SIEMENS LTD Vs. STATE OF KERALA

JUDGEMENT

(1.) This Original Petition challenges the vires of item C of Explanation.4 of clause (xxi) of S.2 of the Kerala General Sales Tax Act, 1963 (hereinafter referred to as 'the Act'). This was introduced by Act 11 of 1995 which repealed Ordinance 11 of 1995. Item C of Explanation.4 of S.2 of the Act says that for the purpose of this Act, the transfer of property in goods whether as goods or in some other form involved in the execution of a works contract shall be deemed to have taken place in the State, if the goods are within the State at the time of such transfer, irrespective of the place where the agreement of works contract is made, whether the assent of the other party to the contract is prior or subsequent to such transfer.

(2.) According to the petitioner, it deals with works contract and the contract consists of both sale of goods as well as sale of labour. But so far as the sale of goods is concerned, according to the petitioner, goods sold are sales of interstate and hence, not liable to be taxed by the State Legislature. Before we deal with the contentions of both parties, it is necessary to state in brief the law regarding the works contract.

(3.) Tax on the sale of goods and purchase is the subject coming under Entry 54 of list II of the Constitution of India. But this is subject to Entry 92 - A of List I of the Seventh Schedule. Under Entry 92 - A it is within the province of the Central Legislature to legislate with regard to tax on the sale or purchase of goods where such sale or purchase takes place in the course of interstate trade or commerce. The question arose as to whether a works contract can be taxed under the definition of "sale" comes under the Act. This was resolved by the Supreme Court in the decision reported in State of Madras v. Gannon Dunkerley and Company (Madras) Ltd.9 S.T.C. 353. This decision, as already stated, gave difficulty in assessing the works contract under the Act.