Works Contracts under West Bengal VAT Act, 2003

RELIANCE INFRASTRUCTURE LTD Vs DEPUTY COMMISSIONER, SALES TAX
West Bengal Value Added Tax Act, 2003 – Work Contracts – Assessee entered into three separate contract agreements with DVC wherein the first contract relates to the supply including design, engineering, manufacturing, inspection, testing and packing of a plant and equipments including mandatory spares of the main plant as Turn Key Package from abroad, the second one also relates to supply contract inclusive of the above of Indian origin and the third contract is restricted to a service. All the aforesaid contracts were agreed under a Turn Key Package for commissioning and setting up of the Thermal Power Project – Assessment – Imposition of VAT on inter-State Sale or import of the goods treating the three separate contracts to be composite one – power to bring the sale of the goods effected in course of inter–State sale or by import within the purview of the West Bengal VAT Act – Forty-sixth Amendment – HELD – It is settled that State cannot by legislature imposed Sales Tax of the inter-State sale or the sale by import in relation to a works contract provided the same is used in commissioning of the project on turnkey basis in the same form without changing its character through a manufacturing process. The power of the state to legislate on imposition of Sales Tax in relation to the works contract is not unfettered but a restrictive one. After the Forty-sixth amendment in the Constitution, the works contract is capable of being divorced into a supply and the labour and service. It is not a universal rule that if the works contract is on the turn key basis, it imbibed inseparation and indivisible but depends upon the construction of the contracts and the intention of the parties to be gathered therefrom. The Deputy Commissioner has simply proceeded on the basis that though the separate contracts are entered into between the parties but they are on a turn key basis, it partakes the character of indivisible and inseparable works contract exigible to the State Sales Tax. There is no finding recorded in the impugned order on the nature of the transaction reflected in the books maintained by the petitioner and the return filed in this regard – Since the same required a voluminous documents to be looked into which this Court has no occasion to look into it, it is not possible to ascertain whether the sale of transfer of property in goods in connection with the Inter State Sale or by import can be segregated and the said authorities is incompetent to levy tax under the State Legislation – This Court, therefore, feels that it would be proper that the Deputy Commissioner should relook the judgment in the light of the law enunciated above and to record his findings and the reasons in relation thereto – The order impugned is thus set aside – The matter is relegated back to the Deputy Commissioner for reconsideration