By C. B. Thakar Advocate G. G. Goyal Jana K Vaghani Chartered Accountants
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Inter-State Sale – Works Contract-Manufacture of Goods outside the State- Used In Works Contract-Transaction of Inter-State Sale.
Sale In Course of Import- Works Contract- Import of Goods- As Approved by Employer- Used In Contract- Sale in Course of Import- Not Taxable, sections 3 and 5(2) of The Central Sales Tax Act, 1956
Facts
The appellant a Public Ltd. Company was awarded indivisible works contract for supply, installation, testing and commissioning of traction, electrification, power supply, power distribution and SCADA systems for Delhi Metro by Delhi Metro Rail Corporation (DMRC). The company manufactured certain goods required for the projects outside the State of Delhi and used in execution of works contract. Likewise, the company imported certain goods required for the projects and used in execution of works contract. The company took approval of the DMRC for purchase of goods as stipulated in the contract. The company while filing vat returns under the Delhi Vat Act claimed the exemption form payment of the tax on sale of goods purchased from outside the State of Delhi being inter-State sale not liable to tax under the Delhi Vat Act. Likewise it claimed exemption form payment of tax u/s. 5(2) of the CST Act in respect of sale of goods imported under the contract being sale in the course of import. The vat department rejected the claim of company both as inter-State sale as well as sale in the course of import and levied tax under the Delhi Vat Act. The company filed appeal before the Delhi High Court against the judgment of the Tribunal confirming the assessment order.
Held
On the facts of the case the High Court held that in the present case, there was a live and conceivable link between the sale and movement of goods. The goods were custom made. The DMRC was aware that the goods were to be sourced from the appellant’s factories which were outside Delhi. The reference to specific locations, in the list issued by DMRC, in respect of particular equipment which were integral to the contract. Accordingly, the High Court held the transaction as inter-State sale and not liable to tax under the Delhi Vat Act.
In respect of import of goods the High Court considering various conditions in the contract held that the transaction was a sale in the course of import exempt u/s. 5(2) of the CST Act. The High Court allowed the appeal filed by the Company.
