Jharkhand govt's plea rejected in sales tax case

LEGAL DIGEST

The Supreme Court last week dismissed the appeal of the Jharkhand government which had imposed sales tax on the works contract undertaken by Voltas Ltd.

The assessing authority acknowledged that the contracts for supplying and installing air conditioning equipment were works contract and the material supplied in the execution alone were liable to be taxed.

However, the sales tax authorities had sought to levy a uniform rate of tax at the rate of 16 per cent holding that in this case, the incidence of tax was commensurate with the actual transfer of property that took place in the execution of the works contract. The company moved the high court and it allowed its petition.

While dismissing the appeal of the government against it, the Supreme Court observed: "It is not merely labour charges which are deductible from the value of the works contract, but all other charges also, except the value of the goods sold in execution of the works contract. This is because only the value of the goods sold can be taxed as sales tax."

Constitution of arbitral tribunal

The Supreme Court observed last week that when a party to a contractual dispute challenges the constitution or jurisdiction of the arbitral tribunal, it must be done at the threshold itself so that remedial measures could be taken without loss of time.

If this step is not taken at the proper time, the party cannot be allowed to raise it later, the court said in the judgement, Gas Authority of India Ltd vs Keti Construction Ltd. In this appeal against the judgement of the Delhi high court, GAIL referred the dispute to a retired judge , who gave a 'no claim' award.

The contractor moved the high court against it. The single judge dismissed the petition. However, on appeal, the division bench set aside the award and asked the parties to appear before a new arbitrator nominated by the contractor. GAIL appealed to the Supreme Court which set aside the high court decision.

Metal billets distinct from ingots

The Supreme Court last week allowed the appeal of the Commissioner of Central Excise and set aside the decision of the Customs, Excise & Gold (Control) Appellate Tribunal on the question of duty on aluminium ingots converted into aluminium billets. Mahavir Aluminium Ltd, Bhiwandi, was engaged in the manufacture of aluminium products.

It was producing billets and consuming them captively for the manufacture of irrigation pipes and also selling them in the market. The authorities issued show cause notice alleging that the firm did not mention the facts in the declarations and threatened penalty.

When the dispute came before the commissioner, he held that aluminium billets had come into existence as a result of conversion of aluminium scraps, ingots and other alloying materials by the process of melting. Billets were thus a commodity distinct from ingots.

There was 'manufacture' in the process. Moreover, the commodity was also sold in the market. When the firm appealed to the tribunal, it held that there was no manufacture involved, observing that "mere change in the physical form of shape or substance does not amount to manufacture." The authorities appealed to the Supreme Court which upheld the commissioner's decision.