SYMON Vs. STATE OF KERALA

JUDGEMENT

(1.) THE challenge in this batch of writ petitions is to the provisions relating to levy of tax on works contract in the Kerala General Sales Tax Act, 1963 ("the Act") and the Kerala General Sales Tax Rules, 1963 ("the Rules"), as they stand after the amendment by Acts 23 of 1991 and 8 of 1992, and otherwise. I make it clear that the consideration in these writ petitions is only of the provisions as amended, the provisions before the amendments being the subject of other writ petitions which we pending consideration by a Full Bench of this Court.

(2.) THE challenge is sweeping and embraces all the relevant provisions, namely, section 5 (1) (iv), sub-sections (7), (7a), (7b), (8), (10), (11) and (12) of section 7 and the Fourth Schedule to the Act, as amended by Acts 23 of 1991 and 8 of 1992, and rules 8 (4), 22a and 30a of the Rules. THE challenge is mainly on the ground that the provisions are not in accord with article 366 (29a) (b) of the Constitution introduced by the Constitution (Forty-sixth Amendment) Act, 1982 (hereinafter referred to as "the 46th Amendment"), as explained by the decisions of the Supreme Court in Builders Association of India v. Union of India [1989] 73 STC 370, Gannon Dunkerley & Co. v. State of Rajasthan [1993] 88 STC 204 and Builders' Association of India v. State of Karnataka [1993] 88 STC 248. 2 (a ). Works contracts as such were not liable for tax in the State till April 1, 1984, when consequent to the introduction of clause (29a) in article 366 of the Constitution, defining the expression "tax on the sale or purchase of goods", amendments were made to the Act and the Rules to levy tax on the transactions of sale, as enabled by the said Constitution amendment. THE definitions of "dealer", "goods" and "sale" were, inter alia, amended to bring to tax the transactions which could be brought to tax by virtue of the 46th Amendment. Explanation (3a) to section 2 (xxi) containing the definition of "sale" was thus introduced to provide that a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract shall he deemed to be a sale. Appropriate amendments were also made to the definition of "turnover" besides introducing a definition of "works contract" in section 2 (xxix) (a ). Section 5 which is the charging section was amended to provide a charge on the transfer of goods involved in the execution of a works contract and provision was made in rule 8 by introducing sub-rule (4) prescribing the manner in which the total turnover of a dealer in relation to works contract was to be determined. Sub-rule (4) as it stood at the time of its introduction in 1984 merely provided that the total turnover in relation to works contract shall be deemed to be the amount payable to the dealer for carrying out such contract, less a sum not exceeding such percentage of the amount payable as may be fixed by the Board of Revenue from time to time for different areas and for different types of contracts towards cost of labour. I am not entering into the details of the percentage so fixed as it is unnecessary for the purposes of these cases.

(3.) THESE provisions are challenged as being in conflict with the 46th Amendment. The history behind the said amendment has been set out in detail by the Supreme Court in Builders Association of India v. Union of India [1989] 73 STC 370 and therefore it is unnecessary to repeat it here. It will be necessary to refer to this decision as also to the two subsequent decisions already referred to in the course of discussion, so that I may just briefly mention the ratio decidendi of each of these cases.