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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 496 OF 1990
WITH
WRIT PETITION NO. 4885 OF 1990
AND
WRIT PETITION NO. 4886 OF 1990
Sudhakar S. Pangol ig .. Petitioner
V/s
State of Maharashtra & Anr. .. Respondents
Mr. A.V. Anturkar for the Petitioners.
Mr. V.A. Sonpal, A.G.P. for the respondents.
CORAM : FERDINO I. REBELLO & D.G. KARNIK, JJ.
DATE : 7TH AUGUST 2009
JUDGMENT : (Per D.G. Karnik, J.)
1. In each of these three petitions, the petitioners challenge the
constitutional validity of Maharashtra Sales Tax on the Transfer of
Property in Goods involved in the Execution of Works Contract (Re-
enacted) Act, 1989 (for short “the Works Contract Act, 1989”) and pray
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for a declaration that the Works Contract Act, 1989 is unconstitutional
and ultra vires the provisions of Articles 14 and 19(1)(g) as well as
Article 246(2) read with Entry No.54 List II in Seventh Schedule read
with Article 366 of the Constitution of India.
2. Mr. Anturkar, learned counsel appearing for the petitioners,
submitted that the grounds of challenge in all the three petitions are
common. He took us through the facts stated in Writ Petition no. 496
of 1990 and submitted that decision on that petition would also be
applicable to the other two petitions.
3. Mr. Anturkar in fairness invited our attention to a decision of this
Court in Writ Petition No. 485 of 1990 (Builders Association of India v.
State of Maharashtra & Ors., decided on 25th August 1994 – Coram:
Pendse, J.), wherein the constitutional validity of the Works Contract
Act, 1989 was upheld by this Court. He however submitted that the
grounds of challenge to the constitutional validity of the Works
Contract Act, 1989 raised in this petition were not raised before the
Court in that petition and, therefore, this Court can again go into the
question of constitutional validity independent of that decision. He
further submitted that in any event the points raised in these petitions
are not covered by the previous decision and, therefore, the points
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raised herein would be required to be considered independently by this
Court. We are afraid this is not permissible. A decision of a Court in a
writ petition challenging the constitutional validity of a statute, if not
akin to a judgment in relm, would certainly amount to a stare decisis.
The challenge to the constitutional validity may be on a different
ground or grounds or in addition to the grounds raised in the earlier
petition would not ordinarily be permissible before the same Court.
The same Court cannot be moved again and again by one and other
petitioners challenging the issue of constitutional validity of the same
statute on different grounds. Even otherwise, we are satisfied that no
grounds exist to declare the Works Contract Act, 1989 to be
constitutionally invalid for the reasons indicated below.
4. In State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd., AIR
1958 SC 560, the Supreme Court examined the ambit of Entry 48 of
List II of the Seventh Schedule to the Government of India Act, 1935
and held that the expression “sale of goods” connotes essential
ingredients being an agreement to sell movables for a price and
property therein passing pursuant to that agreement. The Supreme
Court further held that in a works contract, which is entire and
indivisible, there is no sale of goods and no tax could be imposed on
the supply of material used in such a contract treating it as a sale. After
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the decision of the Supreme Court, with regard to the taxability of
goods involved in the execution of the works contract, the Law
Commission in its 61st Report made a suggestion to insert in Article 466
a wide definition of “sale” so as to include works contracts. Keeping in
view the recommendations of the Law Commission, the Constitution
was amended by 46th Amendment. The 46th Amendment made it
possible for the State to levy sales tax on the price of goods and
materials used in a works contract. In its judgment in Builders
Association of India v. Union of India, (1989) 2 SCC 645, the Supreme
Court upheld the validity of the 46th Amendment to the Constitution.
The petitioners therefore have not challenged the constitutional validity
of the 46th Amendment to the Constitution, but have restricted the
challenge to the Works Contract Act, 1989.
5. Mr. Anturkar, learned counsel for the petitioners, submitted that
the Works Contract Act, 1989 seeks to charge tax on the goods
purchased outside the State and was void to the extent it sought to levy
tax on purchase of goods outside the State. He invited our attention to
section 3 of the Works Contract Act, 1989 which is the charging
section and creates a liability on every dealer on turnover of all
purchases or sales. Turnover of sales has been defined under section
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2(p) of the Works Contract Act, 1989 to mean aggregate of the amount
of sale price received or receivable by a dealer in respect of any transfer
of property in the goods involved in the execution of any works
contract whether executed fully or partly during any period. “Sale
price” has been defined under section 2(m) as follows:-
“2(m) “Sale price” means-
(i) the amount of purchase price of the goods or, as the
case may be, the value of the goods, brought or
transferred from a place outside the State where
such goods are sold in the same form in which they
were purchased, brought or transferred; and
(ii) where the goods have been sold in the form other
than the form in which they were purchased or, as
the case may be, brought or transferred from a place
outside the State, then the purchase price of the
goods or, as the case may be, the value of the goods
brought or transferred from a place outside the
State, and so sold.”
6. Mr. Anturkar submitted that under sub-clause (i) of clause (m) of
section 2 of the Works Contract Act, 1989 lays down that in respect of
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goods brought or transferred by a dealer from a place outside the State,
the purchase price of the goods outside the State would be regarded as
the sale price for the purpose of determination of incidence of tax
payable under the Works Contract Act, 1989. He submitted that thus
the price of the goods paid by a dealer in respect of a purchase
transaction which has taken outside State is regarded as price for the
purpose of determination of the incidence of tax. The Legislature has
thus sought to bring to tax the purchase effected by the dealer outside
the State. The Legislature has no power or competence to tax purchase
or sale which takes place outside the State of Maharashtra and,
therefore, the Act is void for lack of legislative competence.
7. Mr. Anturkar further submitted that the petitioners purchase
goods outside the State and bring them to the State of Maharashtra,
where they are used in works contracts with their customers. The
property in the goods purchased outside the State of Maharashtra
passes on to the customers in the execution of the works contracts. The
Legislature of Maharashtra may be competent to impose tax the value
of the goods which are purchased by the petitioners in the State of
Maharashtra and used in the execution of a works contract. However,
by seeking to tax the goods which are purchased by the petitioners
outside the State of Maharashtra and which are transferred in
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execution of works contract in the State of Maharashtra on the basis of
the purchase price paid outside the State, the Legislature of
Maharashtra has exceeded its power by imposing tax on the purchases
of the goods effected outside the State of Maharashtra.
8. In its decision in Builders Association of India v. State of
Maharashtra (supra), this Court has upheld the constitutional validity
of the Works Contract Act, 1989 and has held that the Legislature of
Maharashtra has a power to impose tax on the value of goods which
are transferred by a person to another while executing the works
contract. In determining value of the goods as transferred, a dispute
may arise as to how the value of goods which have been transferred by
a person to another in execution of works contract, is to be determined.
The property in which it is transferred may have been purchased by the
dealer/contractor either within the State or from outside the State.
While there may be no dispute between the parties as to the
computation of the price of the goods purchased by the dealer or the
contractor or a dealer in the State of Maharashtra and used in
execution of the work, a dispute may arise as to the value of the goods
purchased by the dealer or the contractor outside the State and used in
execution of a works contract. In order to obviate such dispute, the
Legislature has defined the word “sale price” in section 2(m). By that
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definition, it is provided that in respect of the goods brought by a
contractor or a dealer from outside the State and used in the works
contract, the price of the goods at which they were purchased would be
the sale price for computation of the “turnover of sale” in section 2(p).
The combined effect of section 2(p) read with 2(m) is to consider the
price at which the goods were purchased by the dealer or the
contractor outside the State and brought into the State for execution of
the works contract as the price for the purpose of computing the
turnover of a works contract. Undoubtedly, the State is competent to
tax the goods, whether purchased within the State or outside the State
and brought in the State, the property in which is transferred to
another in execution of a works contract within the State of
Maharashtra. For the purpose of taxation, it matters not where from
the goods have been brought by the contractor/dealer and used in
execution of a works contract. Section 2(p) read with 2(m) of the
Works Contract Act, 1989 only provides the mechanism of determining
the value of the goods which have been purchased outside the State
and used in a works contract in the State. By doing so, the Legislature
has not taxed the sale transaction which has taken place outside the
State, but has only provided a mechanism as to how the value of the
goods, the property in which it is transferred by the contractor/dealer
in execution of works contract, is to be determined. This definition is
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introduced to obviate any dispute in ascertaining the price of the goods
which form the total turnover of the contractor/dealer.
9. No other point was urged challenging the constitutional validity
of the Works Contract Act, 1989.
10. For the reasons stated above, we are of the view that there was
no lack of legislative power in the Legislature of Maharashtra in taxing
the goods brought into the State from outside the State and the
property in which it is transferred in execution of a works contract.
The petitions accordingly fail and are dismissed with no order as to
costs.
11. Rule discharged with no order as to costs.
(D.G. KARNIK, J.) (FERDINO I. REBELLO, J.)
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