Case: Larsen &amp; Toubro Limited Vs. Additional Deputy Commissioner of Commercial Taxes &amp; Another

Same parties are entangled in these three appeals which arise out of the provisions of the Karnataka Sales Tax Act, 1957 (hereinafter referred to as the Karnataka Act). Two appeals are preferred by the assessee, viz. Larsen & Toubro Ltd., and one appeal is filed by the Revenue, i.e. the Sales Tax Department of Karnataka.2) The assessee is doing the business of engineers and contractors and in this process it, inter alia, executes projects under contracts with public sector undertakings, local bodies as well as the Union and the State Governments, besides private sector. The assessee is registered under the Karnataka Act and files its returns for payment of sales tax thereunder. The contracts which are secured by the assessee are the works contracts and a part thereof is generally assigned toFor example, in Civil Appeal No. 2956 of 2007, the assessee had secured a contract to construct an indoor stadium styled Sree Kanteerava Indoor Stadium in Bengaluru and the assessee assigned the work of finding their own materials and laying foam concrete to M/s. Lloyd Insulation (India Limited). Thiswas registered with the Deputy Commissioner of Commercial Taxes,City Division, Bengaluru, and accordingly it had submitted returns and paid taxes for the execution of the works contract and was duly assessed under Sectionsof the Karnataka Act. A certificate dated April 10, 1998 to that effect had been marked before thereturns are filed by the assessee as well on regular basis. In the course of the assessment, the assessee submitted that thewere the parties who executed the works contract and since the transfer of property involved in such execution had already been taxed, the appellant cannot be taxed again under Sectionof the Karnataka Act there being only one taxable event for the purpose of Article 366(29A)(b) of the Constitution of India. In nutshell, it was the submission of the assessee that value of the work entrusted to thecould not be taken into account while computing total turnover of the assessee for the purpose of taxation under the Karnataka Act. This submission of the assessee was, however, negatived by the Assessing Officer as well as the Karnataka Appellate Tribunal.

Reasoning:
18. As stated above, according to the Department, there are two deemed sales, one from the main contractor to the contractee and the other fromIf one keeps in mind the abovequoted observation of this Court in Builders Assn. of India the position becomes clear, namely, that even if there is no privity of contract between the contractee and thethat would not do away with the principle of transfer of property by theby employing the same on the property belonging to the contractee. This reasoning is based on the principle of accretion of property in goods. It is subject to the contract to the contrary. Thus, in our view, in such a case, the work executed by aresults in a single transaction and not as multiple transactions. This reasoning is also borne out by Section 4(7) which refers to the value of goods at the time of incorporation in the works executed. In our view, if the argument of the Department is to be accepted, it would result in plurality of deemed sales which would be contrary to Article366(29A)(b) of the Constitutionas held by the impugned judgment of the High Court. Moreover, it may result in double taxation which may make the said 2005 Act vulnerable to challenge as violative of Articles 14, 19(1)(g) and 265 of the Constitution of India as held by the High Court in its impugnedraison detre shall apply, in full force, while answering the question even in the context of the Karn5ataka Act.