

Sachivalaya. Gandhinagar.

Dated the 11 th October, 2013



786 NOTIFICATION

No. (GHN-24) VAT-2013/S.40 (1) (8) -TH: - WHEREAS the Government of

Gujarat considers it necessary so to do in the public interest to give effect to the tax incentives as declared vide the Government of Gujarat, Industries and Mines

Department Resolution No. TEX/102012/65117/T, dated 25

Resolution No TEX/102013/432/T dated 11 th October,2013.

th June, 2013 and

NOW, THEREFORE, in exercise of the powers conferred by sub-section (1) of section 40 of the Gujarat Value Added Tax Act, 2003 (Guj.1 of 2005), the Government of Gujarat hereby authorizes the Commissioner to grant refund to the eligible unit, of the amount of tax separately charged by a registered dealer from whom he has purchased the taxable goods, subject to the following conditions, namely:-

1. The eligible unit shall be granted refund of the tax paid or payable io the selling dealer or, its purchases of the goods to be used as raw materials in its industrial unit for which it has obtained the Eligibility Certificate, in the manufacture of the specified goods for,-

(i) sale within the State of Gujarat or outside the State of Gujarat or for export or as packing material in the packing of the goods so manufactured, or

(ii) dispatch either to its another unit or division situated within the State for use in the manufacture of specified goods for sale by such another unit or division or to its another unit or division situated outside the State of

Gujarat.

2. The eligible unit shall apply within 120 days from the date of issuance of Eligibility

Certificate, in Form TEX-1 appended to this notification, to the competent authority for the grant of a Certificate of Entitlement. Such application shall be accompanied by the original Eligibility Certificate issued to the eligible unit by the appropriate authority.

3. On receipt of application, the Commissioner may issue to the eligible unit a Certificate of Entitlement, in Form TEX-2 appended to this notification, effective from the date of commercial production as mentioned in the Eligibility

Certificate issued by the Industries Commissioner, Government of Gujarat subject to the terms and conditions of the respective Government Resolutions, on the basis of which the eligible unit was granted the Eligibility Certificate.

4. The Certificate of Entitlement shall contain the details regarding the date from which the incentives commence, the quantum of tax incentives and the date upto which the incentives are admissible as above in the Eligibility Certificate issued by the appropriate authority.

5. The eligible unit having additional place or places of business within the jurisdiction of a Commercial Tax Officer or different Commercial Tax Officers shall not be entitled to obtain permission to furnish separate declarations or


NOTIFICATION 787 returns for each such place of the concerned Commercial Tax Officer and shall be liable to furnish consolidated declarations or returns for each such place of the concerned Commercial Tax Officer and to maintain specific and separate details about purchases, production and sales effected at the respective place of business.

6. If the eligible unit has a separate place of business for the purpose of the incentives under this notification, he shall obtain a separate registration certificate for each place of business and shall keep and maintain separate books of accounts for each place of business

7. (i) if the eligible unit contravenes any condition of this notification or any of the provisions of the Gujarat Value Added Tax Act, 2003 or the Rules made there under, the Certificate of Entitlement issued to him by the competent authority under this notification shall he liable to be suspended for a period not exceeding six months and purchases and sales by the eligible unit shall cease to entitle for incentives under this notification and the unit shall be liable to pay tax as a normal dealer during the period of suspension and such period shall be deducted from the total period of incentives specified in the Certificate of Entitlement, and

(ii) if the eligible unit continues such contravention for which the certificate of entitlement has been suspended, then the Certificate of Entitlement shall be liable to be cancelled and on such cancellation, the incentives under this notification shall cease to operate. Accordingly, the entire amount of tax that would have been payable on sales and purchases effected by the eligible unit but for the incentives given under this notification, shall be paid by the eligible unit into the Government Treasury within a period of sixty days from the date of contravention, and on failure to do so, said amount shall be recovered from the eligible unit as an arrears of land revenue.

8. The eligible unit shall be eligible for tax incentives to the extent of the monetary limits and within the time limit, whichever expires earlier, specified in the

Eligibility Certificate issued by the appropriate authority.

(9) (i) If the eligible unit transfers, sells or otherwise disposes of in any manner any of its eligible assets without a written permission of an appropriate authority during the period of incentives, the incentives under this notification shall cease to operate. Accordingly, the entire amount of tax that would have been payable on the sales and purchases effected by the unit but for the incentives given under this notification, shall be paid by the eligible unit into the Government Treasury within sixty days from the date of sales, transfer or otherwise disposal of the assets, along with the interest at the rate of 18% per annum. On failure of the unit to do so,


788 NOTIFICATION the entire amount along with the interest shall be recovered as an arrears of land Revenue.

(ii) If the eligible unit transfers his business in whole by sale to another dealer with a written permission of an appropriate authority during the period of incentives and the business continues at the same industrial unit for which the eligibility certificate was obtained, then the incentives under this notification shall continue to operate to the transferee of such business subject to the conditions of this notification or conditions of the

Government Resolution, dated the 25t h June, 2013, of Industries and

Mines Department.

10. The elgible unit shall be allowed to avail the tax incentive for each year or part of the year to theextent of 12.5 percent of the total monetary ceiling of the tax incentives as mentioned in the Eligibility Certificate issued by the appropriate authority if such incentives limit exhausts during the year, the eligible unit shall be liable to pay tax forthwith from the date of exhaustion of incentives limit, in accordance with the provisions of the Gujarat Value Added tax Act, 2003 till the end of such year. Any unavailed tax incentives during any year can be availed in any of the following year.

For the purpose of arriving at the limit of incentives of the eligible unit availing tax incentive for each year or part of the year, the aggregate of following shall be considered, namely:-

(i) The aggregate amount of refund of the tax paid to the eligible unit under clause 1 of this notification.

(ii) The aggregate amount of reimbursement of tax granted to the eligible unit under Government Resolution

;

Industries and Mines Department No.

TEX/102013/432/T dated the11th October,2013.

Explanation:- For the purpose of this clause , the expression “Year” means a period of twelve months commencing from the date of commercial production.

11 The provisional refund shall be granted in accordance with the provisions of section 37 of the Gujarat Value Added tax Act, 2003 and rule 37 of the Gujarat

Value Added tax Rules, 2006.

12 The eligible unit shall not be entitled to claim tax credit on the purchases for which the amount of tax refunded under the Gujarat Value Added tax Act,

2003.

13 The refund shall not be claimed by eligible unit until he receives from a registered dealer from whom he has purchased taxable goods, a tax invoice

(in original) containing particulars as has been prescribed under sub-section

(1) of section 60 of the Gujarat Value Added tax Act, 2003, evidencing the amount of tax.



14 The refund shall be allowed after reducing the amount of tax calculated at the rate of four per cent. for each of the following, on the taxable turnover of purchases within the state of the goods which are —

(i) used as raw materials in the manufacture or in the packing of goods so dispatched outside the State in the course of branch transfer or consignment or to his agent outside the State,

(ii) fuels used for the manufacture of goods.

15 The refund shall be allowed after reducing the amount of tax calculated at the rate of two per cent on the taxabie turnover of purchases within the state of the goods other than cotton which are used as input including raw material in the manufacture of goods which are sold in the course of interState trade and commerce.

16 The refund to the eligible unit shall not be allowed of the goods which are —

(i) resold

(ii) used as fuel in generation of electrical energy including captive power, not

(i) connected with its business,

(iv) used as fuel in motor vehicles, or

(v) petrol, high speed diesel. crude oil and lignite

(vi) used for purposes other than those specified under the sub-clause (i) or

(ii) of clause 1.

17 Where a eligible unit without entering into a transaction of sale, issues to another registered dealer tax invoice, retail invoice, bill or cash memorandum with the intention to defraud the Government revenue or with the intention that the Government may be defrauded of its revenue, the Commissioner may, after making such inquiry as he thinks fit and giving a reasonable opportunity of being heard, deny the benefit of refund, in respect of such transaction, to such eligible unit accepting such tax invoice, retail invoice, bill or cash memorandum either prospectively or retrospectively from such date as the

Commissioner may, having regard to the circumstances of the case, fix.

18 The unit taking up expansion to whom a Certificate of Entitlement has been issued under this notification, shall be granted refund of the tax paid on purchases of taxable goods used in the manufacture of all the specified goods including manufactured by the existing machinery.

19 Notwithstanding anything contained in this notification, the amount of refund to an eligible unit, of tax on any purchase of goods made from the dealer other than an eligible unit availing tax incentives under any scheme granted


790 NOTIFICATION by the State Government shall not exceed the amount of tax in respect of the same goods, actually paid, under the Gujarat value Added Tax Act, 2003, in to

Government Treasury.

Explanation. - For the purpose of this notification,-

(i) the expression “eligible unit” shall mean an industrial unit eligible for tax incentives which has obtained Eligibility Certificate from the Industries

Commissioner under Gujarat Textile Policy-2012, issued under the Government of Gujarat Industries and Mines Department Resolution No. TEX/102012

65117/T, dated 25th June, 2013 and the Certificate of Entitlement from the

Commissioner of Commercial Tax, under this notification.

(ii) the expression specified goods” means the goods specified and the goods relates to the activities mentioned in the Eligibility certificate obtained by the eligible unit from the Industries Commissioner.

(iii) the expression “Competent Authority” shall mean Deputy Ccmmissicner of

Commercial Tax having jurisdiction over the place of business of the eligible. unit.

(ii) the expression “appropriate authority” shall mean Industries Commissioner,

Gujarat State.

FORM — TEX 1

Application for Certificate of Entitlement

Sr. No. Description

1 Name of unit

.

Address

3 Registration No. under Gujarat Value

Added Tax Act, 2003.

4 Registration No. under the Central Sales Tax

Act, 1956.

5 Number and date of Resolution under which

Eligibility Certificate was issued by the

Industries Department. Government

6.

Year- wise amount of incentive granted under Eligibility Certificate.

7 Period for incentive granted under Eligibility

Certificate

8 Goods specified and the goods related to the activities mentioned in the Eligiblity

Certificate.

Details



I ...................................... do hereby certify that the details shown in the application is true and correct.

(Authorized Signatory)

Place :

Date :

FORM TEX-2

Certificate of Entitlement

2

3

Sr. No. Description

1 Name of unit

Address

4

5

Registration No.under Gujarat Value

Added Tax Act, 2003.

Registration No. under Central Sales

Tax act, 1956.

Number and date of Government

Resoution under which Eligibility

Certificate was issued by the

Industries Department.

6

7

8

Year-wise amount of incentive granted under Eligibitliy Certificate

Period for incentive granted under

Eligibility Certificate.

Goods specified and the goods related to the activities mentioned in the

Eligibility Certificate

Conditions:-

Details

(1) This certificate is issued subject to the conditions prescribed under this notification.

(2) This certificate shad cease to operate immediately on expiry of monetary limit of the unit or time iimit, whichever is earlier.

Place:

Date: Deputy Commissioner of Commercial Tax

Circle .........................


C. J. Mecwan



792 NOTIFICATION

Gujarat Textile Policy — 2012 (5.9.2012)

Integrated approach to strengthen the value chain, Farm- Fiber- Fabric- Fashion

(Garment) to Foreign (export)

(Revised)

Government of Gujarat

Industries & Mines Department

Resolution No. TEX/102012/65117/T

Sachivalaya, Gandhinagar

Dated: 25.06.2013.

Read:

I. Gujarat Industrial Policy, 2009

2. Industries & Mines Department’s GR No. PLM-102006-2149-T dated

15.10.2007

3. Resolution No. PLM/102004/1047/T dtd.27.02.2009 and dated 19.6.2009.

4. Resolution No. TEX/102012/65117/T Dated: 5/09/2012.

1.0 Preamble:

India is the 2 nd largest producer of cotton, and next to China. The global net cotton production has come down substantially in the recent past in China & US. On the other hand, besides US and other developed nations, cotton textile demands are increasing from economically strong Asian Countries. This has created the need for increasing spinning capacity to counter both domestic and global yarn shortage.

On the other hand, Textile being highly labour intensive industry and developed nation has already lost their cost competitiveness and trying to re-locate their activities in low cost Countries like India. In Gujarat Textile Industry has its unique position as a self-reliant industry, from the production of raw materials to fabric and Garment and has a major contribution to the economy. Gujarat is a largest producer of cotton, constituting over 35% share of the country’s production. It is observed that besides the quality production of cotton, Gujarat is quite strong in

Ginning both in terms of Technology & Productivity. But due to non availability of

Spinning activities, over 90% of Gujarat cotton goes either for or to other state for further value addition. Therefore, there is a need to transform the State Cotton

Industry as the leader in manufacturing of yarn, fabric and garment with a policy to work on five F’s — Farm, Fibre, Fabric, Fashion (Garment) & Foreign (Export).

In the export front, Government of India has already earmarked Ahmedabad, once known Manchester of India, as Town of Export Excellence in Textile.



Besides, this approach will enhance the growth of cotton Farmer by way of better price realization & also enable them to withstand the uncertain & price fluctuation of cotton both in domestic and international market in one hand and to strengthen the whole value chain of the textile industry across the State.

Similarly, in the synthetic and non-cotton textile front, Gujarat, in specific

Surat, the Silk City of India, is the largest producer of man-made and filament fabric manufacturer with over 40% share in the country, capturing mainly the need of domestic market. However, a significant need is felt to make this sector internationally competitive by way of value addition and technology upgradation at all level i.e from yarn to fabric and garment.

Looking to enormous potential of Technical Textiles and non-woven with application for industries like Medical, Agro, Automobiles & Construction industries, a need is felt to promote Technical Textiles with higher value addition across the

State.

In the Textile and Apparel (Garment) value chain, development of Garment sector in Gujarat is not very impressive. One of the issues, as identified, is the shortage of Skilled Manpower in the field. State Government, therefore, intends to extend specific support to develop manpower in the field.

The proposed initiative would create substantial rural women employment.

Realizing the potential of the Textile Industry in the country and abroad, In the

Finance Minister’s Budget Speech 2012-13, it has been announced to address the entire value chain encompassing all the stages of the production i.e. from Farm to Fabrics for noteworthy benefits for the farmers involved in cotton cultivation. To promote spinning activities it is provided Rs.70.46 crores as section-1 New Item.

Such special efforts will also create substantial rural women employment.

With the objective of continuing the leadership in the textile industry with a vision of Enhancing the sustainable growth of Farmers by way of Value Addition and to strengthen the value chain for the overall growth of Cotton Textile industries in one hand and Synthetic Filament Textile Industry on the other. State Government intend to provide necessary support for entire value chain i.e Ginning, Spinning,

Weaving, Dyeing & Processing, Knitting, Apparel, Garmenting and Technical

Textiles either for new investment and expansion or for technology upgradation to become internationally competitive. While doing this, the industry currently faces a shortage of skilled man power. The proposed initiative, therefore, has been extended also to provide the support for setting up Training Institute, in specific, for weaving & Apparel sector. Approach is also made to establish Centre of Excellence in the area of hi-tech and Technical Textile to address on product development incubation customized training and services for industries.

The State Govt. received various representations from different textile sectors


794 NOTIFICATION and after due deliberations with the various stake holders and discussions at Govt. levels, it was decided to come out with a comprehensive textile policy to strengthen the whole value chain in textile sector.

Textile Policy 2012, was announced vide resolution Dt. 5.9.2012 with above preamble. After announcement of this policy, State Govt. received representations from various stakeholders. After due deliberations with the concerned, it is decided to announce the revised Textile Policy 2012 with certain changes and clarifications to strengthen the whole value chain in textile sector .

2.0 Resolution:

Government has reviewed the scheme for assistance to Textile & Apparel sector vide Resolution No. PLM/102004/1047/T dtd.27.02.2009 and dated

19.6.2009, under Gujarat Industrial Policy 2009, with respect to support to textile industry, suggesting the need to enlarge the support more on value addition to strengthen the value chain, achieving sustainable growth of Textile Industry in

Gujarat.

After careful consideration, Government has decided to come out with the new policy, in supersession of the support envisaged in the GRs Read at (3) and (4) above and with the introduction of revised scheme for support for Textile Industry in the State of Gujarat.

3.0 Operative period of the scheme

The scheme will come into operation from the date of issue of GR Dt. 5/9/2012 and shall remain in force for five years. Only those enterprises which complete and make operational fully their projects during the operative period shall be eligible for benefit mentioned under the respective scheme, as applicable.

All the textile units/activities commissioned after the announcement of

Gujarat textile policy 2012 i.e. 5.9.2012 are eligible to take the benefit of the new scheme.

Those units which have not taken the benefits under old policy and which are going into production after declaring the Gujarat Textile Policy 2012 will be entitled for the benefits.

4.0 Definitions

4.1 New Enterprise

New Enterprise means the enterprise which commences commercial production/ service during the operative period of this scheme and has obtained acknowledgement of filing Entrepreneur’s Memorandum (EM) with the concerned

District Industries Center (DIC) or Industrial Entrepreneur’s Memorandum (IEM) with Government of India.



4.2 Existing Enterprise

The Existing Enterprise means the enterprise which has filed EM with the concerned DIC or IEM with GoI and is implementing expansion/ diversification/ modernization in the project for carrying out activity indicated in this resolution.

4.3 Expansion or Diversification:

Existing enterprise taking up expansion and/or diversification with or without forward/backward integration, with investment more than 50% of its existing gross fixed capital investment as on date of initiating expansion/diversification and commencing production of said expansion/diversification during the operative period of the scheme shall be treated as Expansion.

4.4 Modernization:

Existing enterprises investing more than 25% in the cost of its existing plant .& machinery to upgrade technology by way of adopting new technology/ production process and/or improving quality of product.

4.5 Gross Fixed Capital Investment:

Gross fixed capital investment means investment in Plant & Machinery before it commences expansion/ diversification/modernization and/ or it obtains, sanction of financial assistance from Banks /Financial Institutions.

All machineries specified in TUF list or covered under definitions of capital goods in VAT Act would be eligible for benefit of the scheme. However if such machinery is second hand, it will not be eligible for VAT concession.

Self Finance enterprises will not be eligible for any incentive under the scheme.

4.6 TUF Scheme

The TUF scheme means the Technology Upgradation Fund Scheme as notified by Government of India and amended from time to time regarding eligible machineries under the scheme. In case of TUF scheme is discontinued, latest amended eligible machineries under TUF scheme will be referred. Any addition or deletion on the eligible machineries over and above with TUF enlisted can be made by SLAC with the consultation of Experts or Institutes like ATIRA, BTRA,

MANTRA, NITRA, NID, NIFT etc.

5.0 Scheme — 1 — Interest Subsidy:

5.1 The scheme will be known as financial assistance by way of credit linked

Interest Subsidy in Ginning & Pressing, Cotton Spinning, Weaving, Dyeing &

Processing, Knitting, Garment/Made-ups, Machine Carpeting, Machine Embroidery and any other activities/process like crimping, texturising, twisting, winding, sizing etc. within the Textile value chain. However, synthetic filament yarn manufacturing


796 NOTIFICATION is excluded under the scheme. In an alternative, units may avail MSME or other

State Government Scheme.

5.2 Eligible Activities: 5.2.1 Spinning:

Spinning activities means setting up of unit having the raw material as 100% cotton OR with blended of any textile fibres OR any kind of spun yarn based on the cotton spinning system or technology from Blow room to Yarn packaging (Winding).

Spinning operation can be performed on Ring spinning, Rotors or Jet Spinning.

5.2.2 Ginning & Pressing, Weaving (with or without preparatory) Dyeing &

Processing, Knitting, Garment /Made-ups Machine Carpeting, Machine Embroidery and any other activities/process like crimping, texturising, twisting, winding, sizing etc. within the Textile value chain.

Investment in Plant & Machinery as specified in Para 4.5.

5.3 Quantum of assistance:

(i) Maximum interest subsidy will be at the rate of 5% per annum. (7% for spinning unit and garment/made-ups unit) This interest subsidy will be in addition to any other incentives available from other schemes of Government of India.

(ii) Interest subsidy will be available for establishing new enterprise under this scheme and for one expansion / diversification / modernization of existing enterprises as mentioned in para-4.3, and 4.4, only for the investment in new and modern plant machinery as specified in Para 4.5.

The enterprises which have acquired second hand imported machineries for

Spinning units having 10 years’ vintage and with a residual life of minimum 10 years duly certified by the competent authority like Chartered Engineer/ Chartered

Account etc., will be considered eligible for support under the scheme to the extent of 60`)/0 of the acquisition value of imported machineries. The acquisition value of the second hand imported machinery will be considered up to 50 % of the value of new imported machinery or actual purchase value, whichever is less.

The eligible list of machineries will be compatible with the list of machineries as specified in Para 4.5.

(iii) The weaving enterprises which have acquired second hand imported

Shuttle less loom having 10 years’ vintage and with a residual life of minimum 10 years duly certified by the competent authority like Chartered Engineer/ Chartered

Account etc., will be considered eligible for support under the scheme with a condition in the line of latest TUF scheme of Government of India and as specified in Para 4.5.

(iv) In case of composite /multiproduct textile enterprises, all the activities will be addressed separately or as a whole for the purpose of getting benefit under the scheme.



(v) The support against the second hand imported machineries will be given only after successful operation of the machineries for six months period after commissioning by the enterprise.

(vi) For the purpose of interest subsidy, the enterprise shall get term loan from

Financial Institution/ Bank recognized by Reserve Bank of India.

(vii) The unit has to apply within one year from the last disbursement of term loan but not later than the date of commencement of commercial production.

(viii) Disbursement of the loan should be within the operative period of the

Scheme.

(ix) The enterprise must start commercial operation within the operative period of the scheme.

(x) The interest subsidy will be available only on interest levied by the Financial

Institution. Penal interest or other charges will not be reimbursed.

(xi) Benefit of Interest Subsidy will be considered from the date for which enterprise has opted but not later than commencement of commercial production.

Such enterprises will not be eligible to claim interest for the period from date of first disbursement to the extended date from when the enterprise exercise the option to avail the benefit if interest subsidy for five years period.

(xii) The interest subsidy will be given to the enterprise which pays regular installments and interest to the financial institutions. If the enterprise becomes defaulter, it will not get interest subsidy for the default period and such defaulting period will be deducted from 5 years period. The defaulter will be considered as per the RBI guidelines.

(xiii) The enterprise has to observe pollution control measures as prescribed by GPCB or other competent authority.

5.4 Support to Spinning units by way of Special concession in Power tariff

& assured supply of Lignite:

(i) Power tariff subsidy Rs.I per unit in the billed amount of the utility for the units will be available for the period of 5 years as promotional initiatives for cotton spinning industries and weaving units with or without preparatory in Gujarat.

This will only be applicable for establishing new enterprises or for expansion/ diversification of existing enterprises as well as the units with second hand eligible imported machineries under the scheme as mentioned in Para 5.3 (ii) and para

5.3 (iii). There will be clear demarcation on the supply of electricity for fulfill the eligibility criteria.

Subsidy will be paid to the enterprises by the Office of Industries

Commissionerate after certified by the Power Distribution Company of the claims.


798 NOTIFICATION

(ii) The enterprises setting up of unit having captive power plant will be given assured supply of lignite by way of supply agreement with GMDC for the period of

5 years from commencement of power plant.

(iii) The units who purchases electricity only from the state electricity / power distribution licensee will eligible for this relief. The unit either generating power from his captive power plant or getting electricity through open access will not be eligible for the subsidy.

5.5 VAT Concession

5.5.1 Refund of VAT paid by the unit on purchases of intermediate product/raw material except for certain goods and certain transactions which are not eligible for tax credit under the Gujarat VAT ACT, 2003 and remission of VAT/CST collected on end product/intermediate product within entire value chain from cotton to Garment and on end made ups to the extent of 100% the eligible fixed capital investments in plant & machinery made within one year (two years in case of investment more than 500 crores) from the date of production or during the operative period of the scheme whichever is earlier.

This concession will be available within 8 years from the date of the production.

5.5.2 If and at such time, VAT and/or CST are replaced by Goods and Services

Tax or any other similar law for the levy of tax in the state of Gujarat, after the date of issue of this GR the interest of the unit would be adjusted in order to maintain the same economic benefits to the unit.

5.5.3 The Eligibility Certificate for the above VAT concessions will be issued by the Industries Commissioner Office.

For the purpose above, Eligible Fixed Capital Investment means investment made in plant and machineries during the operative period of the scheme.

5.5.4 The finance department will issue suitable notification in this regard

5.6 General conditions:

The following conditions shall apply to the above scheme,

(i) The enterprise must start commercial operation within the operative period of the scheme.

(ii) The enterprise availing benefit under the scheme will have to remain in production/services at least for ten years from the date of commencement of commercial production/services.

(iii) All the benefiting enterprises shall file information about annual production, sales, power consumption and such other details as may be asked by DIC on 31 st of every March annually.



(iv) For expansion/diversification/modernization the enterprise will be entitled for incentives only once during the operative period of the scheme.

(v) The Enterprises availing benefit under this scheme can not avail benefit from any other State Government scheme like MSME for the same purpose. However,

Enterprises are eligible to get any other additional benefit under Government of

India scheme.

(vi) Ginning enterprises alternatively can avail the benefit under MSME Policy

GoG as per the norms.

(vii) All the benefits will be over and above benefit and support given by GoI.

(viii) VAT concession for composite unit is eligible for investment in any part of the whole value chain .

In case of expansion, VAT concession will be eligible on total production including on existing machinery .

(viii) Technical Textile Sectors will also be eligible to get VAT concession.

6.0 Scheme - 2: Support to Technical Textiles

6.1 The Scheme — Interest Subsidy

The scheme will be known as Credit linked Interest Subsidy in Technical

Textiles.

6.1.1 Eligible Activities

(i) Technical Textiles are defined as textile materials and products used primarily for their technical performance and functional properties rather than their aesthetic or decorative characteristics. Depending on the product characteristics, functional requirements and end-use applications, the highly diversified range of technical textiles have been grouped into 13 sectors application-wise.

i. Agrotech (Agriculture, Horticulture and Forestry) ii Buildtech (Building and Construction) iii Clothtech (Technical components of shoes and clothing) iv Geotech (Geo-textiles and Civil Engineering) v Hometech (Components of furniture, household textiles and floor coverings) vi Indutech (Filtration, cleaning and other industrial usage) vii Meditech (Hygiene and Medical) viii Mobiltech (Automobiles, Shipping. Railways and Aerospace) ix Oekotech (Environmental Protection)


800 NOTIFICATION x Packtech (Packaging) xi Protech (Personal and Property Protection) xii Sporttech (Sport and Leisure) xiii Defencetech (Textile for defense use) xiv Any other product as notified by Ministry of Textiles, Government of India, time to time.

(ii) This Scheme will be applicable to new as well as to existing, enterprise for expansion/ upgradation in above sectors.

(iii) The machinery of Technical/Industrial textile as specified in Para 4.5 will be considered eligible.

(iv) The Enterprises availing benefit under this scheme can not avail benefit from any other State Government scheme like MSrviE for the same purpose.

However, Enterprises are eligible to get any other additional benefit under

Government of India scheme.

6.1.2 Quantum of Assistance

(i) Maximum interest subsidy will be at the rate of 6% per annum. This interest subsidy will be in addition to any other incentives available from Government of

India.

(ii) Interest subsidy will be available for establishing new enterprises or for expansion/ diversification / modernization of existing enterprises as per para 4.3 and 4.4, only for the investment in New & modern Plant & Machinery as specified in

Para 4.5. The enterprise which have acquired second hand imported machineries having 10 years vintage and with a residual life of minimum 10 years duly certified by the competent authority like Chartered Engineer/ Chartered Account etc., will be considered eligible for support under the scheme to the extent of 60% of the acquisition value of imported machineries. The eligible list of machineries will be compatible with the list of machineries as specified in Para 4.5.

The acquisition value of the second hand imported machinery will be considered up to 50 % of the value of new imported machinery or actual purchase value, whichever is less.

The support against the second hand imported machineries will be given only after successful operation of the machineries for six months period by the enterprise.

(iii) For the purpose of interest subsidy, the enterprise shall get term loan from

Financial Institution/ Bank recognized by Reserve Bank of India.

(iv) The enterprise has to apply within one year from the last disbursement of term loan but not later than the date of commencement of commercial production.



Such enterprises shall not be eligible to claim interest for the period from date of first disbursement to the extended date from when the unit exercise the option to avail the benefit if interest subsidy for five years period.

(v) Disbursement of the loan should be within the operative period of the

Scheme.

(vi) The enterprise must start commercial operation within the operative period of the scheme.

(vii) The interest subsidy will be available only on interest levied by the

Financial Institution. Penal interest or other charges will not be reimbursed.

(viii) Benefit of Interest Subsidy will be considered from the date for which unit has opted but not later than commencement of commercial production .

(ix) The interest subsidy will be given to the enterprise which pays regular installments and interest to the financial institutions. If the enterprise becomes defaulter, it will not get interest subsidy for the default period and such defaulting period will be deducted from 5 years period.

7.0 Scheme — 3 Assistance for Energy Conservation, Water Conservation and Environmental Compliance to existing units (more than 3 years old)

7.1.1 The Scheme

The scheme will be known as assistance for Energy Conservation, Water

Conservation and Environmental Compliance to existing units having in operation for more than three years. 7.1.2 Quantum of Assistance

(i) Assistance up to 50%, Max Rs. 50,000 for Energy Audit/Water Audit/

Environmental Compliance which will be applicable in each case separately.

(ii) Assistance up to 20% of cost of equipments, Max Rs. 20 lakhs which will be applicable in each case separately.

(iii) The enterprises will be eligible for the above benefit once in 2 years of operating period of the scheme.

8.0 Scheme — 4 : Assistance for Technology acquisition and upgradation

8.1 The Scheme

The scheme will be known as assistance to enterprises for Technology acquisition and upgradation.

8.2 Eligible Activities

(i) The enterprise acquiring the technology for the first time in India for specialized application will be considered eligible under the scheme.


802 NOTIFICATION

(ii) The acquisition of technology and collaboration can be in any form, including purchase of drawing and design and technology development through engaging experts/ R&D institution and/or technical consultancy firm. Mere import of Machinery or Technology will not be considered as Technology Acquisition.

However existing Gujarat based textile machinery manufacturers can also avail the benefit for technology collaboration from abroad.

8.3 Quantum of Assistance

(i) The enterprises acquiring the technology will be provided financial assistance of upto 50% of the investment for technology acquisition / collaboration, with maximum of Rs 25 lakhs per process/product once during operative period of the scheme.

(ii) The enterprise availing the benefit for the same purpose under any other scheme of State Government will not be eligible to get benefit under this scheme.

9.0 Scheme — 5: Assistance to Apparel Training Institutions and Trainees

9.1 The Scheme

The scheme will be known as Assistance to Training Institutions, Training

Centers, Trainers and Trainees for Apparel related production.

9.2 Eligible Activities & Quantum of Assistance

9.2.1 Setting up of Training Institution

(i) Under the scheme, any autonomous institutions promoted by government/ public sector undertakings or private sector with a background of textile and apparel industries or skilled manpower development, will be provided assistance upto 85%, with ceiling of maximum of Rs 3 crore, of the project cost covering fixed capital investment in building, equipments and machinery (including installation cost), electrification, furniture and other miscellaneous investment required for setting up training facilities, excluding land cost. Maximum 25% cost of Machineries and

Training Equipments will be eligible to consider for Infrastructure including Building.

(ii) The recurring expenditure for running the training institution has to be borne by the promoter institution.

(iii) Institution shall create mechanism for assessment of trainees either in line of MES, GCVT or third party skill assessment body or Institutions empanelled as decided by SLAC from time to time. However 50% of the candidates undergone training are expected to clear the examination / assessment successfully.

9.2.2 Upgradation of facilities in Industrial Training Institutes (ITIs)

ITIs offer different courses in apparel production as per the training scheme of

All India Apprenticeship Training. These courses need to be upgraded as per the


NOTIFICATION 803 requirement of apparel industry and the training content needs to he approved by

State Level Committee/Anchor Institutions. ITIs, therefore, need additional facilities in terms of new equipments and machineries. Accordingly, ITIs will he provided need based assistance for purchase of equipments required for upgrading their existing facilities to provide training in apparel production. The assistance will be as one time grant of total cost of additional equipments required to be purchased for conducting training courses in apparel production.

9.2.3 Training Centers

(i) In Gujarat, there are large numbers of Training Centers in the form of tailoring schools, which provide training in sev‘ing and other tailoring related activities, set up by different institutions, NGOs and private entrepreneurs and registered by

Directorate of Employment & Training (DET). There is a good potential to upgrade these facilities to provide training for different skills of apparel production. This would generate large number of skilled manpower in urban and semi-urban areas of the state.

(ii) Such training centers, which come forward to upgrade their facilities in order to make them viable apparel training centers will be provided assistance at 50%, subject to a limit of Rs. 20 lacs per center, of their investment towards purchase of equipment and machinery (including installation cost), electrification and necessary furniture. Establishment of new training centers will also be eligible for financial assistance under the scheme. The institutions/ training centers will be required to provide training as per the norms of MES/AEPC or State Level

Committee/ Anchor Institutions.

(iii) The Institution/Training centre shall create mechanism for assessment of trainees either in line of MES, GCVT or third party assessment body or Institutions empanelled as decided by SLAC from time to time.

9.2.4 Reimbursement of tuition fees to Trainees

(i) The training institutions charge tuition fees from trainees to meet their recurring expenditure, as this is the only source of income to run such institutions.

The tuition fees for undertaking training in apparel production are much higher as compared to fees charged by ITIs in different skills.

(ii) It is, therefore, necessary to provide assistance to trainees so as to enable them to pay tuition fees. The assistance will be at 50% of total fees charge by institutions, subject to a limit of up to Rs 7,000/- per trainee for minimum 15 working days (120 hrs duration) per course in apparel production in institutions approved by the State Level Committee. The selection of trainees will be carried out by the committee constituted by concerned General Manager (GM), DIC involving local industries/Industry Association. The tenure of the Training. Syllabus and Tuition

Fees will be prescribed by State Level Committee/ Anchor Institutions.


804 NOTIFICATION

(iii) However, this support will not be available to those trainees availing any other similar support provided by State Government.

(iv) Training Institutions/Centers promoted under the scheme or GoG or GoI will continue to get benefit upto 10 years of commissioning.

9.2.5 Assistance for training to Trainers

(i) Financial assistance, as reimbursement of training cost with maximum limit of Rs.7,000/- per trainer per week will be provided to apparel training institutions/ centers approved by State Level Committee for imparting training to the trainers

(a) at 100% in case of trainers attending autonomous institutions promoted by

Government/Public sector undertakings and

(b) at 50% in case of trainers attending other institutions

(ii) The training period should not be more than four weeks.

(iii) The training will be conducted in the institutions approved by the State

Level Committee/ Anchor Institutions.

10.0 Scheme - 6: Training Support to Power loom Sector 10.1 Stipend to

Trainees of Power loom

10.1.1 The Scheme

The scheme will be known as assistance by way of stipend to trainees of

Power loom training centers operated by ATIRA and MANTRA and other Powerloom

Service Centers OR Skill Development Centers promoted by State or Central

Government OR any autonomous bOdy as approved by State Level Committee from time to time.

10.1.2 Eligible activities

The fresh trainees of Power loom training centers operated by ATIRA at

Ahmedabad & Dholka and by MANTRA at Pandesara, Katargam & Sachin at Surat and other Powerloom Service centres OR Skill development Centres promoted by State or Central Government OR any autonomous body as approved by State

Level Committee from time to time will be considered eligible for stipend.

10.1.3 Quantum of Assistance:

Trainees will be given stipend of Rs.2500/- per month for the period of three months.

10.2 Assistance for advanced training to Power loom owner/ jobber and worker 10.2.1 The Scheme

The scheme will be known as assistance for advanced training to power loom owner/ jobber and worker to upgrade skills to work on Auto looms, High speed auto looms and Shuttleless looms and to improve their working style, skill and behavior.



10.2.2 Quantum of Assistance

(i) Allowances towards cost of transport & incidental expenses to weavers

@ Rs.200/- per day for duration of two days and Jobbers @ Rs.300/- per day for duration of six days. No allowances will be given to Power loom owner.

(ii) No fees will be charged by the Institution from Weaver, jobber or Owner for providing training.

10.2.3 Other Conditions

The following conditions shall apply for providing financial assistance:

(i) Training period will be two days for weaver, six days for jobber and two days for power loom owner.

(ii) Fees to experts, practical training, facilities for training etc. will be decided in consultation with the office of Industries Commissionerate for the each training programme. Reimbursement of actual cost for such expenditure will be given to

ATIRA/ MANTRA or institutions/autonomous OR Non Profit Organization with maximum 25% of the estimated cost as an advance, as approved by State Level

Committee.

11.0 Scheme-7 : Support for establishing Textile & Apparel Park:

The scheme will be known as support for setting up of Textile and Apparel

Park anywhere in the state of Gujarat.

Eligibility:

(i) Any Industry Association/Industrial House/Co-operative society/ Institution registered under the Societies Act, Partnership Act or the Companies Act OR any Government body like GIDC shall be eligible as developer to avail assistance under the scheme.

(ii) The park must have provision for the location of minimum 20 numbers of manufacturing/ service enterprises (Maximum 25% numbers of service and allied enterprises).

(iii) For Spinning Park — The park must have provision for the location of minimum 10 numbers of spinning unit with minimum 150 acres of land. Up to 35

% of land may be utilized for weaving activities also in the park in order to support spinning activities.

In addition to above, provision of common facilities like canteen. space for refreshment, toilets, drinking water, primary medical facilities for workers, employees and visitors are required to be established in the spinning park. Common parking for transporters, garden and fire safety facility are required to be established by the developer in the spinning park.


806 NOTIFICATION

11.2 Infrastructure facilities:

Infrastructure facilities shall include cost for development of infrastructure like internal roads, power lines, communication facilities, water distribution line and water augmentation facilities, sewage and drainage lines, effluent treatment and disposal facilities, storage facilities, common facility centre like training centre, display centre etc. and other facilities as may be required in the Industrial Park. The expenditure incurred for the infrastructure development shall only be considered.

The construction norms shall be decided by the SLAC. No link infrastructure outside the park area shall be considered eligible under the scheme.

11.3 Quantum of assistance:

The park will be provided financial assistance of up to 50%, with maximum limit of Rs. 10 crore (Rs.30 crores for Spinning park) of total project cost for establishing common infrastructure facilities, excluding land cost.

The developer of industrial park and enterprises in the industrial park will be eligible for exemption of stamp duty on purchase of land required for the new industrial park as approved by SLAC. This exemption will be available only for once to developer and the first purchaser of an individual unit. Stamp duty exemption certificate will be issued after approval of the project.

A separate notification in this regard will be issued by the Revenue Department of State Government.

11.4 Mode of implementation:

I. The industrial parks are required to have minimum infrastructure facilities required for park namely internal roads, water distribution network, drainage facilities, effluent treatment, power distribution network and other facilities.

II. Indicative list of common infrastructure facilities are: a) Asphalt road, concrete road b) Storm water drainage system c) Domestic sewage collection and disposal system d) Streetlights e) Open & Green spaces f) Water & Power supply & distribution network g) Entrance gate and security h) Communication network i) Effluent treatment collection/ disposal


NOTIFICATION 807 j) Fire station/ fire fighting facilities with equipments k) Common storage facilities for raw material/ finished products.

I) Boundary wall

11.5 Other conditions:

1. The developer of the park availing incentive under the scheme will not be eligible to avail incentive under any other schemes of the State Government, unless specified otherwise. However, the enterprises coming up in the park shall be eligible to avail incentives under the separate schemes of State Government.

2. The construction of infrastructure facilities of the sanctioned project should be completed within the period of 3 years from the date of approval of project by SLAC. Failure to complete within the specified period will attract the recovery of Stamp duty as per rules by Superintendent of Stamp. Failure to complete the project within period specified as above, will render the project ineligible for financial assistance. The SLAC may extend the project completion period by one year on submission of valid reason by the developer.

3. The promoter/ developer of the project shall commit to hold atleast 20% equity participation in the project.

4. Expansion or modification/ modernization of existing industrial park shall not be eligible under this scheme.

5. The promoter/ developer of the park shall operate & maintain the park.

Otherwise sanctioned/ disbursed/ reimbursed amount will be recovered as arrears of land revenue under the Land Revenue Laws.

6. The detailed O&M arrangement and mechanism of third party inspection will have to be set up as an integral part of the project to claim assistance under the scheme.

12.0 State Level Approval Committee (SLAC)

A Committee, consisting of following members is constituted for sanction of assistance with respect to proposals received under the above mentioned schemes:

I Hon.'ble Minister for Mines and Minerals, Cottage Industries,

Salt Industries, Printing and Stationery Chairman

2 Additional Chief Secretary Industries & Mines Department

Member

3 Industries Commissioner

4 Managing Director, iNDEXTb

Member

Member


808 NOTIFICATION

5 Director, Agriculture, Government of Gujarat

6 Director, Employment and Man Power

7 Jt. Secretary (Textile), I & M Dept

8 Financial Adviser, Finance Department

Member

Member

Member

Member

9 President, Gujarat Chamber of Commerce & Industry Member

10 Director CED Member

11 Director ATIRA Member

12 Addl./Joint Commissioner of Industries Member

Secretary

SLAC may form a committee consisting of representative form Industry and

Government for overall monitoring of the scheme.

13.0 Any dispute / interpretation or contention under this scheme be referred to the SLAC and decision of the committee shall be final and binding on the applicant.

14.0 Procedure

The proposal for getting the assistance should be submitted to the respective

District Industries Centre. DICs will scrutinize and forward the proposal to Industries

Commissioner, who will submit before the State Level Approval Committee for its decision. Industries Commissioner in this regard will issue the detailed procedure separately.

15.0 Expenditure

The expenditure on this account will be met from the sanctioned grant of the respective financial year under the following budget head:

Demand No

Major Head

49 (Plan)

2852 (Industries)

Sub- Major Head

Minor Head

Sub Head

Detailed sub head

80 (General)

800 Other expenditure

IND-9, Development of Textile Industry

Object Head 2852 80 800 319

Subsidies ( c) to others

This revised policy is issued with the concurrence of Finance Department dated 19/06/2013 on this department file of even number .

By order and in the name of the Governor of Gujarat.

(K. C. Tamhane)

Joint Secretary to Government



Gujarat Textile Policy-2013 (Revised)

Integrated approach to strengthen the value chain, Farm- Fiber- Fashion (Garment) to

Foreign (export) ... Amendment thereto-

Government of Gujarat

Industries & Mines Department

Resolution NO.TEX/102013/432/T

Sachivalaya, Gandhinagar

Dated: 11 th October, 2013

Read:

1. Gujarat Industrial Policy-2009

2. Industries & Mines Department’s GR No. PLM-102006-2149-T dated 15/10/2007

3. Industries & Mines Department’s GRNO.PLM/102004/1047/T dated 27/02/2009

4. Industries & Mines Department’s GR NO.PLM/l02004/1047/T dated 19/6/2009

5. Industries & Mines Department’s GRNO.TEX/102012/65117/T dated 5/09/2012

6. Industries & Mines Department’s GRNO.TEX/102012/65117/T dated 25/06/2013

Preamble:

It was under active consideration of Government that the tax concession by way of reimbursement and method of calculation for eligibility to the units under the Gujarat

Textile Policy-2012 (revised) may be given accordingly. After careful consideration,

Government is pleased to decide to amend as under.

Resolution:

1. In Industries & Mines Department GR NO.TEX/l02012/65117/T dated 25/06/2013 regarding the Gujarat Textile Policy-2012 (revised); •

(A) In Para NO.5.5.1,the word “CST” is to be deleted.

(B) In Para No.5.5.1, the word “remission” is to be substituted by “reimbursement”

(C) In Para No. 5.5.2, the word “CST” is to be deleted.

2. In Industries & Mines Department GR NO.TEX/102012/65117/T dated 25/06/2013 regarding the Gujarat Textile Policy-2012 (revised); the following conditions shall be inserted in Para 5.6 at serial no.(x) to (xii) as mentioned here-in-under.

(x) The enterprise will not be entitled to get remission or refund of VAT (VAT

Concession) on their inter-state sales.

(xi) The monetary ceiling available to the eligible unit shall be divided in to 8 years and the eligible unit shall be entitled to avail the annual benefit to the


810 NOTIFICATION extent of 1/8 of monetary ceiling. The unavailed amount of annual benefit during the year can be availed in the next year. If the unit reaches to the entitled incentives by the year, such unit have to pay VAT for the remaining period in accordance with the provision of VAT Act.

(xii) In case of composite unit having Ginning and Spinning activity, the investment made in Plant & Machinery will be considered separately for the purpose of eligible amount for Tax concession. Such monetary ceiling will be applicable in Ginning & Spinning separately to avail Tax concessions.

This GR is issued with the concurrence of Finance Department vide its letter dated 10/10/2013 and dated 10/10/2013 on this department’s file of even number


(K. C.

Tamhane)

Joint Secretary to Government

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ASSOCIATION NEWS 813

ASSOCIATION

NEWS

 Shri Urvish V. Patel - Shri Tejash R. Shah

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lÉÉ. 1-12-2013{ÉÉ ùÉàW Cims Hospital Nr. Shukan Mall, Off Science city road,

Sola, Ahmedabad LÉÉlÉà ©ÉàeÒH±É +´Éàù{Éà»É ¡ÉÉàOÉÉ©É +ÅlÉNÉÇlÉ +yÉÇÊq´É»ÉÒ«É ©ÉÖ±ÉÉHÉlÉ{ÉÖÅ +É«ÉÉàW{É Hùà±É

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Program Schedule

9 am to 9.30am :- Registration tea & coffee

9.30 am to 11 am :- Talk on CPR and First Add

11.15 to 12 noon :- Visit to CIMS

12.30 Onwards: Lunch at CIMS cafeteria

©ÉÖ±ÉÉHÉlÉÒ »É§«ÉÉà{ÉÒ »ÉÅL«ÉÉ 100 »ÉÖyÉÒ ©É«ÉÉÇÊqlÉ Uà. lÉÉà ´É¾à±ÉÉ lÉà ~É¾à±ÉÉ{ÉÉ yÉÉàùiÉà +à»ÉÉà»ÉÒ+à¶É{É{ÉÒ

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October 2013 - The Gujarat Sales Tax Bar Association

: Thought of the Month :

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President’ s Desk

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¡É©ÉÖLÉ¸ÉÒ yÉÒ NÉÖWùÉlÉ »Éà±»É÷àKÉ ¥ÉÉù +à»ÉÉà»ÉÒ+à¶É{É

Threshold Exemption of Rs. 10 Lakh vis-à-vis

Reverse Charge Mechanism under Service Tax

Penalties prescribed u/s 78 of the service tax Act.

SERVICE TAX ON EDUCATIONAL

SERVICES - OVER ALL VIEW

Important changes/ announcements pertaining to the Service Tax law

ÊWÅqNÉÒ - +àH HàÊ±ÉeÉà»HÉà~É

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INTROSPECTION

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yËk÷íkkuLke yxkheyuÚke

swËe swËe yËk÷íkkuLkk yøkíÞLkk [qfkËk

gist of IMPORTANT judgments reported in SEPTEMBER, 2013

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(3) ©ÉÉÊ¾lÉÒ +ÊyÉHÉù ¥ÉÉ¥ÉlÉ +ÊyÉÊ{É«É©É, 2005

Gist of the

Judgements

Tribunal

Judgements

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IMPORTANT SUPREME COURT JUDGEMENT

OÉÒ´É{»É »Éà±É

X¾àù ~ÉÊù~ÉmÉ

ASSOCIATION

NEWS

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