MICHAEL Vs. STATE OF KERALA

JUDGEMENT

(1.) THE petitioners in both these cases are contractors undertaking civil works for the Kerala State Electricity Board. THE petitioner in O. P. No. 9192 of 1992 had undertaken the work of remetalling or grouting of road, while the petitioner in O. P. No. 2291 of 1993 did the work of laying cables. All the materials for the execution of these works are supplied by the electricity Board and the petitioners only supply the labour. As the petitioners put it, the work is a labour oriented one without any supply of materials. THE Electricity Board has issued a circular, a copy of which is marked Ext. P6 in O. P. No. 2291 of 1993, on 24-6-1992, directing deduction of specified amounts from the payments made to contractors to meet the sales tax due on works contracts under the Kerala General Sales Tax Act, 1963 (the act ). Petitioners state that no such deductions can be made from the amounts due to them under the aforesaid contracts, as there is no transfer of goods involved in the execution of these works. Petitioners have therefore filed the writ petitions seeking relief against collection of sales tax in respect of the above works.

(2.) THERE is no dispute that the petitioners are not supplying any materials to the Electricity Board and that they have only supplied the labour for the purpose of carrying out the works. The Forty sixth amendment to the constitution has introduced Clause 29a to Art. 366 defining "tax on the sale or purchase of goods" as inclusive of 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 definition of sale in S. 2 (xxi) of the Act was thereafter amended with effect from 1-4-1984, inter alia adding Explanation (3a) deeming a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract, as a sale. The Supreme court has analysed the reason behind the Constitutional Amendment in Builders association of India v. Union of India (1989) 73 STC 370 and laid down that the emphasis is on the transfer of property in goods. Without such transfer of property in goods being involved, there could be no levy of sales tax in relation to a works contract. The ratio of the decision applies to Explanation (3a) to S. 2 (xxi) of the Act as well.

(3.) THE respondents are therefore directed to look into the matter and make payment to the petitioners of any amount which has been withheld from them in respect F works contracts not involving any transfer of property in goods whether as goods or some other form. THE original petitions are disposed of with the above direction. . .