A Division Bench of Jammu & Kashmir and Ladakh High Court held in favour of the assessee that sales tax is not applicable on goods and material purchased by it from outside the State against C-Forms for the purpose of erecting/establishing transmission lines, substations and power grids
The bench of Justice Rajesh Sekhri and Justice Sanjeev Kumar observed that the assessee may not be a dealer liable to pay tax under the Goods and Services Tax Act for the supply of goods purchased from outside the state. Further, the transaction doesn’t constitute ‘sale’ as it was defined under Section 2(L) of the Goods and Services Tax Act, 2017 during the year prior to 1997.
The assessee, M/S Power Grid Corporation of India Ltd. is a Government of India undertaking engaged, inter alia, in establishing its own grid stations and laying wires for transmission of electricity. It was in the execution of its aforesaid works, the assessee purchased some goods, material and machinery etc. from outside the State.
The bench found that handing over of the goods and material to the contractors for construction and laying of power grids, substations and transmission lines of the assessee did not involve the transfer of right to use goods.
In accordance with a separate supply contract, the assessee obtained the products and materials from the contractor outside the State and provided them to the same contractor to be utilised in various assessments of the assessee in order to avoid the contractor’s liability, claimed by the counsel of the assessee, Subash Dutt as a tax planning.
The court observed that the assessee deftly attempted to circumvent the Goods and Services Tax Act’s requirements.
According to the panel, it was abundantly clear from the definition of “sale” as it stood as of 15 May 1997 that the transfer of property in the form of goods or in any other way involved in the performance of a work contract constituted a “sale” as defined by Section 2(L) of the Central Goods and Services Tax Act and was subsequently subject to tax.
Further observed that the transfer of property in goods and the transfer of right to use any goods for any purpose, whether or not for a specific period, was retained as a part of definition of “Sale”. However, the transfer of property in works contract came to be excluded from the dentition of “Sale”.
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